I’m hoping to soon get started on a paper about reforming Australia’s shambolic student loans system, so I was interested in a Marginal Revolution link to Lumni human capital financing.

Lumni invests in students in exchange for a share of their future earnings. Joe Clark wrote a Policy article on this a few years ago. From a student’s perspective, it has these differences from our HELP scheme:

1. With Lumni, the graduate provides an agreed % of his or her income for a fixed period of time rather than a fixed % of his or her income until the debt is paid off or the graduate dies. Successful graduates could end up paying much more under Lumni, while unsuccessful students will have their debts written off more quickly.

2. Lumni will only invest when it believes a return is likely – so presumably it will not invest in risky students (eg older students, those with weak prior results) or low-return qualifications (eg Arts). HELP will lend to anyone regardless of risk. As Joe points out in his article, one advantage of seeking a return on investment is that there will be more research into the prospects of different degrees, institutions, and types of student. This could help guide students even if they don’t take out a loan. Continue reading “Investing in students” →