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?"
That is a excellent idea.
Another issue, many HS graduates shouldn’t even go to college at all. If I could go back in time, I’d become a lineman.(for the County, of course...)
Precisely.
Tuition was between $5-6k per semester , her rent was $350-$400 per month sharing a place with three girls. She did it .
“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.”
And a BA in Gender Studies? Because their income will be minimum wage.
+1!!!!!!!!
Not only internships, but those in high demand fields like Medical can put in 5 yrs in under served Rural areas which have no doctors.
I live a 2 hr round trip from quality medical. There is 1 child dentist, 1 Pediatric Dr, 1 GP. 2 Pharmacies, 2 Physios and 1 rarely has cars there. We have to go into Memphis for doctors and hospitals. Then you have to watch which hospital you chose, Methodist North is in a high crime dope area where they openly smoke the crap under the hospital porch lights at night.
Hubby taught Jr College for 20 yrs sure didn’t make 6 figures they make now and he retired as head of his department.
I have a better idea.
Everyone takes the SAT in March of junior year in high school.
You get <1200 you don’t go to college, you get a job.
This would solve almost all of this problem.
Interviewed for an electric company in my very early 20’s.
Interviewer told me straight out I was the wrong sex and the wrong color.
Diversity was all he was allowed to hire.
There’s a lawsuit where I live, because the HR guy for the electric utility was told to hire no Whites.
He hired the best candidates, and they were White. They fired him...
“The college picks the student, so investors don’t have a direct relationship with the student.”
One little problem with that. Colleges are giving priority to races that are not Asian or white. They are not arbiters of merit.
When they sign the pro contract........
So doing something when you’re a Junior proves your thoughts as an incoming Freshman?
You didn’t answer, do you know how much money the make the Universities?
Personally, my parents worked and saved for me to go to college. I worked part-time through the entire 4 years it took to get my undergraduate degree. Then it flipped. While working full-time, I went to school part time for two graduate degrees. At no time was I ever in debt.
I picked reasonable schools with good reputations for turning out successful graduates. I picked fields of study that I had a knack/interest in and had good prospects for good employment. While at school, learning was job #1, not partying, not travelling, but acquiring knowledge and skills. Ok, yes, I did go to spring break once - the year *after* I graduated with my undergrad degree and before I had started my first masters program.
I also believe college is grossly over-rated. You could go to a trade school and end up with a life/career arc not significantly different from your average college grad. Maybe even better now, depending on the trade and the degree. I'm sure there are mechanics, OTR truckers, etc. doing better than some schmuck stuck in a cubicle with six figures of debt hanging over him for the next decade.
I guess I just did it wrong. Was working for the Sheriff’s department not soon after getting out of the ARMY in 72, attended Junior College and later Angelo State while still working full time. This was all out of pocket, no GI bill. Then my wife went to nursing school and graduated as an RN, again all out of pocket. She’s an RN and I’m just an old oilfield ranch hand who happens to be a Petroleum Engineer. If you want it it’s yours and you don’t have to borrow money to do it, you just have to want it.
I'm sure Dennis Rodman had every intention of getting an engineering degree from Southeastern Oklahoma U.......LOL!
Yea, I know how much money the football teams bring to their colleges, LOTS!
But it's irrelevant since even the last place Big 10 school will still pack the stadium.
I didn’t say what I thought, I said “prove”.
Are you going to be the sole arbiter of assigning punishment?
Do you think punishing success is conservative?
I have a better approach:
All of the most expensive universities have HUGE endowments. They should be required to fund all of their own student loans from their own endowments. What better way for them to fund their future by than funding the future of their students? It would probably offer a better return, as well.
You will quickly see them stop funding all of the “Women’s Studies”, “Minority History”, and other such useless degree programs, and fund only the ones that will allow decent jobs and futures for their students. If not....they go bankrupt.
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