Betting on Bright Young Minds

college bills

In very broad terms, education is considered the solution to many of the world’s most significant problems. In my personal studies I have noticed a common theme suggesting that investment in human capital is the single greatest determinant for successful development in the long run. One of the major challenges we face both here in the US and abroad is creating diverse public and private financing options that make higher education a possibility for all qualified students. We seem to be in the midst of one of those “creative/destructive” periods for access to finance in higher education. For a quick, but telling glimpse into the “destruction” part, take a look at the graph below.

It is this same environment which produced an unsustainable credit bubble and massive student debt that is also enticing innovators to produce new financing models.

If you attended a four-year college, you probably combined a mix of scholarships, grants, federal loans, and private financing. You worked hard and earned the scholarships, which can be funded by college endowments or private donors. If you received any need-based grants, it was because you had a low FAFSA Expected Family Contribution (EFC), or maybe you were a well-suited applicant to a specific grants program (side note: I recommend playing around with the EFC calculator, pretty enlightening). Maybe grandma and grandpa had deep pockets, or maybe mom and dad had been preparing for this day with a 529 Plan, but I’m assuming many of us instead turned to traditional student loans. In this case, most of us, as usual, were at the disposal of the lenders. Options were pretty standardized and grossly favored students who had parent cosigners with high credit scores. Many talented students were left out on the sidelines.

What if students had other readily available options than commercial banks and Direct Loan programs? What if your likelihood of receiving college financing wasn’t based on credit scores, but rather on your talent, merit, and potential as a student? Is higher ed finance ready for a true market-based approach? Good questions for an entrepreneur to be asking…

Enzi describes itself as an “equity based education funder.” The idea is that individual socially motivated investors can look through a list of “Enzi Fellows”, pay for the upfront cost of schooling, and then recoup their investment over time as a percentage of the Fellows earnings. Nothing very new about this – it’s royalty financing – but applied in a new way, and only made possible through an internet exchange platform. It’s certainly interesting, but is it really a more just and sustainable option? Or, is it somehow predatory on bright young people who are without any other means to pursue school at the next level? Could you envision a world where investors had “human portfolios” alongside their stock portfolios? What if you made a bet on the next Bill Gates or Steve Jobs?

Other organizations like Vittana are up and running with innovative models that are contributing to the expansion of higher education especially among international student populations. I often wonder how many brilliant thinkers have been squandered by the inadequacies of our educational system. How many world changing ideas haven’t been given the chance to emerge? Would a market-based approach like Enzi’s do anything to change this? I’ve clearly asked more questions than presented answers here. I hope you may have some instead.

And here’s one question to end this post,  which is perhaps the most relevant today: is it worth it to go to college at all? Peter Thiel seems to think otherwise, but that’s a topic for another blog.

6 thoughts on “Betting on Bright Young Minds

  1. As I finish up undergrad, your last question is one I think about a lot. In econ my freshman year while discussing the Lemons Problem – – my professor said that a cynical man would see college degrees as merely market signals to overcome the lemons problem in the job market.

    When I hear employers say work experience, character, and networking savvy are the most important factors in getting a job and that most job skills needed are learned on the job, I tend to agree with him. I’m getting a BS in Marketing and Management, but sometimes I think companies just want proof that I can market and manage my BS.

    So is it worth it to go to college, even if it is just a market signal? I think the real question is are there any legitimate alternatives? In most employers minds I would guess, no.

  2. I think alternative structures to formal education are entering the marketplace all the time: Skillshare, P2P learning networks, open source/web-based learning networks, etc. And these networks are experimenting with their own accreditation models that help signal uniformity of quality to the marketplace. P2PU ( for example is experimenting with different kinds of accreditations that are more diverse than those employed by universities – in particular, peer accreditation. How might that change the shape of our universities?…if we knew we were going to be graded by our peers?

  3. Thanks for the post, Pat!

    Financing aside, college has become too expensive. When I talk to my mom about how different the ratio of her college expenses to earnings abilities were 30 years ago, it seems like something’s gotta give. I don’t have much in common with Peter Thiel, but I also question whether college is “worth it” in every situation.

    I’m a part of the Open Master’s Program here in DC. Over 30 people are creating learning experiences for ourselves, supported by a community of inquisitive, thoughtful learners who want to make the world a better place. We’re going to be using peer accreditation, which I think will gain traction in the coming years. Most of us are in our 20s and see this as a substitute for grad school, but we span generations — one person is 17. :)

    • Thanks so much for sharing, Allison…let’s keep the creative ideas coming. I especially liked the learning categories listed on the blog: 1) The Art of Making Things Happen 2) The Art of Communicating Big Ideas 3) The Art of Hosting and 4) The Art of Being. Not the typical topics one would see on a college syllabus. I’ll have to join you all and learn more about the Open Master’s Program sometime soon.

  4. Great post, Pat! It really resonated with me because I have an absurd amount of student loans from undergrad at Boston College, and despite some help from Deloitte, getting my masters at Georgetown required me to take out even more loans to cover 2.5 years of tuition. I learned a ton from both institutions, but as I begin to pay back these loans, I definitely wish there had been an alternative financing option.

    I like the idea of “betting” on students to succeed, and not just because I enjoy the occasional trip to Atlantic City. We had a rockstar intern at PunchRock this summer, who just started his senior year of high school! There’s no doubt that he will be a huge success in his professional career after college, and well worth the investment to help with college tuition costs if he needed it (and I could afford it). I’m intrigued to see how this type of college financing evolves and what demographics of students benefit from it the most.

  5. Great post! I agree that making higher education more accessible is an important issue that needs to be addressed. While I appreciate your point about alternative financing options, another question that deserves to be asked is why is higher education so expensive in the first place? Perhaps there is more that can be done to make higher education more affordable so that there is less need for financing in the first place. As for your point about whether college is necessary, there are certainly benefits to being exposed to different perspectives, developing critical thinking skills, and being credentialed in a particular subject. My main critique of the higher educational system is more attention tends to be given to theory rather than practice.

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