The Corner

Education

How Income Share Agreements Are Better than Government College Loans

A student works in Wilson Library at the University of North Carolina at Chapel Hill, N.C., September 20, 2018. (Jonathan Drake/REUTERS)

It’s too bad that Uncle Sam ever got into the college-financing business. The feds have no constitutional authority to lend money to students (or anyone else) and millions of students have gotten themselves deeply in debt for education of dubious value. Easy federal loans were essential in fueling the “college for everyone” movement that has raised the cost and degraded the educational value of earning a degree.

Often people speak of college as an “investment” but the money for it isn’t invested in any real sense. No person or group evaluates the likely costs and benefits of college for a particular student and then decides if it makes sense or not. The feds simply dish out the funds and if the student can’t later pay, taxpayers suffer the loss.

But there is an alternative that actually involves investment analysis, namely Income Share Agreements (ISA). In today’s Martin Center article, Mary Claire Anselem of the Heritage Foundation discusses this eminently sensible approach.

“Federal loans,” she writes, “give students a false sense of value when they receive the same federal loan regardless of where they go or what they want to study. An ISA, by contrast, would make it very clear to students that certain courses of study are more lucrative than others. Students can only benefit from a more transparent system where earnings potential is factually discussed.”

Purdue University is leading the way toward ISAs, with its “Back a Boiler” program. The school covers the cost of the student’s education, but the student agrees to pay Purdue back based on his or her earnings after graduation.

I wonder if ISAs will ever replace federal loans — we are very bad at undoing huge policy blunders like that — but we’d be much better off if they did.

George Leef — George Leef is the director of research for the John William Pope Center for Higher Education Policy.

Most Popular

Elections

Weirdo O’Rourke

Friends of the young Bill Clinton and Barack Obama spoke of the special glow of promise they had about them, even back in their early twenties. Angels sat on their shoulders. History gave them a wink and said, “Hey, good lookin’, I’ll be back to pick you up later.” Robert O’Rourke? Not so much. He ... Read More
Education

Our Bankrupt Elite

Every element of the college admissions scandal, a.k.a “Operation Varsity Blues,” is fascinating. There are the players: the Yale dad who, implicated in a securities-fraud case, tipped the feds off to the caper; a shady high-school counselor turned admissions consultant; the 36-year-old Harvard grad who ... Read More
U.S.

McCain at Annapolis

President Trump has been doing a lot of tweeting today -- against TV programs, companies, and other things that have incurred his displeasure. These tweets make for interesting reading. One of them is this: So it was indeed (just proven in court papers) “last in his class” (Annapolis) John McCain that sent ... Read More
Health Care

David Brooks Forgets to Oppose Some Suicides

The well-meaning David Brooks urges us to prevent suicide in his most recent New York Times column. The crisis is certainly real. From "How to Fight Suicide:": You’ve probably seen the recent statistics about the suicide epidemic — that suicide rates over all have risen by over 30 percent this century; ... Read More