Earlier this year, we covered a new proposal that colleges should bear some of the risk associated with student loans.

This “skin in the game” concept was recently discussed at two American Enterprise Institute conferences, as well as promoted by law professor Glenn Reynolds and former education secretary Bill Bennett and coauthor David Wilezol in their book Is College Worth It?

Duke Cheston, a reporter for the John William Pope Center for Higher Education Policy, summarizes where the discussion now stands:

Advocates see numerous benefits resulting from such a rule, starting with improvements in the likelihood of graduating. In 2010, nearly 375,000 students defaulted on their loans within two years of beginning repayment, a rate of 9.1 percent. Disturbingly, at more than 260 colleges in the country, a higher percentage of students default on their loans than graduate.

A “skin in the game” rule would dictate some selectivity in lending. If colleges were on the hook for 10 to 20 percent of the balance, wrote Reynolds, “You can bet … universities would be much more careful about encouraging students to take on significant debt unless they are fully committed first to graduating, and second to a realistic career path that would enable them to service that debt over time.”

Taxpayers would likely save money, too, since their money is used to make the loans. If more students can pay back their loans, taxpayers will lose less.

A third benefit, advocates say, is that it would change aspects of higher education itself, since (depending on the amount of “skin” in the game) colleges would have a much larger incentive to help students graduate and find well-paying jobs. For example, if colleges are afraid of losing money, they may steer students away from, say, gender studies and find new ways to cut costs to keep student debt low.

But there are strong objections to the idea of colleges sharing default risk. Some of them, understandably, come from universities and lobbyists, since some schools might have to pay sizable sums—or lose students. In an interview with the Pope Center, economist and higher education reformer Richard Vedder predicted a “firestorm” of protest from universities and lobbyists.

One criticism is that the rule would prevent many students with poor academic records from going to college, even though some of them will beat the odds and succeed. To use the popular phrase, it would limit “access.”