The Student Loan crisis is building.

We need alternatives to federally subsidized student loans.

Some novel tools do exist but people are ignorant.

A thread. Learn something 👇
Currently subsidized student loans put all the risk on the borrower.

This is not now any other loan functions.

The borrower also operates in a low information environment.

They are borrowing against an asset (the degree) but have no idea what the value of the degree is.
The lender will loan money to any student who wants it.

And then the students are bound for life to pay it back because loans are current non dischargeable in bankruptcy.

Again, unlike any other loan.
The student has low information, is pressured by society and culture, and the lenders have 100% recourse - so they hand out loans like crazy.

That’s how we got here. Where total student loan debt has exploded and the wrists of youth are shackled with a lifetime of debt.
Now there is an alternative to the current system. It’s called income sharing agreements.

The borrower promises to pay a fixed percentage of their income over time as repayment.

The percentage never changes. The time period never changes.
Some idiots on twitter will scream indentured servitude at this model. If you hear someone say that, you know they are an ignorant retard.

Let’s discuss why.
- the percentage of your income never changes.

Which means yes, that when you make more money you pay more. But when you make less money - you pay less!

It also means. If you make zero. zero.

Which means folks can take time off to have kids or start a biz.
But how do they figure out what percentage rate to charge?

Here is where it gets really interesting.

The % rate is based on the degree you get.

If you get a degree that will pay more sooner (finance) it’s lower.

If it’s a degree which pays less (gender studies) it’s higher
Which means..... the repayment risk is shared by the lender! Holy shit what a crazy idea!

And in order to accurately assess the future value of a degree - ALL college degrees in ALL subjects will be subject to S&P style credit ratings.

A third party will assess a degree value!
Imagine that? A third party assessment of all degrees (and course work) at each college.

This would properly incentivize people into choosing degrees which have societal value rather than ones which are useless.

The net gain to the country would be astounding.
As it stands bc of subsidies student borrowers make horrible irrational decisions which drive up the costs for everyone.

Income sharing agreements would make college loans and degree selection transparent and rational.

So many societal problems would be solved.
Income sharing agreements are not indentured servitude. They are a brilliant way to erase net losses to society, bring transparency to the degree market, incentivize rational choices AND cool out the culture wars.

Everyone should support ISA’s but especially people on the right
If you fancy yourself a fan of free markets and free information - then you should get behind ISA’s.

If you want borrowers to have flexibility and a chance to stay home and have kids or start a business - support ISA.
If you want to starve the bloated vampiric university admin class currently sucking the life from your children. Support ISA’s.

And finally if you want to help end the culture wars and neuter the toxic breeding grounds in activist “degree” courses on campus - support ISA!

You can follow @jackmurphylive.
Tip: mention @twtextapp on a Twitter thread with the keyword “unroll” to get a link to it.

Latest Threads Unrolled: