1. Welcome! Please take a few seconds to create your free account to post threads, make some friends, remove a few ads while surfing and much more. ClutchFans has been bringing fans together to talk Houston Sports since 1996. Join us!

What does everyone think about ISA(Income Sharing Agreement)?

Discussion in 'BBS Hangout: Debate & Discussion' started by pirc1, Apr 4, 2016.

  1. pirc1

    pirc1 Contributing Member

    Joined:
    Dec 9, 2002
    Messages:
    13,805
    Likes Received:
    1,561
    What do you all think about Income sharing agreement for funding college education. You will have a cap for max payment amount, time off for education, peace corp, etc. You will have a fixed number of payments for a fixed percentage of your income based on your year in school and your major, if you make less than a certain amount, you will pay 0.
     
  2. JuanValdez

    JuanValdez Contributing Member

    Joined:
    Feb 14, 1999
    Messages:
    31,813
    Likes Received:
    9,480
    My first thought is that the schools will have to do a few things to ensure their revenues:

    1. Set the cap as high as possible so that the successful graduates can not only pay their own burden but also offset the costs of the free riders, those that failed to meet earnings expectations.

    2. Tailor curricula to the areas with the highest salaries, preferably with the shortest payback period. Don't bother with a philosophy department, because it'll only produce a lot of bad debt.

    3. Recruit students who want to maximize wealth, not students with intellectual curiosity.

    It'd introduce some distortions to higher education, but it's already pretty messed up now. For some schools that position themselves in the market as training centers anyway, it's probably appropriate given that their mission is to maximize earning potential anyway. For the elite schools more concerned with academia, research, and innovations it probably doesn't fit so well. But multiple models can coexist. Might as well try it.
     
  3. cml750

    cml750 Contributing Member

    Joined:
    Jun 14, 2002
    Messages:
    4,936
    Likes Received:
    1,366
    Sounds like socialism.
     
  4. Space Ghost

    Space Ghost Contributing Member

    Joined:
    Feb 14, 1999
    Messages:
    11,789
    Likes Received:
    4,030
    Yup. Those who work hard in the early years of high school and earn scholarships have to pay for those who want the easy way out and get pointless liberal arts degrees.

    No thanks. How about we concentrate on the sky rocketing costs of education first.
     
  5. BleedRocketsRed

    BleedRocketsRed Contributing Member

    Joined:
    Jul 15, 2009
    Messages:
    7,027
    Likes Received:
    488
    Sharing is caring?
     
  6. Liberon

    Liberon Rookie

    Joined:
    Nov 10, 2009
    Messages:
    8,838
    Likes Received:
    841
    It's a greedy business first and foremost.
     
  7. pirc1

    pirc1 Contributing Member

    Joined:
    Dec 9, 2002
    Messages:
    13,805
    Likes Received:
    1,561
    I think this is actually a pretty good idea depend on how it is done. It would be better than getting a private loan, you do not have to worry if do not make enough after you graduate, and the cap means the real successful people would not be giving up too much either. The cap is two and half the borrowing amount with max pay period of nine years.

    People who are saying this is socialism, what exactly is wrong with it? When you are going to college, no one knows for sure if he or she will succeed, so both the students and the lender are sharing in the risk. This is actually going to the first of its kind program among large schools.

    http://www.purdue.edu/backaboiler/
     
  8. okierock

    okierock Contributing Member

    Joined:
    Oct 3, 2001
    Messages:
    3,120
    Likes Received:
    186
    Nothing is wrong if your the person who got free college and everything is wrong with it if your the person paying for the freeloaders.

    Why should anyone have to pay for something that has no value? If you make a mistake and spend money on something of no value then you should pay for your own mistake.

    It really isn't hard to understand.
     
  9. pirc1

    pirc1 Contributing Member

    Joined:
    Dec 9, 2002
    Messages:
    13,805
    Likes Received:
    1,561
    This works just like insurance, you never know if you will have hardship, maybe everyone is doing great and the pool of money just grows over time. What is wrong, so only if we saddle the unlucky students with a debt they cannot pay off for the system to be considered fair? In this case it is the school fund that setup the ISA, they are not in it to make a lot of money, they just want the students to succeed.
     
  10. okierock

    okierock Contributing Member

    Joined:
    Oct 3, 2001
    Messages:
    3,120
    Likes Received:
    186
    Students are not lucky or unlucky they make choices and those choices have consequences.
     
  11. pirc1

    pirc1 Contributing Member

    Joined:
    Dec 9, 2002
    Messages:
    13,805
    Likes Received:
    1,561
    What if they are sick and drop out of school? What if they have accidents? What if there is a major recession like in 2008? I am sure everyone who could not afford to pay off their school loans choose to default of their free will.
     
  12. Baba Booey

    Baba Booey Contributing Member

    Joined:
    Jul 25, 2012
    Messages:
    2,092
    Likes Received:
    138
    Students who graduated from college in 2008-10 were certainly unlucky. Not everything is related to the choices you make. Sometimes **** happens that you have no control of.
     
  13. okierock

    okierock Contributing Member

    Joined:
    Oct 3, 2001
    Messages:
    3,120
    Likes Received:
    186
    That is life, but you are still responsible for your decisions. Life is not equal and it is not fair.

    I always wanted to be an NBA player but I'm short and slow.... I think there should be a system to pay for the fact that NBA players are tall and make lots of money and I wanted to do that too but I was unlucky.
     
  14. pirc1

    pirc1 Contributing Member

    Joined:
    Dec 9, 2002
    Messages:
    13,805
    Likes Received:
    1,561
    Thus you are against medical insurance, you are against social security, you are against medicare right? Why do we ever help the weaker members of the society, survivor of the fittest, yup that is surely the best way to go.
     
  15. CometsWin

    CometsWin Breaker Breaker One Nine
    Supporting Member

    Joined:
    May 15, 2000
    Messages:
    28,028
    Likes Received:
    13,020
    Insurance and public services are the socializms.
     
  16. pirc1

    pirc1 Contributing Member

    Joined:
    Dec 9, 2002
    Messages:
    13,805
    Likes Received:
    1,561
    I expected a discussion about if the option is good for investors, students, parents, school etc. I never thought it would a discussion about socialism. :grin:
     
  17. London'sBurning

    London'sBurning Contributing Member

    Joined:
    Dec 5, 2002
    Messages:
    6,354
    Likes Received:
    3,630
    I've never needed to call the cops or have the fire department come over to my house for assistance, yet those damn free loaders in need get to use that service as much as they want with my tax dollars. :mad:
     
    1 person likes this.
  18. Rashmon

    Rashmon Contributing Member

    Joined:
    Jun 2, 2000
    Messages:
    16,873
    Likes Received:
    9,679
    Quoted for truth...
     
  19. pirc1

    pirc1 Contributing Member

    Joined:
    Dec 9, 2002
    Messages:
    13,805
    Likes Received:
    1,561
    Yes, my neighbor's house was on fire last year, the fire trucks, police cars and ambulances were parked all over my lawn, I should charge him for the damage to my lawn! Socialists! :eek:
     
  20. JuanValdez

    JuanValdez Contributing Member

    Joined:
    Feb 14, 1999
    Messages:
    31,813
    Likes Received:
    9,480
    Actually, it doesn't sound anything like socialism. It sounds much more like capitalism to me. The school is making an investment in the human capital of individuals. Some of those investments will pay off and deliver good returns. Other investments won't work out so great and you take a loss. The school aims to have a sufficiently successful portfolio with more good investments than bad.

    On point one, the schools would know going in what the earning potential is of their graduating liberal arts majors, so they can calibrate their spending on the program and the terms of the ISA to make the cohort of such graduates profitable. Or, if they can't make the math work, they probably wouldn't offer such degrees. They can probably command less profit from those students than they can from the engineers, for example, but companies take varying profit margins for customer types as it is anyway. Assuming you can more than cover the variable costs of serving the liberal arts major segment, the engineers are still better off having them around even if margins are thinner, because it gives the school greater scale on which to spread their fixed costs.

    On point two, a pricing scheme like this can address the tuition inflation problem. I see this problem as resulting from the lack of price discrimination on the part of the consumer (the student and his parents) because the value is potentially high but uncertain, and the dynamic is complicated by the infusion of third-party cash from loans that empowers people to buy more than they can afford. With an ISA, the value of the education is still uncertain, but it is tied directly to the price thereby eliminating value uncertainty as a price distortion. And, since the school will now take annuity payments instead of lump sum loans, you don't have an artificial inflation of one's ability to pay. The price is tied to your ability to pay.

    That sounds to me like an argument for the ISA. If the college offers a service that has no value, why should they collect any payment? If you bought a car and the car didn't work, you'd want your money back. Likewise, if you buy an education and the education doesn't work, you want your money back. With a scheme like this, you pay what the service is worth (insofar as the value of the service is salary enhancement -- as I'd said earlier, I think this scheme is better suited to training-oriented schools and not so well suited to Ivy League schools).

    The more I think about it, the better I like it. It's a product value proposition that leverages market forces to spread risks among the stakeholders in a different way. In the traditional model, universities have very limited exposure to the risks of their students failing in life. The lenders had bad debt risk, but are compensated with interest. The student, who is the least-informed party and the least able to mitigate and manage the risk, takes almost all the investment risk in this endeavor. With an ISA, lenders get out of the relationship (though I could see universities securing their loans from banks with the ISA revenue streams from students, or even securitizing them), and universities share in the risks of the investment. They probably deserve a premium in compensation for taking on risk, but with the exposure they'll probably get much more adept at mitigating the risk, which would mean better outcomes for the students.
     

Share This Page

  • About ClutchFans

    Since 1996, ClutchFans has been loud and proud covering the Houston Rockets, helping set an industry standard for team fan sites. The forums have been a home for Houston sports fans as well as basketball fanatics around the globe.

  • Support ClutchFans!

    If you find that ClutchFans is a valuable resource for you, please consider becoming a Supporting Member. Supporting Members can upload photos and attachments directly to their posts, customize their user title and more. Gold Supporters see zero ads!


    Upgrade Now