<p>This proposal was made by some students, and the UC President found it interesting enough to consider further. The proposal is that instead of paying tuition/fees, students will pay a percentage of their income (5% +/- some adjustments like +1% for out-of-state, -0.5% for living and working in California) for 20 years of employment.</p>
<p>[Fix</a> UC: UC Student Investment Proposal](<a href=“http://www.fixuc.org/]Fix”>http://www.fixuc.org/)</p>
<p>In the long run, it might work better. But how about the next few years? Will the UC’s suck air for their employees? Will the Presidents of UC’s take a $1 salary for 4 years?</p>
<p>Regarding salaries, there are too many looples. A self emplyeed normally pays very little “salary” for example.</p>
<p>What is old is new again: </p>
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Milton Friedman, 1955</p>
<p>[Milton</a> Friedman on The Role of Government in Education](<a href=“http://www.schoolchoices.org/roo/fried1.htm]Milton”>http://www.schoolchoices.org/roo/fried1.htm)</p>
<p>Great plan until you factor in inflation. Expected future contributions would rise until, voila, you have the European system of education.</p>
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<p>It is not clear why inflation is such a problem here. When a loan has a fixed payment as with a fixed-rate mortgage, say, inflation transfers wealth from lenders to borrowers. Under the Friedman plan, if wages rise at the rate of inflation, such a wealth transfer does not occur. So, if you think that we should encourage inflation in order to lower students’ indebtedness, then the Friedman plan is not for you. But surely there is a better way to make education affordable.</p>
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<p>But it’s not a fixed payment, it’s a fixed rate of payment. So as wages increase, the payment increases. Perhaps enough to keep up with inflation, perhaps not. And it’s not fixed for everyone. Some graduates’ wages will stagnate or decline. Can you imagine a mortgage system where repayment is optional, depending on employment status? Oh wait, that’s effectively what we have now. </p>
<p>I actually like the European system, free university education for all who meet stringent admissions standards.</p>
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Isn’t that virtually the case here - the most qualified candidates can often get a tuition free education - just not necessarily at the highest ranked U they were admitted to - i.e. accepted to one or more of HYPS and flagship state U with full merit at the state U (but ends up selecting HYPS anyway)?</p>
<p>I’m not sure yet where I stand on the proposal, it certainly is intriguing.</p>
<p>One question, though: since it is a rate of payment, that means that higher income earners would pay more for their education than lower income earners.</p>
<p>So, a graduate in philosophy would pay less to attend college than a graduate in engineering or computer science. If this is the case, then why not just charge differing tuition rates depending on the major? </p>
<p>I majored in Sociology as an undergrad, so I would have paid less than my friend that majored in architecture. </p>
<p>Shouldn’t the value of an education be the same regardless of earnings in one’s career? </p>
<p>Just asking some questions.</p>
<p>I don’t think there s/b a variable cost based on earnings. A slacker should have to pay the same cost as someone who works very hard despite having the same degree. The course ahead for the grad isn’t cookie cutter - there can be (and are) some sociology majors who end up earning more than an engineering major. There can be one sociology major who ends up earning very little over the course of their life and another who becomes a multi-millionaire. And what happens if the person decides to become a stay at home parent within a few years of graduating - do they essentially pay almost nothing?</p>
<p>What about perpetual student who simply wants to take course after course stretching out their degree times, get degree after degree, take forever getting various PHDs of dubious value, and end up costing the system a lot of money to educate them and reduce and payback salary time for any reimbursements that might happen? </p>
<p>Hmmm, can you imagine if this were applied to car purchases? We’d all be driving luxo cars.</p>
<p>I think the student should pay for the service they received and the tab should be the same for everyone since the cost of delivering the service is the same.</p>
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<p>That is the point. What is good about this system is that you pay when you can and not when you cannot. In that sense, it is like the financial instrument known as an income bond. I guess I am just missing your concern with inflation.</p>
<p>This proposal reminds me of the horrible drubbing I got years ago when I first joined CC. I said I didn’t believe in grants for college - all FA should be loans that must be paid back in some manner over a person’s lifetime. I was literally called “a hater of the poor” for suggesting it.</p>
<p>GGD, a better analogy than luxury cars is venture capital. When you invest in a start-up, you know that it may flourish or flounder. You get partial equity ownership, which means a big pay day if the company flourishes but not if it flounders. Another analogy is to investors who pay the entry fees for tournament poker players. In both cases, you may be “investing” in a single individual.</p>
<p>coase - I guess the difference in the analogies I see is that the venture capitalist is investing in the business but the college isn’t making the investment in the student - the student is making an investment in themselves with the college simply providing a service.</p>
<p>Another issue with this idea - it seems that budgeting would be a nightmare since it’d be very difficult to know what the actual incoming revenue would be since it varies with everyone’s job or even their desire to work or not.</p>
<p>Like most simple ideas based on economics the actual workability is terrible. That’s why nobody in their right minds pays too much attention to the ideas of economists. The first thing they do is assume away all the complications and non-predicted reactions that might be uneconomic.</p>
<p>From a financial point of view, the proposal basically causes the school/state to view the students’/graduates’ cost of education as more like equity/stock investments (which pay dividends based on earnings, which may be a lot or may be nothing) and less like debt/bond investments (which pay specified amounts on a specified schedule, but may default if there is not enough money).</p>
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<p>However, the very existence of subsidized public universities indicates that the government has an interest in educating the people, because a better educated population will grow the economy (and tax revenue) more. State governments are “investing” in the population’s education and hoping to get the dividends of a larger economy paying more taxes.</p>
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<p>Earnings of and payment from large number of students can be statistically modeled; the revenue from such a scheme is unlikely to be as volatile as revenue from the state government (which is mostly volatile in the downward direction, since other budget items like K-12, health and welfare, prisons, and limiting taxes are of higher priority, in part due to voter initiatives).</p>
<p>Implementation is certainly not as simple as it seems, since determining what is income that the 5% +/- assessment is calculated from can be complicated (just look at income tax forms).</p>
<p>Also, the proposal does not penalize late graduation; UC does not like late graduation since students staying for extra semesters or quarters take up space which keeps them from taking more new students.</p>
<p>What is the probability that at the time of repayment the Occupy people will say “I didn’t know the implications of what I signed. How come students from U. of Michigan (say) do not have to repay anything”. If people do not “understand” paying back student loans, why would they better understand this proposed system?</p>
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<p>Indeed it can, and would be very easy to also model the ‘no pays’ on purpose. 17-year old and unable to legally sign such a doc? No problem. Move out of state? No problem. (Sure, UC could turn it over to a collection agency, but based on what? And where?) International? No problem. Stay home parent, with zero income? No problem. Undocumented/illegal, which by definition cannot legally work? No problem. Choose a ‘PC’ profession like Government service/teaching? No problem, (we’ll waive repayment).</p>
<p>A good deal for all. A greater deal for many.</p>
<p>btw: this model works extremely well for professional schools, because it one could lose a license for non-repayment of say, law school loans.</p>
<p>I dislike this proposal…</p>
<p>I want to pay for the service and I want to be done…</p>
<p>All this is is…a tax…</p>
<p>Then everybody will be arguing on what kind of income should be exempt…</p>
<p>I am sure anybody who makes their money as carried interest will want their income exempt…</p>
<p>The students don’t understand that the wealthy don’t pay themselves with a salary…or …maybe they do. :)</p>
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In that case maybe it’d be smart of the UCs under this model to do away with the majors with the least effective return and focus on mostly the higher paying majors from a statistical perspective. So much for sociology, religious studies, and many other majors.</p>