A few years ago the Obama administration took over the student loan business. That then represents an aggregation of that various entities that previously did it. The problem is, this is directly the opposite direction in which society is moving. As explained by my Theory of Disaggregation, the Internet connects producers and consumers directly with no middle man required. This then inevitably leads to society restructuring from one structured primarily on physical proximity of resources, to one based on intellectual proximity of resources. This means that people who have similar interests can collaborate online even if on opposite sites of the globe. Improved communications (including transportation) means that most of our goods in the US are actually made in China and then shipped to us.
Back to college funding.
Meet Alaric Blair, a 47-year-old elementary school teacher from Calumet City, Ill. He is strict, pleasant and ambitious. Right now, he’s taking advanced classes at Chicago’s Dominican University, hoping to recast himself as a school principal. It’s costing him $10,000 — and he has no desire to get tangled up in the current student-loan mess.
That’s where Blair’s story gets intriguing. Rather than borrow money to attend Dominican’s program, he has arranged $10,000 of equity financing through Education Equity Inc. It’s an ingenious, Chicago-based start-up that hopes to change the way many students pay for their schooling. For each $5,000 of financing that Blair obtains this way, he agrees to repay a total of 0.7% of his future earnings over the next 10 years.
It makes a lot of sense to do this. It forces people to look at what they are actually getting into and it will match up money with people who will get an actually useful skill.
Of course it’s not fair right? That is what some will say about something like this. What if some kid wants to get a Ph.D in Greek Literature? I have no problem with that but they shouldn’t be subsidized with tax money. I don’t think there should be loans at all. In fact, I guarantee if there was no federal student loan system, college wouldn’t cost nearly as much as it does now. Any price will rise to absorb a subsidy, it’s just economics. Of course there wouldn’t also be $47.8 million dollar dorms on some campuses.
I like this program and think we will see more like this in the future (unless the government makes it illegal). Capital should be matched up with potential. That is the only way to make sure we allocate finite resources wisely.