Friday, October 08, 2010

How About Insuring Student Loans Instead of Guaranteeing Them

The net effect would be similar - if a student defaulted the lender would be able to make a claim for indemnification from the insurer. But the mechanism would be different - rather than having the taxpayer write a blank check, educational institutions would contribute part or all of the cost of insuring student loans based upon their default rate. No educational institution would have to participate, but the price of not participating would be ineligibility for participating in the insured student loan or federal tuition grants programs.


  1. I like this idea. I could even see having different rates of insurance for different areas of study (sorry philosophy majors).

  2. I think we all know what the Washington Post would say (in an unsigned editorial) about it.

    This idea is similar to your post about the real estate industry. There is "no" good reason for your idea not to be implemented . . . but there are millions of dollars lined-up to guarantee that it doesn't.


  3. I expect that Kaplan, er, I mean the Washington Post would explain how such a system would discriminate against people who desperately need to complete overpriced, generally worthless private degree and certification programs. And that it's their own fault if the taxpayers end up paying off those loans.