I, like many of you, have a ton of student debt. There are news articles and threads almost every day about ‘’, concerns of a bubble, and the transformation of recent graduates into indentured servants. The thing that continually strikes me is that the student loan conversation always revolves around the fact that school is paid for with loans.
Why not instead pay the university back for your education by letting it take an equity investment in you?
So here's my bass-ackwards idea: Eliminate annual tuition.
Neither the schools nor the students actually receive any money up front. Instead the school is paid by receiving a certain percentage of the student’s gross income for, say, 10 years after graduation. It comes out of the graduate’s paycheck just like taxes do but it doesn’t go to the federal government, it goes straight to the university.
In order to plug the gap created by the elimination of annual tuition, the university issues its own short term bonds. These bonds must be paid back once the university starts receiving cash flow from graduates. Once the university has incoming cash flow, it becomes ineligible to issue more bonds.
In my mind there shouldn’t be a motivation on the student’s part to take lower paying work or shelter income to avoid paying the tax. Except for a specific subset of the population, I don’t think anybody actually wants to waste their life working in a coffee shop.
The motivation for the university is there to help its students get the long term highest-paying jobs they can, because that’s the only way the university is paid for the education services it provided.
The university is literally invested in the success of each and every student. No more tuition hikes to build a new recreation center because the gravy train of guaranteed federal funds is gone.
This isn’t income-based repayment in the sense that you originally borrowed a certain amount and have flexibility in repaying that fixed amount.
I know the idea is rather convoluted and might not work in actual practice (I haven’t actually crunched any numbers). I also know that the value of a profession is more than just a person’s salary. The world actually needs at least a few English teachers too.
I’m curious to hear from you guys and gals what creative ideas you might have for reworking the education finance system? Would you be willing to give a percentage of your salary to your university for 10 years, 20 years, or even for the rest of your life? Going to an even bigger and more philosophical question, how do you value an education?