Why Sara Goldrick-Rab Sees Income-Share Agreements As a ‘Dangerous’ Trend

Why Sara Goldrick-Rab Sees Income-Share Agreements As a ‘Dangerous’ Trend

You know an issue has risen to the top of the national imagination when it gets featured on “The Daily Show.” The high cost of college has hit that milestone: A few months ago Sara Goldrick-Rab went on to talk with Trevor Noah about her book, “Paying the Price: College Costs, Financial Aid, and the Betrayal of the American Dream.”

Goldrick-Rab, a professor of higher education policy and sociology at Temple University, was a natural pick because of her passion, and also because she’s done her homework on the struggles today’s students face trying to pay for college. Her book is based on six years of research tracking thousands of low and middle-income students. And she’s not shy about suggesting how she thinks financial aid needs to change, and about criticizing income-share agreements and other ideas that are popular with venture capitalists these days.

EdSurge recently talked with Goldrick-Rab about her big ideas for the future of student loans. The conversation has been edited and condensed for clarity. We encourage you to listen to a complete version below, or on iTunes (or your favorite podcast app).

EdSurge: There’s some deep research behind your latest book. In fact, your team followed 3,000 college students over six years—and all of these were students on Pell Grants—to track their struggles paying for college, and their experiences. And your conclusion is that some of our standard narratives about higher education are simply not true anymore.

One common narrative that you’re challenging in your book is that, in our national debate, we end up blaming students if they can’t pay for college. The programs are there, so they must just not be using them correctly if they’re not getting through. Could you say a little more about the way we think about some of these students in debt?

Goldrick-Rab: The centerpiece of all of higher education policy in this country is financial aid. In other words, we spend a lot of money, and a lot of our focus goes towards providing money to people who we believe are the neediest folks in terms of their economic situation and distributing resources to them, and therefore we believe, effectively addressing their economic constraints. So if they show up in college, and they have filled out the FAFSA, then we tell ourselves that money-wise, they’ve been taken care of. And therefore, if anything else is to happen to them—if they don’t make it through college, or they struggle afterwards with debt, this is really somehow a personal problem that is created by a lack of knowledge, a lack of resilience, maybe a lack of information, but not really a lack of money.

The aid system fails in so many ways to alleviate economic constraints, and money is really central.

You looked specifically at public colleges. Some of this has been about states shifting away from supporting higher education, right?

Oh, it absolutely is. Most undergraduates in this country go to public colleges and universities, even though we spend an awful lot of our time talking about places like Harvard. So if 75 percent of the undergraduates are in the public sector, then the real story about what people can afford in college has got to be about the public sector. And it’s in the public sector where prices and resources for financial aid have changed a lot over time.

It used to be that the state governments pretty much struck a deal with each family who wanted to send their students to college, or each adult who wanted to go themselves. The state government said, “Look, you want to go to college, all right. We will pay, say, three-quarters of the deal, and you will pay a quarter.” And students were actually able to do pretty well in that deal that left them with a price they could generally afford. And if they couldn’t afford it, there was enough financial aid to go around to take care of the rest.

Now, at a time when more people go to college than ever before—and frankly, college students are more diverse than ever before—states are striking a very different deal. Instead of saying, “We’ll put in three-quarters,” if the students are lucky, states are saying “We’ll put in half.” And sometimes they’ll only put in a quarter. Which leaves the students footing a much bigger part of the bill, and there’s a lot less financial aid on a per-student basis to go around.

So the prices are higher, the resources for covering those prices are much more limited, and to top it all off, this is happening at a time when most American families are not getting ahead. They’re seeing their incomes stagnate or decline. And so the result is that money is so central to who gets college, and who doesn’t.

There’s another recent book about financial aid by Beth Akers and Matthew Chingos called “Game of Loans,” which argues that even though students today do have higher loans than in the past, they also end up with higher incomes and that the student loan burden actually hasn’t changed—that it’s a purchase, like buying a house, so you just need to take out a big loan, and that things aren’t as bad as the way you paint them. What is your response to their argument?

Right, so they’re essentially contending that there really isn’t a student loan crisis, and that the problems that we think that we’re seeing are really obscured. The one thing we do agree on is that this is not really a problem about six-figure debt, with people with $200,000 loans. We do agree that the most vulnerable people are those with, say, $5,000 of debt, who just simply didn’t get a college credential. And that’s the biggest issue.

We disagree, though, on the larger question of whether these high prices for college represent a problem. So they’re simply looking at this through a lens that says, “College is an investment, it’s worth it, it pays off, so you should go ahead and borrow for it, it’s really not an issue.” But there are many problems with that. First, college does not pay off for everybody in the same ways. They’re looking at averages, average returns for those sorts of things, and they’re projecting them based on students of the past, and their returns.

Today’s students are far more disadvantaged, on average, than yesterday’s students. They also include more students of color and women who are going to face continued discrimination in the labor market, whether or not they go to college. They aren’t going to reap the same returns. Nor is the same certainty present in today’s labor market that was present in yesterday’s.

None of that means that college isn’t worth it—because of course the purpose of college is not only to get economic returns, that education pays off in many ways, including by creating more stability in one’s life, in helping promote innovation, and those sorts of things. But we also disagree with the assumption that everybody’s going to buy into simply mortgaging their futures for things we tell them are worthwhile. Some of the most vulnerable students out there today come from cultures that don’t believe in borrowing in order to finance things you need. They live in the here and now because they know better than to count on the future.

Latino students [and] Native American students, for example, some of the fastest growing populations in this country, are what we call “loan averse.” They’re not buying into our pushy narrative about how they should finance their lives. And so if we create a college financing system that requires them to take student loans, they aren’t going to get college. And I’d argue, that would create a real crisis. We cannot afford to have large swaths of people in this country not getting a post-secondary education, because the way that we financed it is unacceptable to them.

Some colleges are experimenting with income-share agreements, or ISAs. It seems like these addresses a little bit of what you’re describing because the idea is, “Okay, you don’t have to take out a loan now, but to do these income-share agreements, you’ll promise to give a certain percentage of your wages once you get a job after college for a few years, and that will pay it back.” I’m curious what you think of this kind of approach that Purdue University is experimenting with and which other upstarts are trying?

Well, I think some people call it innovative. I think it’s dangerous, and I think it’s dangerous for a couple of reasons. First, I don’t think it does resolve the problem that I was describing earlier. I think that folks who know that their economic lives are fragile are gonna be very wary—and rightfully so—of giving away part of their future income to “repay” through an ISA. I think that they know that the expenses that their families are facing are growing, that it’s actually harder to predict now. You not only have to take care of yourself, [but also] your partner, your children, and now your parents. So I think that people are gonna be looking ahead and saying, “No, there’s way too much uncertainty for me to take that on.”

I also think it represents a “solution” that it’s fully privatized. So rather than the government and taxpayers together saying, “Look, we value people being able to get an education, and we’re going to support it together so that we ensure that everybody does get it,” this says individuals are going to bear it on their backs. I can’t imagine what this country would have looked like if we had decided to finance elementary school for people through ISAs. We decided to do broad-based government support for that program because we really couldn’t imagine people not having an elementary-school education, which we gradually expanded to become a secondary education, and I think it’s very reasonable in the 21st century to at least argue that it should include grades 13 and 14.

You recently spoke at the ASU+GSV summit, and as you probably saw, many entrepreneurs are making a private-sector push into education. What is your advice to that crowd about how they should think about the problem of student access?

First, I think the private sector needs to recognize how much it needs an educated workforce to be coming out of this nation’s schools. And I think that it does realize that, with regard to K-12 schools, and it has begun to take a very active interest in improving those schools.

The same sort of thing applies to higher education at this point. And I also think that the private sector has a great interest in having a diverse workforce, and the folks who are getting the most hung up by these costs, let’s be honest, are people of color. If you want female workers, if you want people of color, if you want people from working-class families to work with you in the private sector to create innovative technologies or whatever else, you’re gonna have to ensure that they can finish college.

I also think that the private sector should be looking towards public-private partnerships. I think rather than propose solutions that are only in the private sector, for really important priorities like education, we are best situated if we engage the private sector through partnerships with the public sector, where there is the potential for both innovation and nimbleness, and also widespread and democratic input into the process, and some sustainability—because there really is no substitute for taxpayer support from any of these programs.

We’ve seen colleges and universities that have thought, “Well, we can basically become like businesses and go stand on our own two feet, because the state isn’t funding us very much anymore.” They’ve been incredibly naïve, and they have fallen apart, because they have never been able, on their own, to replace the incredible amount of money that still is flowing from states into those institutions.

So I spoke at ASU+GSV about a problem that, as I told folks, I don’t think the private sector can solve on its own, but it better pay attention to, which is the growing number of college students who can’t even focus on doing the sorts of workforce preparation activities they’re interested in, because they’re food and housing insecure. We have a growing number of hungry and even homeless college students. And if we skip past that, we’ve missed the boat.

In this political climate we’re in, a lot of the arguments you’re making really do go back to public support, which feels like an uphill battle these days in many places. How optimistic are you that some sort of free college initiative could go forward in the Trump administration?

If there’s one thing I’ve learned over the last 15 years, it’s that really important changes don’t happen overnight. And any scholar of history knows that. So for those of us working on public policy, we knew this was going to be a long slog. The point is to make progress. And I believe, firmly, that hope is a strategy. So I think optimism is very productive here. I think that we’re in tough times, where we have leadership that not only disagrees with us, but also isn’t interested in science, and isn’t grounding policies in basic facts.

I’m hopeful that the American people are going to figure this out. They’re going to demand policies that meet their needs. And we can continue to connect with their own lived experiences. For example, when I talk to anybody, of any political party, and we talk about the level of dismay and frustration, and distrust, and anger they feel when it comes to college prices, we connect. And that’s the most important part: we both understand there is a problem.

The next step is to decide who is responsible for fixing it, and after that, how best to fix it. Is free college the best approach? We don’t know. But it is pretty crazy to resist it when it is a viable possibility. And we should move forward so that we can learn about it, rather than continuing to perpetuate a system that clearly has failed us for 50 years.

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