In his alternate loan talk, economist Daniel Altman recognizes that that the US student loan industry is in a state of catastrophe.
Students who finished school during the economic downturn have had difficulty finding jobs, leaving them unable to repay (or, more importantly, renegotiate) the high-interest, private sector loans they've taken out to complete their education. Though the government has the power to forgive these loans, this raises the potential problem of "moral hazard." This term refers to the fact that, if there is a safety net, people will be more inclined to behave irresponsibly and take ill-advised risk.
Altman suggests we find a more innovative solution to the problem. Instead of simply lending a student money, Altman proposes that you would become an "equity investor," someone who purchases shares in the student's future income. Altman believes we can draw up structural agreements to figure the likelihood that these students will earn their predicted income, but do so in a way that is "transparent, that doesn't exploit students and actually makes that money available to them with a slightly lower level of risk."
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Daniel Altman's Alternate Loan Talk Imagines Selling Your Future
Aug 28, 2014By: Vasiliki Marapas -