Posted on 10/23/2019 3:51:36 AM PDT by Kaslin
Student loan debt keeps growing.
There is a better solution than the ones politicians offer, which stick the taxpayer or the loan lenders with the whole bill.
It's called an "income share agreement."
Investors give money to a college, and the college then gives a free or partially free education to some students. When those students graduate, they pay the college a certain percentage of their future income.
It's a way "for the school to say to students, 'You're only going to pay us if we help you succeed'," explains Beth Akers, co-author of the book "Game of Loans."
Andrew Hoyler was thrilled when Purdue University got him an ISA loan. Now he's a professional pilot, and he'll pay Purdue 8% of his income for 104 months.
"After that 104-month term ends, if you still owe money, it's forgiven, forgotten, you don't owe another penny," he says in my latest video. "Now, if I find myself in a six-figure job tomorrow, there's a chance that I'll pay back far more than I took out."
Hoyler wouldn't mind that, he says, because of "the security of knowing that I'll never (have to) pay back more than I can afford."
What students pay depends partly on what they study.
On a $10,000 ISA, English majors must pay 4.58% of their income for 116 months. Math majors, because they are more likely to get higher-paying jobs, pay just 3.96% for 96 months.
"It conveys information to the student about how lucrative a different major's going to be," says Akers. "Some think that's unfair, but really that's just a way (investors) can recapture the money that they've put up."
"It may also sway students away from majors that don't have job prospects," says Hoyler. ISA recipients learn "not only what a career may pay, but how stable it may be, what the future is like."
"We should invest in students the same way that we invest in startups," says Akers. "Share equity."
With one difference: The college picks the student, so investors don't have a direct relationship with the student.
Purdue ISA recipient Paul Larora told me, "We don't know who the investor is, but I'd love to give him a hug or buy him a beer!"
"The institutions are saying, 'If I'm operating as the middleman, I can make sure that no one's taking advantage of my students,'" explains Akers.
Sadly, many politicians would rather have the government handle student loans and charge all students the same rate.
President Barack Obama signed a student debt relief bill that he claimed would "cut out private middlemen," meaning banks. He said that "would save taxpayers $68 billion!" It didn't. Costs to taxpayers increased.
Some politicians are so clueless that they still blame banks.
In one hearing, Rep. Maxine Waters, D-Calif., chair of the House Financial Services Committee, demanded JPMorgan Chase CEO Jamie Dimon tell her, "What are you guys doing to help us with this student loan debt?"
"We stopped doing all student lending," responded Dimon, pointing out that "the government took over student lending in 2010."
Instead of forcing banks out of the loan business, we should get government out of it. Banks are in the business of assessing loan risk.
If actual private lenders, people with skin in the game, made loans, then they'd care about being paid back.
They'd tell students which majors might lead to higher-paying careers and warn them that studying sociology, art history or gender studies may make it tough to get out of debt.
But with the government charging the same rate to everyone, students don't have much incentive to think about that.
The Brookings Institution found that 28% of students don't even know they have a loan.
The market would make better judgments and stop students from starting their adult lives under a burden they may never escape.
Yet some people still call ISAs "predatory" because investors hope for profit. They say ISA makes students "indentured servants."
Larora had a good answer to that, which is also serious advice: "If you don't have a job, you're not paying anything! Where's the servitude in that?"
Get government out of the business of guaranteeing loans or giving loans.
Allow student debt to be discharged in bankruptcy.
Problem solved.
If they are smart enough to go to college, they are smart enough to research this information before they go to college. The Department of Labor has websites.
Knock it down to 84 months, more biblical.
For student athletes on full scholarships whose only interests are using their universities as a gateway to the NBA or NFL, they should be required to reimburse their university for the entire cost of their education and room and board out of their professional signing contract bonus.
Sorry, but when I went to college, professors made 45K. Now they demand huge money and the administrators make more. And then, they don’t teach how to think critically, they teach politics and bs.
students should reject universities and attend community college, then finish up at a school that can handle advanced courses. And forget this stupid Greek garbage. Also, work and pay as you go.
There’s an even better way. An internship. Work for a company while you go to college for a lower hourly wage, but get a stipend for the months you’re going to class. Then after you graduate, work for that company a year for each year you spent in college at competitive salary. I did that and graduated in four years as an engineer - debt free.
Indentured servants - boy we have come a long way since the 1700s /s
The reason colleges cost more today then they did up until the 1980s or so is because of third party payers.
When the student was responsible for paying for their own education it was possible to work part time, go to school, and pay for books and tuition.
Colleges knew they could only get so much money out each student and so cost were kept low because there was no choice in the matter.
Government guaranteed student loans changed the equation. Now college cost could go up and the government would gurantee payment regardless. It became a wealth transfer scheme between the middle class and the elite.
Now that the fraud of student loan is being exposed they come up with a “new idea”. Hey pilgrim, we will pay your passage to the new world but you will have to work for us for a number of years...indentured servant!
Personally I believe on line colleges will eventually become the main path to a degree. Until then, I will tell anyone young person that ask, stay away from student loans.
Company Store
Sharecropping
Indentured Servitude
There have always been these type of schemes to indebt people for life....
Careful, this is the IRS’s territory and they don’t like competition...
A lot more and there are lots and lots and lots more of them too. Like everywhere. It's an extension of the swamp. It's where the money really goes.
> If they are smart enough to go to college, they are smart enough to research this information before they go to college. <
The problem is that colleges shamelessly lie to freshmen. Let’s say you’re interested in becoming a theater major. That’s pretty much a dead-end degree, and many websites will tell you that.
But the theater department will tell you that it’s a great degree. And they’ll give you a few slanted examples to “prove” how great it is. So I don’t completely blame freshmen for making bad decisions on their majors. The colleges are willing enablers.
I, for one, would like to see the colleges have some skin in the game. Perhaps we should make them co-sign student loans.
My daughter just graduated from UW Madison debt free by working two part time jobs basically full time for years during and after high school and paid for all of her tuition and rent/food. If there’s a will there’s a way. I call BS on all of these folks deep in debt.
Permit discharge by bankruptcy
Claw back 1/2 the losses from the school that received the money
Residents of Wisconsin pay an annual total price of $25,635 to attend University of Wisconsin Madison on a full time basis.
So your daughter generated $100,000 in wages plus room and board working part time and full time for two years? YEAH RIGHT PAL.
Why? Do you have any clue how much money they make for the University?
Also, how can you prove their intent?
Ending the H-1B visa program would do more for college graduates prospects than any other thing that has been proposed.
Regarding excessive administration costs, for one example, colleges didn’t have an army of Diversity Deans and staff when I attended. Does this really further education?
An example:
Ohio State Diversity Office Has 88 Employees and $7.3 Million Budget
https://www.breitbart.com/tech/2018/09/11/ohio-state-diversity-office-has-88-employees-and-7-3-million-budget/
Congratulations, you obviously raised your daughter right.
Have all the colleges and universities pay back the student debt through raiding endowments, and selling property.
They were the beneficiaries of the loans, not the students.
They often marketed false products.
Let them pay it all.
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