Yes, higher education must be much more of a joint venture, for all involved.

Sir, Sheila Bair is absolutely right that “proceeds from student debts go to colleges, while the risk of repayment falls on borrowers and, if they default, on taxpayers provides little incentive for schools to contain costs [which] provides little incentive for schools to contain costs.” As a solution she refers to “income share agreements” where universities provide some funding and students pay back a small share of their income over some years. “An investment model to put US students through college”, March 15. 

Since in a 2007 Op-Ed I asked whether higher education should not be more of a joint venture, I fully agree with the orientation of these proposals. 

That said I would not leave it solely as a student to college/university level. I believe that professors should also have skin in the game, and so perhaps their retirement plans should include a clear linkage to how their students did.

And why leave it at that? Why not think of securitizing those possible future participations in earnings so as to provide some upfront money to cover expenses? And what about insurance companies investing in these? And what about some students crowdfunding their tuition fees?

Where I do part though from Bair’s opinion, is on the concept that high earning students could/should subsidize the study costs of lower earning professions. That could cause some unexpected distortions, and it is much more a general societal responsibility, which the higher earning - higher tax paying already share.

PS. Sir, over the years I have written several letters to you on this subject... but 😒

@PerKurowski

FT, I have two questions and one observation to make about the securitisation and privatisation of student debt in UK.

Sir, Thomas Hale writes that after “the biggest privatisation of student loans…the first of a series of anticipated transactions that stand to create a market for graduate debt in the UK, the parliament’s spending watchdog concluded the government received too little in return for what it gave up”. “Spending watchdog criticises student loans privatisation” November 22.

The Department for Education, DfE, answered it was “confident that we achieved value for money for taxpayers… as Student loans are designed so that borrowers only repay when they can afford to [which] only means many students will never fully pay back their loans”

I have two questions and one observation to make

First question: Before a student has his debt packaged into a security to be sold off to investors, should he not have the right to make a preemptive offer for it? Not that it makes a real difference but, emotionally it might not be the same for some to owe their government than to owe Goldman Sachs  their student debt.

Second question: If taxpayer should receive value for money for all these student loans, should not those who are supposed to help students to repay their debts, the professors, the universities also have some skin in the game? I mean at this moment it would seem they get all the benefits from the students taking on debt, at no cost or risk for them.

I recently tweeted: Have you ever seen a university stating a normal investment disclosure like: “Warning, if you pay us for your studies by taking on debt, you might not earn enough to repay it.” 

Hale writes: “Securitisation, a process where assets are packaged together and sold on as bonds to investors, ranging from pension funds to alternative asset managers”

It is with respect to that I would like to make an observation, namely that of reminding that securitization is basically like making sausages, the worse the ingredients, the higher the profits. So pension funds, please beware!

@PerKurowski

How many university professors know they are educating kids for jobs not to be had?

Sir, Mo Ibrahim writes: “the more time young people in Africa spend in education, the more likely they are to be unemployed… It highlights the worrying mismatch between the skills our young people are taught and those needed by the contemporary job market. This is a recipe for frustration and anger” “Africa’s youth, frustrated and jobless, demand attention”, April 13.

Scary! But it is even scarier if we connect this to Rana Foroohar “Dangers of the college debt bubble”, April 10 and Alex Pollock’s letter of April 12, “Colleges are acting like subprime loan brokers”.

A question. In our universities how many of the professors might be aware of the slim chances of their students’ landing a job in the future that will allow them to service their student debt and have a life… and still say nothing?

In many occasions over the years I have written about the needs to better align the remuneration of professors, at least their pensions, with the future of their students.

It is amazing to see so many professors criticizing bankers for poaching their clients while they de facto behave just the same. Load up the kids with loans, so that we can collect (bonuses) today! 

It will not work, and it will come back and bite us all.

PS. If I owed a student loan I would ask for a debt to equity conversion, offering a percentage of my after tax earnings over a certain amount for a definite number of years.

http://teawithft.blogspot.com/2010/04/if-incentives-are-correctly-aligned-all.html

http://onechildonevote.blogspot.com/2007/01/should-not-higher-education-be-more-of.html

PS. We need worthy and decent unemployments

@PerKurowski