The Association will share a couple new ideas to help easing the massive current $1.4 trillion US student loans through the market system, rather than regulations. Data show that the accumulation of student loans never show a sign of slow-down, even when the DOW has increased more than 5K points in the last 12 months. The first idea that we are going to share is CI (College Drop-out Insurance), or simply CI. Many by products can be derived from CI, depending on how intensive the buyers would like to cover their risks. So, the risk drives the other and new by-products.
We have discussed the ideas behind CI here. It is basically a form of insurance which the students and their family can buy to cover the possible college drop-out. 2 Year or 4 years to get an Associate or undergraduate programs will expose students from all kind of possible risks which may prevent them from finishing school.
The amount of insurance premium will be determined, partly with the major/program which they will be in. Example, pre-med students will pay more because uncertainty is high. Competition among pre-med students has been described as a cut-throat major, but have big potential pay-off later if they ever get high enough MCAT scores. On the other hand, soft science major is also facing higher risk because of the a smaller job market for them. It is truly exciting for AAEA to work on producing the baseline risk scores by applying IRI analytics for different majors, at different schools which will support the CI idea. Contact us here for more info.
As it is now, there is no instrument or market, at least the Association is aware of to shift, some of the exposed risk to the third parties who are willing to bet on it through the market mechanism such as NYSE. The new instrument will help many young Americans & their family; and of course some business to make extra money. Wall Street will love to grab this billion dollar new business innovative ideas. Whoever benefitting and participating in launching the CI, have indirectly helped Uncle Sam to solve one of the stickiest problems in the history of the country. Let the race begin for company like JP Morgan Chase, AIG, Berkshire Hathaway, Goldman Sachs, Wells Fargo, Citygroup, BOA, and others to enter this new billion-dollar market. Good luck!