An interesting proposition for colleges:

The Economist published an article on April 9th concerning an idea of California college students that could possibly radically affect college students everywhere if it is taken into consideration by universities.

Students of the University of California propose that instead of charging tuition, they’d like universities to take 5% of their salary for the first twenty years following graduation.

This idea has some huge implications for higher education. An individual’s level and quality of education would no longer be determined by parental current income, but by a student’s future income, which would open more opportunities for them.

What particularly fascinates me about this article is the potential overhaul of universities’ organizational structure and culture. They would be the ones bearing the most risk under this proposal. With their income being contingent on their student’s job placement, universities have large incentives to become much more focused on placing their students in high paying career positions.

Most business schools, especially McCombs, already place a high emphasis on placing students in successful jobs upon graduation. The place I feel there would be a huge change would be in liberal arts and natural sciences. At least here at UT, it seems that many of my friends in these colleges are planning on pursuing a higher educational degree, whether it is medical school, law school, or getting a masters or PhD. I feel colleges would change their culture to push students towards finding a job immediately upon graduation to collect their percentage of salaries sooner. At the same time, the culture may not change because they would be able to collect more money from students that pursue another degree as their income will be higher. The question with this, however, is whether students will have to pay 5% of their salaries to each institution they attended, or if universities have to fight over the 5% of a student’s salary.

Another concern this article points out is that students in business and engineering that historically have higher salaries upon graduation will be paying more for their degree than the majority of other students. The very valid question the Economist raises to this point is, “If the degree is worth more, shouldn’t students pay more for it?”

I think this article gives us a lot to think about. If California does accept this student-led proposal, it will be fascinating to see how it plays out.

One thought on “An interesting proposition for colleges:”

  1. The incentives here are totally perverse. So if someone is more successful, and adding more value to the economy (something which should be encouraged), he should incur a higher penalty as a portion of income?

    “If the degree is worth more, shouldn’t students pay more for it?” No, they shouldn’t. Should cost of capital be higher for firms which generate a higher profit? No, it shouldn’t. Why? because it doesn’t cost more to educate a humanities major than a business or engineering major. If someone wants to major in sociology, that’s their poor investment, not mine.

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