The Future of Student Loan Debt

19 | There is a crisis of college student loan debt that is mind-blowing in its scope. Let me share some numbers with you: 44.7 million Americans have student loan debt representing $1.56 trillion owed to the government and of that HUGE amount of money, 11.5% of student loans are 90 days or more delinquent or in default. Add to these facts that students are still applying to US Universities with no sign of slowing down, at least according to the statistics portal – Statista. So, the cycle of student loan debt will continue or, will it? I happen to think that the future of student loan debt is no more long-term debt, thanks to “income sharing.” Tune in to find out what I mean.

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About the host:

Over the past decade, Jim Stroud has built an expertise in sourcing and recruiting strategy, public speaking, lead generation, video production, podcasting, online research, competitive intelligence, online community management and training. He has consulted for such companies as Microsoft, Google, MCI, Siemens, Bernard Hodes Group and a host of startup companies. During his tenure with Randstad Sourceright, he alleviated the recruitment headaches of their clients worldwide as their Global Head of Sourcing and Recruiting Strategy.  He now serves ClickIQ as its VP, Product Evangelist.

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PODCAST TRANSCRIPT

Hi. I’m Jim Stroud and this is my podcast.

There is a crisis of college student loan debt that is mind-blowing in its scope. Let me share some numbers with you: 44.7 million Americans have student loan debt representing $1.56 trillion owed to the government and of that HUGE amount of money, 11.5% of student loans are 90 days or more delinquent or in default. Add to these facts that students are still applying to US Universities with no sign of slowing down, at least according to the statistics portal – Statista. So, the cycle of student loan debt will continue or, will it? I happen to think that the future of higher education is income sharing. I’ll tell you why I think that, after this, special message.

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  • Lambda School is doing something that I think is revolutionary. Or, at the very least, is leading a revolutionary trend. Lambda School trains people online to be software engineers at no up-front cost. Instead of paying tuition, students can agree to pay a percentage of their income after they’re employed, and only if they’re making more than $50k per year. If you don’t find a job, or don’t reach that level of income, you’ll never pay a cent. Drop the mic’. Boom!Lambda School is one of the few education institutions doing this type of deferred payment initiative. The official name for this type of program is called – Income Sharing Agreements. Purdue and startup boot camps like App Academy and General Assembly offer similar ISA (income sharing agreement) programs. For the record, I love this model because it makes perfect business sense to me. ISA schools succeed when the students succeed. Such being the case, the curriculums lean towards high-salary jobs since they teach skills like iOS development, Android Development and Data Science. Looking at Lambda School objectively, its only been around a year. Will this idea work long-term? I hope so, but I don’t know. There are several successful alumni featured on its webpage and quite recently they raised $30m to expand its 6-month programs into high-demand industries like nursing and cybersecurity.So, are income sharing agreements the model all schools should adopt? If they did, what would likely happen? Umm… Let me speculate.
  • The Lambda model works well for jobs where the salaries are high. Such being the case, I don’t imagine Lambda supporting careers where the average pay is below… $50,000.00. Other schools seeking to duplicate this model, would likely follow suit which means, there would still be a lot of college debt but for people with lower incomes which, is not a good thing. But on the flip side, if more people join schools with income-sharing agreements, those jobs making less than $50k will have to raise their salaries in order to attract talent.
  • Something else to consider, a student in an income sharing agreement is not obligated to work; so during periods when the student is not working and has no income, the student does not have to make payments on their income sharing agreements. Compare that to the average student loan that you have to pay back whether you are working or not. I think this is a good thing as it will reassure students that they will only owe money on worthwhile education. So, how will some of the IVY league schools compete with that? I think they will have to offer fewer course like: Underwater Basket Weaving offered by the University of California at San Diego; or courses on pop stars like – Lady Gaga which was offered at The University of VA, officially entitled – “Gaga for Gaga: Sex, Gender and Identity.” Or, the “Joy of Garbage” which is a course designed to teach students how to manage garbage and encourage them to make less waste and recycle more. You can sign up for that at UC Berkeley.
  • And finally, one last concern, should this income sharing agreement model take off like I want it to. I think some regulation would have to be in place to protect students from predatory practices. For example, Lambda’s program puts a cap on how much money you pay back – $30,000. Competing programs could easily set a cap much higher, add late fees and without the safety net of being accountable only when you are working; how would that be any different than a government sponsored student loan? It wouldn’t be. It would be the same type of debt under a new name.

I am hopeful that the Lambda school model of income sharing agreements catches on. A good education, in exchange for a percentage of your income for a limited time is SOO much better, in my opinion, than graduating like the average college student with $39,000 in debt with 10 years to pay it back.. with interest. But that’s just my opinion. I would rather hear yours. A penny for your thoughts?

If you love what you heard, hate what you heard or, don’t know what you just heard, I want to know about it. You can reach me at my website – www.JimStroud.com. In addition to finding source material and related information for this podcast episode, you’ll find other goodies that I hope will make you smile. Oh, before I go, please financially support this podcast with a little somethin’-somethin’ in my virtual tip jar. (There’s a link in the podcast description.) Your generosity encourages me to keep this podcast train chugging down the track. Whoot-whoot, whoot-whoot, whoot-whoot…

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