While Democratic presidential candidates compete to shout “Free College” the loudest, a bipartisan group of lawmakers is taking a subtler—and potentially more effective—approach to defusing the student loan crisis, proposing legislation that would provide a federal legal framework for income share agreements.
Income share agreements allow students to pay zero tuition today in exchange for a fixed percentage of their income tomorrow, and tie education providers’ financial fate to their graduates’ earnings. This financing model may be too niche and technocratic for campaign tweets, but the agreements are a potentially powerful instrument for protecting students and addressing not just the cost of college, but also its value.
The student loan debt balance, now well over $1.6 trillion, is a stern reminder that in higher education, you get what you pay for—and how you pay for it. Taxpayers and tuition-payers currently just pay colleges to enroll students. Higher education’s funding isn’t contingent on how many students walk across the graduation stage, much less on how many land good jobs. It’s not surprising then, that this system produces one student loan default for every two bachelors’ degrees.