July 2008
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Professional standards needed to raise NZ educational achievement
Universal student allowance 'too high a cost'
Ireland follows UK, Canada and Australia on PPP path
Election year: minor party profile – United Future
UK university earnings from industry grow dramatically
British political parties unite behind academy schools
Quote of the month
Norman LaRocque moves to Asian Development Bank
Boost skills by giving industry 'more say' over funding decisions
Low-skilled job pay rates drop, skilled rates climb
Teacher shortages 'looming'
Surge in foreign teachers
Parties' ECE policies analysed
UK plan for university links with primary schools
Free university sector and let fees rise, argue British peers
French university first to raise private funding
OECD recommends policies to improve education results
Indian government readies PPP model for secondary education
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Test scores on rise since No Child Left Behind Act (2002)
Regulatory context for private education considered
Report looks at ways to reward teachers for performance
Private universities on increase in United States
US universities best resourced
EMO schools do better than others
World's 'most independent' university in Saudi Arabia
 
 

eBay auction inspires not-so-crazy education investment idea

Inspired by a student who tried to auction future earnings on eBay to pay for his education, researchers suggest students could arrange for investors to pay their college bills in exchange for a percentage of their post-graduation income.

Writing for the American Enterprise Institute for Public Policy Research (AEI), the two researchers suggested the California State University freshman's "crazy idea" could be an alternative to student loans and grants.

Ron Steen tried to auction 2 percent of his future earnings "for a chance to go to college' in 2006, although eBay pulled down his offer before the auction could begin.

The AEI researchers hypothesised that financing college students' education like this might introduce a healthy element of market speculation to college funding.

Because most student loans were guaranteed by the federal government, there was little risk involved for colleges or lenders, whereas for students who borrowed too much, dropped out before graduation, or earned less than they anticipated, the result could be serious financial problems, they said.

If students could arrange for investors to pay their college bills in exchange for a fixed percentage of their future income, students would shift the financial risk to lenders, who could pool that risk and then package their students’ bonds into bundled securities that could be sold on the open market.

Bond parameters, such as the period of repayment and percentage of earnings, would be based on certain key criteria such as grades, test scores and specific aptitudes.

The system would reward colleges that add more value to their students’ education, as investors seeking to maximise their return would uncouple the "college component" from the "student portion".

The smart money, the researchers predicted, would not necessarily go to "blue-chip" institutions such as Harvard. They would seek out bigger returns at less expensive colleges that added greater value.

Lending a student $48,000 over four years and collecting 4 percent of the future earnings would yield more than lending that student $180,000 and collecting the same 4 percent.

A marketplace would soon be established, with discounts for students at good-value colleges and investors steering away from overvalued institutions.

The report is at this web page.