Florida Senator and Republican presidential candidate Marco Rubio described his economic platform in a speech Tuesday in Chicago, touching on well-worn GOP priorities including slashing corporate taxes from 35 to 25 percent, further deregulating the private sector, restricting family immigration, and resisting calls to raise the minimum wage. Taking several specific shots at Democratic frontrunner Hillary Clinton, Rubio said his plan would avoid “pumping more of today’s money into yesterday’s programs,” and bring the U.S. into the future.
In the speech, Rubio also called for a “revolutionized” higher education system. If elected president, he promised to “bust…the cartel of existing colleges and universities” by loosening the rules for accreditation so that “innovative, low-cost competitors” can court students. But critics say the government accreditation process is already far too loose, allowing predatory for-profit chains like Corinthian Colleges to win federal approval and funding even as they mislead students into paying for essentially worthless degrees.
He also touted the “Student Right to Know Before You Go Act” he co-sponsored with Oregon Democrat Ron Wyden — a plan extremely similar to one President Obama pushed for last year that ranks colleges by how much their tuition costs and how much money their graduates make.
Lamenting the “shadow of debt hovering over millions of graduates,” Rubio then proposed a model already suggested by his rival Governor Chris Christie (R-NJ): allowing rich individuals or hedge funds to pay a students tuition and collect their investment back post-graduation.
“It may result in a profit for the investor or it may not – but unlike with loans, none of the risk lies with the student,” Rubio said.
He expanded on this idea in a speech last year:
Let’s say you are a student who needs $10,000 to pay for your last year of school. Instead of taking this money out in the form of a loan, you could apply for a “Student Investment Plan” from an approved and certified private investment group. In short, these investors would pay your $10,000 tuition in return for a percentage of your income for a set period of time after graduation – let’s say, for example, 4% a year for 10 years.
This group would look at factors such as your major, the institution you’re attending, your record in school – and use this to make a determination about the likelihood of you finding a good job and paying them back.
Unlike with loans, you would be under no legal obligation to pay back that entire $10,000. Your only obligation would be to pay that 4% of your income per year for 10 years, regardless of whether that ends up amounting to more or less than $10,000.
But these “Student Investment Plans,” which also have the Orwellian name “human capital contracts,” raise many serious concerns. For one, investors may refuse to cover entire fields of students not likely to bring in the big bucks after graduation, or would charge them a staggeringly high percentage of their income. For those backing this plan, such as the conservative think tank American Enterprise Institute (AEI), this poses no problem.
“Isn’t this ‘unfair’ to those wanting to be librarians, teachers, social workers, etc., since they would have to forego more of their incomes to satisfy the human capital contract? Not really,” writes AEI Adjunct Scholar Richard Vedder. “Society puts a relatively low value on those jobs.”
Additionally, following Rubio’s math of 4 percent over 10 years, a graduate would have to earn an extremely low salary for the investor not to make a profit. Vedder and other advocates of the plan are less cautious, and have voiced support for plans that take as high as 25 percent of a graduates salary for multiple decades after they enter the workforce.
The National College Access Network and other groups have warned that such a plan could cost students even more than high-interest federal loan programs, diverting away money those graduates could have used to save for retirement or buy a house.
Rubio’s proposal is similar to the “Pay It Forward, Pay It Back” model currently being explored by the state of Oregon — with one crucial difference. In Oregon’s plan, the investor is the democratically-elected state government, so when graduates repay their loans that money can go back into public education. Under Rubio’s version, the money would go into the pockets of investors.