Income-contingent loans

Following up on my piece yesterday about income-contingent loans, here is a cartoon that represents precisely why they require government provision. [HT: The Big Picture]

ICL

2 thoughts on “Income-contingent loans”

  1. That’s nonsense. The banks in South Africa used to compete to get student loan business (and still do for all I know). The argument that some sort of market failure stops banks from lending to students in simply false. There may be an argument why an income contingent loan is somehow preferred to a straight out bank loan but that is a very different point to your inference here.

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  2. The market failure is that the bank has no collateral to insure against the costs of a student loan default.

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