schrutebeetfarms wrote:The government should also set the price of houses because people can't be trusted to make smart decisions. Lets blame the businesses, not the consumers.
Honestly the two can't be compared. But since you decided to...
At least with homes the applicant is required to put down a large deposit. The only time you don't need one is with a government backed FHA loan that only requires a 3% down payment and proof of 3 months of payment in the bank. During the housing boom banks were starting to lend 95 to 100 percent of a homes value (either through 80/20 loans or straight 100 financing loans). These are the loans that fared the worst during the foreclosure crisis. Private lenders no longer offer them (unless it is through a government program).
The market learned that people are a lot less likely to walk away from a debt if they have put some money down (i.e. have skin in the game). Paying with your own money makes everyone a better consumer. You are a lot more likely to consider risk and shop around for better options of you have to put some of your own money into a transaction. But that is not possible with student loans. How do we make for people pay for part of their education if they have no source of income?
So maybe the government shouldn't "set the price of houses" but maybe it should protect consumers that use its special financing from faulty or defective products. OH WAIT it already does that. In order to qualify for an FHA backed mortgages your house has to pass a special home inspection. This inspection is much more thorough than a regular home inspection and involves a through checklist to ensure the home is a good investment (at least the extent that it is valued). If you even miss one thing on the checklist you will be denied financing.
So why not the same with student loans? Why can't the government have a thorough inspection of a student's education prospects at a particular institution and deny them a loan if the inspection is not favorable?