Cost of tuition = 10% of net worth

[NormalDan]

Great channel

[Maphistos_Sidekick]

@Indy

Here’ my plan: You can borrow up to the full cost of college from the federal gov’t. When you graduate, you get a payment based on a 10 year amortization schedule.

But, your payments are capped at x% of your annual income in excess of the average pay of people with just a HS diploma. (about $35,000/yr for 25-34 year-olds.)

If you’re short in one year, the gov’t forgives half the shortfall in that year and the college pays the gov’t the other half. At the end of 10 years, you’re done with the loan.

The problem with that is you have the taxpayers picking up part of the tab…and I don’t really want to pay for someone’s fluff/useless-in-the-market degree, particularly if that person runs into life issues that prevent their productivity. While that method does create an incentive for schools to steer students into making rational decisions, I’m not certain the student would have the proper incentives by virtue of having skin in the game.

Under my x% of income per year of schooling scheme, both the school and the student have the proper incentives. And, if I hogtie and gag my inner libertarian, I would have no strong objections to the government facilitating the system by using its low cost of capital to facilitate matters by providing the cash up front in return for the rights to keep the future revenue stream from the student.

[Indy]

I get that concern. But, it seems that your system has to be mandatory to work. Otherwise, people who expect high paying jobs will go to schools that have the traditional tuition system.

[Chewbacca]

yup, i was thinking something along those lines. But it depends on how Harvard vs. NewRich school will play out in the prestige game.

[Nick_Papagiorgio]

I think this is a cool solution that Purdue University offers. Your loan is paid back as a % of income during first 10 years out of college. There is even a minimum income threshold before that payment kicks in.

https://www.cnbc.com/2019/02/08/purdue-university-introduces-first-income-sharing-agreement-for-students-.html#:~:text=Instead%20of%20taking%20out%20loans,-sharing%20agreement%2C%20or%20ISA.

[Chewbacca]

@NormalDan

The kid would just pay with his own ($0) net worth…

how does this work now? If jeff bezos’ kid goes to harvard and pays his own way, can they get financial aid

[Maphistos_Sidekick]

@Indy

I get that concern. But, it seems that your system has to be mandatory to work. Otherwise, people who expect high paying jobs will go to schools that have the traditional tuition system.

I was actually envisioning it as an alternative to the current framework of student debt, leaving open the possibility of someone paying out of pocket or seeking purely private debt.

I’ll admit that loses the effect of addressing some of the inequities arising from differences in wealth, and how those inequities tend to propagate across generations…but my libertarian-ish political philosophy leads me to be a bit uncomfortable with making this kind of funding mechanism, or a “cost of tuition = y% of net worth” mechanism, mandatory.

I can stifle my libertarianism enough to like the idea of this kind of mechanism to give folks of limited means an opportunity for a leg up without facing the stress of a mountain of debt…but denying folks an opportunity to go it on their own (if they’re fortunate enough to have the resources to do so) is a step too far.

But if I could set aside that objection due to overreach…note that I was proposing x% of income, not x% of wages. If you did make it a mandatory way to pay for school, you would get a distinct “tax the rich” effect, assuming “the rich” earned investment income on their wealth.

[NormalDan]

Not from the government. I actually ran into this issue when my parents were like you’re on your own since you did sh*t freshman year and I couldn’t borrow from the government because my parents had too much…