March 12, 2019

ALL IS PROCEEDING AS I HAVE FORESEEN: White House Might Put Colleges on the Hook for Student Loans: Executive order under consideration would require schools to take financial stake when students don’t repay.

The White House is weighing a measure that would require colleges and universities to take a financial stake in their students’ ability to repay government loans, an effort that could squeeze loan availability to students and reduce defaults.

For several months, Trump administration officials have been discussing enacting such a mechanism or making a push for one in Congress as part of a broader effort to combat rising college costs.

In the administration’s budget proposal released Monday, officials made brief mention of a “request to create an educational finance system that requires postsecondary institutions that accept taxpayer funds to have skin in the game through a student loan risk-sharing program.”

Such a proposal could be included in a coming executive order addressing higher education, several officials said.

You heard it here first. Though remember this? Senate Democrats push for colleges to have “skin in the game” on student loan defaults. “In a call with reporters, Senators Richard Durbin of Illlinois, Jack Reed of Rhode Island and Elizabeth Warren of Massachusetts highlighted a package of new and existing proposals aimed at reducing the burden of student debt. Durbin acknowledged that the senators had had ‘limited success’ in getting Republican support for the measures, but said they will be a centerpiece of the Democratic agenda in the Senate in 2014. One of the more controversial new proposals, to be introduced by Reed, would require colleges with high student loan default rates to pay a penalty to the government that is proportional to the defaulted debt.”

So Trump can honestly say this is an idea with bipartisan support.

Flashback: “Up until now, the loan guarantees have meant that colleges, like the writers of subprime mortgages a few years ago, got their money up front, with any problems in payment falling on someone else. Make defaults expensive to colleges, and they’ll become much more careful about how much they lend and what kinds of programs they offer.”

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