Investing In Human Capital

June 14, 2013 in Daily Bulletin

The Economist reported on a new way that students can help manage the costs of college:

  • Companies such as Upstart and Pave allow individuals to sell a stake in their own earnings.
  • In exchange for an initial sum of money, students agree to pay a portion of their pretax earnings for a specified period of years.
  • There is normally a cap of around 10% on the proportion of their incomes that students can promise to give up.
  • One service also caps the payback amount so that if the next founder of Facebook uses the service, they don’t hand over exorbitant sums of money.
  • The idea is an attractive value proposition for students, since, unlike with a student loan, if their income falls, then the amount they have to pay back also falls.
  • Investors also have an incentive to contribute to a student’s success – one user of the service reports receiving free study materials from a backer who is hoping to ensure their investment provides maximum returns.

Read more about how it works, what the founders of the services have to say, and how it relates to poker over here.

Source: The Economist