> By all means continue to mandate that loan terms be familial-wealth blind (and institution-blind),
Student loan terms (private and public) are blind to neither of these factors.
> but allow lenders to differentiate with rates on the basis of area of degree earned.
Lenders outside of the federally guaranteed system are allowed to do this, as well as to consider all of the other factors you suggest loans should “remain” blind to. The only lender inside the federally-guaranteed system is the federal government itself (and it is also not blind to the factors you suggest it should remain blind to, since both are factors already.) Further any argument for major sensitivity is a much stronger argument for much additional weighting by institution, since all the market factors that apply to majors also apply to institutions.
(Clarification: I'm talking about the US loan program)
> Student loan terms (private and public) are blind to neither of these factors.
They are negatively blind, in that I cannot charge someone with family wealth in excess of $1M a lower rate than someone with negative family wealth. Correct me if I'm wrong.
> Lenders outside of the federally guaranteed system
I'm limiting these statements to the federal loan system, because that where a huge chunk of debt is created.
> The only lender inside the federally-guaranteed system is the federal government itself
Apparently this was changed in 2010? Prior to that, this was absolutely not the case via FFELs [1].
> and it is also not blind to the factors you suggest it should remain blind to, since both are factors already
See clarification about positive vs negative blinding.
> Further any argument for major sensitivity is a much stronger argument for much additional weighting by institution, since all the market factors that apply to majors also apply to institutions.
Not intrinsically. The problem with allowing rate sensitivity is making it outcome-sensitive while avoiding it becoming pre-existing wealth-sensitive.
I think everyone would feel it's unfair if Harvard loans charged 2% interest, while Community College loans charged 25%, because the acceptance demographics and underlying default rates supported that difference.
> They are negatively blind, in that I cannot charge someone with family wealth in excess of $1M a lower rate than someone with negative family wealth. Correct me if I'm wrong.
Private student loans (which, like federally guaranteed loans, have reduced bankruptcy dischargeability since 2006) have no such restriction.
Federal loans do have such a restriction, but that obviously doesn't exist to influence lender behavior, if it ever did, since the entity imposing the rule is also the only lender now permitted to issue such loans.
Student loan terms (private and public) are blind to neither of these factors.
> but allow lenders to differentiate with rates on the basis of area of degree earned.
Lenders outside of the federally guaranteed system are allowed to do this, as well as to consider all of the other factors you suggest loans should “remain” blind to. The only lender inside the federally-guaranteed system is the federal government itself (and it is also not blind to the factors you suggest it should remain blind to, since both are factors already.) Further any argument for major sensitivity is a much stronger argument for much additional weighting by institution, since all the market factors that apply to majors also apply to institutions.