Former Secretary of Education Bill Bennett has co-authored with David Wilezol of the Clarement Institute, a book called Is College Worth It? In this review of the book, George Leef of the Pope Center for Higher Education Policy analyzes the authors’ key recommendations, including one related to financing of higher education.

They would eliminate all federal aid for students who are not “needy” and tighten eligibility for students who are needy by instituting a “skin in the game” feature. What they have in mind is a requirement that colleges have an “equity stake” of ten to twenty percent in loans originating so students can attend there.

That change would compel schools to evaluate the likelihood that students they admit won’t be able to repay their loans. When private lenders make student loans, they usually insist that a responsible party co-sign the note, which forces that party to think carefully about the student’s prospects. Having the schools do essentially the same thing for government loans would have the same salutary effect.

A well-prepared student who intends to study chemistry would almost certainly get the school’s backing, while a weak student who wanted to major in a “soft” field such as “communications” probably wouldn’t. And although the authors don’t make this point, it would also make schools think more carefully about where they put their resources.

 “Skin in the game” makes a person think very hard about what they’re doing, the investment they’re contemplating, and the long-term ramifications of the decision.