Student loan policy revisited. Putting our brightes young behind the 8-ball at the start of their adult careers is unwise for the 99% while ideal for the 1% -- so for now it gets done.

With an educated population we lessen the risk of having too many simplistic thinkers, and that is a social benefit beyond noting that it is usually the educated who innovate, with jobs and other economic benefit following and with a domestic economy that leads the world instead of lagging. But what are we to do about allocating the costs of "buying" this benefit, for our nation and for world progress? In an anonymous Economist editorial now almost a year old, a partly factual picture is first drawn so far as the argument needs a basis in fact. Skipping that intro, The Economist opines:

That said, student-loan systems in America and elsewhere are often badly designed for an extended period of high unemployment. In contrast to the housing crash, the risk from student debt is not of a sudden explosion in losses but of gradual financial suffocation. The pressure needs to be eased.

One option is to change the bankruptcy laws. In America, Britain and elsewhere, these treat student debt as a special case: unlike other forms of debt, it cannot be wiped out. If student debt is not to shackle existing graduates and put off future ones, the rules could be changed so that it is dischargeable in bankruptcy. Yet the reasoning behind the current bankruptcy provisions is logical enough: education is an asset that cannot be repossessed and that keeps on benefiting the individual through his or her lifetime. Some worry that graduates would rush to declare bankruptcy, handing losses to taxpayers.

So a second option is preferable. Many countries, America included, have designed student debt primarily as a mortgage-like obligation: it is repaid to a fixed schedule. Other places, like Britain and Australia, make student-loan repayments contingent on reaching an income threshold so that the prospect of taking on debt is more palatable to people from poorer backgrounds. That approach makes sense, especially when jobs are scarce. Barack Obama this week proposed to limit loan payments for some struggling American graduates to 10% of discretionary income and forgive outstanding debt after 20 years. Income-based repayment ought to become the norm.

Then in closing, The Economist presents a paragraph that I think would make blogger Gary Gross happy:

Both changes would lead to a repricing of student debt. That would be a bad thing for taxpayers, but a good thing overall. Just as borrowers need to understand the risks they are exposing themselves to, voters need to understand the liabilities that governments are taking on when they subsidise students. If such information were made public, other useful data would follow—on the average financial returns to graduates of specific subjects, for example. Those studying less lucrative subjects would have to pay more, or be subsidised more. It would be a controversial approach, but a more educated one.

Earlier in the item The Economist notes the great divide in acquisition cost of a higher education in the US of A vs. elsewhere, with American students collectively being far more greatly disadvantaged, debtwise, by our set up. Read the entire item to see the prelude to the above conclusory quotes, for full context.