Joey Rivenbark, Analytics Editor
Joey Rivenbark
The student debt crisis is a reality at NC State, and it is both terrifying and heartbreaking. The NC State class of 2017 had an average debt per borrower of $24,053, with over half of students being borrowers. Knowing that the class of 2017 had about 5,900 graduates, that adds up to over 73 million dollars of debt (more than one country’s entire 2017 GDP). I want to repeat, terrifying and depressing.
These debts are the symptoms of the rising price of higher education, which itself is a result of society disproportionately rewarding those who are able to afford the college experience. Barring any large change in the culture of the United States, it seems economically infeasible to simply lower the price of university without somehow paying for it indirectly. So the real question that needs to be asked is this: What is the best way to treat the symptom, debt?
Enter equity. Any student who has taken a basic business, accounting or economics class has probably heard of equity. For businesses, it takes the form of stocks and shares. But it also has the ability to work for students in the form of an income-share agreement. Investors (usually a university entity) will cover your college expenses if you agree to give them a certain portion of your future income for a predetermined amount of years.
Simple, less stress, fewer lives ruined, and the potential for a fundamental change in the way life after a degree is treated. Universities facing the debt crisis head-on, like NC State, need to implement income-share agreements immediately.
Usually amounting to around 3-4% for up to 10 years, income-share agreements have a few basic benefits. Perhaps the largest is that if the borrower’s source of income is somehow jeopardized by them being laid off or making less, they don’t have to worry about keeping up with payments, unlike loans. After all, 3% of $0 is still $0. So if alumni cannot immediately find a job with their degree, their life is not going to crumble around them.
Of course, there is a caveat to this. Borrowers are on the hook for the full 10 years, and if they are unemployed for a portion of that, the clock stops. But this safeguard is far preferable to ruining someone’s credit score.
With income sharing, universities also have to believe in the value of an education. The argument that degrees are overrated and job markets are oversaturated is one that has few consequences on the actual educator. NC State doesn’t need to care what happens to us after we get a degree.
In a system like this, however, institutions have a direct and vested interest in the success of alumni and would want to make sure they receive high-quality educations that prepare them for the workforce, rather than just “surviving.”
There is even a possibility that once a university has invested in a student, they could work with that student to help increase the probability they are hired and paid well. Alumni would then be set up well even after the agreement is over due to resume building and their current positions. Actions like these are logically sound and mutually beneficial, so it is reasonable to hope that they are a possible outcome.
Income-share agreements are spreading, with colleges all over the country launching their own programs. Even other engineering universities like Purdue, whose average debt per borrower was close to ours in 2017, offer ISAs.
But NC State cannot do this without a few ground rules. The first is that only the university should be a student’s investor. Until this practice is more widely used, it needs to take place in the most controlled environment to ensure students are not preyed on due to a lack of knowledge.
This also means that students need to be aware of what they are signing, which considering that this type of agreement is largely unheard of has the potential to be a problem. Lastly, the autonomy of alumni cannot be sacrificed. If a graduate gets a degree but wants to do something unrelated, NC State cannot have “voting rights” over them.
There really is nothing stopping NC State from adopting this within the next year. In fact, the merits of income-share agreements make me hope that NC State adopts a system like Purdue’s soon. Simply offering this option to students in need is a choice that they deserve, and it could go a long way for the future graduates of NC State.