For many years, critics of the student loan system that grew up around our Great Leap Forward into pushing higher education (during LBJ’s “Great Society” years) have argued that one enormous defect is that there is no connection between the lending of money and the losses when it isn’t repaid. Students, no matter how weak and disengaged, can borrow large amounts and if they can’t later repay the loans, the losses are not felt by the schools that pocketed the money. That encourages them to admit almost anyone, keep them enrolled with inflated grades in many fluff courses, then forget about them after they either graduate or drop out.

In today’s Pope Center Clarion Call, Jeffrey Docking, president of Adrian College in southeastern Michigan, explains how his school has begun a program that actually gives it “skin in the game.”

The selling point of the program is that students who choose Adrian will get some help from the school in repaying their loans. How much help they get depends on how much they earn after graduation. Those who earn less than $37,000 per year will receive aid from the school to help them cover their loans. (Docking provides the details in the article.)

What I like about this is that it is a voluntary effort at dealing with the problem of excessive student borrowing and repayment burdens. It gives the college strong incentives to make sure that it doesn’t enroll lots of those weak and disengaged students who simply want a college degree with minimal effort. Similarly, it creates a strong incentive to make sure that the courses are well taught and do something to help students improve their stock of skill and knowledge. Letting profs get away with the “faculty-student nonaggression pact” and award credits where the student has learned little will increase the probability that the school will have to pay off student loan debt. The Adrian program thus aligns the incentives better.

Will it work? Nobody can say at this point, but this is a part of the market’s competitive discovery process.

Would the Adrian approach work elsewhere? Probably so — at schools where most of the students are rather serious about learning. It wouldn’t work at schools where the business model is to lure in lots of poor students who rely on loans, pretend to educate them, then let taxpayers cover the costs of their college experience.