How To Solve The Student Debt Crisis

Release Date
January 4, 2017


Debt Economics Education

Government and media are overwhelming champions of getting a college degree (“investing in your future”), but when 6 in 10 students aren’t graduating within four years, it may not be the right investment for all people. Jared Meyer, author of “Disinherited: How Washington Is Betraying America’s Young” discusses a potential solution to the Student Debt problem that approaches education differently.

2016 Presidential Election: Student Debt – Learn Liberty (video): Professor Don Boudreaux explains the different sides of the debate on how to address the student debt crisis.
The devaluation of higher education (blog post): This article explains how government programs to allow more students to go to college devalue the worth of a college degree.

Jared Meyer: Let’s say college was an investment that paid off for everyone. There could be an argument for public funding or at least public subsidies for higher education, but that’s not the case.
Evan S.: Got more audience questions. William [Han-nah 00:00:17] asks, “Is there a liberty-based solution to solving the student debt crisis?” William, thanks for the question.
Jared Meyer: I think in the long term there is a more liberty-based solution in getting the government out of providing higher education funding. If you look at it, investing in a qualified student for their future is a great investment, and you all know what it looks like. Someone who did very well in high school, does great on their standardized test, goes and studies engineering at Stanford-
Evan S.: Has four internships while still taking five classes.
Jared Meyer: Obviously, not every student’s going to be on this level, but that’s clearly going to be a good investment. This is something investors could connect with. There’s an idea called income-based payments or income-shared agreements where investors would pay for a pool of students to go to college.
The rates they have to pay back at would actually switch based on your past performance, maybe your past work history, your academic success, your major. All these different things. What school you’re picking, so that if you went and studied an in-demand field where you’re pretty much guaranteed to get a return and make back the money, you get to pay a lower interest rate, where right now everyone has to pay the same rate on the government loans.
I think that idea of opening up individual investors to have a stake in the student, and then using, let’s say, a percent of that student’s future income as payment back, that can be somewhere we could go. This has gotten quite a bit of interest in Washington, but the problem is there’s really no clear legal structure on how this would work right now.
Evan S.: There’s always issues when you introduce money into education. I mean, there are people who don’t want to pay, college athletes. There’s this squeamishness about “I’m here for an education. I’m not here to make money.” If you have students being treated like startups and having venture capitalists pumping money into students, you’re going to have a lot of people finding that not to be a great thing even though it might work.
Jared Meyer: Yeah, and I think it’s an option that we should pursue a lot more. Let’s say college was an investment that paid off for everyone. There could be an argument for public funding or at least public subsidies for higher education, but that’s not the case. The numbers I laid out earlier, 6 in 10 students not graduating within four years. That’s clearly not an investment. Then, of those who do end up graduating, 45% of them about, end up working in jobs that don’t require college degrees. We have gone too far now in pushing all students into college.