In the long run, dropping AUs isn't going to make the banks any richer.
Let's say that next school year, high school teachers as a whole get mean and ticked-off, and decide to grade tighter. Where last year the interquartile range of GPAs was 3.5 and 1.9, this year it's 3.1 and 1.4. Where in a class of 30 a third got over a 3.0 last year, this year a tad less than a fifth manage. Guess there'd be a lot of empty seats in college the following year, since everyone's grades went down, right?
A moment's reflection, plus the application of some basic economics, are enough to show that nothing would really change. There are a set number of seats in college, and those seats will be filled by the butts with the smartest heads attached to them. The admissions officers would realize rather quickly that grades this year trended lower, and so the cutoff point for college eligibility would be lowered to admit the same number of butts into those seats. Where last year a 3.5 may have been necessary, this year the cutoff will be 3.2.
The same principle applies to loans and FICO. There is a set amount of money banks can loan out. They're going to loan that money, because that's how they make a profit. And the interest they charge is going to be the same, because interest is simply the cost of using someone else's money, and a change in the FICO system alters neither supply nor demand for loan money. If taking away AUs tanks the average FICO score 30 points, then before long a 660 FICO is going to draw much the same interest rate and loan eligibility as a 690 FICO did before the change. The cutoffs will be moved just as they were in the grades analogy above.
