How much is the American dream worth? Approximately 1.5 trillion dollars. This is the total amount of debt accumulated by American students; It is equivalent to the total GDP of economic powers such as Australia or Spain. On average, each college student will leave their degree with approximately $22,000 in debt. Loans that are a burden on less cheerful students and are sometimes non-refundable.

To do? Silicon Valley has found an answer. Instead of extending the loan (with 10% interest), payment for the training can be made in another way. The student accesses the center free of charge and starts paying part of his salary to the university after he graduates and finds a job. That’s the idea behind Lambda School, a non-university center that’s attracting the attention of investors.

Model name? Income Sharing Agreement or ISA.

in numbers. Lambda is a technical and digital school that aims to attract expert profiles. A few years ago, a group of investors led by Geoff Lewis, close to Peter Thiel, put up $30 million to develop it under ISA-led development in the future. Generally speaking, it works like this:

• If a Lambda student earns more than $50,000 a year after completing their education, they will have to pay 17% of their salary to the school. For two years.
• If you charge less, you pay nothing. If you find a job above the threshold, you restart payments. Lambda states that 83% of its students find positions paying over $70,000.
• A student can pay up to $30,000 a year so that debt does not hinder access to better-paying positions.

Argument. Did Silicon Valley invent taxes? Even though it’s a joke recurrent For this reason networking social, no. It is only partially similar to the model tax system. Here the school (or university) functions as a benefactor for a small elite group of students; funding is not universal (this voluntarily and not all taxpayers pay for it) and the payment is canceled below a certain threshold.

Examples. This is not a new idea. Australia has a similar credit system: HECS, implemented in 1989. Scotland and Uruguay also use similar models. Even in the United States, where most loans operate traditionally, there is a program that replicates what Lambda offers. None of them stop paying your debt, for example, if you lose your job.

Good idea? Adhere to. $50,000 is not a very high salary in California or New York. Since it works almost like a tax, a student would have to pay 17% of their tuition plus the corresponding amount (more) in personal income tax. It seems more advantageous than the current model, which is a profitable lending system operating in a captive market. It’s worth going into some degree of debt in the US.

Europe and other countries have a proven alternative: collect taxes from all taxpayers and finance services with them. Public education.

Image | Andrew Hunter

in Xataka | US student debt is already as big as the entire GDP of Spain or Mexico: $1.2 trillion

in Xataka | You study for free and give part of your salary when you work: funding from training camps in Spain

*An earlier version of this article was published in January 2019.