That's true at first, but at a certain point the incremental cost of each additional student gets really low. Consider existing scholarships and financial aid - you can work in a level of "default" or "higher risk" into the student "portfolio".
> The school would have a strong incentive to control the lives of students
That's true
> Collecting a percentage of income might be difficult to enforce
Not sure how it's more difficult to enforce than any other type of debt, other than if income is misreported. (That's easy: require a W2).
> Legslly, can you sign a contract that permanently grants a percentage of your income?
I don't view it as a "permanently" thing. Just x% for the first y years.
They would also have a big incentive to boot you if you had a bad semester or two, like an underperforming stock or race horse.
The school would seem to have a strong incentive to only accept applicants who they are pretty sure will make a lot of money. The incentive isn't to teach anyone who shows up.
The school would also seem to have a strong incentive to control the life decisions of students after they leave. i.e. they won't want to let students switch careers after they discover they weren't cut out to be whatever they trained for.
Collecting a percentage of income seems like it might be difficult to enforce. People are eventually going to decide they've paid the school enough and want to stop paying. Is the school going to constantly face legal costs trying to recapture it?
Furthermore, legally, can you sign a contract that permanantly grants a percentage of your income? I'm wondering if that would be declared invalid by the courts.