Academic Backing
Our core mission and product design have been supported by key academic works and evolutions of financial products domestically and internationally. One of the most influential papers is “The Role of Government in Education” by economist and Nobel laureate Milton Friedman, published in 1955.
This paper addressed a few ideas that resonated with us and our mission. The first being the value of education. He begins by illuminating the benefits of education on a personal and social level. Education, he argues, contributes to both individual socioeconomic growth and to broader societal stability and prosperity (Friedman, 1955). This idea deeply resonates with us as we’ve witnessed firsthand how transformative education can be, and it's a core reason we founded this company. Given the immense value of education, we feel like it is important to leverage it in order to increase access to better financing solutions.
Friedman also proposed an innovative model to reduce the financial risk of education: instead of taking on traditional loans, students could agree to pay a portion of their future income.This model would ease the burden on students, lower the risk of default, and better align the cost of education with the value it provides (Friedman, 1955). This idea has evolved into what today we see as Income Share Agreements (ISAs). This innovation was another key motivator for us in the creation of our company as it aligned very closely with our mission and values.
Today, the state of ISAs remains turbulent and complex. While there have been many successful implementations around the world, such as Australia’s HECS-HELP program, Colombia’s Lumni, and the United Kingdom’s Student Loans Company (SLC), the U.S. has not been able to achieve the same level of success. There have been a few case studies of colleges running pilot programs or private companies issuing Income Share Agreements, but none have thrived. This is largely due to the culture around ISAs in the country as well as legislation and regulations. The government has created some novel solutions that are similar such as the Income Driven Repayment program which restructures monthly payments in a way similar to an ISA, but it still has not gained a lot of popularity.
Our products build on these academic theories and global models, aiming to combine the best elements of each into forward-thinking financing tools. By working with schools and learning from the past we aim to create educational products that can achieve the novelty and success of ISAs and similar forward thinking financing products while implementing them in a way that not only fits in today, but in the future of education financing.
References:
Friedman, Milton. "The Role of Government in Education." In Economics and the Public Interest, edited by Robert A. Solo, 123–144. New Brunswick, NJ: Rutgers University Press, 1955.