{ "media_type": "text", "post_content": "Would u have considered this during college? WHY/WHY NOT. \"$25k immediate cash (for student loan, new car, travel, anything) in exchange for 5% of your pre-tax income for first 5yrs out of school.\"", "post_id": "59794ffb6c775a001017d972", "reply_count": 19, "vote_count": 4, "bowl_id": "552d1d24dc1c586b09d2d051", "bowl_name": "Consulting" }

Would u have considered this during college? WHY/WHY NOT. "$25k immediate cash (for student loan, new car, travel, anything) in exchange for 5% of your pre-tax income for first 5yrs out of school."

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No, bc I was still a member of the Bank of Dad

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And we are back to Econ 101.

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Yes absolutely. Some companies are actually offering this option. Why? Because that's way more than the amount of debt I graduated with.

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Look.. if I were a rational 18 year old in this spot (which may not exist), 2 min with a spreadsheet would give me the NPV of this proposal.. In reality, most people whose parents aren't fitting the bill would take the money--young people are quite myopic.

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I'd take it. I would have paid for my education. I funded a lot of it on a healthy rotation of student credit cards to cover what loans and scholarships didn't. That would've allowed me to be CC debt free when I graduated.

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Yes because in retrospect I would have ended up ahead financially even without taking into consideration NPV (which would favor cash now vs cash later). Also, I tend not to spend money I don't realize I have, so in that respect taking 5% of my pre-tax income would be like putting a little more into my 401k -- I do my budgeting off my take-home so I wouldn't miss the 5%.

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OP. I remember reading about a study on this in Econ. I won't bring up the details cause it would pollute the discussion.

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R there any companies that do this? eg "lend to" / "invest in" you and u and the lender mutually share in the risk/reward based on the success of your 5yr career income.

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Do it. You will come out ahead. Less student loans, less interest paid. Unless you will make 100k plus right out of college. Plus put some in yearly cds to get some interest on it. My 2 cents.

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I'd take the 25K and invest it since I only made 65K coming out of school (5% comes out to a little over 16K over 5 years)

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Yes, but back then salaries were a lot lower.

@PWC1 r unsaying that u would have made a spreadsheet decision? (Just trying to understand thought processes.)

Wish my irrelevant human ATM was still bank rolling me...

I totally went to IRR in my head when I first read this. But the answer for me is yes - the expected NPV of my first five years of pre-tax income given my anticipated post-consulting exit options would certainly have been less than $25K (and the assumption that I could land such a high paying job directly out of college would've been a stretch). Even considering that my next job is in finance (which I had ex-ante assigned a low probability to) it is probably still a good trade assuming the $25K wasn't taxed, that I received it early on, and was invested wisely.

And OP - equity financing for education is in its infancy.

What college. If u can share.

@A1 amen

Sure. NPV is the right way to compare on paper... but you also need to consider the relative happiness each $ buys at different stages of your life. In short, "value" on paper still needs to be calibrated to value to the individual's situation- time and place.

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