Thursday, September 6, 2018

College Moves From Loans To Income Sharing (Plus Loans)

By Professor Doom

     The student loan scam has destroyed many lives in this country, and people are finally starting to balk at letting their kids take out ridiculously huge loans, particularly for degrees which offer little hope of paying back the loan…these days, that’s most degrees.

      Eager to snatch up more students, and knowing that loans just aren’t selling like they used to, some schools are now getting students into an “income sharing” agreement in exchange for their tuition. Instead of a loan, the student agrees to pay a portion of his income after he gets his degree, for a set number of years after graduation.

      Now, considering how ruthless so many of our schools have been when it comes to exploiting kids, I’m naturally wary of anything they have to say. That said, this new agreement makes considerable sense. Part of why the student loan scam was so horrific was the schools had no skin in the game: no matter how fraudulent the “education,” the schools got their loot, while the students got debt.

      If the school has a vested interest in the student actually learning something, the school might be more motivated to offer a legitimate education. A recent article on Norwich University and its new plan to offer Income Share agreements to certain students caught my eye:

Norwich’s program is starting out on a small scale, mainly for students who do not have access to other types of loans or those who are taking longer than the traditional eight semesters to finish their degree.

      And…there goes their credibility. They’re only offering this to students who’ve basically run out of loan money, in an attempt to squeeze just a few more dollars out of them. So, after the school  has grabbed all the low hanging fruit of student  loan money, then and only then will the school return to its mission of helping humanity. Still, this isn’t all bad:

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.

      Overall, this still is a good idea, but I wish they would offer it to everyone, from their very first day on campus. Their cherry-picking worries me that they’re just simply looking for more revenue, rather than helping humanity through education and research.

       The very clear dark side here is higher education was never supposed to be about raking in money, either for the school or for the students. This type of program makes sense for jobs-training degrees…but what of the liberal arts, or frankly all sorts of degrees which are far more about knowledge than job skills? These have no choice but to fall to the wayside, although, granted, this is happening in schools not offering these types of programs anyway.

    The terms can vary, notably the length of the agreement and the salary percentage. Hoyler is currently paying back 8 percent of his income. 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.

     Again, in principle, the idea makes a great deal of sense, but I still see problems with making this work outside of very particular jobs training programs. Suppose a student comes in to be a petroleum engineer, but washes out after 2 years (and trust me, this happens quite often)? Can he switch over to gender studies, and then pay back the tuition by giving up a share of his income as a janitor?

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.

     In March of 2015,  I wrote of unaccredited coding schools which promised either a job or free tuition to its graduates. It’s good to see that this amazing idea is being taken to the “legitimate” schools, but I still find it likely they’ll corrupt it into yet another means of exploitation of vulnerable kids, instead of a way to help humanity.

      At least some schools are now heading the right direction again. Knowing that they will only do so once the student loan money runs out, we can speed up this process in an obvious way: end the student loan scam.

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