Student Loan Reform

Author: bmdrocks21

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#1
bmdrocks21
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This 2020 presidential election is pushing for "free" colleges. Proponents of this system have some good points. I don't believe that it is a good idea to impose high levels of debt on students, which may take them over a decade to pay back.

I have recently learned about a system called an income share agreement. Now whether this is the schools or private individuals offering the loans is irrelevant. An income share agreement would be the school or investor agreeing to pay for the schooling of the student and in return, they would receive a portion of the income from the student for a predetermined number of months after they graduate.

For instance, they may pay for your pilot school, and then for the next 8 years, they investor would receive 6% of your monthly income. This is a great incentive because as the student succeeds, the investor succeeds as well. These investors then have a strong, vested interest in your success (unlike now, how even a bankruptcy will not forgive the debt. They will get it back sooner or later.). It is also great because, if you are unemployed, you don't have any obligation to pay a dime to the investor for that month. You won't ever have to struggle to pay them back.

This will push students towards majors that are more productive and lucrative. The investors would require a smaller percentage of the income and smaller payback periods for these more lucrative majors. If you study something that has few available jobs or low income, they will want that extra security. So, a pilot may pay for 8 years, while a teacher or someone studying performing arts may have to pay for 12 years. Currently, the government doesn't distinguish between majors as far as I know. They just treat those getting gender studies and business degrees the same way, with little regard for the risk of losing money.

I think this is the best possible system. It is better than the silence of most conservatives on the matter and the "free" college propositions of many Democrats. And since it leads people towards higher paying, productive majors, it will be much better for our economy,

Let me know what you think.
#2
Imabench
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I lean more towards a combination of other things:

- Lowering the interest rates on student loans from 8% to more fuckin sensible levels such as 2% to 4%

- Student loan forgiveness for students who have already paid 150% of what was originally owed (A student borrows $10k, already has paid $15k, but due to interest still owes another 10k, they will have their loans forgiven since theyve already paid much more than they borrowed)

- Student loan forgiveness for students who hold majors in STEM fields (Engineering, Medical, Science fields that are incredibly hard to succeed in in the first place)

- Raising Awareness that college isnt a necessity + certain 'hacks' that can save tons of money (Top example: Go to community college for two years, get credits, transfer to a university, spend remainder two years there... You get a degree from the university itself at half the cost, graduate schools only look at last 60 semester hours or so which never goes further back then 2 years, and allows for increased flexibility to figure out what you want to do since many students change majors multiple times in college) 

#3
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@bmdrocks21
It's an interesting idea. But I doubt it would work. There seems to be alot of ways it would blow up in the investor's face.

What if the student fails out of school? Would they still be required to pay back the investor even though they wouldn't be earning the kind of money they were supposed to be? And even if they did still have to honor their side of it. 8% of a low paying job for 10 years likely wouldn't cover the costs of the schooling. 

What if they are unable to/don't work? Say for example they got in an accident and couldn't work, or they couldn't work as many hours. They would make significantly less money and the investor would likely take a loss. 

I can't see investors taking that kind of risk. The only way i can see investors agreeing to this is if the student were locked into iron clad contracts that guarantee their profits. IE they garnish their wages until it is paid off, or a co-signee is on the hook etc. But if you add in those kinds of restrictions, then these contracts would be seriously dangerous for students. If something bad happens to you, you could be signing over the rest of your life to some investor, or potentially your family's lives as well. 
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#4
bmdrocks21
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@Imabench
Well, what exactly makes 2 or 4% more reasonable? Maybe 8% is the best rate with how things are currently done based on risk and reward.

I am not sure that I would necessarily agree on the 150% paid back, either. In some cases, yes. In others, no. If it took 20 years to pay that back, when you account for inflation and the lost revenues from investment, it doesn't seem like that would be worthwhile. But, overall, not too opposed to that plan.

I would like more grants for STEM fields because they are so valuable. However, since you are lowering rates from 8%, this probably wouldn't work too well when you start forgiving loans. That would shift the costs of these loans to people who don't get them forgiven, which means higher interest rates.

I agree on pushing for life hacks and educating more people about trade schools or cheaper ways to make a living without a college degree.


Do you see any major flaws with my plan? Trying to think about how it would work as a policy.
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#5
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@HistoryBuff
Well, I looked more into this. It looks like multiple investors each put their money into a fund, which would most likely be managed by the school. The school would be in charge of making sure these loans aren't predatory. That fund then gives money to multiple students, which significantly lowers risk for the investors. This will make sure that any unfortunate accidents or flunking out doesn't devastate the investor. Shared risk and profit.

I'm guessing that they would still owe something back. But maybe the money is only owed back if they finish college? They will definitely look at the students' academic performance when determining the risk of the investment. If you have done poorly, they might shift the payment period around.


#6
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@bmdrocks21
It's the sort of plan where the devil would be in the detail. For example. If i did all of university except 1 class, then dropped out. My contract is now void. I go back the next year and finish that 1 class and i'm good. 

There are just all kinds of loopholes you would need to be absolutely certain were sealed or investors would never agree to it. It would also be the sort of thing that would be very easily abused if the people managing it wanted to. People in general, but teenagers especially, are not good at thinking through the long term consequences of their actions. They could very easily be tricked into signing horrible contracts with fine print that screws them over. 

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#7
bmdrocks21
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@HistoryBuff
Yeah, with any bill, there would have to be considerations with loopholes. Some colleges currently use this plan, so they will have thought through some ways to keep people from gaming the system. They probably would stay active indefinitely, so if you go back to college and finish, it would kick in. That is how I would do it. At that point, it is both of your best interest for you to finish college.

And like I said, the fund for Purdue University is run by the school. Their goal is to work in the interest of the students on this. They try to balance the interests of the funds' investors to make a profit and the interest of the student not to get taken advantage of. And I don't think they will work solely in favor of the investors, which you may be thinking. That would be terrible publicity for the school. 

That isn't to say that they are perfectly set up. Some only pay partially for college among other things. With a little tweaking, I think these could work out pretty well. 
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@bmdrocks21
It still sounds like a niche idea that would be hard to implement and manage on a large scale. I'd say the much better idea is to offer free college for students. Then you don't need to worry about whether there is fine print in that massive contract that might screw you over for the rest of your life. It makes the system so much simpler and safer for students. 

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@HistoryBuff
Well, we both want a lot of people going to college. Neither of us want people to suffer with debt. So that is a good starting point.

However, I believe that the costs should be attributed to the people going to college. Under the system of universal education, should people who don't go to college pay for people that did? Should people that already went to college and paid off all of their debt have to take on the burden of everyone else? If people make bad choices in majors, I'll be paying for their education and their welfare. I don't find that quite fair.

And it is especially unfair for people who already went to college. They are subsidizing their competition. Even though they already paid for everything and gave up a lot to do so, they are training people that they will have to compete with for jobs. That devalues the diploma they already received.
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@bmdrocks21
 I believe that the costs should be attributed to the people going to college.
So we should charge all small children for going to primary school? We should charge every person a police office saves?We should charge a person if the fire department saves their house?

As a society we offer services to people. We pay for those services through taxes instead of at the point the service is used. That is one of the main purposes of the government. Providing a free college education is no different that providing a free primary school education. People need them, we should make sure everyone has the ability to get one regardless of their finances. 

should people who don't go to college pay for people that did?
Should the people who don't get mugged pay for police? Should people whose houses don't catch fire pay for firefighters? I would answer the same for all of them. We as a society should make sure these services are paid for for everyone. It doesn't matter if a particular individual ends up using the service. As a society we are better off if everyone has access to the service. 

And it is especially unfair for people who already went to college.
This is the worst possible argument. You are advocating for not fixing a problem and allowing more people's lives to be massively damaged so that the people who have already had their lives damaged won't feel bad. 
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#11
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@HistoryBuff
Well, some departments have a really good system. If you need an airlift out of the forest, they will actually send you a bill afterwards because people are draining police resources by acting carelessly. 

Whether or not I should have to pay for something should be based on if it is an investment for me, the taxpayer. If that person will pay back more in taxes than I put in, then I could support it. However, the government doesn't discern between majors in college. So, we have plenty of bums that get degrees in art, music, gender studies, etc. Something completely worthless that I will have to pay for. If the government was run intelligently, and they paid for mainly business, economic, and STEM degrees, then we can talk.

Ok, but there is a clear distinction between police/firemen and college. You can opt out of taking college. You can't opt out of police saving you. One is a choice. Unless, you are opting to get mugged somehow, I don't see how this applies.

No, you are punishing people who were responsible. You are going to drive their wages down by devaluing their degree. Will you pay them back for putting themselves through college? Or should people learn that you shouldn't take initiative and wait around until the government buys things for you?


You need to understand the inherent inefficiency of government. When you don't charge people based on their actions, they won't act responsibly. If you made all food free, would people eat more than they should? Yes. So, don't make all food free. Will people get inefficient and excessive education when you make it free? Yes, so guide their actions with income share agreements and grants that steer their behavior towards efficient outcomes.

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@bmdrocks21
Whether or not I should have to pay for something should be based on if it is an investment for me, the taxpayer. If that person will pay back more in taxes than I put in, then I could support it. However, the government doesn't discern between majors in college.
The government doesn't discern between smart 8 year olds and dumb ones. Should we charge the dumb kids because they aren't learning to read fast enough?

Ok, but there is a clear distinction between police/firemen and college. You can opt out of taking college. You can't opt out of police saving you. One is a choice. Unless, you are opting to get mugged somehow, I don't see how this applies.
This applies because they should both be a public service that society provides to improve society. We need police to maintain law and order. We need an educated society in general, and an educated work force to drive the economy. Both are critically important to our society. There is no reason we should charge a teenager trying to get an education, but not charge someone for police or fire services. 

No, you are punishing people who were responsible. You are going to drive their wages down by devaluing their degree. Will you pay them back for putting themselves through college?
Again, why is that relevant. If you found out your local police force was torturing suspects, would you want them to stop torturing people or would you argue that if they stop torturing people it wouldn't be fair to the people who have already been tortured? The current system is a mess. We need to fix it as quickly as possible. 

ou need to understand the inherent inefficiency of government. When you don't charge people based on their actions, they won't act responsibly. If you made all food free, would people eat more than they should? Yes. So, don't make all food free.
Do you really think that people are going to go to college over and over again? They would still not be earning any money while in college. They would still need to be able to eat and pay rent presumably. There is still a benefit to getting your degree and getting a job. You don't need to saddle them with debilitating debt. 
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#13
bmdrocks21
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@HistoryBuff
It is really stupid that we have common core, and that the government doesn't discern between smart and dumb kids. They should get separate teaching so they reach their potential. I didn't talk about the intelligence of the people in my post, so I don't know why you brought it up. 

You see, I don't follow. The right to life is... well, a right. You have no right to an education. Education is an investment by the state so that you can grow up and pay taxes. We should stop paying for those dumb majors that don't result in people getting productive jobs. Sure, education is important. But it is an investment and should be managed as such.

You're not addressing what I am saying. Ending torture of someone helps them. Do you acknowledge that a large influx of people with marketing degrees will drive down the salaries of people who already had marketing degrees? Yes or no.

You would have a lot of people getting unnecessary graduate degrees. That will drive costs way up. They might tag on some extra minors. When you aren't paying for it, why care what the costs are? And I don't know, your party offers free government housing and SNAP, so I doubt they would need to worry about all of that. And you forget, I am fighting to eliminate debt. I am just the only one who still would like to apply personal responsibility.

Question: how do you plan on keeping people from making poor decisions for majors? My plan has clear parameters to solve that issue. 
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@bmdrocks21
It is really stupid that we have common core, and that the government doesn't discern between smart and dumb kids. They should get separate teaching so they reach their potential. I didn't talk about the intelligence of the people in my post, so I don't know why you brought it up. 
I'm taking your argument and putting it in a slightly different environment so you can see how ridiculous it is. You don't think society should pay fora kid to be able to take a degree that you see as a waste. So why would we educate a child who isn't going to do well? Isn't that also a waste of resources? 

You see, I don't follow. The right to life is... well, a right. You have no right to an education. Education is an investment by the state so that you can grow up and pay taxes. We should stop paying for those dumb majors that don't result in people getting productive jobs. Sure, education is important. But it is an investment and should be managed as such.
Your argument is exactly why we need to, as a society, make sure that these things are a right. If you treat things as an investment then you can cut them when they aren't profitable. If a kid has a learning disability and isn't likely to pay much taxes, then the correct fiscal decision would be to deny him an education. But because education is a right, if any politician tried that, they would thrown out of office. We need to establish that college education is a right too. 

You're not addressing what I am saying. Ending torture of someone helps them. Do you acknowledge that a large influx of people with marketing degrees will drive down the salaries of people who already had marketing degrees? Yes or no.
No, not really. They wouldn't have the job experience that someone who is already working in the industry would have. But again, you are arguing that helping children is bad and we shouldn't do it. Do you really not see how shitty that sounds?

You would have a lot of people getting unnecessary graduate degrees. That will drive costs way up. They might tag on some extra minors. When you aren't paying for it, why care what the costs are? And I don't know, your party offers free government housing and SNAP, so I doubt they would need to worry about all of that. And you forget, I am fighting to eliminate debt. I am just the only one who still would like to apply personal responsibility.
But are you actually fighting for that? The republican party hasn't had a new idea for how to fix issues for decades. They have no interest in reforming the system to help students. I seriously doubt your idea would work, but I also seriously doubt it would get any support from republicans. 

Question: how do you plan on keeping people from making poor decisions for majors? My plan has clear parameters to solve that issue.
You assume that we need to do that at all. why? Your plan is also full of holes that would make it almost impossible to implement and would make it very easily abused. 
#15
dustryder
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@bmdrocks21
This is somewhat similar to how my country does things. We have government student loans, but they are interest free (for now). When you start working and if your income passes a threshold, a percentage of the amount that goes over the threshold is taxed to pay off your student loan. This way, the student gets an education without too much pressure from ballooning loans and the government gets a return in an educated worker as well as recouping the loan.
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#16
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@dustryder
That sounds like a pretty good system. Although, I have to ask: does the threshold change based on which major you choose? Because some majors are less likely to pay it back quickly if at all.
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@HistoryBuff
If a kid can't learn to read, they likely have a sever mental disability. Should we keep sending a kid to school that will never learn anything using taxpayer funds? No. So, let me get this straight: under your system, you would be perfectly fine sending people with really bad autism and downs syndrome to college, even though they will never pass? I wouldn't.

Yeah, but rights are more based on what others can't do to you, rather than what you can force others to do for you. I have a right to make you not kill me. I don't have the right to make you defend me if I am getting attacked. I can't make you save me if I am drowning, but I have the right for you not to drown me.

I don't care about what it sounds like. I am saying that you are hurting people who made sacrifices and took opportunity costs to make it through college by reducing their salary. And by flooding the market with people with similar degrees, they will at some point be competing with you for a job. This really isn't my primary argument. Just mentioning how the law of supply and demand works and how you will be rewarding people who incur tons of debt that they refused to pay off while shafting those who actually did pay it off(referring to canceling student debt) as well.

I actually got this idea from watching John Stossel, who is a libertarian. So, it might be more popular than you think. I'd rather reform my own party than jump in your boat and embrace socialist policies. Sick of that slippery slope bs you guys pull. At first, abortion was "safe, legal, and rare". Now it is abortion on demand. No, gay marriage won't affect businesses that don't want to sell to gay couples. Oh really?

My plan is already being used in a few colleges lol. It isn't "almost impossible to implement". And you don't think that people getting degrees for jobs that they will never find is a problem? About 44% of people ages 22 to 27 with college degrees have jobs that don't require college degrees. https://www.forbes.com/sites/prestoncooper2/2017/07/13/new-york-fed-highlights-underemployment-among-college-graduates/#3a75ee5d40d8

So, should I pay thousands more in taxes for people to get a gender studies degree or some other bullshit degree that they will never get a job with? Hell no. Of course people "following their dreams" is a problem. Get a useful degree or don't get one at all, unless YOU want to pay for it. But when you don't find an underwater basket weaving job and are stuck with $50k in loans, don't come bitching to me. That is more or less my stance. Under this plan, they would have very strict percentage requirements and longer terms, which will deter these degrees from being pursued.
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@bmdrocks21
No. But at the same time it hasn't really been a problem

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#19
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@dustryder
It could be the case that, culturally speaking, you guys care to go for useful majors. But, even though your country's system doesn't have any large problems with that, I don't know if it is as efficient as it could be. What country is it?
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@bmdrocks21
New Zealand. To me it's more likely the case that people picking "less useful" majors isn't as big of a problem as you make it out to be
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#21
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@dustryder
Well, I pulled up a statistic for HistoryBuff. 44% of people aged 22 to 27 with college degrees have jobs that don't require college degrees. The case is likely that they picked a major with few job prospects. It doesn't necessarily have to be a joke major or anything. Even if they got a nursing degree, I would consider it useless if there was little demand for nurses and little projection for future demand. That sort of thing.