Tuition Repayment Plans and Impact on University Behavior

One of the consistent themes in reading anything about the U.S. employment market is the massive income premium afforded to college graduates vs. those with no degrees. One of the other consistent themes is the increasingly large debt load of college students, debts which can't be discharged in bankruptcy.

The debts pile up for a lot of graduates, ones who can't repay it on the job market. The graph below illustrates the relative increase in recent years, in part driven by ever-increasing tuition loads.



That always gets me interested in figuring out a way to short student loans and betting on default - but I don't think there's a way to do it. However, it also gets me interested in alternative tuition models - and one that I've read about a number of times is a repayment plan based on future earnings rather than fixed debt payments.

From a Vox.com summary


Right now, in-state tuition at the University of Oregon is around $10,000 per year. Students can pay that up front with their own money or with grants and scholarships. Or they can take out a loan from the US Education Department and pay it back after they graduate. Once they've paid back the amount they borrowed, plus interest, they're done, whether that takes 10 years on a standard plan or longer on an income-based plan.

But Oregon is also exploring another model, where students wouldn't have to pay tuition at all when they enroll. Instead, they'd pay 3 percent of their income to the state for 20 years after graduation.

Essentially, Oregon could get rid of public college tuition and replace it with a flat tax on graduates' incomes.

Sounds like an interesting idea - and this article (along with others that describe similar systems) talk a lot about the burden it removes from emerging graduates.

But there's an aspect that consistently goes unmentioned, and something that I think would be a huge argument for the model, and that's the impact it would have on the universities themselves.

I don't mean an impact on tuition loads. This type of scheme doesn't seem to do anything to curb tuition inflation generally. But what I have to assume it would change is the focus and emphasis colleges place on employer relations and career services.

When I was at Penn State (seemingly forever ago) - the career services department's help was - let's say - limited. I remember a couple career fairs at the basketball stadium, I remember applying through on-campus recruiting, and I remember it was around 2002, so employers would show up and tell you they didn't have any immediate openings but they'd be sure to get back to you in the future.

Although I really didn't know it at the time, I should've been a little disappointed in the level of service (or maybe I should've been a little more proactive...probably both).

But now let's assume that Penn State wasn't getting a check from my family every semester, but instead, it was effectively investing in my FUTURE earnings on a payback scheme. Now the incentives have changed, and the school will care a whole lot more not just about whether I get a job, but whether I get a job that pays me very well.

Now some would argue that schools have all the incentive in the world to make sure their students get jobs. You could argue it helps their rankings (which I believe has a component based on employment rate...at least MBA programs are evaluated that way). But that type of metric (percent of students employed) is a binary one which doesn't get to quality of employment (someone with a job at McDonald's would count the same as a Fortune 500 CEO - which would be a hell of a job out of undergrad).

But if the school's financial interest rests on helping students find high paying jobs - then I have to assume they'll care a lot more about getting the best recruiters to campus and preparing their students to out-compete their peers at other schools. The ROI on those efforts, all of sudden, would really matter - today you could argue they try to create successful alumni to donate, but as far as I'm concerned that's not even in the same ballpark as a defined financial arrangement based on graduate compensation.

It would get the schools a lot more invested in getting students employed, and employed meaningfully. It should (my thinking goes) also work to reallocate university investment in programs which create the types of employees companies are looking for (e.g., business, not basket weaving). So when it comes time to hire faculty, build new facilities, or establish new programs, the school might think about how much more employable the students will become.

The argument against this would be that universities should serve to advance the interests in all fields, and not just ones which churn out accountants and computer science majors and doctors - but also, I don't know, philosophers or something.

Meh - call me a heartless pragmatist.

National Car Rental - Customer Service Rant

I'm not sure what to make of rental car companies and their customer service. At this point, I've had issues with just about all the major ones at one point or another:

- The time Enterprise charged my $600 for a door ding that I wasn't responsible for

- The fact that Thrifty forces you to bring them a fuel receipt from a gas station within a certain distance radius to prove your tank is full

- That time Hertz charged me a fuel refill charge of $150 - which only would've made sense if I had been driving a tractor trailer

Through all that, I had never really had a bad experience with National. Outside of using Joe Buck as their spokesperson, I never really had a major issue with them or their service.

I guess you could say I was due.

A few weeks ago I found myself in Bentonville, Arkansas, like you do when you're a consultant who ever touches consumer packaged goods. Due to an early Monday meeting, I had to fly in Sunday night, which regardless of your feelings towards business travel, definitely stinks. Anyway, I scheduled a late flight on Sunday night to preserve as much of my weekend as possible, and was landing at 10pm in the evening. Wouldn't be much time to check out the late night action in Bentonville, but I assumed I wouldn't be missing much.

I had a car rental booked, and was planning on getting the car to go straight to the hotel and go to sleep. I had even gotten the welcome email from National as I had landed, reminding me I had a car to pick up.

But when my flight landed at XNA (an underrated airport) - we got to the gate a bit behind schedule, maybe 10:15. I got through the airport and went down to the rental counters, and National was there, only the lights were turned off and no one was around.

Not a good sign.

I looked around a bit, and thought maybe they were at the point where there was just someone in the parking lot with the cars, and went just outside the terminal (its not a big airport). But no one to be found.

I had a pretty good theory on what all that meant (they were closed) and called National's Emerald Club customer service line to see what to do. But of course, they were closed as well. Not that helpful. So then I found a general customer service number and called them. At this point I was more than a little annoyed given it was late on a Sunday night. I got a representative and told her the situation, she told me the XNA location wasn't supposed to close until 11. Well that seemed odd to me, but given she couldn't really help me, I went to the Hertz counter (still open) and fortunately they wanted to give me a car in exchange for money.

That would've been enough to tick someone off, but that's not the whole story. You see, the next day after the meeting, I went back to the airport to fly home, and I couldn't help but go by the National desk and ask them about what had happened.

I went to them and asked if they closed early last night.

No, the responded, they closed at 10 like always.

I told them that was too bad, because I had a rental reservation for 10pm and customer service told me you guys were supposed to be open.

But rather than apologize, the reps got indignant at my suggestion. It was like I was insulting them by suggesting that they were supposed to give me a car the night before.

One of the reps told me they didn't have any no-shows (hard to believe given I know I reserved the car) and the other rep told me that customer service lied to me, that they were a franchise and the general customer service line didn't know anything.

I thought that was an interesting response. When a customer has a bad experience, you should definitely get defensive and definitely put the blame on them.

So whatever, a couple nitwits in Arkansas are bad at their jobs - but so I wrote a quick email to National customer service, because frankly, I thought they might want to make up for the miss on their part. Maybe a free rental day or something, at least an apology and an indication that they'd take the matter seriously.

Well, let's just say their apology left me wanting. Below is the text of the response I got:


"Thank you for your e-mail! My name is John, and I'd be happy to assist you. I want to begin by apologizing for the frustration and inconvenience this issue must have caused. Please be assured that the service you received is not indicative of our usual high standards of excellence. Therefore, I have documented your comments. If I can be of further assistance, please feel free to contact me. I want to ensure you are completely satisfied with my services."

My issue isn't with the tone of the email, they apologized and clearly regretted that this happened. No, my issue is with one portion of the message...


"Therefore, I have documented your comments."

So you guys screw up, and apologize, and the action you take is to document my comments? I basically take that to mean my email is saved as a .txt file on some magnetic tape drive in a room like the end of Raiders of the Lost Ark. Just documenting the comments doesn't really seem like your doing anything to actually improve the situation. Actually, to be technical, I documented the comments myself and sent them to you!

I mean they could've even lied to me and said they would pass the comments along to the manager or something. Even if it wasn't true it would've indicated some kind of fake feedback loop to ensure it might not happen again.

But no, they just documented them, somewhere, in some form, maybe.