“The cost of attending Purdue University will be lower in 2021 than it was in 2012,” is a bold claim to make in this higher education landscape. It seems compelling and better yet, it seems possible.
While tuition freezes are helpful, current cost levels are unattainably high for most Americans. It’s a “yes, AND” situation. Yes, controlling cost is great, AND we should also explore alternative models for paying for higher ed.
This episode half explores how Purdue is cutting costs, and half explores a new model for paying for college: income share agreements. In the tech world, Y-Combinator-backed, Lambda School
, is experimenting with this model in the world of coding and the early anecdotal outcomes are compelling
Compared to our current system of going to college for four (maybe six) years, taking a wide variety of interesting classes, finding yourself, and making lifelong friends, income share agreements seem a bit outcome-centric. “When you get a job, you will pay us 17% of your salary for a few years.” It immediately incentivizes the university to help you get a high paying job.
While the clarity of incentives makes it obvious you are entering a business transaction with your university, it also aligns both parties in a way that does not currently exist. You could pay $250,000 for a degree, whether in engineering, liberal arts, business or other, and if you’re unemployed for years after graduation, your university would still get paid. There’s no money-back guarantee. Other than marginal reputational gains and an extra name in their alumni network, the university doesn’t have a direct, financial stake in your success.
While income share agreements won’t solve all of our problems, I think they are a compelling solution because of the incentive alignment. It’s very worthwhile to continue exploring and innovating in this space because the traditional higher ed model feels like a bubble that will burst when enough pressure is on it.