Paying More to Earn More

Catch up on this week’s show above.


On this week’s show, we talked about how dire the student debt crisis is. But think bigger.

In 2017, the estimated total sum of student debt reached over $1.4 trillion, with a whopping loan default rate of 11.2 percent, according to nonprofit Student Loan Hero.

In the show, Dartmouth sociologist Jason Houle mentioned the idea of income-based repayment programs for college students, but said that the enrollment rates in these programs are startlingly low. Let’s explore another possible alternative proposed by Penn State Professor Sajay Samuel.

In his TED talk, Samuel outlines three major advantages of, what he calls, income-based tuition programs (IBTs). IBTs are designed to predict students’ potential earnings following graduation and then peg tuition to that prediction. That means a student might pay more or less tuition, depending on what they study. It can help college kids make up their mind about what career to choose. Think of it like an interstate sign that tells you what lies ahead—you can choose to go further or quickly get off at the next exit.

He explains that some students need more resources for their classes. Take, for example, a biomedical engineering student. Think of all the computer programs and lab equipment her professors may require. Then look at a political science student. He just might need a good old copy of Rousseau’s The Social Contract or Hobbe’s Leviathan.

Samuel believes that flat tuition rates across all majors is inherently unequal. Some students shell out money for their peer’s costs, without the full use of higher-ed resources for themselves.

Lastly, he asserts that IBT programs would lift the burden of anxiety surrounding American college students’ investment in a postsecondary education. Cost of attendance would be accurately appraised and students know they will have returns.

Samuel’s idea of tuition based on a student’s potential earnings seems pretty sound, right? While it’s not yet been put into practice, some programs are making strides towards an IBT system.

As featured in a New York Times article, companies like Pave or Upstart attract investors or “backers” of a student’s education, who pay a portion of the student’s cost of attendance. This hints at tuition becoming proportional to a student’s chosen field of study. Specifically, Upstart estimates one’s potential earnings through field of study, grade point average, college attended, as well as other factors. In return, the student would then pay a percentage of his future income for a set amount of time to the investors, say, 5% for the next 20 years.

Of course, many criticisms arise from this type of program. First, opponents argue this is a modern form of indentured servitude. Students work just to see their hard-earned money go away. Next, programs like these may dissuade lower-income students from entering a field, because a shiny price tag herded them away. Additionally, these poorer students would see an extra salary deduction that they just might not be able to sustain, or even want to. It might even be possible that these pay cuts total more than if the student were to take out loans.

On top of all this, there exists the risk that these systems might wrongly estimate a student’s earning potential, which may spell trouble for students and universities alike. 

What do you think about the missions of companies like Pave or Upstart? Are they an alarming trend, or a valuable asset to students? Let us know in the comments below!