What Lending Crisis?

Inside Higher Ed carries a very interesting article about how Columbia University’s Barnard College cut its volume of student loans by 73 percent. According to author (and Inside Higher Ed editor) Scott Jaschick:

The only real change in policy the college made was to require a conversation. Before Barnard would certify to a lender that a student was enrolled, the college required students or their parents to talk to an aid counselor. If, after that conversation, the family wanted to proceed, Barnard did not stand in the way. But for many families, the talk revealed risks and options they didn’t know about.

As a result, private loan volume fell 73 percent. (The total was only $1 million and, given that Barnard, all told, costs most students nearly $50,000 a year, it’s clear that not that many students were actually getting private loans.)

So what’s going on? Frankly, I’m not sure why the government should ever back student loans. People with degrees are much better credit risks on the whole so it makes sense that the market should be able to take care of lending to students. Congress, meanwhile, seeing a crisis, is planing all sorts of changes to clamp down on private lenders. If Barnard’s situation is any guide, however, it appears that current lending programs already displace a massive portion of private lending and probably don’t need any changes for the purposes of increasing access to college.