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Skin in the Game

A market-based solution to the student-debt crisis may have financial repercussions that are just as burdensome

When Dusan Simien, a San Francisco native with a knack for technology, enrolled in a two-year coding program at the for-profit Holberton School, he financed it with an income share agreement: a contract in which he agreed to pay the school 17 percent of his income for a set period after graduation. But before long, Simien found himself struggling with Holberton’s instructorless education model and its cheaply designed curriculum. And when he was expelled on a dubious charge of plagiarism, he found himself owing the school a percentage of his paycheck from the same job he’d had when he enrolled.

Simien’s case typifies a growing trend. As Avi Asher-Schapiro documents in the December issue, income share agreements (ISAs) have taken off in the past few years as a means of financing education, and they’ve caught the attention of policymakers—and investors—across the political spectrum. To their proponents, ISAs are an answer to traditional financing options that have left many poor Americans, especially African-American students like Simien, unable to attend college without taking on exorbitant debt. These financial tools could theoretically make institutions more accountable, by tying institutional profits to alumni success. To their detractors, ISAs can be predatory loans in disguise, ripe for exploitation by unscrupulous institutions such as Holberton. By tying contract terms to projected earnings, they also increase the pressure on students to seek careers that are likely to be financially lucrative.

In this episode of the Harper’s Podcast, Violet Lucca talks with Asher-Schapiro, who covers technology and human rights issues at the Thomson Reuters Foundation, about these and other hopes and concerns for the growing ISA market. They discuss the origination of the ISA idea by Milton Friedman, parallels between ISAs and the charter school movement, and the potential ramifications of “treating students like startups.”

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December 2020

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