For-profit to go non-profit?

America's lending standards for credit cards, real estate, etc., aren't perfect. But they have improved in recent years, and they are much tighter than the standards for student loans.

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Suppose a 19-year old kid, with a high-school diploma and no current job prospects beyond the fast-food industry, walks into the local bank.

Now suppose that the kid asks the bank for a $100,000 real estate loan, so he can get a condo. What are his chances?

Or suppose that the kid asks the bank for a $100,000 car loan, so he can get a nice Ferrari. What are his chances?

Or suppose that the kid asks for the bank to issue him credit card with a $100,000 limit. What are his chances?

The loan officer will say: "Security, will you escort this punk out of the building?"

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OK, now suppose that the kid asks the bank for a $100,000 student loan, so that he can study Underwater Basket-Weaving.

In this case, the loan officer will say: "Shouldn't we make it $200,000, so you can cover living expenses while you study?"

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So there's a difference. But why? Isn't there a similar risk of default in all four cases?

The answer is: Yes, there is a similar risk of default in all four cases. But in the first three cases, the bank bears the risk, and in the last case, the government (= taxpayers) bears the risk.

So guess which loan the bank will make.

 

The rules gradually tightened between 1976 and 2005.

Not unless you mean "waiting until death". And technically, even death won't discharge a student's loans, if parents or other relatives were co-signers.

 

No. What they do with it also matters. A lot.

 

Your right, they can spend it on recruiters OR new football stadiums, dorms that look more like high end condos that have more amenities than most people have in their permanent residents. Or they can spend it on educational junkets that include wine tastings for admissions and financial aid staff while they are sold a debt card to reimburse the amounts left over from financial aid.

I am not saying that for-profits don't do things wrong they do, but so do non-profits it is just hidden better.

 

Or they can spend it on innovative new programs. Valdosta State's DPA comes to mind. So does Bellevue University.

Or entire nontraditional universities could arise and use their revenues to grow. National University. Fielding. Union. Oh, my.