Better Choices, Better Rates

Not until the end does Malcolm Harris give it a name, and it’s a good one: Subprime Kids. Like puppies, kids evade criticism, as they possess an innate purity that shouldn’t be subject to cynicism. While they may turn bad, turn sour, along the way, no child starts out that way, and so each deserves their chance to be all they can be. It’s got enormous appeal.

But Harris’ description of I.S.A.s, income share agreements, otherwise sounds like a pretty good pitch.

Now private capital is starting to find its way into I.S.A.s, through a handful of online computer science training programs. With names like Pathrise, Thinkful and the Lambda School, these “career accelerators” provide tech companies with certified coders and provide participants with a credential in months, not years. Students in these programs can pay by way of an I.S.A. that is financed and serviced by investors gathered under their own Silicon Valley-style names like Leif.

The dumb money of Silicon Valley thinks that they need coders, so train them at no upfront cost to the student and take a percentage of their income for a set number of years afterward rather than require tuition. Not such a crazy idea, and it’s spreading.

A company called Big League Advance has started lending to algorithmically approved minor-league baseball players; something similar might appeal to college athletes whose scholarships fail to cover all their costs. From there, it’s only a few steps before investors sets their sights on other reliable investments: Ivy League finance, Stanford biology, engineering at flagship state universities.

Is this a good thing? Harris makes a decent case for it.

What’s the appeal of an I.S.A. over a regular student loan? From a capitalist’s perspective, the federal government has a weakness: It treats all borrowers the same. Borrowers face the same interest rates whether they are mediocre art students or valedictorians studying quantum computing at a top engineering school. But private I.S.A. lenders can skim the cream of students off the top.

Why finance a student who’s going for a gender studies degree, knowing that there is no market for their “knowledge”? If they’re unemployed, they can’t pay back their loan. On the flip side, why should an MIT engineer pay the interest rate fixed to cover the defaults of all students, including the gender studies major? Is it fair to someone who chooses a remunerative career to cover the losses for the person who doesn’t.

But wait, you exclaim. Knowledge is an inherent virtue, and gender studies matters, even if it doesn’t pay. If I.S.A.s snag the students with promise, the ones who will be able to get jobs to repay the investment, the government-run system will be left with the mutts, the students who made choices to study subjects that are unlikely to enable them to repay their loans.

But I.S.A.s are premised on the idea of discriminating among individuals. Once the high-achieving poor and working-class students have been nabbed by I.S.A.s, the default rate for federal loans starts to rise, which means the interest rates for these loans have to go up to compensate. A two-tiered borrowing system emerges, and the public half degrades.

Some students will be discriminated against because they are “poor-achieving,” which is a nice way of saying not-too-bright or too lazy to work hard. Some will argue that they just don’t come from a culture of education, or feel like outsiders in college and so fail to acclimate well, making their performance unsatisfactory. Some will point out that they feel unsafe in this world and can’t perform at their best in such a hostile environment.

The question isn’t the validity of the myriad excuses for failure, or to be gentler, less than peak performance. As for their choices, there is nothing wrong with students who choose to dedicate their lives to social justice careers, to what they perceive as the public good, even if it’s not likely to produce survival level income, no less the ability to repay students loans. The question is whether students who work hard, achieve success, make smart career choices, should pay rates to compensate for those who do not.

But Harris’ point is that the public student education finance system will either be constrained to charge higher interest rates to compensate for its pool of low-achieving students or collapse.

Every child becomes his or her own start-up. I.S.A.s will no doubt protect their child-ranking algorithms as trade secrets, but if years of research on tech bias is any guide, we can expect they’ll perpetuate existing inequalities.

Is hard work an inequality? Is choosing engineering over gender studies an inequality?

For students who are risky bets, rated as less than investment-grade, lenders can tweak repayment periods and terms until the algorithm approves. Computers can make practically infinite distinctions among potential borrowers, and there’s nothing to stop future applicants from optimizing themselves into anxiety and depression even worse than what we see now.

Harris assumes that opportunity for students leads inexorably to anxiety and depression. He’s likely right, given that these pathologies seem to be epidemic among the young. Sure, they can show grit, resilience and toughness, but too many don’t and take the path to victimhood instead. If their future is shaped by scheming for ways to game the I.S.A.s, this will be one more thing to fear failing.

Should good drivers pay for bad drivers? Should people who live their lives in a healthy fashion pay for people who choose not to do so? Should engineers pay for gender studies majors? Harris has a point that this will create subprime kids, which sounds awful. But then, the alternative is to burden prime kids, the ones who worked hard and made smart choices, with the lowest common denominator. Why work hard, why make hard choices, when you’re going to be dragged down to the level of subprime kids anyway?

The mistake in Harris’ fear is that there are subprime kids, at least in the financial sense. It doesn’t make them bad kids or undesirable kids, but some will excel and some will fail. The price of lifting up the bottom is dragging down the top. Somebody is going to lose, no matter what, and the question is whether society is better off losing its high achievers for the sake of those who are bad bets.

22 thoughts on “Better Choices, Better Rates

  1. Guitardave

    “when any dog can have its day, no leash to keep the beast at bay.
    no muzzle to get in the way…”

    Reply
    1. SHG Post author

      In the future, there will still be ditch diggers, but they will have Ph.D.s. Doesn’t everyone deserve a Ph.D.?

      Reply
  2. Bear

    The impetus behind what I call the second industrial revolution (as do others, I make no claim of invention), of computer technology, biotechnology, etc., and which took decades rather than centuries that defined the first, was largely done long before it was made profitable by engineers. It was the result of research in the “hard” sciences of chemistry, physics and biology and others—sometimes theoretical research. I do worry that the short term thinking of business may neglect these disciplines, and the financial means to pursue them. The students who chose them were certainly hard working.

    This is possibly orthogonal to your argument with which I generally am in agreement.

    Reply
    1. SHG Post author

      On the one hand, we need art historians and philosophers as well as coders. On the other hand, we’re producing more of them than society can absorb. It’s no doubt unfair that the market values short term skill needs over long term, but then the efforts to micro-manage the revolution to produce an over-abundance of grievance studies majors may be the fault rather than the devaluation of diverse disciplines.

      Maybe everybody can’t go to college. Maybe everybody can’t go wherever their “passion” dictates?

      Reply
      1. Bear

        Yes, I said I agreed with the overall thrust of your post. If students are greatly passionate to study a certain subject they need to take the chance in won’t provide employment, and re-educate themselves as necessary or settle for jobs at Starbucks.

        Reply
      2. LocoYokel

        There is also the fact that during what is being called the second industrial revolution the total population of the US and world was half (less?) than what it is currently and everything was more labour intensive. Perhaps part of what we are seeing is an over-abundance of labour in the workforce in general as we are producing more (and it’s staying longer as lifespans increase and the retirement age moves up) and automation makes many things less labour intensive. We need more viable, productive fields that the surplus can occupy, and to get over the notion that manual, skilled labour is not honourable or valuable unless it requires an advanced degree.

        I know, this is a dive down the rabbit hole.

        Reply
        1. SHG Post author

          Yeah, it’s the rabbit hole, but I kinda like this one, so I’m going with it. Remember Rosie the Riveter? Men were fighting in Europe and Japan, so women came into the workforce to fill the gap. When the troops came home, women went back into the kitchen. Putting side the sexism of this shift, there was a numbers game at play, that there were only so many jobs available.

          That situation has been exacerbated by automation and technology. There are still only so many good-paying jobs out there, and fewer every day. We can argue the point all we want, but that isn’t going to create more decent jobs, particularly when we’re simultaneously doing everything possible to tech our way to fewer jobs and educate people out of the workforce.

          Reply
  3. Henry Berry

    I wonder if Harris realizes that what he defines as a problem or an issue (and I’m not saying that it isn’t) is also an argument for free college tuition for all.

    Reply
      1. Henry Berry

        Right — I wasn’t putting in a word for free college, which I think is a terrible idea. There has to be some standards for going to college, whether these are financial, intellectual, whatever. And the money to support college for students has to be paid by someone. The point I was wanting to make is that the problem Harris poses and the seemingly realistic, rational, and fair argument he makes can be solved by what is euphemistically and misleading called “free college.” My view is that college should not be stupefyingly costly, especially when much of the cost goes to administrative and government compliance. If someone wants to take the risk in going to college by borrowing a sensible amount of money on the possibility or probability that they will have a higher income and better life with a college degree than without, this is a choice and path for an individual to make. College should not be prohibitively, obscenely costly. As the situation now stands, lots of students pay wildly exorbitant costs to supposedly earn degrees which are worthless no matter what they would pay for them. If someone is going to buy something that is worthless, one shouldn’t have to pay a crazy price for it. It’s only fair.

        Reply
  4. Pedantic Grammar Police

    Harris makes a lot of sense. He says “But I.S.A.s are premised on the idea of discriminating among individuals.”

    He doesn’t say that discrimination is a bad thing; he doesn’t have to. All right-thinking people know that discrimination is bad. If we discriminate, we might end up paying people more for working than for sitting around smoking pot and drinking beer. Who are we (or the evil corporations) to say how people should spend their time? If someone wants to spend zis youth studying and then work productively throughout zer adult life, that’s zes choice, but we shouldn’t punish those who make a different decision.

    “If I.S.A.s take off as a desirable funding source, it’s inevitable that they will begin to reshape childhood. Instead of just trying to build a résumé that appeals to admissions committees, students would spend their adolescence trying to build profiles that scan as successful to investors. ”

    Imagine the horror! Instead of hanging out at the mall or playing video games, children might be motivated to study and learn. We can’t have that.

    Must we continue saddling people who are too young and dumb to know better with a lifetime of undischargeable debt to pay for a worthless degree, so that they can continue to support the well-paid administrators who manage our bloated university cartel?

    No, that’s better than discriminating, but there is a better choice. More taxes! Because we don’t pay enough already. And because those administrators must be paid. The university cartel cannot be allowed to fail because that would be bad and then we would be sad.

    “The alternative is to reconsider education as a social good and make capitalists pay for it, not as an investment but via taxation. ”

    There are still a few people who benefit from their hard work; that is a problem that must be solved. We won’t be a moral society until the benefits from sitting in front of the TV all day are exactly the same as the benefits from running a major corporation.

    Reply
    1. phv3773

      The primary tool admissions departments use for discriminating good students from bad is the high school transcript. What are the I.S.A.s going to use?

      Reply
      1. SHG Post author

        Why ask this of PGP rather than go to the source, unless you ask not to get an answer but just to poke blindly in the wind?

        Reply
  5. Rxc

    From each according to their abilities, to each according to their needs.

    That is the only truly moral society.

    Reply
  6. Rxc

    Somewhat trolling, but if you really think about what it means for a society to be moral, in terms of the values of western civilization, you inevitably end up where Marx did.

    Unfortunately no one has been able to figure out how to make it work on practice. I think that Christianity was an early attempt, but even Jesus seemed to recognize the problems, and did not try to create the perfect society here on earth- it is left as an exercise for the believer to behave the right way and believe the right things, and the reward is issued after you die. Very convenient for the priests that there’s no way to actually test their preaching.

    But Marx tried to figure out how to make the perfect, moral society here, right now, in a “scientific” analysis. He invented a technique used by countless leftist activists ever since where you define your system in such a way that the results automatically flow the way that you want. You ignore all the unknown, messy, and conflicting phenomena and data, and just work it thru with your own assumptions, and voila, you have scientifically demonstrated socialism.

    Engineers do this all the time, because there are always known unknowns and unknown unknowns that can bite you later, so a good design includes margins and testing and all sorts of stuff to deal with them. The social engineers don’t work this way, so their designs fail often or work very badly. Many people often die.

    Reply
    1. SHG Post author

      1. Reply button.
      2. No, you never get to define morality for anyone else. Never even presume it. Never. There is no discussion because no one, ever, cares if you approve of their version of morality, because their morality doesn’t need your approval. So never, but never, do it.
      3. This wasn’t an invitation to take a dive down this rabbit hole. Not now. Not ever.
      4. I now regret not trashing your initial comment. I will not make that mistake again.

      Reply

Leave a Reply

Your email address will not be published. Required fields are marked *

All comments are subject to editing or deletion if I deem them inappropriate for any reason or no reason. Hyperlinks are not permitted in comments and will be deleted. References to Nazis/Hitler will not be tolerated. I allow anonymous comments, but will not tolerate attacks unless you use your real name. Anyone using the phrase "ad hominem" incorrectly will be ridiculed. If you use ALL CAPS for emphasis, I will assume you wear a tin foil hat and treat you accordingly. I expect civility from you, but that does not mean I will respond in kind. This is my home and I make the rules. If you don't like my rules, then don't comment. Spam is absolutely prohibited, and you will be permanently banned.