Malinvestment starts the same every, single, time. Over extending credit to unworthy investments. Usually this is done through the government because their primary objective is not to make money, but to appease voters. Sometimes this is done by financial institutions that offload the risk to someone else and make their profit on fees, or commissions (but never negative commissions).
Here is why this is a bad idea: There are no price signals to the potential students to help guide them to the correct career choice. In Ontario the things you can get bank loans for are the following: STEM, Medical fields, Economics, Accounting (both of which are kinda STEM-y).
The government interferes here, by paying the first 75% of the cost and by creating loans for the poor and almost middle class, but at the very least a good number of us have to work some amount to pay for degrees that don't pay for themselves.
Another reason it is a bad idea: It means that universities no longer have to compete on price, they compete on marketing.
As an aside: There is this general trend that I've noticed. The baby boomers load up the country or state with debt or equivalent (like defined benefits, or entitlements) but because the state can no longer handle increased debt loads they do not afford the same ponzi scheme to Gen-[x-z]. They load us up with 3% for 24 years on your income on top of the debt that we're going to have to pay for. Also, how the hell does the majority of the western world go into debt during a period where the largest bubble of the population is at their peak earning potential? This is crazy, we couldn't afford largesses then, and we certainly won't be able to when they retire, and we also have to service the debt, and we also have to deal with longer lifespans, and we also have to deal with 3% on our malinvested education subsidies.
What's going to compel this generation to stay saddled with this debt? If we don't vote it (or spending on seniors) out we'll just move out of the country. Have Macbook, will travel.
Bad debt is a good point, and it comes down to the loan provider agreeing on what they will and will not pay for. In below references to the Australian system you'll find that the load provider (the government) will at times stop providing funding for industries, or limit the number of funded positions (you still have the option to go at as a full-fee paying student) when there is less of a need.
A great example of this would be teachers, there are limited positions as there are a lot already and new positions do not open up as rapidly as universities can train teachers. A great way to control this and push people in other directions is to simply not fund that degree to the same extend as say various engineering courses.
Don't be afraid of it just because the government is involved. It can, and has worked. There is a lot to gain from having an educated society.
Yes, this is a horrible idea that sounds like a good idea, which makes it all the more horrible.
People who graduate from college have a significant wage premium over people who don't. Over the past generation schools have figured out how to grab more and more of that wage premium for themselves, sometimes more than 100% of premium for certain students.
Now we're trying to make it even easier for them to capture exactly how much of that they decide they deserve. And having the IRS enforce it.
Fortunately it's only a pilot program. While I doubt it will happen, it's conceivable that they will realize these flaws and make regulatory adjustments accordingly.
Malinvestment starts the same every, single, time. Over extending credit to unworthy investments. Usually this is done through the government because their primary objective is not to make money, but to appease voters. Sometimes this is done by financial institutions that offload the risk to someone else and make their profit on fees, or commissions (but never negative commissions).
Here is why this is a bad idea: There are no price signals to the potential students to help guide them to the correct career choice. In Ontario the things you can get bank loans for are the following: STEM, Medical fields, Economics, Accounting (both of which are kinda STEM-y).
The government interferes here, by paying the first 75% of the cost and by creating loans for the poor and almost middle class, but at the very least a good number of us have to work some amount to pay for degrees that don't pay for themselves.
Another reason it is a bad idea: It means that universities no longer have to compete on price, they compete on marketing.
As an aside: There is this general trend that I've noticed. The baby boomers load up the country or state with debt or equivalent (like defined benefits, or entitlements) but because the state can no longer handle increased debt loads they do not afford the same ponzi scheme to Gen-[x-z]. They load us up with 3% for 24 years on your income on top of the debt that we're going to have to pay for. Also, how the hell does the majority of the western world go into debt during a period where the largest bubble of the population is at their peak earning potential? This is crazy, we couldn't afford largesses then, and we certainly won't be able to when they retire, and we also have to service the debt, and we also have to deal with longer lifespans, and we also have to deal with 3% on our malinvested education subsidies.
What's going to compel this generation to stay saddled with this debt? If we don't vote it (or spending on seniors) out we'll just move out of the country. Have Macbook, will travel.