November-December 2008
by Staff, Utne Reader
As the cost of higher education has grown at an unprecedented rate and government-backed loans have dried up, students and their families have turned to the private sector for assistance. In 2006–07, private loans totaled $17 billion, up from $2 billion a decade earlier. Now, because of today’s flagging economy and tight credit market, even these high-interest lenders are closing their doors to young American dreamers. Is there anything else the free market can do?
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The American online (June 12, 2008) proposes modern indentured servitude. Investors would front students’ tuition in exchange for a percentage of their future earnings. A securities market would emerge to rate borrowers on SAT scores, grades, and majors. School choice would also be a factor, as investors gamed out graduation rates, job placement, and potential pay. (Philosophy majors, fret not: The government might still fund you and others who aim to make a difference.)
The Chronicle of Higher Education (July 25, 2008) suggests a less complicated, more forgiving tack: Offer tax credits to employers that pay employees’ monthly loan principal, leaving grads to cover the interest. Businesses would save on employee retention and tax bills. And loan-laden grads would just add another box to their paycheck stubs, which already show subtractions for health insurance, 401(k) contributions, and Social Security funds.