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?"
It’s all about life’s lottery. Finding a way for a significant number of people to pay you for a service they want for their entire lives.
Consider:
Education
Insurance of all types.
Armed services
First responders
Fast food.
Food in general
Mortgages and shelter of all kinds
Transportation
Government and everything that goes with it should be first on the list.
Booze and whatever else entertains one.
The list is endless and not everyone reaches the pinnacle finding their winner.
Residents of Wisconsin pay an annual total price of $25,635 to attend University of Wisconsin Madison on a full time basis.
Your story is BS.
That includes dorm and food plan dipshit. My story is fact.
How come no GI Bill with a discharge date during the Vietnam Era? Really not intended as nosy, just curious how you ended up without that benefit. Was it because of not being a full-time student?
Allow any gooberment debt owed by a person to be discharged and watch how quickly the gooberment becomes more responsible with funds.
100% for 50 years, plus a turbo wedgie for being a moron.
Friend of mine, couldn’t hack college after two years.. Loved woodworking. Went to work in a boat yard, started his own shop, residential work (kitchens and baths), graduated to commercial work, at one time work was two years backed up. His “shop” was 18k sqft, 22 employees. He sold out and retired at 50. Self educated, super smart.
Sorry, the current model is broken. While I’m glad your daughter is super-human the cost:income ratio of college has become completely absurd. I know students paying $50K PER YEAR. If they’re spending the necessary time to study, go to class, complete assignments, etc. there should NOT be time to have a full time job as well.
Basic stats show costs have increased at an accelerated rate compared to income. I’ll refrain from questioning the details of your daughter - but even if true, it is a sample of one, which is irrelevant. No way a computer science major has the time to work full time.
State universities in Wisconsin are taxpayer subsidized about 60% of the total cost. That means students pay the remaining 40%. It’s still a good deal compared to private universities. My daughter is an accounting major who is now working on getting her masters which will allow her to take the CPA. She did it working as a waitress(tips!) and retail jobs, spending very little on herself. I didn’t do it, she did it and my point is that it can be done without going deep in debt.
I really don’t care if anyone believes me, I saw her do it and I get tired of people bitching and moaning about going into debt. Debt is a choice.
You’re denying reality. It’s not about “bitching and moaning”. It’s about economics. You basically admit that your daughter only accomplished 40% of what you’re saying everyone, outside of Wisconsin, has to, or should be able to, do.
Did she claim all those tips on her tax return? Young ladies can earn a lot from tips, not such the opportunity for males. A guy working in college can expect a job paying less than $10/hr while working, at most, 20 hours a week. That’s $200 week and assuming doing that for an entire year is $11,200 - before taxes. While accumulating $50/year in debt. Even if the entire $11k is put toward the debt, which would never happen, you’ll still result in $150k of debt - assuming it only takes 4 years - which isn’t the norm either.
Sorry, your daughter is not a good representative of the reality of everyone else. Endless “government help” has resulted in sky rocketing costs, it is an industry that has enriched itself through politics while exploiting students. It must change. You’re excusing them.
State universities are less expensive than private. No one is making kids go to Marquette or other private colleges. So yes, if you are choosing to go to a private college when a less expensive public university is an option, stop bitching and moaning about the cost. That is reality. Taxes are already going for public universities, you’d be a fool to not take advantage of it since you’re already paying for it. Surprised to see so so much animosity from a kid paying her way in college. If you don’t like that she did it, piss off I guess!
No regrets. They got their degrees (engineering and computer science) and are both doing quite well with the bonus of not having onerous school loans to pay off.
I’ve nothing against the success of your kid - never said anything disparaging. Good for her - I don’t see anyone showing animosity toward her. Even if State college costs were half what they are it doesn’t negate any of the points I’m making.
Stop being so defensive and wake up to the corruption around education. You only have to look at the ratio of salaries to education costs changing year over year to see what is going on. I’m tired of people like you that assume everyone else is bitching and moaning. You have a sample of ONE as your basis of an argument. You’re being self righteous.
I chose not to use it.
“Allow student debt to be discharged in bankruptcy.”
You just closed all the medical schools in the US. Dr Patel will see you now
Well my daughter just graduated OSU this year. I paid all the bills. It was 10-11K/semester for 4 years. That is tuition at ~6k and 5k (may have those reversed) for either the dorm or an apartment (apartment her last 2 years was actually cheaper - food definitely was).
The entire deal for us was about $80-90k. We’ve asked her to give us back 1/2 when she can instead of taking loans (I don’t want it, but she committed and it seems to have made her more responsible).
I can see how if someone lived from home or shared rent with a few others that they could get it down to about 50K for the 4 years. If they worked part time and made 20-25k/year for all 4 years, I definitely see them being able to do it without debt. It wouldn’t be out of the realm of possibility. 30K for 3 years would do the same thing.
The math doesn’t work. Lets say you make $10/hr and work full time. Well $10/hr is $20,000/yr. In 4 years you would earn $80,000 BEFORE taxes. Lets say after taxes that $80,000 is really $60,000. Again, the math does not work.
You’re beating a dead horse here pal. She worked more than 8 hours per day in the summer and made more than $10 an hour. She also put the money in Vanguard Windsor II mutual funds. It’s over, she did it. Let it go man, it can be done.
Do the math. Show the numbers. She should of has ZERO money to invest. How much did she make? What did she do? The say the story is fishy. It’s BS.
You are not college educated, right? You don’t realize maintaining a decent GPA requires a lot of work. Very few ( nobody ) can work 40/week and do that. Maybe for one year but not for 4 years.
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