When US Students Sell Their Capital

Since U.S. college graduates earn $1 million more on average than workers who are not college graduates, investors can bet on them like on a corporation by providing funding for them in exchange for a percentage of their future income.

Students are funding the investment in their future − a degree from an expensive American university − as a business would: by resorting to loans or selling a portion of their capital. This is an idea that has been circulating lately on Wall Street. Companies sell their shares on the stock market; students can sell their intellectual capital. Since U.S. college graduates earn $1 million dollars more on average than non-college graduates, investors can bet on them like on a corporation by providing funding for them in exchange for a percentage of their future income. Unlike loans, which must always be repaid according to a fixed schedule, this plan would have you pay only once you obtain a well-paying job. If you are very successful, you are going to pay more.

We are not talking about science fiction here. Institutes such as Purdue University in Indiana, Norwich University in Vermont and the University of Utah have already adopted mechanisms of this kind which are known as income-share agreements. For example, the agreement at Purdue University stipulates that, once a minimum income threshold is met, English majors will pay 4.5% of their earnings for every $10,000 they received, whereas engineers (who are supposed to have a higher income) will pay 2.5% for seven years. This situation is almost incomprehensible for us. We often criticize the quality of our higher education, but (aside from the fact that, alongside poor quality universities, several other worthy ones are growing and are even internationally renowned) we do not sufficiently consider the value of an education that is available nearly for free. In the U.S., where a year of college can easily cost $70,000 (public colleges charge half as much) regardless of the institute’s quality, students often graduate with loans amounting to $200,000 or $300,000, a burden comparable to shouldering a house mortgage. American students owe more than $1.5 trillion in student loans. Many have likened this credit bubble to the subprime mortgages of 11 years ago, even though, should this one burst, its effects ought to be less severe than the 2008 crisis. However, the bubble needs to be deflated, and here Wall Street sees an opportunity for profit, a profit made by turning professional training, dreams, careers, promotions and firings into shares to be placed on the market.