So, I have thought for a while that part of the resolution to
the student loan crisis was for the government to get out
of the business of student loan lending, which has caused
tuition costs to skyrocket without any increase in the value
of a college degree. And that part of getting the government
out of the student loan business is selling its student loan portfolio.
So last week I was sharing this, and friends of mine said they had never heard the idea,
It really goes back to Agriculture Secretary Earl Butz, when he sold off government food reserves, he then sold the silos in which the surplus had been stored.
To remove temptation, he said.
I have blogged about the student loan crisis here for years now, how the increased tuition costs have gone to bloating college administrations. How colleges have lowered standards and added meaningless majors to sucker in more customers, that is, students, as they have no skin in the game.
They get the student loan dollars, and make the money, whether you get a degree or a job or not.
Discharge Student Loans in Bankruptcy
Before the student loan portfolio is sold, bankruptcy laws need to be amended to provide for discharge of student loan debt.
Private lenders will make student loans, when they make sense, but they need to know there is risk to analyze, if something makes that student unable to repay the student loan debt, it might be discharged in bankruptcy.
There will be opposition claiming that kids will not be able to afford college without government loans.
Well, government money is the same as private money.
Except the government uses our money, and is not quite so careful with it.
Glen Reynolds, of Instapundit, writes a lot about this issue.
So, the government should stop making student loans, like, yesterday.
The bankruptcy laws need to be changed to make student loan debt dischargeable, in certain circumstances.
The old 7 year waiting period would be appropriate. That was, it had to be 7 years after the first student loan repayment was due, not counting forbearance times, before student loan debt was dischargeable in bankruptcy.
Then the government should start auctioning off its student loan portfolio, and get out of the student loan business entirely.
Some colleges will go under. Some already are.
Just like any other failing business.
And student loan lending should be just like any other lending, lenders assessing risks and charging interest rates according to those risks.