COMMENTARY | Big things are on the horizon for investors: According to The Street, Republican senators Marco Rubio and Tom Petri have created a bill dubbed the Investing in Student Success Act that will place income-sharing agreements, where investors can lend people lump sums of money in exchange for a percentage of their income over a period of time in return, on firmer legal footing. The Act is intended to drastically cut student loan debt by allowing students to fund their college education through income-sharing agreements. Some students will hit it big after graduation, generating profitable returns for their investors, while those who do not land high salaries are not forced to pay – everyone wins!
For Rubio, the Act could help give him some much needed political common ground between conservatives and liberals. The ability to invest in students who are majoring in lucrative fields – STEM, medicine, and law – will appeal to staunchly capitalist conservatives, and the ability for middle- and working-class college students to graduate without having traditional loans to pay back will appeal to liberals. Both the top dog and the underdog receive some sort of benefit from the Investing in Student Success Act, giving Rubio kudos from both capitalists and populists as he mulls a 2016 presidential candidacy.
And, as an added bonus, the Act might fix education, both at the post-secondary and secondary levels.
Though Rubio has mentioned the Act as likely being more intended for graduate students, aggressive investors will undoubtedly want to invest in high-performing undergrads who show promise, meaning that high school seniors could potentially land ISAs before even setting foot on a college campus. Knowing that investors might fully fund one’s college education even before the first day of lecture would be a tremendous incentive for high school students to work hard, develop a good resume, and keep a clean record.
As a high school teacher, I can attest that many students are smart but unmotivated, feeling little incentive to prove themselves. They do not see much potential reward for extra effort: You’re either the valedictorian or salutatorian who get full-ride scholarships, or you’re everyone else who has to take out big loans. But what if a teen’s efforts could translate into real dollars from investors who wanted to get in on the ground floor of a budding career? Wouldn’t that result in more effort in the classroom and as part of the community?
Though critics would deride the idea of investing in 18-year-old high school seniors as unwise and taking advantage of youthful naivete, don’t traditional student loans do the same thing? Either way, be it investor or lender, someone is taking a leap of faith on a teenager with ambitions and dreams. Why not, for the good of society and the economy, allow it to be investors rather than lenders who play the risk-return game? When investors win, they can win big, but when they lose the investee, meaning the college graduate, does not suffer a lifetime of negative financial and social consequences.
How much productivity is our society missing out on as our teens languish and laze, unmotivated, because the current system of higher education does not appear to directly reward effort? For better or worse, capitalism works at providing motivation. Not everyone will win, but won’t those who deserve to win have a much better shot with ISAs and the Investing in Student Success Act than under our current system of student loans, where everyone from the C- slacker to the A+ Eagle Scout have to pay back the same principal and interest?
As the A+ (okay, A-) Eagle Scout, I would have loved the ability to compete for investors. It would have kept me motivated and on the ball during my senior year. I would have actually studied and pursued the A instead of settling for the 88. I would have worked harder to get that varsity letter. I would have worked harder in speech and debate to make it to nationals instead of being satisfied with state. So many students are in the same boat: They can do better, and reap the lifetime of intellectual and physical benefits from that effort, but are not motivated.
Letting students compete for the investor dollars just makes sense. Marco Rubio, despite my disagreement with many of your other policies, I salute you! And so should my Economics students.