Time for Colleges to Have Skin in the Game -They Need to Guarantee Student Loans

by Ed Farnan –

America’s student loan debt is in excess of 1 trillion dollars; it is believed this will be our next huge financial crisis as these loans go into default.

One of the reasons people are having a difficult time repaying their student debt, is that they can’t find jobs as newly minted college graduates. See the 10 worst college degrees by Forbes.

Granted the economy is in the doldrums and good jobs are hard to find.  But a college education was sold to these students by the education industry as their ticket to a good paying job.

Let’s use some outcome based education for a change. If you are going to let a student burden him/herself with a huge debt in order to graduate from your school, you should have some skin in the game.  Colleges should have to guarantee these loans, instead of laying that debt off onto taxpayers if the student defaults. Perhaps there would be a change in admissions, stricter standards and heavier counseling.

Right now colleges and universities have the best of all worlds.  Many are in receipt of government funding, many have endowments and almost all are the recipients of an unending stream of government guaranteed tuition. There is no incentive for them to see if the student loans ever get paid back.

It’s a one way street in the higher education system and it’s time to make some changes. . These easy government backed student loans are correlated to rising costs. Colleges have every incentive to raise costs knowing the loans will be adjusted upward to reflect those costs.

Colleges should have job placement programs for the students they graduate.  There needs to be some responsibility from the higher education system and some accountability.

Should taxpayers be put on the hook for a college graduate with a liberal arts degree who can’t find a job?  Or if the jobs available with those degrees are low paying and will never be able to justify the student loan amount?

Additionally, let’s face it, many of those attending college aren’t college material and should be learning a trade or craft.  Skilled craftsmen make on average far more than many college graduates.  Why aren’t colleges and universities offering these types of educations?

The country has a problem supplying the manpower needs of our high tech sector, so much of a problem, that special laws are being created to allow foreign workers into our country that have the math and engineering skills necessary to work in this environment.

We should be proactively pushing students to get educations in the sectors the country desperately has a shortage in, even offering discount tuition, etc. Perhaps ,even using a hybrid of the voucher system that the Friedman Foundation is promoting for public school choice and introduce some competition.



If a student wants a degree in ethnic/gender studies, music appreciation, law and a whole host of liberal arts that don’t necessarily translate into lucrative careers, then there should be an agreement between the college and the student over how the tuition gets paid. Let colleges aid the student in finding scholarship help, etc.

We saw the problem that unfulfilled promises academic institutions made to students when our cities were clogged with Occupy Wall Street. Many of these young people expressed anger at their inability to find a job, a good paying job with the liberal arts degrees they possessed.  They felt they were lied to by their education institutions…in a way they were.

There is also growing unrest among students who are seeing their ever increasing college tuitions rise, while chancellors and educators don’t take a hit and in fact get raises.

Here is an excerpt from an excellent expose’ by Joseph Palermo in the California State University system:

“Last year, CSU executives were paid between $240,000 and $400,000 in salary alone. On top of that, each executive is allotted $12,000 per year as an auto allowance. Campus Presidents and the Chancellor each receive either state-owned homes or housing allowances of $50,000 or $60,000 per year. Other perks available to executives include special retirement packages such as lifetime employment as a tenured professor.”

Looking at the above salaries you can see these educators are insulated from the realities that many graduates face after they leave their institutes of higher education.  Instead of raises, many of them should be fired. Let’s get some accountability into education.

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Sue Christensen
9 years ago

Kids who borrow money to attend college are indebting themselves way more than the money they will receive in their job. They will quickly lose interest in paying down a debt that will never end.

Stop the government financing of schools and the cost of tuition will drop significantly.

Kids also spend their tuition money on modern electronics and parties and nothing on student loans.

They are kids afterall.

Diana Erbio
9 years ago

All good points. College and university tuitions are so out of control because supply and demand is not allowed to work. If a student can not afford to go there will always be a government-funded student who will be able to pay the price.

9 years ago

When your paying the staff 6 figures, the sports coaches 7 figures, and the union staff 40-60K to do menial work, there’s few ways that you can decrease tuition. Salaries and benefits need to be in line with the overall costs of running these institutions. Go to any campus and you see expensive new sports stadiums, new buildings, and fancy accoutremonts all over the place. Gosh, I suppose the students of many years ago, who went to the basic college campuses didn’t learn anything.

9 years ago
Reply to  DrJCA1

You’re absolutely correct. The colleges are very good at deflecting any attention away from the bloated salaries, excessive benefits of the teaching, administrative and operational support staffs. They also try to keep prying eyes from taking a closer look at the various over-the-top construction costs associated with each new planned expansion or renovation.

9 years ago

Rather than suggesting that colleges merely have “some skin in the game”, which is a good initial premise, I think a more straight-forward and honest approach would be for colleges to be more honest with up-font with students before enrollment. The vast majority of students pursue a college education, because it has been drummed into their heads that it is essential to getting “a good job”.

One, there are many well-paying professions that do not require a college degree. For those professions, either a community college or a trade school are a much more cost effective and time efficient means to garner the skill sets required to gain a position.

Two, colleges should be required to provide, up-front before student enrollment, the latest private industry stats in job demand from a reputable independent third-party source for the various professions that their educational offerings would be directly applicable to. For instance, in the area if Business Administration, there are a number of studies that show that demand in this field is already far lower than the annual graduation rates. The pursuit of an MBA, that may have been a hot ticket educational path 20 years ago, is no longer a sure thing. This information could be used by the student to determine beforehand whether they wanted to pursue an educational path, and its associated costs, in a field already experiencing a glut of job applicants.

Three, a number of college majors have either limited or no practical prospects for providing the student with a viable, reasonably well-paying job post graduation. This is the result of colleges trying to differentiate themselves and trying to appear trendy. Two examples would be gender studies and art history. While students should be allowed to pursue their interests, they should do so with the full knowledge that, in some cases, what they’ve chosen to study has no real job potential. That might motivate them to pursue a different area of interest before signing up for tens of thousands of dollars in student loans. On this item, such courses should NOT be eligible for government backed student loans as those who graduate with such degrees are almost certain to not obtain employment in these fields.

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