I heard an interesting proposal recently that sounded like venture capital for education. Students would receive tuition money and the lender would receive a percentage of their post graduation salary for a specified number of years.

Even without novel approaches students already get non-subsidized lines of credit so I don’t think it’s unheard of

That reminds me of the Paradox of the Court. Obviously not quite as straightforward but such a payment model does encourage at least some degree of sandbagging.

https://en.m.wikipedia.org/wiki/Paradox_of_the_Court

On another note the idea rubs me as immoral in ways that loans don't for reasons I am not quite able to articulate. Like viscerally seeming too far too similar to indenteture.

Indenture is loathsome because the person under it is compelled to work. That isn't so in this payment model - they're free to work or not as they wish, and they are free to choose the amount of work, and their own balance of pay vs working conditions, and so on.

Interesting link, thanks for sharing!

I found a link but couldn't add it to my original comment. There is a 5% salary payment for 15 years once the student reaches $25k. Sandbagging is possible but it seems like students would start working against their own monetary self-interest pretty early (from a salary perspective at least; who knows, I'm sure there's other creative ways to game the system).

Australia has a version of this sort of thing, except the 'bank' extending the loan is the government. When a student graduates they repay their education 'loan' with a slightly increased rate of income tax until the loan is repaid in full. There are a couple of other features of the loans that make them different from commercial loans in that the effective rate of interest is 0% (it's tied to inflation, but no interest clock is ticking) and repayments are only required once a graduate reaches a certain income threshold (hence, if you leave the workforce and stop earning income you don't have to pay, and you don't pay if you are unemployed or seeking a job straight out of college).

Student Loans in the UK can work like this - you repay, I think, 9% above £25,000, and it's wiped after 30 years, regardless of how much is left. Some details may be different depending on exactly when the loan was issued.

So if you have a huge loan but a small income, it's more like a 30-year graduate tax than a loan you expect to fully repay.

I think the difference (if I'm understanding the U.K. situation correctly) is that in the U.K. the loan can be paid off in full prior to the end of the term, correct?

In the situation above, it acts more like an investment rather than a loan. (i.e., there's no upper bound on the payment, outside of the 5%/15 year cap, so the student may pay back more than they receive)

Found a link. Basically, if someone makes more than $25k they owe 5% of their income for 15 years:

https://nationswell.com/venture-capital-college-student-debt...

I can imagine the graduated students would quickly become indignant and look for ways to default.

Sort of like those radio ads that say they'll help you "not pay the greedy credit card companies that trapped you".

This is how some of the coding boot camps like Lambda School work.

That's why the loans are not dischargeable in bankruptcy. Awful state of affairs, but it is an effective thing to leverage.

> They have no money or assets.

That's entirely the point. Tuition would have to come down so it's actually affordable, or there would be less people attending. Businesses might actually foot the bill for tuition to train their people, because there would be a shortage of qualified applicants.