"What do you think of income share agreements vs student loans?"
*prepares to go balsa*
Listened to a podcast about this, and apparently there is a real push to make these Income Share Agreements a widespread thing.
How it works: Folks pretty much buy stock in students. You need $20,000 for school? Okay, I'll give you the $20,000 in exchange for _% of your earnings for the 8 years after you graduate.
How much you pay back is dependent on your income. If you make very little money post graduation (or can't find a job), you pay very little. If you get a good job, you pay more. So it could be the case that you don't come close to paying back the $20k, or you could pay way above the $20k.
Because it is not a loan, so you can't default or go bankrupt because of it. In a scenario where you never find work over the 8 year period, you would pay nothing and owe nothing.
This system comes with downsides too. For example, how can we get folks to invest in students projected to enter important, not so lucrative fields (social work, teaching, etc.)? It seems like the all the funding would go to engineers or business students. Or else, they would have to take a large chuck of future income from the education/social work students.
Anyways, I thought this was interesting and a better model than student loans. What do you think? Would you be hesitant to sign your kid up for an income share agreement?
1. "great for paying gaps in scholarship, loans etc...shouldnt be used for f..." In response to Reply # 0
tuition payment especially if you plan on having a high paying job i've seen law students do isa's and they end up paying more than they would have with fed loans great that an option
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Navem nu, cuando sol Tutu nu, vondo nos nu Vita em, no continous non Nos nu ekta nos sepe ta, amen
When the sun shades the ship We sweat and life is not safe To swim or to touch not When we unite we hedge amen
2. "Done in reverse, seems like it could be an NCAA answer" In response to Reply # 0
to compensate student athletes in revenue sports, that and adding a salary cap for coaches.
No reason state employees all over the country, but especially states like Mississippi, highest paid employees earn millions a year coaching unpaid athletes. Paid millions a year, Ole Miss head coaches haven't lead their teams to national, let alone conference, championships since the 60s. All while Mississippi continually ranks at the bottom, every year, of all national metrics for education and health.
3. "How would this work (re:NCAA)?" In response to Reply # 2 Tue Apr-02-19 12:21 PM by PimpTrickGangstaClik
You mean like: student athletes get nothing today (basically loaning the school their labor). But after they graduate, they get a portion of the athletic department's "profits"?
5. "Instead of a student being provided cash to cover 4 years of school cost..." In response to Reply # 3
Then repaying a percentage of their salary for 8 years after graduation, to cover that upfront payment, it could be done in reverse. Maybe compensation is provided in the form of a pension of some sort, or a long-term health insurance policy, or just cash.
An example, a student plays basketball--in sold out games and conference play--also at Purdue, he would receive a percentage of that year's sporting revenue (specifically the revenue which now goes to inflated coaching salaries) over the span of 2X the amount of years they played, similar to the 2X payment length for the borrowing students on the other side, since this system has established it as a fair length for repayment.
4. "Make the income from those students tax free" In response to Reply # 0
That benefit would also make "investors" willing to receive a smaller income share from those students.
>This system comes with downsides too. For example, how can we >get folks to invest in students projected to enter important, >not so lucrative fields (social work, teaching, etc.)? It >seems like the all the funding would go to engineers or >business students. Or else, they would have to take a large >chuck of future income from the education/social work >students.
8 years of repayment is certainly better than lifetimes worth of loan debt people have now. But just like the woman in the story who was about to decide on military service to pay for school. Why doesn't government have other, non-military service options to supplement the greater good as a way to offset tuition costs. Didn't the Peace Corps used to function like this?
10. "All debt isn't bad debt" In response to Reply # 9
I just made my monthly mortgage payment on a house that doubled in value within the first year of purchase.
Compared to something like child support, the length and salary deduction percentage is optimal. I know multiple people with 6 figs of students loans. I'm positive all of them would prefer a repayment option that was finite and and manageable as this plan seems to be.
11. "yeah, I was generalizing for emphasis...but still... i'd rather see " In response to Reply # 10
a strong effort to reduce & cap higher education expenses at Public Universities. The disparity in costs among state schools within the same state is kinda crazy. And the overall cost in general is just embarrassing.
14. "I'm not optimistic enough to realistically envision that change." In response to Reply # 11
The plan instead will likely continue to be guiding current students to supplement their course load with transferable low cost courses from community colleges during breaks and holidays, so they can graduate early.
12. "^^ on that Dave Ramsey. Poorly used debt is bad debt" In response to Reply # 9 Tue Apr-02-19 01:48 PM by PimpTrickGangstaClik
All debt isn't bad debt. If you use debt for productive purposes it is very beneficial.
If you need a reliable car to get to work, there is no need to wait until you store up enough to buy one with cash. You can use debt to get a car that you need now instead of waiting years.
Same thing with student debt. If school is going to provide future economic benefit for you, then it is worthwhile to take debt today instead of delaying until you have the cash.
13. "If you graduate with over $100K in loans that are spread out on a " In response to Reply # 12
15 year repayment... that's 15 years adverse impact on your income...
and I believe $100K might be low....
So..I dunnoo... I get that it ain't ALL bad...but it ain't necessarily good either. And in the current job market.....it DEF ain't good for a lot of recent grads
15. "I agree. And that's where the "poorly used" part comes into play" In response to Reply # 13
If you take on $100k of student debt to study something that will likely lead to a job that can pay barely enough to keep up with the interest payments, that is a poor use of debt.
For some people however, that may be a wise investment (medical school, engineers, biz school).
>15 year repayment... >that's 15 years adverse impact on your income... > >and I believe $100K might be low.... > >So..I dunnoo... I get that it ain't ALL bad...but it ain't >necessarily good either. >And in the current job market.....it DEF ain't good for a lot >of recent grads > >"Get ready....for your blessing....."
she spent about 18 months straight, full time, learning coding and software engineering, graduated from that program, and they got her the interview at Dow Jones. She secured the position. Black girl, too...i was so super proud of her. she's a friend of my son
I think she has to pay 12% of her salary for 3 years...which comes out to roughly $28,800.
21. "Wow, that's 100% worth it." In response to Reply # 20
$80K at 19, working for a top institution, she'll have enough saved after two years, with no debt, to afford to do anything in the world she'd prefer doing.
she's from the hood and has been using most of her money to help family pay rent etc...which is the trap that low income kids often get into.
when they come up, they get pressured by family to help out. She really has nothing for herself right now.
this is part of why i don't allow my sons to give any of their money to me for bills etc. i'm teaching them to save and invest their money into their own careers.
But, she's in the same position as a lot of rookie athletes who come from the hood, only younger. The great thing, her earning potential will steadily increase...unlike most athletes, especially after that elusive max contract (and percentages they pay to agents, and managers, and child support, and the street, and champagneing & campaigning)
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