December 2, 2015
By Paula Dwyer
Marco Rubio has taken a lot of heat for endorsing what some have derided as indentured servitude for college students.
Intriguingly, the plan the Republican presidential candidate is backing is indentured servitude, though strictly voluntary, as he keeps pointing out. It's also one of the more promising solutions to the U.S. student-debt predicament.
The new method, called income sharing, typically involves a "loan" (I'll explain the quotation marks later) from investors to students. Instead of paying the money back with interest, students contract to pay their investors a set percentage of income for a fixed number of years after graduation.
The concept dates to 1955, when economist Milton Friedman concluded it made no sense to require new graduates to make fixed loan payments when earnings are so low. Instead, he suggested, why not make equity investments in human beings? Investors could finance college students by buying a share in their earnings prospects. Successful graduates, some of whom would pay back more than the initial investment, would compensate for the unsuccessful ones.
Read the full article at Bloomberg View: Rubio's College-Cost Plan Deserves a Chance