Lift the debt burden and shift to a repayment system linked to graduate income.
The US needs to rethink the way it finances higher education. Multiple generations are already set to struggle under the burden of $1.5tn in outstanding student loans. Some colleges think they have found a solution in “income share agreements”. Under these arrangements — also known as human capital contracts — a funder finances a student’s education in exchange for a small percentage of their income, paid over a certain period of years. The payment varies with the borrowers’ actual income, unlike traditional student loans, which require the borrower to repay a fixed sum. Though originally proposed by Milton Friedman in 1955, these agreements have come into their own only in the past few years.
Some colleges think they have found a solution in “income share agreements”.
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Sheila Bair the former president of Washington College and former chair of the U.S. Federal Deposit Insurance Corporation. Preston Cooper of the American Enterprise Institute also contributed. This piece is based on a new Manhattan Institute report, The Future of Income-Share Agreements.
This piece originally appeared in Financial Times