5 ms·

Are you saying to get rid of the federal government backing of the loan? Let the banks making the loans sink or swim based upon the success of the students and

by crusso 10y ago

Are you saying to get rid of the federal government backing of the loan? Let the banks making the loans sink or swim based upon the success of the students and their ability to pay it back?

austenallred 10y ago
In my ideal world (I'm trying to start a company that will eventually do this, but hard for obvious reasons) college would be a place where you "just show up," you learn what you need to, then you pay back the school with a percentage of income. The percentage piece aligns incentives, because the school is now invested in you earning the highest income, and it's now in part the school's responsibility to make sure it's providing skills that are in-demand in the workforce. I also think a system like this would help a lot of the social divide; right now it's much more risky for poor people to go to college (or trade school), so many opt out. I'm obviously biased and could be wrong, it's just a problem that's been eating at me for a long time.
- winstonewert 10y ago
  I like the idea in general, but a few issues seem problematic to me. The school would seem to have a strong incentive to only accept applicants who they are pretty sure will make a lot of money. The incentive isn't to teach anyone who shows up. The school would also seem to have a strong incentive to control the life decisions of students after they leave. i.e. they won't want to let students switch careers after they discover they weren't cut out to be whatever they trained for. Collecting a percentage of income seems like it might be difficult to enforce. People are eventually going to decide they've paid the school enough and want to stop paying. Is the school going to constantly face legal costs trying to recapture it? Furthermore, legally, can you sign a contract that permanantly grants a percentage of your income? I'm wondering if that would be declared invalid by the courts.
  - austenallred 10y ago
    > The school would seem to have a strong incentive to only accept applicants who they are pretty sure will make a lot of money. The incentive isn't to teach anyone who shows up That's true at first, but at a certain point the incremental cost of each additional student gets really low. Consider existing scholarships and financial aid - you can work in a level of "default" or "higher risk" into the student "portfolio". > The school would have a strong incentive to control the lives of students That's true > Collecting a percentage of income might be difficult to enforce Not sure how it's more difficult to enforce than any other type of debt, other than if income is misreported. (That's easy: require a W2). > Legslly, can you sign a contract that permanently grants a percentage of your income? I don't view it as a "permanently" thing. Just x% for the first y years.
  - gozur88 10y ago
    >The school would seem to have a strong incentive to only accept applicants who they are pretty sure will make a lot of money. The incentive isn't to teach anyone who shows up. They would also have a big incentive to boot you if you had a bad semester or two, like an underperforming stock or race horse.
- antisthenes 10y ago
  > I also think a system like this would help a lot of the social divide; right now it's much more risky for poor people to go to college (or trade school), so many opt out. How does your system address the reduction in capacity that's going to happen once schools start optimizing for highest paid salaries. Under your system, the first to go will be low paid degrees like women's studies, sociology, etc. and schools are going to optimize for STEM. It's more than probable that they will boost their STEM enrollment to professor/TA capacity, and axe most programs or cut them to make extremely selective. I guess it's better than having people running in the real world with no skills, massive debt and a useless degree.
  - austenallred 10y ago
    To be fair I don't think any new system would replace the current university/college system wholesale, at least for a long time. Honestly I'd take the trade off of being able to study degrees that don't provide careers in my school, but that's just me. Such a solution probably wouldn't be right for 100% of people.
gshubert17 10y ago
One alternative is to have the college be on the hook for the first 20% of the loan. Now they would have skin in the game. Once 20% is gone, then the federal government could backstop the rest.

by crusso 10y ago

Are you saying to get rid of the federal government backing of the loan? Let the banks making the loans sink or swim based upon the success of the students and their ability to pay it back?

austenallred 10y ago

In my ideal world (I'm trying to start a company that will eventually do this, but hard for obvious reasons) college would be a place where you "just show up," you learn what you need to, then you pay back the school with a percentage of income. The percentage piece aligns incentives, because the school is now invested in you earning the highest income, and it's now in part the school's responsibility to make sure it's providing skills that are in-demand in the workforce. I also think a system like this would help a lot of the social divide; right now it's much more risky for poor people to go to college (or trade school), so many opt out. I'm obviously biased and could be wrong, it's just a problem that's been eating at me for a long time.

winstonewert 10y ago
I like the idea in general, but a few issues seem problematic to me. The school would seem to have a strong incentive to only accept applicants who they are pretty sure will make a lot of money. The incentive isn't to teach anyone who shows up. The school would also seem to have a strong incentive to control the life decisions of students after they leave. i.e. they won't want to let students switch careers after they discover they weren't cut out to be whatever they trained for. Collecting a percentage of income seems like it might be difficult to enforce. People are eventually going to decide they've paid the school enough and want to stop paying. Is the school going to constantly face legal costs trying to recapture it? Furthermore, legally, can you sign a contract that permanantly grants a percentage of your income? I'm wondering if that would be declared invalid by the courts.
- austenallred 10y ago
  > The school would seem to have a strong incentive to only accept applicants who they are pretty sure will make a lot of money. The incentive isn't to teach anyone who shows up That's true at first, but at a certain point the incremental cost of each additional student gets really low. Consider existing scholarships and financial aid - you can work in a level of "default" or "higher risk" into the student "portfolio". > The school would have a strong incentive to control the lives of students That's true > Collecting a percentage of income might be difficult to enforce Not sure how it's more difficult to enforce than any other type of debt, other than if income is misreported. (That's easy: require a W2). > Legslly, can you sign a contract that permanently grants a percentage of your income? I don't view it as a "permanently" thing. Just x% for the first y years.
- gozur88 10y ago
  >The school would seem to have a strong incentive to only accept applicants who they are pretty sure will make a lot of money. The incentive isn't to teach anyone who shows up. They would also have a big incentive to boot you if you had a bad semester or two, like an underperforming stock or race horse.
antisthenes 10y ago
> I also think a system like this would help a lot of the social divide; right now it's much more risky for poor people to go to college (or trade school), so many opt out. How does your system address the reduction in capacity that's going to happen once schools start optimizing for highest paid salaries. Under your system, the first to go will be low paid degrees like women's studies, sociology, etc. and schools are going to optimize for STEM. It's more than probable that they will boost their STEM enrollment to professor/TA capacity, and axe most programs or cut them to make extremely selective. I guess it's better than having people running in the real world with no skills, massive debt and a useless degree.
- austenallred 10y ago
  To be fair I don't think any new system would replace the current university/college system wholesale, at least for a long time. Honestly I'd take the trade off of being able to study degrees that don't provide careers in my school, but that's just me. Such a solution probably wouldn't be right for 100% of people.

gshubert17 10y ago

One alternative is to have the college be on the hook for the first 20% of the loan. Now they would have skin in the game. Once 20% is gone, then the federal government could backstop the rest.