Education

How to Fix the Student Loan Mess

There is a better solution than the ones politicians offer.

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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 percent 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 percent of their income for 116 months. Math majors, because they are more likely to get higher-paying jobs, pay just 3.96 percent 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 percent 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?"

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69 responses to “How to Fix the Student Loan Mess

  1. I’ve heard of the income sharing agreements, but did not know that the repayment schedule was dependent on the type of degree. The terms for an English major sound better than I would have guessed, compared to a math major. I think I’ll look for rates for other majors.

    1. Here’s a better idea: If you take out the loan – pay it back.
      And get the government out of the student loan business.
      If you are a bad risk, it’s reasonable you should pay more for a loan.
      That way money goes to actual “students” – not just dumb asses who want someone to fork over beer and pizza money while they hang out and party.

  2. A $10,000 loan isn’t going to do much for a student these days.

    And are math majors really going to get better jobs? It’s not engineering. I dated one while in college, and she got a job at Gamestop with her degree.

    1. I was a math major and I work with robots and artificial intelligence, so you know I make some money. It’s all about how you apply yourself. Your ex sounds depressed, I’m sorry to hear that.

    2. Apparently student debt is a lot lower on average than we are led to believe. There are a significant contingent of millenials with $100,000 debts from college, but most actually have around $20,000 in debt.

      1. I can confirm that $20,000 figure. I am a second-year college student, and due to, shall we say… an unsatisfactory 1st semester, I was denied financial aid for the semester I am currently in. I was charged a bill of $4,688, which includes late fees. Multiply that number by a 4-year degree, and you get about $18,752. If I were to compare this to the price my class-mates have to pay (without scholarships), I would end up with an average somewhere in the neighborhood of $20,000. FYI: I’m enrolled at Indiana State University.

      2. I believe the median debt is around 40k. The 100k you hear about are outliers, and typically have graduate and even post-graduate degrees (and debt) as opposed to just undergraduate

        Part of the reason for that is if you enter a graduate program your undergraduate loans stay in deferment, and again for post-graduate. So people with poor job prospects for their degrees get sucked into grad programs to keep from having to start paying their loans.

        Additionally, in my experience, private schools aggressively recruit grad students from their undergrad classes. Shortly before I finished my undergrad I was told I was guaranteed acceptance in my schools grad program, and was hounded for weeks by advisors wanting me to pick a graduate program and register for classes. They even used the deferment argument to try to convince me (I just stuck with my undergrad though)

    3. A math undergrad won’t do much for you, but PhDs (with the proper specialization) are in demand in finance and many computing fields

    4. Something like 90% of the math majors I knew in college ended up working for the NSA working on cryptography.

    5. My first degree was mathematics – and I wound up in the computer field – and working with robots and vision systems (among other things).

  3. Or you could just use the money as startup funding for a real estate portfolio ????

  4. Um…pay back the loans they took out?

    The average student loan debt is about $38,000, which is about the same as the cost of new car (Chevy Volt, $33,520; Honda Civic $36,300).

    How many of these students will run out an buy a new car as soon as they get their first job? And not one of them will cry about the “crushing debt” of the car note but are moaning about their student loans?

    STFU and pay the bill you ran up.

    1. Wikipedia:

      The average student debt is $38,390. The median student debt is between $10,000 and $25,000, while 2% of borrowers owe $100,000 or more.

    2. How many of these students will run out an buy a new car as soon as they get their first job?

      None that I know. We all bought used. Heck, I’ve almost paid off my student loans (another year at my current rate, but I’ll probably pay it off in January), and I’ve still never bought a new car.

      I did buy a new motorcycle once. A little Honda rebel, about $4k. Was cheaper new then a decent used car, cheaper on insurance, and the gas mileage was insane.

    3. Most of the young-uns these days, especially in hip urban areas, are not buying cars, but using bikes & scooters!

  5. This ain’t a solution at all. The underlying problem is that kids simply don’t have many options now when they graduate HS. We’ve created the worst sort of binary tracking system to connect ‘work’ and ‘school’. The competition in ‘post-secondary learning’ industry should not be ‘English’ v ‘math’ (and the third default of ‘no more learning needed forever’). It should be apprenticeship v work/study v fulltime study v fulltime work v work for a few years then study v etc. Where college is not attached like a leech to the 18-24 age demographic and employers avoid that age group like the plague.

    What has become clear – after now a couple decades of failure – is that the employer side of that school-work interface is not going to create a ‘market’ solution. IDK whether its MBA short-termism or ‘free trade’ ensuring that every HS grad is immediately put into competition with every unskilled laborer in India or the ‘job signalling’ stuff of Michael Spence. But everything on that side of the pipeline connection is now a part of the problem not part of the solution.

    And that doesn’t even begin to address the problems on the ‘school’ side of that connection – ingrained rent-seeking behavior at colleges (eg the very notion of ‘income sharing’ as the means of pricing their product) and the HS side recruiting the absolute dumbest college students (‘education major’ may be smarter than PE major but that’s it and guess where they both end up) themselves.

    1. I find it funny as hell that people are pretending that ‘education’ should be differentially priced and that is ‘free market’ but that ‘medical’ being differentially priced is ‘socialism’.

      1. Well, it’s the free market if it’s all done voluntarily.

        1. Actually it’s only the free market if the barriers to entry/exit, playing field tilt, symmetry of information/knowledge, etc are roughly comparable between the two parties. That IS the free part.

          1. “Actually it’s only the free market if the barriers to entry/exit, playing field tilt, symmetry of information/knowledge, etc are roughly comparable between the two parties.”

            Bullshit. That’s an idealize market which never did and never will exist.
            A free market exists so long as neither party is coerced into action.
            You
            Are
            Full
            Of
            Shit.

  6. This sounds like a fixed-interest loan, but directly through a college rather than through a bank or the government.

    1. Sounds similar. Isn’t. Notably it is paid as a percentage of your income — so, if you are paying 5% than it is 5%. If you work for 25k a year or 225k a year it is still 5% of your income for the fixed term.

      A fixed interest loan would have its payment based either on the original loan amount or the current balance.

      Maybe I’m missing something, but this is how I understand it.

  7. This idea completely ignores the core problem of college costing at least twice as much as it should. They padded the admin. and other departments with way too many people. Many professors are overpaid. Either outright or they get paid and then don’t teach (just research/write papers to publish which no one reads). There was a great study on all this of the University of Minn. a year or so ago, as just one example. Next, many built extremely fancy buildings (regardless if someone donated the money, still have to maintain it, staff it, fill it with items). More: many offer crazy classes such as all the LGTB crap, the so called “racists” type classes, you know, we used to call them basket weaving classes. There is one at the University of Michigan on “Surviving the Coming Zombie Apocalypse: Disasters, Catastrophes, and Human Behavior”. No lie. Duke has a class “The Selfie”. Monte Clair has one “How to Watch Television”. UW Madison had a class on the fictional language the characters spoke in the movie The Lord of The Rings. I could go on. Let me be the head of any college in the nation for one week. I’ll get the cost down to 1/2 of what the current cost/price/charge is.

  8. The schools ought to refund about 75% of what they charged these people in the first place.

    Problem solved.

  9. Students should learn to say no to high priced schools.

  10. Have you been on a college campus lately?

    With the laxity of requirements for student loans, the various lottery-based scholarships, etc. the areas around many campuses (campii?) are now filled with what are basically luxury apartments geared toward students. With the flow of easy money, many students are opting to use loans to fund their off-campus lifestyles with pools, gyms, saunas, party rooms, etc. They have lottery money that covers their actual school bills, but still take loans to pay the rent.

    These kids have never wanted for anything, never been told no. Live in a dorm room in a squalid 100-year-old building on campus with communal bathrooms? God no!

    And yes, I know there are kids who are scrimping and saving and working and living at home and really need the loans.

    1. Have you been on a college campus lately? I work at one. While I wouldn’t characterize the apartments as “luxury,” campuses have plenty of luxury amenities, including the “pools, gyms, saunas, party rooms, etc.” to which you refer. One of the biggest cost drivers on campuses is, in addition to the administrative bloat, the fact that many college presidents, boards of trustees, and other important decision makers (at many div. 1 schools, the Athletic Director is better compensated and more influential than the president) have gotten caught up in what some call “the student amenities arms race,” and believe that they need to constantly spend vast sums of money to create a campus much more like what you describe as having occurred off-campus.

      1. Not campuses, the areas around the campus, the off-campus housing.

        Like https://www.google.com/search?q=athens%20student%20apartments&ie=utf-8&oe=utf-8&client=firefox-b-1-e&npsic=0&rflfq=1&rlha=0&rllag=33939607,-83384346,3764&tbm=lcl&rldimm=3720847204208092025&ved=2ahUKEwizxrrh8rLlAhWrUt8KHeR8BNkQvS4wAHoECAoQIA&rldoc=1&tbs=lrf:!2m1!1e2!2m1!1e3!3sIAE,lf:1,lf_ui:2&rlst=f#rlfi=hd:;si:3720847204208092025;mv:[[33.97508740000001,-83.3364295],[33.9041284,-83.4505302]];tbs:lrf:!2m1!1e2!2m1!1e3!3sIAE,lf:1,lf_ui:2

        1. My off-campus house I rented was a 100-year old building that pre-dated running water in the area†, was infested with spiders, leaked heat like a sieve in the winter and felt like an oven in the summer, and rattled when the train went by (about two hundred feet down the road). Oh, and the previous tenets left a couch, which was full of dead mice.

          Some “luxury” would have been nice.
          ________
          †The bathroom, which was clearly not part of the original building, had exposed pipes and a genuine claw-foot tub. That thing was older then my parents.

  11. For student loans, I’ve had the idea that the interest rate paid for loans funding particular majors should reflect the unemployment rate associated with the respective major.

    Chemical Engineering majors could pay 4% (most chem eng grads have jobs). Nuclear Engineering majors get a deal at 0.0%. OTOH, Social Work majors would have to pay 11.9% and “Cultures” majors would have to pay 21.4%. Education majors split difference at 8.5%.

    Why are we subsidizing the creation of more Social Workers and Gender Studies grads when it is clear we have a glut of them already?

    1. Actually social work is a good major with the ability after graduation to work for the government and non-profits without a masters or to quickly obtain a masters and have counselor credentials. Now whether or not we need that many social workers and counselors in our society is a different discussion, but as a degree, it has a high hire rate.
      As a side note, when I was in college 20 years ago Nuclear Engineering had the lowest required GPA of all the Engineerings because no one wanted to be in the major.

      1. Yeah, that’s what I get for pasting an 4-year-old comment I made on another site without updating the numbers to reflect today’s actual market. OTOH, why would we want to be producing more government workers?

      2. Today’s unemployment rate by major would indict Mass Media (7.8%), Liberal Arts (6.7%), Anthropology (6.6%), Philosophy (6.2%), Ethnic Studies (5.7%), Fine Arts (5.6%).

        Lowest rates would be for Medial Technicians (1%), Theology and Religion (1%), Early Childhood Education (1.7)%, General Education (1.7%), Civil Engineering (1.9%), Nursing (2%), Computer Engineering (2.5%), Chemical Engineering (2.6%) Accounting 2.8%).

  12. Why does a “mess” exist? An individual entering a contract *student loan* does not have a gun held to their head to take on that debt. The fact that you are claiming “a mess” exists is leaning towards social engineering and some collective solution exists.

    1. An individual entering a contract *student loan* does not have a gun held to their head to take on that debt.

      Why do you define ‘gun held to one’s head at the final point of decision-making’ as the only form of coercion? Fact is – that’s not even the form of coercion that govt itself imposes via regulations. There is no death penalty for that stuff. There certainly is no death penalty for refusing to lend money for student loans even for banks which have been granted the privilege to CREATE govt-recognized money via loans. At most regulations result in an outcome like ‘go to jail’ or far far more likely ‘pay some extra amount’. Qualitatively, there really is no difference between that and ‘become homeless and get kicked to death in a gutter’ or ‘pay some extra amount’. The context of decisions in their entirety is what creates coercion.

      So then is the objection that government is uniquely coercive because it is an unwanted third-party? Well guess what. It’s only an unwanted third party if BOTH sides in that transaction want it to stay out. If one side is already benefiting from govt involvement (eg the ability to drive someone else into bankruptcy/court in order to enforce the terms of a contract by means other than a bullet in the head), it is ludicrous to argue that the other side can’t also try to change govts already-existing involvement in that transaction.

    2. The mess exists because of Boomers playing at social engineering and giving bad advice to their kids.

      1. So be it…they can live in generational housing their entire lives, similar to many successful Asians. If the BA in Chicano studies isn’t paying, then house up with the family comrades.

    3. An individual entering a contract *student loan* does not have a gun held to their head to take on that debt.

      And a lender offering a loan to pay for a master’s degree in Lesbian Performance Art does not have a gun to his head. It takes two parties to make a bad loan. The possibility of losing the money is the risk the lenders take in order to make money at their business. The laws should not give them special privileges that protect them from that risk.

      1. “And a lender offering a loan to pay for a master’s degree in Lesbian Performance Art does not have a gun to his head. It takes two parties to make a bad loan. The possibility of losing the money is the risk the lenders take in order to make money at their business. The laws should not give them special privileges that protect them from that risk.”

        Oh, my, my.
        Poor Vernon is arguing that some ‘authority’ should discriminate WRT the major!
        First, these are supposed adults taking out these loans. Do we as a society, owe it to them to direct their studies?
        Secondly, how long would that last before the inevitable law suits?
        Why don’t you and they grow up instead?

        1. What would you know about growing up?

  13. they could repay the loans?

    1. they could repay the loans?

      WOAH. Dude, back away from the ledge! We’re all trying to be reasonable about this.

      Couldn’t we just get the government a little more involved?

    2. Two problems.

      First-off, even when grads do pay back student loans according to plan, the fiscal resources going towards loans delays other life milestones. Some of those “milestones” are arbitrary (buying a house or a new car), but many have serious long-term impacts (delayed marriage, children, etc.) Which is to say, student loan debt, even when paid off according to plan, is having a negative effect on America.

      Second, the minority of folks who can’t pay them back. This is most often not because they took out too much to start with (the folks taking out hundreds of thousands in loans often end up in incredibly lucrative careers and do fine), but because something went terribly wrong in their life, and their initially normal amount of debt ballooned up to an unmanageable size that means they could spend every free dime they have and not cover the interest payments. It ends up in a vicious cycle where the person is basically trapped, for the rest of their life, paying off a debt that they will only be able to pay if they win the lottery. They can’t even discharge it in bankruptcy.

      So no. For the actual problems we have, “repay the loans” is not a solution.

      1. “So no. For the actual problems we have, “repay the loans” is not a solution.”

        Yes, it is.

        1. For his next trick, Sevo will squeeze blood from a stone.

          1. “For his next trick, Sevo will squeeze blood from a stone.”

            Nope, but that stone will crawl on broken glass before it gets another nickel.
            You have problems with paying back what you borrowed? Is that just too ‘adult’ for you?

            1. You have no problems with lenders being given extraordinary protection from the consequences of their bad decisions? We should treat the students as adults, but not the lenders?

      2. dang. seemed simple when I did it.

        1. And for you it may have been.

          But you should know better then to project your experiences onto other people who very obviously not experiencing them.

      3. The college kids have bought something with all that money. And while the college kid may not immediately be spending the money on cars, housing, marriage industrial complex stuff, someone certainly is. That money paid for tuition isn’t just disappearing in a black hole; the college generates jobs, and pays people, who buy houses, cars, etc.
        In the end, all that money gets spent on consumer goods. So do we let the college kid spend it because we bail him out, or let the college employees spend it, because they were smart enough to fleece the college kid.

        1. So do we let the college kid spend it because we bail him out, or let the college employees spend it, because they were smart enough to fleece the college kid.

          It’s interesting that you chose the word “fleece”. Even if you don’t go by the dictionary definition (a: to strip of money or property by fraud or extortion; b: to charge excessively for goods or services), it’s still got some pretty negative connotations. Which is to say, if the school fleeced the kid, then they are clearly a bad faith actor and should not be given the respect of a good faith actor.

          You don’t reward con-artists, so if college is a con, it’s pretty obvious who should get stuck with the bill.

          That said, you addressed, at most, 1/4 of my point.

          1. You don’t reward con-artists, so if college is a con, it’s pretty obvious who should get stuck with the bill.

            If you want to let university graduates sue universities for bad educational and job outcomes, I’m all for it. After all, it is the fraudulent promises of universities that induced students to take on this debt. Good luck trying to get that through any legislature.

            But the only culpable parties here are the universities and the students who took out the loans. Nobody else should have to pay for their errors or fraud.

      4. First-off, even when grads do pay back student loans according to plan, the fiscal resources going towards loans delays other life milestones. Some of those “milestones” are arbitrary (buying a house or a new car), but many have serious long-term impacts (delayed marriage, children, etc.) Which is to say, student loan debt, even when paid off according to plan, is having a negative effect on America.

        What is having the “negative effect on America” is that people foolishly take out student loans they can’t repay.

        On top of that, you want to add an additional “negative effect on America” of taking money from people who made better choices and would likely use the money for capital investments and redistribute it to people who made poor choices and will likely use the money for consumption.

        Second, the minority of folks who can’t pay them back. This is most often not because they took out too much to start with (the folks taking out hundreds of thousands in loans often end up in incredibly lucrative careers and do fine), but because something went terribly wrong in their life, and their initially normal amount of debt ballooned up to an unmanageable size that means they could spend every free dime they have and not cover the interest payments. It ends up in a vicious cycle where the person is basically trapped, for the rest of their life, paying off a debt that they will only be able to pay if they win the lottery.

        The federal government already offers income-based repayment, meaning the debt won’t get overwhelming. But it may indeed turn into a lifelong tax. I don’t see a problem with that: bad choices in your youth will often effectively serve as a “lifelong tax”.

  14. At first blush, this idea sounds fine moving forward, but it misses an important aspect of the current problem: the folks who already have student loans.

    Fact is, there are multiple parts of this problem.
    (1) People who can’t repay loans, can’t discharge them through bankrupcty, and are seeing, due to interest, the loan amounts climb ever higher and higher making it extremely likely that, absent some government intervention, they will still be “paying off” that debt when they die in sixty years.
    (2) People who are putting off milestones due to on-going student loan payments. These milestones include everything from marrying, having kids, saving early for retirement, buying a house, etc. See the whole “Millenials are killing the X industry”. Part of this is just Boomers in finance having unrealistic expectations, but part of it is having long-term impacts (specifically the marriage/kids bit).
    (3) Predatory lenders. As a quick, but relatively minor example, I’ve been paying off my loans for something like eight/nine years, and I’m on track to pay them off early. During this time, I’ve had two different “loan service providers” randomly cancelled my auto-pay, repeatedly and consistently apply payments to the wrong loan, charge hundreds of dollars in “convenience fees” for the privilege of paying my loans on time (they have never sent me my monthly notice in time for me to pay on-time by mail). Oh, and the bills I receive are intentionally obfuscated and confusing. One time I sat on the phone with their own support line trying to make sense of it, and that person had to get their supervisor because their system is so intentionally obfuscated that even their trained support personnel don’t understand it. And it’s not like my loans are anything complicated, their system is just intended to confuse you.

    So this isn’t a bad idea moving forward. But it’s not a solution, because it does nothing to address the people who are currently snared in the problem.

    1. (3) Predatory lenders. As a quick, but relatively minor example, I’ve been paying off my loans for something like eight/nine years, and I’m on track to pay them off early. During this time, I’ve had two different “loan service providers” randomly cancelled

      Good grief, you don’t even know that your lender is the federal government? The federal government then outsources servicing to these private companies.

      (1) People who can’t repay loans, can’t discharge them through bankrupcty

      Since these are mostly loans made by government, that wouldn’t make much sense.

      (2) People who are putting off milestones due to on-going student loan payments. These milestones include everything from marrying, having kids, saving early for retirement, buying a house, etc.

      Oh my, the horror! What do you think the people who actually paid back their student loans and made it into the top 20% of income earners (=net positive tax payers) had to do get there?

      But it’s not a solution, because it does nothing to address the people who are currently snared in the problem.

      People took out more loans than they could afford to attend colleges with nice accommodations, big names, and often in fun but obviously not remunerative fields. And since people voted to destroy the private student loan market, there was no risk assessment by the lender. Why should I or anybody else pay for their foolish choices?

      Someone takes out a federal student loan, they knew the terms, they suffer the consequences, it’s as simple as that.

    2. “(3) Predatory lenders. As a quick, but relatively minor example, I’ve been paying off my loans for something like eight/nine years, and I’m on track to pay them off early. During this time, I’ve had two different “loan service providers” randomly cancelled my auto-pay, repeatedly and consistently apply payments to the wrong loan, charge hundreds of dollars in “convenience fees” for the privilege of paying my loans on time (they have never sent me my monthly notice in time for me to pay on-time by mail). Oh, and the bills I receive are intentionally obfuscated and confusing. One time I sat on the phone with their own support line trying to make sense of it, and that person had to get their supervisor because their system is so intentionally obfuscated that even their trained support personnel don’t understand it. And it’s not like my loans are anything complicated, their system is just intended to confuse you.”

      Is the world unfair, EscherEnigma? Do you always seem to be the victim of someone smarter than you?
      Well, get used to it. Unless you grow up, it’s gonna be that way until they plug you in the ground, and I’m laughing!
      Go peddle your whine to someone who cares; maybe your mommy.

  15. Just make student loans dischargable under bankruptcy, and much of the scam will disappear.

    1. More than 92% of the student loans are held by, and guaranteed by, government. So, “making student loans discharg[e]able under bankruptcy” is pretty much the same as the tax payer paying them off.

  16. Here’s a way to rid student debt.
    Have Comrade Bernie and Liawatha Warren pay off your debt out of their own pockets.
    I’m sure they wouldn’t doing that since they’re so free and easy with other people’s money.

  17. A Socialist Education System – What a FREAK-EN MESS.

    Politicians “standardizing” knowledge and spreading their idiocy onto everyone while robbing them blind. Yep, sounds like socialism to me.

  18. Quote: “They say ISA makes students “indentured servants.””

    and that is PRECISELY what it does, and THAT is also precisely why/how it WORKS. From the 17th through the 19th centuries, millions of folks, mostly from Europe, “bought” their passage to America by indenturing themselves to the one fronting their fare. They GOT HERE, no money ut of their pockets, which most times had naught in them to begin with. They owed some period of time in binding employment with their benefactor, perhaps two, maybe three years. They also had the benefit of learning that trade, which was marketable once they were free again. Some even proved themselves so profitable for their benefactor they stayed on in regular employment, some for years. America was thus populated by hard working individuals with marketable skills, don’t forget, there WERE no food stamps, SSI, Medicare free to the indigent. Business and tradespeople got the labour they needed to prosper, some had to train to get the desired skillset, others indentured men in given trades from the start.
    Some men did far wrose than this, joining the Navy or army of England.. they truly WERE slaves, no option but to continue on in their service, or desert (which many did, ending up here for no cost, but also penniless. The British Navy only issued pay when one’s term of service was completed.

    This actually appears to have signficant merit, I really like the part where the various majors carry a higher percentage of income as owed, and also that if one cannot find work one pays nothing. FUrther, I think it wise that the college actually manages the loans, vetting the prospective student, determing the rate and period of payback. They have a vested interest in returning a high rate of success, else the lenders would soon enough blackball them, no more student loan funds available.

    1. ISA’s are not like indentured servitude. The lender does not have the power to tell the borrower where to work. It would be entirely within the contract to borrow $250,000 for Harvard law school at 5% of future income, graduate and get ones lawyer license, and go to work for a non-profit earning $30,000 a year and paying just $1,500. If that deprives the lender of most of the income they expected, it also deprives the borrower – but there are people that find poverty preferable to working for Big Law. OTOH, there aren’t very many that would make that choice. Just like the current student loan system, the big problem is the students who drop out, flunk out, change to an easier major, or even get the degree they contracted for but turn out to be incompetent for that profession.

  19. Sounds like another bad idea that attempts to address the funding of college, while ignoring the real issue is the rising cost of college, which is a function of the race to the top. Universities continue to ramp up capital spending, building expansion…despite the rational growth of online options. Control the spending, offset more classes to online and the tuition issue will improve.

  20. “How to Fix the Student Loan Mess”

    Have the people who borrowed the money pay it back.
    Fixed.

    1. And make them all give the lenders a pony. They should have ponies.

  21. The problem with Stossel’s plan is that, just like government student loans, the college official making the decisions has no skin in the game. None of their own money is invested in the ISA, there’s no link between their pay and how well the contract works out years later, and often they won’t even be in the same job. And so they’ll be deciding based on arbitrary rules, modified by political correctness…

    It’s a good idea, but needs better motivations for the administrators. Form ISA pools for private investors, with the investors having a say in who gets the loans and under what conditions – and even being encouraged to meet and mentor the students. I think that would work out well for retirement savings. Since the payback is a percentage of future income, there’s a built-in inflation hedge.

    There’s no hedge against economic collapse, but no retirement plan truly has that – if the economy isn’t producing a surplus to support non-workers, then the goods they need just aren’t there, and government fiat won’t correct that.

  22. Thanks for sharing this. Nice information. Will helpful for my friends will share this with him..