There is a simple (not necessarily easy) way to reign this in quickly.
1. Get the federal government out of the lending business, both directly and as guarantor.
2. Make student loans dischargeable in bankruptcy.
3. Require the underlying institution to indemnify the lender for 50% of the value of a defaulted loan used to finance the “education” provided by institution.
You’d see the market sort this out very quickly. No more $200,000 in loans for a Middlebury lesbian studies degree when Middlebury and the lender are potentially both on the hook for up to $100,000 for that worthless “education”.
That was a simple and effective solution going forward. Hopefully we can find one to solve the current disaster that is out of control.
One of the few responsible solutions offered. The institutions have to be on the hook for some of this. I would also like to include a performance clause that would require colleges ensure a reasonable graduation rate. Pushing kids into college who are incapable of college work is criminal.
The only thing worse than having a worthless degree with huge loans is not having one and still having the loans.
I think the biggest fallout from this would be the massive deflationary pressures on all aspects of higher education, from salaries, facilities and the cost of a degree. Which may be the tough pill that needs to be swallowed. It is just painful when you’ve build a business model based on certain costs and then all of a sudden you find out that the good or service that you are offering just isn’t worth as much anymore.
I’m amazed at the number of posters who believe they can retroactively rewrite contracts.