The US needs to rethink the way it finances higher education. Multiple generations are already set to struggle under the burden of $1.5tn in outstanding student loans.
Some colleges think they have found a solution in “income share agreements”.
Under these arrangements — also known as human capital contracts — a funder finances a student’s education in exchange for a small percentage of their income, paid over a certain period of years. The payment varies with the borrowers’ actual income, unlike traditional student loans, which require the borrower to repay a fixed sum. Though originally proposed by Milton Friedman in 1955, these agreements have come into their own only in the past few years.
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