
Oregon Proposes Investment Model For Student Loans - sethbannon
http://techcrunch.com/2013/07/07/move-over-peter-thiel-oregon-proposes-investment-model-for-student-loans/
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awt
No reporting on this idea ever discusses what appears to be a fatal flaw in
the basic idea: there is still no incentive for universities to lower their
costs. They can still charge as much as they want for an english degree and
the state pays them for it up front. The public is on the hook for the bill
when the english major fails to get a job.

EDIT:

Just wanted to add that this is the sort of brain-dead reporting that allowed
the student loan industry to essentially socialize loan losses by not
permitting students to default on student loans and by allowing the federal
government to guarantee them, subsequently allowing education costs to sky-
rocket.

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yummyfajitas
The incentives are actually _worse_ than the student loan model, since the
incentives to the student to major in something that makes money are now
reduced.

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karamazov
This has a critical flaw: those expecting to work in a high-paying field will
self-select more traditional loans, whereas those pursuing a degree with less
promising income expectations will disproportionately opt for this type of
loan.

If a university (or a state) chooses to force everyone to study under this
model, they'll find that students expecting high-paying jobs will go
elsewhere, and students expecting low-paying jobs will flock to those schools.

Fundamentally, if I'm planning to study CS for the next four years, it's a
good bet that I'll be making more money than someone getting an English
degree; and I don't particulalry want to subsidize their education with my
future earnings.

There's a close parallel here with John Galt quitting his job in Atlas
Shrugged.

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icn2
This is the part I am always confused. If we all know graduates getting an
engineering degree(CS,EE) make more money than graduates with english/arts
degree. We should see an obvious trend students heading to engineering majors.
Why still so many students go to english/arts/... major and they know they
will make less promising income?

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cdavid
Same could be said of doing a MBA or medicine compared to STEM. Yet few people
on HN made that choice.

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icelancer
Not even close RE: MBA. There is an insane glut of MBAs because of rational
choice to go there where MBAs used to have a ton of opportunity. Then the
economy crashed and now STEM fields are being mined for business intelligence
/ game theorists that can learn rudimentary business practices on the fly (or
the company will pay for a night-time MBA).

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wtvanhest
The majority of people who struggle with getting high paying work after an MBA
previously struggled with getting high paying work as a Stem graduate.
Something like 40% of MBAs are engineers.

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Ensorceled
I think education should be covered under the social contract ... "we'll give
you a good education, you pay your taxes and pay off that huge debt we
accumulated".

I'm not sure how we expect these next few generations to pay off their rapidly
increasing student loans, deal with the massive debt we are leaving them with
AND fund social security/medicad.

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prostoalex
So they're not employable enough to cover their loans, but suddenly employable
enough to boost tax revenues?

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Ensorceled
My point is that we can't keep loading them up with debt, both personal and
institutional. I'm not sure what your point is.

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dano414
1\. This s not a bad idea. 2\. Student loans should have zero interest. 3\.
Don't take out student loans for any school that is for profit, or advertises
on T.V.. 4\. Remember student loans are not bankruptable. 5\. Your interests
will change as you age. 6\. If you can swing it, get a bachelor's degree. 7\.
I despised "networking". I made friends with people I truely liked. Well, I'm
paying for it now. I hate to say this, but force youself to be friends with
"people of means". I know they have the personalities of drift wood. 8\. With
the right direction; I feel an ambitious student could lean what they need off
the Internet. 9\. If you do make a lot of money in your life--Remember what it
was like to have nothing. 10\. Oh, yea--really think about marriage. I'm not
sure it's necessary anymore.

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codeonfire
This betrays the true views of government with regards to education.
Government's true goal is to add additional taxes on high earners for the rest
of their careers to capture the premium they earn due to being the best and
brightest. It would seem the goal is to marginalize the value of work. The
only thing this is going to accomplish is to remove the incentive to study and
move into advanced careers. If Oregon wants to put an additional income tax on
college graduates, I suggest they think about what this will do to their
graduation numbers. If anything, they should be giving tax breaks to college
graduates.

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count
How is this different from indentured servitude? In any way what so ever?

"Free trip to the colonies, in exchange for a chunk of your output for the
next 20 years."

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dangrossman
> How is this different from indentured servitude?

If the state raised a 2% income tax on everyone to pay for free college
education, instead of a 3% income tax on students getting a free college
education, would that also be indentured servitude? Are all taxpayers
indentured servants of the state?

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count
You can leave taxes behind by moving / etc. You won't be allowed to leave this
behind in any sense.

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jberryman
One nice thing about this is it would seem to more directly incentivize state
universities to provide a curriculum that maximizes student earning potential;
I think that's a great thing especially for people who've chosen their fields
for reasons other than money. 25 years is a somewhat scary number, but this
very exciting.

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scotty79
I propose different model. Either you'll pay for my education to become
engineer who'll pimp up your self-driving flying car, or I'll become
uneducated mugger who'll beat you up and steal your stuff or I'll become
uneducated cop who'll beat you up and shoot your dog for not respecting my
authorita.

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smsm42
The thing with investment model is that VCs filter their applicants very
carefully before investing. Rejecting many applicants that may seem and indeed
later prove very worthy, but are not to the particular VCs liking. With higher
ed today, anybody with a technically functioning brain can go into higher ed
institution and get a paper saying "degree in whatever" on it. Investment can
not work this way - in order to invest, one needs to select and reject.
Current policy would aggressively resist the idea of selection - and indeed,
how would you select high school students by their future earning potential?
Nobody can do that with any degree of accuracy or any appearance of fairness
and basic dignity. Without selection, however, the whole model would become
uneconomical unless the sums charged are raised significantly. Free is very
powerful attractor - so the number of people wanting to use it would explode.

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schrodingersCat
This is a brilliant approach! I'm sure it will look nothing like this by the
time it comes for a vote on the house floor. Will probably have an anti-
abortion rider and a lifetime payment cap by the time the lobbyists are done
with it...

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MJR
They already voted - "The plan passed unanimously in Oregon's Senate on Monday
and in the House the previous week. The state's Higher Education Coordinating
Commission will next develop a pilot program and in 2015 lawmakers will decide
whether to implement the program."

[http://abcnews.go.com/Business/oregon-legislature-
approves-t...](http://abcnews.go.com/Business/oregon-legislature-approves-
tuition-free-college-pilot-program/story?id=19577994#.UdnVy2RAR3Y)

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schrodingersCat
Thanks for the update. I'm really glad this passed!

