Just say no to the new Income Sharing Agreement (ISA). I could leave it at that and write no more. Through a new kind of financial instrument called an ISA, financiers are transforming student debtors into stock investments, with much of the same risk and, ideally, greater returns. But the millennials who are mortgaging their futures by giving equity in themselves away to Wall Street is beyond reproach.
As I’ve allayed numerous times, large college debt taken on by students of today will be a thing of the past. With the possible exception of the elite schools, where you have recently been exposed to the notion of scandalous parents bribing higher education to continue the lineage of what most did not deserve in the first place. It’s all Freudian in nature, but beyond our scope here. As noted by this author in March of 2018, “At some point, you have to ask yourself, is the investment in a $70,000 college education today worth the return.
Educational scholars over the last 30 years have proposed that every child needs a college degree. That we all can become doctors, lawyers, and wholesale jewelers. That simply hasn’t turned out to be the case. As such, we are now littered with students coming out of college with degrees that are watered down and unlikely to achieve a near-term return on investment.”
Enter the thieves who disguise themselves as benevolent and advocate for the prosperity of the young masses. I will alter my rhetoric somewhat by saying that high school of the future, like in the past, circa 1955, will be the equivalent of a modern day college degree. One caveat, and it is a big one, is that the modern high school curriculum has become grotesquely bloated compared to its 1955 parochial agenda, in which the core was actually an intellectual foundation that was more than sufficient to expand wealth at the time.
Listen up Gen Z, you will need to understand what I just said, and what to watch out for in the financial traps that lie just ahead. Lesson 1: When a new financial concept is peddled to the public, the sole benefactor will be the peddlers. Students, that means that the ISA is not in your best interests. Always follow the money. It leads back to them, and not you. Such monetary derivatives as the reverse mortgage and leasing of cars, et al., are all seemingly beneficial to you, but much more so to the lenders.
If you chose to proceed down the educational game of life, and don’t have the means to do so, pick your poison, albeit debt or the new ISA equity. You will be viewed as a stock or bond, no more, no less. Cynical perhaps, but wake up and smell the coffee. The college game has been set up against you, for the favored few, and for those who innately have a call to intellectual inquisitiveness, as opposed to the many whose only endeavor is to seek the next kegger.
According to Bloomberg, the last big ISA experiment, at Yale University in the 1970s, ended up as a cautionary tale. Yale pooled all borrowers, and they owed the school a percentage of their incomes for 35 years, or until everyone paid back what they owed. Juan Leon, who sells business jets for Dassault Aviation SA, graduated from Yale in 1974 with a degree in urban studies. He borrowed $1,500 through the college’s “Tuition Postponement Option.” By the late 1990s, he’d paid back $8,000. “We didn’t read the fine print,” Leon says. “It was quite, quite onerous.”
The current college and university system has most setup for failure. Whether you decide to finance your education with traditional student loans issued via the government, or more nefarious ISA equity, where you have sold your soul for decades in advance in the fashion of a large monthly payment. Unfortunately, there is no happy ending here. The colleges that over charge and under educate will soon be out of business. Only then will other options come to light for the next generation of Americans.