Snarky Behavior

On Oppressive Student Debt

July 26, 2007 · 4 Comments

Wow! Reading through Dani Rodrik’s blog on his upcoming course curriculum at Harvard’s KSG, I noticed a brilliant comment by Per Kurowski (who is the former executive director of the World Bank (2002-2004) for Costa Rica, El Salvador, Guatemala, Honduras, Mexico, Nicaragua, Spain and Venezuela). His idea seems to answer the conversation we’ve had on “Doing Well vs. Doing Good” :

Higher Education needs to be more of a joint venture

Hearing so many young professionals in the USA describing their problems with debts they incurred while studying, I guess that soon some of them could be suing their Alma Maters for misrepresentation or plain failure in delivering the services offered.

Perhaps the incentive structure of the education system needs to be revised so that at least some of the higher education providers offer to collect a part of their fees through a profit participation scheme, like for instance by receiving a small percentage of the student’s future earned gross income that is above the level that the student could have been estimated to earn without further education, during his first 20 years of work.

How are then the universities going to pay for their professors now? Easy, that is what the financial markets are for. These participations in the future of our youngsters could be securitized and sold in the markets, perhaps even as a good investment for a professor’s retirement fund… of course, that is if the professor delivers on his promises.

For a university to show a willingness to invest in their own students, because they are sure of what they are giving them, might be a better marketing tool than outright grants and “we invest our money in your future” is my slogan. Also, for students, the question of what university offers to invests the most present dollars against the smallest percentage of the expected future earnings… should rank among the first when selecting an Alma Mater into which to invest their own future.

A joint-venture! Every student would be an individual investment for the University. Students would only be responsible for repayment above and beyond a certain income threshold, and would feel less pressured to immediately enter high-yield professions.

What do you all think? Would you be willing to share your future earnings (as a flat percentage of your income over a 20 year period) with your undergraduate or graduate schools if they footed your bill now?

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4 responses so far ↓

  • Rohit // July 26, 2007 at 9:49 pm | Reply

    Ah, Horatio Alger, how I hate thee. Though this prospect sounds nice (as I prepare to incur $150K in debt), I don’t think I’d be swayed. What if I hit it big after selling my soul (it was bound to happen either way). I’d rather pay off my $150K in debt with my bonus one year, and keep the rest for myself, than share it forever more with my alma mater.

    (Of course, the fact that I will likely never strike it rich, and inevitably die in loneliness and misery, is what keeps the American dream/nightmare alive.)

  • Anna // July 27, 2007 at 11:39 am | Reply

    I think that is what my loan system is already like – I borrow insane amounts of money (I think I will get up to $240,000)and then as long as I work in low-income (but not that low income), public interest jobs, they pay it back. Should have come to school with me Jon!!

  • Rob // July 28, 2007 at 3:01 am | Reply

    If this sort of system replaced tuition, Classics departments would be doomed. Universities would only care about degrees that put students in investment firms or law offices, and funding for all other departments would quickly dry up. It would probably mean the death of education as an end in itself, and ironically make it even more difficult for you to be “doing good.”

  • Jon // July 28, 2007 at 1:03 pm | Reply

    “Death of education as an end in itself seems to be going a little far.” USC football will put a death to the legitimacy of education first.

    As it stands, the top universities rely on voluntary alumni donations. And a lot of students of professional schools already make decisions (as Anna mentioned) based on the factors of debt forgiveness and median salaries upon graduation.

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