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.
3. Because HELP spends taxpayers’ money, nobody cares much what happens to it or the students they have lent to. Lumni helps students get jobs, to their mutual benefit.
Because HELP effectively offers subsidies to students, I think Lumni-like entities would struggle here. But from a small government and market-oriented perspective, it has clear advantages. It doesn’t mean that some disciplines or student types couldn’t receive special treatment by the state. But most students attend university for primarily commercial reasons, and Lumni-type arrangements would fix the education capital market problem without state subsidy or all the red tape that goes with it.