Washington Monthly’s College Guide blog has the scoop on latest ingenious plan presented at the American Economic Association’s conference:

The premise is this: people are reluctant to go to college because of the financial risk associated with it. The decision to drop out of college is apparently also financial: the student is more likely to drop out the greater the financial risk he has assumed.

How to solve this problem? Give kids “failure insurance” so that if they flunk out, some of their loans are forgiven. Not only does this encourage the wrong people to go to college — people who are afraid they might drop out for academic reasons — but it lessens the cost of (and thus encourages) dropping out for people who are already there.

Also, kids who want to drop out for other reasons will have an incentive to lower their grades below the “failing” threshold first, which sounds like the plot of a really awful comedy.

NOTE: This post was amended to make clear that the plan was presented at the AEA’s conference, not devised by the AEA itself.