Student loans suck! I know it, you know it, my grandmother’s dog knows it. They take a toll on your 20s, 30s and maybe even 40s.
What if we could avoid that nauseous joke? What if we could pay them off right before we had kids and get on with our lives? What if you could pay them off in your 20s and be done with it?
Well, a solution to this problem already exists and it is available in Mexico, Colombia, Chile, Peru and United States through private organizations, as well as directly through universities such as Northeast, Purdue and the University of Utah. This is called an Income Sharing Agreement (ISA).
The idea is simple: you go to university and you pay nothing during your studies. After you graduate and find a job, you pay a fixed portion of your income for a fixed number of years. Then you are done.
The portion of the income you pay and the length of the agreement is decided before you graduate so that you can plan for the costs and you don’t need to deal with a floating interest rate.
The biggest advantage of ISAs is that they have a fixed end date – after a small number of years anybody will contact you regarding your loan repayment. You would be abandoned to your vices and everyone would leave you alone.
And there is an unspoken benefit of the program. This increases a university’s incentive to train students with skills and knowledge that will allow them to find jobs quickly and with good jobs. Because if he doesn’t, he won’t get his investment back in the student.
So what’s the catch? ISAs are expensive to start up and to function at their best, they must be managed by the university from which they benefit the students.
Starting them is expensive because any new financial program requires the organization offering them to assume some level of default risk, so organizations have their cost in risk, not in actual money spent.
The program must be managed by the recipient university so that a feedback mechanism exists. If a bank ran the program, there would be no ongoing assessment of the university’s vocational training, meaning the university wouldn’t know whether it is pumping out low-quality graduates or graduates who are earning high standards. good jobs.
Another problem is that they won’t work for everyone. Some students would end up paying more with an ISA than they would with traditional student loan programs, while those in programs with low-wage bonuses would probably not have the opportunity to participate.
But just because ISAs wouldn’t work for everyone doesn’t mean you shouldn’t try them. A program like this could help UBC attract students from more disadvantaged backgrounds or help students who would otherwise drop out because of tuition fees.
If UBC launched a pilot program where it offered this program to 30 national undergraduate students of aapplied sciences, it would cost around $ 874,000 over four years, including a two percent increase in tuition fees each year, or about 0.0437 percent of UBC’s annual budget.
An ISA is an opportunity for UBC to shake things up a bit, grow out of their laurels, plan for the future of education, and actively help students in dire need of financial assistance.
Zubair Hirji is a first year student in the MA program in Food and Resource Economics. He is also the former treasurer of The Ubyssey.