I like the notion behind this effort—ensuring that colleges don’t get rich by saddling their students with disastrous financial burdens—but policymakers should also make sure to implement some complimentary policy changes to increase fairness and avoid unintended collateral damage.
Colleges Aren’t Yet in the Game
Skin-in-the-game requires accompanying changes to our financial aid system. Most proposals would have colleges pay a set percentage of any loan that defaults. But under the current system, colleges aren’t yet in the game because they are not a direct party to the loan. Once a college has admitted a student (and keep in mind that many colleges are open admissions, meaning virtually anyone can enroll), they have no say in whether or how much a student borrows.