re: Govt should allow free market to fix student loan debt

Let's say tomorrow, the government stopped backing all student loans. The free market then would decide to whom to lend money, based on normal credit worthiness.

What would happen?

1) 99 percent plus of college students would not qualify for a loan without a parental co-signer.

2) Some small percentage of students would have an eligible parent who would co-sign on this loan.

3) The demand for college would collapse overnight.

So now the colleges have a huge issue. With demand down, way down, the "free market" says they would have to lower tuition costs so more people can afford it.

But to lower revenues also requires it to lower costs. And while every college has plenty of BS employees they could get rid of, and fewer students = fewer professors needed, they still have a crap ton of fixed costs.

All those beautiful apartment dorms, lazy rivers, rec centers, were all paid for with debt. Debt which needs to be paid back.

That's going to be an issue.

Many private schools, with no ability to pay this debt back, will simply close.

That will lower supply. Lowering supply will allow other schools to not have to cut what they charge, as much.

So now we will have a bunch of laid off employees, foreclosed buildings the size of a neighborhood, etc.

Also, they are going to cut scholarships, because one of the reasons they can give those out is because they are soaking the full cost students... who are paying with borrowed money.

The reality is, the "good intentions" of government backed student loan debt has completely changed the college industry.

The way to fix this is to put a pin in the bubble. When we put pins in bubbles, the short term impacts for our society are absolutely a disaster.

We will be better for it in 10 years, but there's going to be a lot of problems for anyone trying to go to college in those 10 years.

This is not a simple solution.