Duke Cheston of the Pope Center for Higher Education Policy has written an interesting piece about the idea of making colleges and universities accountable when it comes to student loan defaults. 

A “skin in the game” rule would dictate some selectivity in lending. If colleges were on the hook for 10 to 20 percent of the balance, wrote Reynolds, “You can bet … universities would be much more careful about encouraging students to take on significant debt unless they are fully committed first to graduating, and second to a realistic career path that would enable them to service that debt over time.”

Taxpayers would likely save money, too, since their money is used to make the loans. If more students can pay back their loans, taxpayers will lose less.

A third benefit, advocates say, is that it would change aspects of higher education itself, since (depending on the amount of “skin” in the game) colleges would have a much larger incentive to help students graduate and find well-paying jobs. For example, if colleges are afraid of losing money, they may steer students away from, say, gender studies and find new ways to cut costs to keep student debt low.

Human nature dictates that if there is a personal price to pay for failure, human beings are much more likely to engage in due diligence and more prudent decision-making.