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.