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October 23, 2012 10:00 AM Funding Someone Else’s College, For a Price

By Daniel Luzer

According to a new piece in the Wall Street Journal, many people are now looking at debt as an investment. No, not the ambiguous “I’m taking out debt now because I’m hoping to make more money when I graduate” kind of debt. This is much more direct.

According to the piece by Rachel Louise Ensign:

One new website, Upstart… “accredited investors”—generally, those who earned $200,000 or more in each of the last two years, or have a net worth of more than $1 million, not including a primary residence—can loan money to a specific recent graduate in exchange for a portion of his or her income for the next 10 years. The money can be used for any purpose, and some of the initial graduates have used it to help with student debt.
The service, which launched in August, is offered at Stanford University, the Rhode Island School of Design and 28 other schools.

While this might seem useful as a personal funding model, there’s something a little odd about treating someone else’s education as your personal investment. If the education of human beings is just a way to make some cash, over the long run no one funds artists or teachers. (Even scientists don’t look like the best return on investment here.) And the world doesn’t need more investment bankers.

Here’s a thought: tax those who earned $200,000 or more in each of the last two years, or have a net worth of more than $1 million or higher and use the funds to make tuition lower at public institutions of higher education.

Daniel Luzer is the news editor at Governing Magazine and former web editor of the Washington Monthly. Find him on Twitter: @Daniel_Luzer

Comments

  • SR_EducationGroup on November 21, 2012 8:37 PM:

    This is such an interesting idea. You are essentially taking out a loan and the investors are banking on the idea that you are going to make a lot of money if you really are that talented, smart, special. But in this economy and with many jobs starting at entry level salaries, it seems like a risky investment and something hard to enforce. I agree with your assessment that it makes a LOT more sense for states to tax the wealthy more so that they can provide more funding to state schools.