Splitting the responsibility of paying back student loans between institutions and students may help regulate the cost of public tertiary education, keeping it affordable to all.
The argument
Public subsidy of tertiary education is often attacked on the ground that it writes a blank cheque: the government pays, the institution collects, and nobody bears the consequences if the education turns out not to be worth what was charged for it. Risk sharing is the design that answers that objection. Under a risk-sharing arrangement between students and public tertiary institutions, the institution is made liable for some of the payments that its graduates are unable to make in a timely manner. The effect is to give the school a direct financial stake in what happens to its students after they leave. A school that raises tuition beyond what its graduates can service ends up carrying part of the shortfall itself; a school whose teaching does not produce well-qualified graduates who are likely to get jobs and make payments ends up in the same position. The incentive therefore runs in both useful directions at once: to keep tuition down, and to keep the quality of education up. That combination matters because those two goals ordinarily pull against each other when the student alone carries the risk. An institution paid in full and in advance has no financial reason to care whether the degree pays off afterwards; an institution exposed to the downside cannot be indifferent to it. The alignment is structural rather than exhortatory, so it does not depend on institutions choosing to behave well. The arrangement builds in accountability on the student side as well, through the use of benchmarks to determine eligibility. A student who does not meet the eligibility criteria can no longer benefit from the programme, so support is conditional on continued performance rather than automatic. With institutions liable for part of the outcome and students held to benchmarks, public money goes to education that actually leads somewhere — which is the case for government subsidy on this model.
Premises
Counter-arguments
Risk sharing creates an incentive for institutions to reconsider their admissions policy, which would favor higher-income students who can afford to pay more tuition. This is inequitable and puts low income students at a disadvantage.
Rejecting the premises
[Rejecting P1] Students with the means to pay for college in full can circumvent any student-loan policy with ease.