[Citation needed]
We already know who the "good bets" are. They're the rich kids. And if you think "income sharing" and the private sector will drive rates down from a federally-subsidized ("predatory") rate, well, I don't know what to say.
I certainly don't think burying underprivileged students under a mountain of debt at graduation is a good thing. I'd very much like to see costs come way down, and I do agree that doing something about the loan system is a piece of the puzzle. But the reason the underprivileged are taking on this debt is that they're attempting to move up, in a way that avoiding debt by avoiding higher education will never achieve. Unfortunately, higher education has become the only way to hang on to an otherwise-falling standard of living; wage stagnation despite increasing education level.
The exams could then also show percentiles, so even if you were self taught you could be ranked against Ivy League students.
Cons to this approach would be the same issues that exist with standardized testing today. Emphasis on only learning to the test, high stress make or break testing (although this already exists with the SATs and other exams). I'm sure there are also a number of other cons.
Pretty much all private student loan borrowers pick off the "good bets". Because the government rate is the floor.
This was Sofi business model. I remember looking at their securitizations and most were graduate school loans for top schools( Wharton, Harvard, Columbia, etc). It wouldn't be rare for an entire securitization of thousands of loans to have no loans even 30 days delinquent. And they paid back quickly too.
> Investors received a financial return and borrowers received rates lower than the federal government offered. The company sought to minimize defaults by focusing on low-risk students and graduates
Yeah people roll these dice and win, but plenty of people roll the same dice and lose.
Maybe.
Or maybe the the costs and loans will remain huge - but now with parents as co-signers, and only available to people whose parents are homeowners with good credit.
It's no accident that those industries with the most anti-competitive regulations are those with the highest costs and poorest service (which ironically begets more anti-competitive regulation).
Tensions between supplier and consumer are profit opportunities for extant and would-be competitors. That no one is stepping in to reap those profits is a strong indicator of a (state-enforced) anti-competitive environment.
[1] https://theunbrokenwindow.com/2011/05/16/lodge-practice-evil...
[2] https://www.ncbi.nlm.nih.gov/pmc/articles/PMC1652413/?page=1 A doctor in 1908 complaining that fraternal lodge medical insurance was too cheap:
> the chief aim of many fraternal orders appears to be the exploitation and control of physicians in the interests of the numerical and financial growth of the lodges and mainly at the expense of physicians.
If they go away, the federally subsidized loan programs will likely be phased out over ~5 years or so. The private sector will replace them for students who are good bets, probably with income-share agreements or something similar and MUCH less predatory than the current federal loan programs.