Recently I mentioned going to my 25th Harvard Business School reunion. While you were left wondering why the reunion would be held in the fall — isn’t June reunion month? — I was left wondering how a young guy like me could possibly be this old. I must have graduated when I was 12.
It also occurred to me that a couple of comments might be in order.
The first is: what is this fund-raising stuff? My classmates and I were asked to pony up ten million dollars. OK, I sent something — I do believe in "participation." But if there’s any school in the country that should be self-sufficient, it’s Harvard Business School. It’s the college or the divinity school or the ed school or the science labs that need alumni money. If I were running the B-School (and you can be sure I will never be asked), I would jack up the tuition from whatever astronomical sum it now is ($25,000 a year?) to the full unsubsidized cost plus a profit ($50,000?) and then offer the 95% of students who couldn’t afford it a couple of financing plans.
They could borrow as much as they wanted on terms more or less identical to a 15- or 30-year mortgage (with a small life-insurance fee tacked on to pay off the debts of those struck by lightning out on the golf course). Or they could agree to pay, say, 5% of their income for life (or until they had paid a sum equal to double all they had borrowed, plus accumulated interest at the prime rate).
This is obviously rough — it would be fun working out the details — but the ballparks are right. Say you borrowed $75,000. That works out to about $7,000 a year for 30 years on an 8% loan. Starting pay for graduates of top B-schools tends to range between $50,000 and $100,000, so 5%-of-pay for most would quickly rise to cover the cost — and over a lifetime, most students would wind up paying their debts in full, with interest, while many others would pay up to double their debt with interest. The extra money from those would cover any shortfall from those who chose less lucrative careers.
That’s my plan. Understandably, the B-school alumni magazine chose not to include it with the other thoughts it solicited for our 25th — which, if you are really a glutton for this kind of musing, you are invited to come back to this space to read tomorrow’s comment.
(OK, OK — for it to work, I guess the country’s other excellent business schools would have to do more or less the same thing, lest Harvard lose all its best applicants to lower-priced rivals. So maybe Harvard should just begin to ease into this gradually, raising tuition a little and offering financing options, leading the way for the other schools to follow suit.)
Quote of the Day
Every debt is ultimately paid, if not by the debtor, then eventually by the creditor.~Jim Grant
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