Usually, when I see the words "predatory lending", I expect to be lectured about evil lenders who offered option-ARMs to homebuyers who couldn't afford things once the rate adjusted. Or lenders who offered no-documentation loans.
This seems to ignore the buyer, who was asking for more mortgage than they could afford. If the buyer didn't know the difference between a conventional and an ARM, they had to be ignoring the documents they signed. If the buyer could only keep a home by expecting appreciation and a refinance, then the buyer probably knew that the payment scheme currently in place would not stay that way for long.
In that case, both the lender and the buyer are at fault. (Though if the lender has nothing to lose by making and re-selling a bad loan, then why do we expect the lender to protect other people from accepting loans they can't repay? If he has no skin in the game, why does anyone expect him to act as if he does have skin int he game?)
On the other hand, lenders who lend to college students might be predatory. For comparison, look at this situation:
Let's see...A University which accepts students into any course, regardless of the employment market for graduates of that course. The University gets the money when the course is registered, not when the student completes the work. The University gets the money whether or not the student finishes their degree-plan. And the University encourages students to register for classes and apply for loans.I saw a similarly shady racket in the military....car dealerships and loan companies would conspire to get young servicemen into waaay more car than they could afford, using the Government as their loan enforcer by garnishing paychecks and assisting in the repossession actions when the seviceman inevitably fell behind on payments.
And the University, if it is a typical American University, raises costs at double the rate of inflation.
That seems like predatory lending to me.
And I return to the question: how much skin does the lender have in the game? Is there any chance of loss due to bankruptcy?
How much skin does the University have in the game? How much is lost when a student leaves the school with debt and no diploma? How much is lost when a graduate is unable to make his monthly payment, and unable to find employment that can meet the cost of his loan?
Whether or not the lenders and sellers are predatory, I think that they should have some skin in the game. So that the number of pathways by which the University profits while the student is screwed would be decreased.