Up until now, the loan guarantees have meant that colleges, like the writers of subprime mortgages a few years ago, got their money up front, with any problems in payment falling on someone else.
Make defaults expensive to colleges, and they’ll become much more careful about how much they lend and what kinds of programs they offer. China, which has already faced its own higher education bubble, is simply shutting down programs that produce too many unemployable graduates.
