There are a couple of columns in this week’s Economist which suggest that the Rubio plan for private sector equity investments in the future earnings of students has substantial merit. I do not think the authors considered all of the implications of this approach for an average student, which include the following:
1. The typical college student has, at best, a vague concept about what he wants to do with his life. He may well change majors while in school. When he leaves school, he will have a variety of career choices, some of which may pay well, and some of which certainly will not. Everything else being equal, he will (and should) select the ones that are most consistent with his interests and values, which may or may not include maximizing his income.
2. All of this would be anathema to a prudent equity investor. He would insist on an enforceable business plan up front, which would have to include standards for grades and a major designed to generate the maximum possible income. Any significant deviation from this plan would be a default and would require repayment of the investment. In other words, no changes of major (and forget getting a liberal arts degree), no slacking off, and no going into public service when you leave school.
I think it is fair to call this kind of interference in the life of a college student a form of indentured servitude. If you were 18 years old and just starting to think seriously about your future, would this appeal to you?