Sunday, April 26, 2009

One Way to Solve The Student Indebtedness Problem

At age 14, Agassi persuaded his father to buy him an Apple IIe by promising him 10 percent of his “lifetime profits” from writing software. It turned out to be an excellent deal: at age 21, the younger Agassi founded TopTier Software — which made portals to help companies organize their internal information — and sold it nine years later to the German software giant SAP for $400 million.
Instead of having college students accumulate debt to pay for their education, I have wondered if something like this would make more sense. The government could setup a system where they would pay for your education in exchange fore something like 10% of your future wages. Instead of taking on debt, you would sell equity in yourself.

I wonder though if there would be adverse selection, where those that are looking to go into professions with low wages or become house wives would sign up for the system, while those that are planning to take up high paying engineering or law careers would choose instead to take on debt.

via NY Times Mag


Rebelfish said...

This is already being done with select fields. Not so much taking a share of the salary, but locking in a useful career position. In "Teach For America", the government pays the lion's share of obtaining the teaching degree in exchange for a couple years of teaching in a high-need area. And corporations do this with advanced degrees: they'll pay for someone to get a M.S. or M.B.A part time in return for again a few years of (theoretically more productive) work at the company after the degree is completed. In fact, it seems that nearly all the people getting M.S. degrees in engineering or many of the sciences are doing it through corporate sponsorship or are just getting the degree en route to a Ph.D. (which has its own interesting funding structure)

Fat Knowledge said...

Good point. Or ROTC that will pay for school if you go to the military for 5(?) years. That will take care of the debt problem.

But, the other thing I like about the % of future wages is that everyone pays the same %, so that those that are in high salary careers help to subsidize the cost of tuition for those in low salary professions, but all still get the same % of their pay to take home and spend.

Anonymous said...

Doesn't income tax to some extent serve this purpose (if you attend a public school)? This sounds a bit like welfare checks to the university system.

I think the cost of private schools is out of control. My company is paying the bill for my M.S. degree at a private university. If they weren't footing the bill, there's no way I'd shell out upwards of $80K for the degree from my own pocket.

Fat Knowledge said...


In a way income tax does do it. The key difference being that only people who actually go to college would pay.

I agree that private school costs are out of control. I still don't understand why prices have gone up so much since 1980 when it seems like the way things are taught is fairly similar. I think they need to start looking into ways to making college less expensive.

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