“By any objective measure, our system of federal student financial assistance for college students has been an unmitigated disaster, Dr. Richard Vedder, Director of the Center for College Affordability and Productivity and Professor Emeritus of Economics at Ohio University, who posits a “income share” or “human capital contract” concept in a Forbes column.
Dr. Richard Vedder
With federal assistance to students now exceeding $160 billion a year, a nine-fold increase since 1970 in inflation-adjusted terms, the magnitudes of our national commitment to higher education is large even for a $17 trillion economy. Yet these programs have contributed significantly to rising tuition costs (the universities and their staff have captured the benefits of student aid), the proportion of recent lower income students amongst recent graduates has declined, the programs have aggravated a huge problem of college graduate underemployment, they have contributed to declining academic standards, millions of young and even middle aged Americans are struggling to pay off college loans, et cetera.
What to do? One approach is to find new ways of financing higher education. Students currently do the equivalent of selling bonds – they borrow money with the promise to repay the funds. Why not issue stock (equity) in themselves – give investors partial, temporary ownership of a college graduate’s “human capital,” in return for a share of his or her earnings. Call these contracts between investors and future students “income share agreements” or “human capital contracts.”
Read the rest of his column on “Income Share Agreements, and Their Role in Making Higher Education More Affordable.”
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