I think that they help universities raise tuition as long as the projected lifetime income increase from going to college exceeds the cost of tuition. Which will just allow our unsustainable "tuition rises faster than inflation" trend to last a few more years before it falls apart.

Note that "projected lifetime income increase" is generally overestimated. What we do is compare average income of a college graduate with a high school graduate and attribute the difference to college. However people who could get through college likely would have made more than people who couldn't, even if they hadn't gone to college!

Its also backwards looking, obviously. In the boomer working years, colleges were very selective and a degree was a stealth IQ test along with socioeconomic group membership.

At this point the average IQ of a college grad is very close to 100. I guarantee that within the next 30 to 40 years someone will make the shocking discovery that the presence or absence of a degree has no influence on income, success, or happiness.

At that point the ponzi scheme of higher ed can collapse.

There's nothing wrong with designing and implementing an education system for the top 5% of society and the jobs that top 5% will likely have. There is a big problem with a marketing scam along the lines of every American is a temporarily inconvenienced millionaire.

Surely, my favorite waitress at Dennys is making more money as a waitress than she would as a K12 educator, if she could get hired, which she cannot. The degree does not make her a better person nor a better waitress. It does signal that she's in maybe the top 50% of humanity WRT the skills required to get a degree. She's a somewhat better than average person because of who she is, not a meaningless piece of paper for training she will never use. The point of discussing my favorite waitress is we need "something" to signal in the job market who is in the upper half of potential employees, and $100K of debt and four years of labor seem a huge waste on a civilizational level.

Lots of research done on this by Bryan Caplan (Princeton) [1], the TLDR is return on a degree is mostly signaling.

[1]https://en.m.wikipedia.org/wiki/The_Case_Against_Education

P.S. Signaling is very profitable for the individual benefitting from the signaling, it just isn't good for society.

Ironically, income share agreements are increasingly being challenged on the grounds that they violate the 14th amendment (being rather close to the indentured servitude model).

I think the (optics) problem is that it's a "more obvious voluntary fractional slavery program". So it's easy to criticize. Of course, because it's a less obvious voluntary fractional slavery program, non-dischargeable loans are simultaneously harder to criticize and harder for people to see the trap they're walking in to.

I could be okay with income share agreements if they had a (short) time and percentage cap. Otherwise I feel like we'll have the same problem, students will sign agreements that they don't understand, and then end up paying for it for a large part of their life.

Is 10 years short? 20% for 10 years is what it would take for many computer science majors to pay for their degree. And that's ignoring the time value of the money.

I fail to see how an ISA is better than an unforgivable loan, and to be honest, this seems a lot more like indentured servitude/wage slavery without the pretense of a loan. If the investor (Purdue in the article) has to step in and say we won't make more than 2.5x our investment on you, you know the student is being taken advantage of. The problem is that the ISA model is still bound to the private market by virtue of the fact that the investors are private and not public entities. The carrots and sticks that are in place are not there to benefit the student.

I wonder how society would react by making student loans forgivable. Would banks stop giving out loans because there is no collateral? Or would they require a cosigner to rope in an adult with collateral to lose? Would schools get cheaper as a result of people not being able to afford the already high tuition, would they become a status symbol for the mid-upper class who can afford it? It is definitely an interesting thought experiment.

To me, fundamentally the issue is one of alignment of incentives.

Right now, there are students who can come to Perdue who are looking for university as an "investment" in their own future: they want to spend $100k to get more than $100k back over their lifetime. But the fact is, some of those students are studying subjects which will never pay them back for their investment; and others will never make that money back no matter what subjects they study.

So the question is, what incentive does Perdue have with regard to these students, under the "unforgivable student loan" system?

1. From a pure short-term financial perspective, it has an incentive to get as many students in the program as possible.

2. From a reputational point of view, there may be some damage to having lots of students graduate without getting jobs

3. Perdue is made of human beings, many of whom actually have feelings and morals; those people feel much happier when their students' investment pays off, and feel much worse when their students' investments don't pay off.

And the point is, at the moment, for students in the category of people we're talking about, you have #1 fighting #2 and #3. That's always going to be an unstable system where things fluctuate between "terrible" and "not quite so terrible".

Consider the incentives in an ISA system. The incentives are now aligned: Perdue would have a vested interest in the success of their students after graduation: the more money their students make, the higher return they get (up to a point). If a student wants to come in and major in Underwater Basket Weaving, they can say, "Perhaps a degree in in Accounting or Education might be a better choice." And if they do offer Underwater Basket Weaving, they'll be sure to add in classes on the Economics of Underwater Basket Weaving, Advanced Basket Weaving Management, and so on, to make sure that those students are actually prepared to make money after they graduate.

So what you‘re proposing is that a fairer way to paying back tuition is making it essentially free when taking it and then, IF you end up making a lot of money, paying it back with a share of your income?

I can‘t resist the feeling this sounds surprisingly related to the concept of free higher education and a higher, progressive income tax, a pretty revolutionary approach we‘ve been doing with limited success over here in Germany.

Then again, that might just be my naïve European perspective on things and since taxes are theft and free education is just for those commies wanting free things, it‘s surely inappropriate for a free country.

I realize you're being somewhat facetious, but a key difference with ISA is that you don't actually pay the "tax" if you don't go to college. this doesn't make much difference for successful people, since most of them probably went to college anyway. but if you're a lower/middle income person who didn't go to college, it seems sort of unfair to have to pay towards other people gaining an advantage over you in the job market.

Out of the fire and into the frying pan..

What makes you think that "profit motive" or "regulatory capture" will be kinder and more gentle with this approach?

For hundreds and thousands of years Indian farmers had a version of "income sharing". You should research how it went. And please don't respond with "Sure they fucked up but WE will build a better system this time around"

Do you have a source for this history of income sharing? Just trying to learn more.

S/he is referring to tenant farming and sharecropping, if you search those terms you can read more about it.

I love income share agreements.