POSTED BY MARTIN KICH
In “Colleges Ask for a Share of Future Salary in Lieu of Loans, “ an article written for the Associated Press and published in the Washington Post, David Jordan reports that Norwich University in Montpelier, Vermont, has become the latest post-secondary institution to adopt this alternative way for students to finance their educations.
Jordan provides this background on such programs:
Income share agreements were first proposed by Milton Friedman in 1955, and Yale University briefly experimented with the idea in the 1970s. In the past decade, technical training programs, such as coding boot camps, have used this type of funding largely because participants do not have access to federal student loans.
In 2015, Oakton, Virginia-based Vemo Education began working with accredited colleges and universities. The company now works with nearly 30 public and private colleges and universities across the country, including Norwich University. Vemo’s first partnership was with Purdue University. It began financing the school’s “Back a Boiler” income share agreement program in 2016.
He then highlights these perceived benefits of such programs:
Those touting the programs say they give colleges greater incentive to help students find high-earning jobs after graduation, because a higher salary means the school may recoup its investment in a shorter period of time.
For some students, income share agreements are seen as less risky, especially if they end up in a lower-paying job or struggle to find work after graduation. While students are unemployed or earning below a certain threshold they don’t have to pay anything back.
He then acknowledges these potential problems:
But because employment and salary determine repayment, it’s possible providers could be seen as discriminating against recipients who choose lower-paying professions. . . .
The terms can vary, notably the length of the agreement and they salary percentage. Since future salary is generally unpredictable, it can be difficult to forecast how much a student will pay back over time, although most agreements do place a cap on the amount paid back.
I can think of several major issues with such programs:
1. It sounds as if it will be even much more difficult for students to calculate how much the contracts will cost them and how long it is likely to take for them to pay off their obligations.
2. Programs in which individual investors or investment groups cover the cost of a student’s education for a percentage of future earnings have been around for a while, and the main objection has been that such arrangements amount to a sort of indentured servitude. In effect, the notion of higher education as a public good is turned on its head and replaced by the exploitation of those who yearn to be educated and the commodification of the educated.
3. These programs are the polar opposite of the nascent trend of employer’s offering to offset student debt as an employee benefi—a trend that ought to be encouraged in every way possible.
4. For colleges and universities to participate in these programs is very concerning—if not alarming–because there are major issues of conflict of interest that are not addressed at all in Jordan’s article. Anyone who teaches at a public university knows that tying state subsidies to completion rates has begun to compromise standards in all sorts of small ways. If an institution has a much more direct and longer-term financial interest in seeing students graduate, the risks should be greater and even more obvious.
Jordan’s complete article is available at:
Yes, Martin, I agree. At first glance it sounds like a pretty creative idea; but one of the things we learn as a result of higher education is not merely to glance, but to LOOK; and to think twice, thrice, or more, rather than judging at first glance. And the more I look, the more ways I see in which it’s an insidious and harmful idea–to the whole concept of education, to the future of the nation, and to the individual student’s values and development. Thanks for this alert!
Articles are published and responded to with arguments for or against in an imaginary space-time continuum of a group of audience with a static view of selected variables which is appropriate to the 20th century and earlier mind set. In this 21st century when the audience may be an AI in addition to the living dead, such logical discourses are meaningless at best outright waste of audience’s time, attention and resources with no return on their investments at their worst. Why not instead, let the data fuel the computation of solutions for individuals and societies using the available computational resources and simply appreciate the outcomes? Data and its use to support the societal and individual decisions is not an imaginary plane but real and non-academic. Education and its valuation is neither static nor measurable. Similarly, the costs associated with such an endeavor are also dynamic and difficult to quantify. The future of the data fueled societies might be in the optimization of as many variables as possible for the groups involved just as the weather and the climate in which they exist.