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I think by going after the macro issues you can a few problems. For instance, you want to have higher interest rates for less earning majors, one of these is Teaching. Now IF we learn that students learn to be smarter and go for practical majors within their interests and strenghts they jump into the STEMs, Accounting, Finance, Healthcare, ect. As we see right now, some of these programs are overloaded already. Now, with the importance on what you major in to save you interest (rather than hearing what you need or want to do like it is now) you will flood the market with the majors in those programs.
It's hard to forecast four quarters in advance, let alone four/five years in advance. Because of this and the "common sense" of the measures you propose, I think it has a high likelihood of increasing the interest rates across the board.
I struggle to see how anything you just said is a negative.
Why is a freer market system good for everything BUT education loans?
I struggle to see how anything you just said is a negative.
Why is a freer market system good for everything BUT education loans?
They are a negative because the market is telling students what they should go to and overload currently overloaded majors. The issue is you are playing roulette on people's future. Roulette is a good game if you are playing on house money, not your own. Now yes, loans can be house money but unlike house money, in the end you still have to pay it back with interest. You put in for a major that has a huge projected need but the need is decreased when you exit, you bet on black when the ball landed on 00. You can't expect people to gamble on their lives when they haven't even started living.
You seem to struggle to see the point behind what I am saying instead of taking me literally, word for word. Do you realize how using examples work in conversations? Do you seriously disagree that a student from a low ranked school majoring in liberal arts has a higher default rate on loans than a student from a top ranked school majoring in an engineering field? Answer yes or no please.
According to national statistics, Johnny is more likely to repay the loan. I am sorry if that doesn't sit right with you, but the national statistics do not support what you are saying. The good honest hardworking english major rarely outperforms the partying ivy league STEP major in reality. No national statistics on college grads support what you say. This is real life, not a movie.
I want to look at MACRO LEVEL STATISTICS. Not micro level. How is that so hard to understand?
Clearly we are talking past each other so I will make this as simple as possible: Basing interest rates on default rates by school and major (or any other "macro" level national statistic) won't work. That's why no one has done it.
It would be like a bank saying "the average lawyer has a 3% chance of default and the average construction worker has a 9% chance of default so we'll charge lawyers X% and construction workers Y%" without looking at the specifics of the loan and indivduals involved. They don't do it that way because it doesn't work.
Loans are made to indivduals, not to some average, so the specifics of the individual's situation (e.g. Johnny or Suzy) are what matters most. The stats you want to use are too high level to be more than one relatively small data point in an underwriting decision.
Go ahead and pitch your idea to banks and investors and see if anyone signs up to make student loans based on your criteria. There is a huge untapped market of students in high demand majors at good schools who would love to pay less than the government mandated rate of 6.8%...
Ok so that accounts for 100 schools out of how many??
It accounts for most of the students who should be in college. As quality drops and debt goes up college is not always a smart choice.
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