12 Days of Christmas Wishes — Part 6 — Fixing Student Finance

Students taking on a huge amount of debt to go to college has terrible consequences.

A few consequences that strike me as most troubling:

1 — Low income families will often have less information about loans and be more subject to being taken advantage of. They will also default more.

2 — All students will have to take a job, almost any job, to start paying off their college indenture. This likely keeps them from doing things they are passionate about that might take some time to turn into jobs.

3 — The likelihood of grads entering public service falls as loan balances increases, simply because contributing to the public good pays less than most private sector jobs.

In some ways, the sky high tuitions are a bigger problem than the loans themselves. I wonder though if smart colleges will start taking more financial risk on their students moving forward. Income Share Agreements used in the workforce development space by companies like Lambda School allow a student to pay back their loan with a percentage of their salary once they have a job. If they don’t get a job, or the salary isn’t high enough, they don’t pay. So they have freedom to decide what they want to work on. Could that be applied to colleges? I think so.

If I were running a non-elite college I would think pretty seriously about re-orienting my financial support to encourage my grads to take more risk with their careers. Basically turn tuition into a means of equitizing the future incomes of your grads, you are betting on them and with them. Higher ed moves slowly, but I’m hopeful we see people start to work on things like this around the edges soon.

If you are building something in student finance or excited to build something, send me an email -john@danners.org. I would love to help!