Should colleges be held to a fiduciary standard?

If students can’t afford the total cost, they must either obtain loans for not matriculate. In the former case, the college receives the revenue without risk.

In the latter case, the college simply picks the next person on the waiting list.

In the present scenario, colleges can raise rates with minimal downside, as long as the supply of applicants continues unabated.

If the student defaults on the loan, the college still keeps the revenue that loan brought in. The student earns a poor credit rating.

The college? It continues to take in more students, with more loans, ad infinitum.

What does this suggest how their interests are aligned?

Are they working in the best interests of their customers (i.e., the students) or themselves?

Clearly, the outcome of this arrangement is a continuing escalation of student debt.

That’s the status quo. That’s what we want to change.

But how?

Let’s require colleges to act as fiduciaries. Let’s require them to always act in the best interest of the students (at least when it comes to financing their education, not when it comes to academic rigor).

Students can still rely on third-party loans, but, under this collegiate fiduciary standard, all colleges would be required to be the only co-signer on those loans. In this manner, if the student defaults, the college is on the hook to repay the loan.

Do you think colleges would take a greater interest in making sure their graduates obtain jobs with reasonable income potential? Is that in the best interest of the students?

And now we know just how powerful a fiduciary standard can be.