(Bloomberg) — American International Group Inc. Chief Executive Officer Peter Hancock cited government student lending and flood insurance as programs that could benefit from the perspective of private businesses.
Insurers like AIG could take into account borrowers’ career prospects, encouraging them to pursue fields of study that are more likely to pay off financially, he said. Federal student loans aren’t underwritten and are widely available to college students, though the amounts are limited for undergrads.
The climbing cost of college has helped swell total student debt to almost $1.2 trillion, with the federal government holding or backing more than $1 trillion of that amount, the U.S. Consumer Financial Protection Bureau said last year. More than 90 percent of all loans for the last academic year were government-backed, according to the College Board.
“Something that is almost 100 percent, probably doesn’t have the nuanced incentives that encourage people to spend their education dollars wisely on things that are going to provide sustainable careers,” Hancock said today in a speech at a conference held by National Underwriter in New York. “As an insurance industry, we can do a better job of positioning ourselves to help.”
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The government should still play a role in encouraging higher education, said Hancock, whose predecessor at AIG repaid a U.S. bailout. He said the federal student loan program is one of several places where the government competes with insurers and can crowd out innovation. The insurer has nof plans to make student loans, Jon Diat, a spokesman for the New York-based company, said by phone.
AIG, which is one of the largest life and property-casualty insurers in the U.S., has been increasing its role as a lender to diversify its investment portfolio. The company started a joint venture with Oak Hill Capital Management in June to make loans to mid-sized companies.
The insurer’s former CEO, Robert Benmosche, emphasized direct lending in real estate as a way to bolster yields and lessen the company’s reliance on Wall Street middlemen. AIG received a U.S. bailout that began in 2008 and swelled to $182.3 billion after mortgage-related bets soured.