Hi everyone! After a nice long break it's time to get this thing going again.
Having learned last quarter about the current systems in place keeping so many low income students from finishing college, this quarter we will be looking at an organization that is currently working to address this problem. We will then recommend changes that would make that organization more effective.
Something my team discussed at a recent dinner was the idea of tying financial aid to personal and career counseling. As we found last quarter, two of the most important reasons for college graduation failure are finances and stress. What if we could kill wo birds with one stone? What if we required that, in order to receive a low-interest loan, a student must meet with a counselor twice a month to work on personal issues holding that student back? Could we assure financial stress relieve coupled with significant improvement in stress management and life skills? Could this significantly help with college graduation rates for low income students?
First, we need to answer a few important questions.
How do we sell the idea to investors?
Investors want to have reassurance that either their investment is low risk, or that their risks are balanced by a high potential payoff. I believe that the former would be the main argument we'd have on our side. Here's why: Most of the risk involved with student loans is the threat of missed repayment. Students who don't graduate have a hard time finding a good job. If they don't get a good job, then they can't repay their loans. If we can do something to significantly increase graduation rates and get good jobs, even if that costs more, we can increase repayment and potentially offer loans to students traditionally considered "riskier" and offer lower interest rates. I believe the costs of providing counseling would be minor and be offset by higher repayment rates. But even more importantly, this could make significant strides in lifting low-income students out of poverty.
What would the students be coached in?
Personal development, career development, study skills, stress management, relationship management, and financial management would be a few of the areas in which any student would greatly benefit, but especially a low-income student. The content would be similar to what we focus on in Leadership and Personal Development at BGI, but tailored to undergraduate students. Counselors would be trained in and focused on helping students to graduate and find a successful, fulfilling career. Upward bound might provide a useful model for coaching and counseling students.
Of course, there's still some research we'll need to do, such as the effect of counseling on student graduation, typical student loan rates, and the cost of providing counseling, but I believe this may be a great opportunity to greatly impact the lives of many students and begin to address income inequality in our country.
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Chris, I think this is an interesting idea -- and one that I suspect some/many colleges are already implementing. (The reason I think this is that I recently visited University of Oregon with my college-bound daughter and they described such a program and showed us the building where it takes place.)
ReplyDeleteOne of the key issues from an "investor" standpoint is the question of who really benefits from such a program. Clearly, the disadvantaged students do -- and clearly society as a whole does. But who else -- and particularly, who else that might be willing to pay for such a program?
In this case, we're right up against the limits of the private sector and the argument for government intervention in issues of social equity. Clearly, "everyone" will benefit if these students graduate from college, break the cycle of intergenerational poverty, become gainfully employed, pay taxes and raise children who also go to college, etc.
But who, but the government, would be willing and able to pay for such programs? I would submit there are only a handful of candidates (unfortunately):
* Impact investors, a new category of investors whose ROI is measured in social terms rather than financial terms
* Foundations, who have historically focused on issues of this sort
* Potential employers, who might be able to put students through school and be able to reap the benefits in terms of trained employees
* Lenders, whose prospects of repayment will be significantly enhanced by actual graduation (in most cases, this is the government rather than anyone else)
It's interesting that in some immigrant communities education is seen as an avenue to prosperity for both the college-bound student and his/her family. Thus, the family saves money and invests in its own offspring in a sort of "pay it forward" regime. It would be interesting to see whether there's a "bootstrap" model in this that might be more universally applied.