Investing In Students’ Futures
I’ve been stalling writing about this one—I can’t figure out where I stand. It seems creepy, kept, indentured and whore-ish, but when you really look at student loans, those do, too. College students need to finance their educations so they can learn lots, thereby enabling them to go off and seek their fortunes. The catch-22 being, if they can’t afford to learn the stuff, they won’t be seeking much of a fortune.
Loan companies and the federal money people are basically gambling on a student’s future when they agree to front the student some money for a college education. Regardless of how much the student stands to earn in the future, whether it’s a teacher’s salary or a doctor’s, the student will owe the loan amount plus interest. I won’t go into too many painful details as I’m sure we’re all aware how far over the barrel college loan recipients are bent.
Some modern thinkers, like Miguel Palacios and his company, Lumni, have begun brokering their own deals with college students. The investors pay for a student’s college education, and in return the student owes the investors a percentage of his or her future earnings. The students who become doctors owe their investors more, and underpaid teachers owe their financial backers less. The percentage part of the deal is the bit that sways me over to the I’m-For-It side of the fence.
On the I’m-Against-It side, there’s the inevitable stickiness of investors only ever wanting to back kids who promise to go into large-gain careers; no one will be backing the future social workers of the world. And even if a student has big social-worker dreams, they will have to lie to investors until their pants combust in order to get their MSW paid for. Student loan companies and the Feds are evil with regards to interest rates, but they’re also equal-opportunity shafters—they’ll give anyone a loan, no matter what their future earning potential might be.
So you see my dilemma; on the one hand, it’s wonderful to see some new and creative ways for people with money to financially assist college students. On the other hand, the investor option seems just as evil as the student loan option, but in fresh and exciting new ways. And there’s the whole issue of how effed up it is that anyone has to pay for education at all, but we can skip that for today.
Further Reading:
The American: Popping the Tuition Bubble
Posted by Alexa Harrington
Much as I agree that education in different fields of study are worth different amounts of money, the open-endedness of “a percentage of future earnings” seems too reminiscent of sharecropping.
What if the doctor or lawyer comes to a realization that he does not want to continue in his chosen field and wants to become a social worker or writer? This system does not give him the freedom to pursue life changes- the graduate is locked into a profession forever, because the penalties involved in such a change would be too great.
In 2007, congress passed the College Reduction and Access Act. One program under the Act is a public service loan forgiveness plan. The federal government forgives the remaining debt of borrowers who make 120 loan payments while working full-time in public service jobs. Borrowers typically end up repaying only a fourth to half as much money on the loans than they would have otherwise. Public service jobs are wide-ranging and can include any government/non-profit organization jobs.
Another way to go is to see if your state offers a loan forgiveness program or if your particular profession will qualify you for loan forgiveness(e.g. teaching).
The Chicago Tribune had an article back in the Fall that begged the question: “Is College Worth It?” http://archives.chicagotribune.com/2008/oct/14/business/chi-college-costs-14-oct14
While the rising cost of tuition and job uncertainty certainly can make one wonder if it really is worth it, graduating college will almost always lead to a higher standard of living than ceasing education after high school.