The Purdue Plan

No more student loans? Purdue University proposes selling shares of students’ future income

Purdue University wants to offer a very different way for students to pay for school: private investors will fund their education, and get paid back as a portion of the students’ future income. It’s called an Income Share Agreement (ISA)—if students earn more than expected after university, they pay back more; if they earn less, they pay less.

I would put my money on the students with the highest IQ/SAT scores and or STEM majors…pretty obvious to me and probably everyone else, too, which is why I would be surprised if the program isn’t terminated, should it prove successful, due to political pressure by the left. Let’s see …a Computer Science major with a near-perfect SAT vs. a Feminist Studies major with a mediocre SAT score, who would I rather fund? Even if you eliminate majors, I and any other rational investor would invest by IQ/SAT scores, since IQ and lifetime income highly correlated.

And that brings me to a second idea I have, which is related to the high-IQ basic income, and that is allowing private equity to invest in high-IQ kids in much the same way they invest in companies and other asset classes.

It would work like this: IQ scores for children are collected, and those who score really high (>140) would be listed anonymously on a special government database that is only accessible by firms who will pay the entry fee to see it. So it would not be visible to the general public unless you pay the fee. An entry for the IQ database could look like this:

# 5342 | Gender: M | Age: 5 | Verbal IQ: 140 | Spatial IQ: 160 | Tot. IQ: 150 | complete: 45% | Click Here to Sponsor

Upon sponsoring, the money would go into a trust fund that isn’t accessible to the beneficiary until later, presumably college. Like the Purdue plan, the investor would be entitled to a certain percentage of future earnings, and this would be determined by records held by the IRS, but unlike the Purdue plan the payouts would not come from the beneficiary’s salary but instead the government, similar to the high-IQ basic income proposal, but it could cost less due to external funding.

There would be a funding cap on each entry, as detonated by the ‘% complete’ column, which upon hitting 100% the child would be removed from the database. I imagine males with high spatial IQs would get funding the quickest, with women the slowest. Removing gender would make it more fair, but would make investors more hesitant to invest.

The program could be made more profitable by raising the payout threshold, so that instead of getting a certain percentage of any income, only a certain percentage of income above, say, a million dollars. If the threshold is high enough, some investors will lose money, making it a gamble like a high yield bond. Or by including lower-IQs into the database; however, rational investors would avoid them if higher IQs are available. There could be some combination of payout and IQ threshold based on income actuarial data, the risk preference of investors, and how much of a short-term loss the government is willing run in exchange for potential long-term economic value. If after 15 years the program has a net loss of, say, $5 billion, but the equivalent of five Googles, Amazons, Apples, or Facebooks are created, that’s a good deal, since those companies will pay taxes, making the program a net-positive indirectly. And these companies also create jobs, both directly and indirectly, and boost the overall US economy.

Related: Stanford’s Free Tuition

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