, Columnist
Don't Make Colleges Pay for Student-Loan Defaults
They'd just stop accepting poorer students who are bigger credit risks.
Be careful what you wish for.
Photographer: Chris Goodney/BloombergThis article is for subscribers only.
Incentives matter. This is a fundamental tenet of economics: People respond to their incentives. If something in a market seems to be going wrong, it’s because the incentives have gotten screwed up.
Looking at the market for education, it’s hard not to think that there’s something wrong with the incentives. Tuition keeps going up and so does debt. The percentage of people who are not paying off that debt — either because they are in default, deferment, or an income-based repayment program — is staggering. Naturally, a lot of folks would like to get the government in there to start tweaking those incentives until the market stops being so crazy.