What's the Latest Development?
With interest rates on federally subsidized student loans set to double, at what point do the business practices of higher education harm the social good it is meant to serve? Competition among America's universities has become fierce, as evidenced by the exposure of many endowments to risky investments at the time of the financial crisis. The search for capital also includes "a high level of expenditures on student amenities (to attract rich kids), on intercollegiate sports (to stimulate alumni donations), and on faculty 'stars' who can attract research grants and impress parents and alumni."
What's the Big Idea?
Jurist Richard Posner and Nobel economist Gary Becker, two free-marketeers at the University of Chicago, support a more market-based approach to student loans. "If loans, not being subsidized, were more costly, tuition would be lower; and promising students would still receive scholarships and low-cost loans, financed by the universities themselves, because universities want to have good students," said Posner. It is also important to allow students to discharge student loan debt through personal bankruptcy, said Becker, "the way other debt can be dischargeable through bankruptcy."
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