Academic accreditation comes with a built in cost of inefficiency by demanding schools to arrange classes around semesters or quarters so that material is broken up into series of courses with later courses requiring prerequisites and achieving a year-level (minimum number of total credits). Education is dragged out with accompanying incidental living costs that add to the cost of education.

Accreditation offers advantages to students in terms of transferring between schools and qualifying for interest-deferred and tax-deductible student loans. However, it comes with a high cost of dragging out learning over multiple years with time wasted with pacing material over a semester and breaking a sequence of learning with idle gaps between semesters.

More affordable education is possible by concatenating consecutive courses into a single course, covering the material at a faster pace, and cutting out the filler distractions required to meet accreditation requirements for a single course.

Such an education may not be accredited by states. This will result in locking in students to just one school until entire course is completed. It will also eliminate the option for the student to obtain state-subsidized student loans.

In its favor, such education can be more cost effective by achieving senior-level competence in fewer number of months, possibly within a single calendar year instead of paced over 4 calendar years (8 semesters). The cost benefits comes from requiring less living expenses and enabling quicker access to labor market.

Being more intense, it will require more teacher attention to classes (smaller teacher-to-student ratios). This will make the the actual instruction more expensive.  Even though the education is completed faster (and more cheaply overall), most students will not be able to pay cash for these courses.   Because the courses are not state-accredited, the students would not have access to cheap student loans.

One possible solution is for this new type of school to provide the education by contract agreement to have access to a certain percentage of gross income based on the number of years this commitment is required. For example, a school that provides 4 years of college within two years can request 100% of after-tax income for two years, 50% of after-tax income for 5 years, or 20% of after-tax income for 8 years, etc.

The longer the term, the less annual burden on the student but it will accumulate to more total cost to the school. In this scheme, the obligation to pay the school ends after the term is up no matter how much total payments are received. Some students will pay more because they have better jobs or some may pay less because they are unable to find good work or need to return to school. As a result, the school faces higher risks for longer payments periods.

The payment terms may be inverted with prepayments based on percentage of income prior to starting the college. The terms will depend on circumstances but the prepayment will pay for full cost of school without any burden afterwards. This arrangement will probably be more attractive to working people seeking continuing education instead of parents financing their child’s education. I suspect most students will choose the future payment model.

To collect the funds, the school may bill the student a high premium and the student would have to provide official income information to verify a lower payment calculated by the agreed percentage. Unlike student loans, this payment is not tax deductible and does not include a separable interest payment (unless the student misses a payment). The benefits to the student include the knowledge that the cost is a fixed percentage of income and that the obligation will end after a certain fixed date.

As mentioned such school arrangements are not accredited. This provides the school an advantage to accelerate education and remove the superfluous material needed to break material into semester-credits. The disadvantage is that the school needs a different approach to establish credibility with employers. This may be obtained through coordination with industry certification programs using nationally recognized and independently proctored exams and the program recognizing the school’s program as qualifying experience.

As this form of education becomes more prevalent, the industry certification programs can grow to provide more certifications to cover more academic areas.

This sets up a parallel education system to the current accredited academic schools. The two will operate independent and may not recognize each other’s accomplishments. In particular, employment as professors in the older accredited institutions may require education within the accredited colleges as they do now.   This makes emphasizes the fact that accredited colleges are most optimized to train professors.   This is especially true in the advanced degrees leading to the PhD.

The non-accredited for-profit schools may be better equipped to offer attractive candidates for certain industries. Industries can abandon the semester-based academic education as a preferred qualification for work.  The industry certification approach is more appropriate than accredited education that is more suitable for training teachers.

Of course, if this happens it will starve the academic schools of paying students. I think this is also good because it will require the schools to concentrate on academic excellence instead of maximizing number of graduates for non-academic employers. Academics is suffering due to the need to process a lot of students who are not motivated for academics. Even those who achieve PhDs are often motivated by employment opportunities in schools rather than academic research and innovation.

This concept of a non-accredited for-profit schools are financed by deferred payments based on percentage of gross pay for a fixed number of years instead of debt.   The terms are set by statistics of range of pay for jobs enjoyed by its graduates so that the school can earn a comfortable profit despite some students paying less than others.   This arrangement is similar to peonage (debt servitude) that involve a commitment of service after education.

After a quick search for peonage laws I found this article that describes the 19th century experience that led to outlawing peonage in 1867 but not extensively enforced until early 20th century.  These articles specifically discuss the specific and abusive practices on minorities, recent immigrants, and on former slaves.  From the second reference:

In a sense, slavery in the United States did not end in 1865, but merely took other forms. For example, there was the system of “peonage” whereby blacks were held in servitude until they worked off their debts. This use of “peons” thrived throughout the South for over five decades and it did not start to decline until the brutal murder of 11 men in 1921.

That’s about the extent of my current understanding of peonage.   The current rigor of labor laws have some legacy of prevention of the now century-old practice of peonage.   Our history of use of peonage (debt slavery) came associated with such abuses.   These abuses were common but probably not universal.

It is possible to have peonage with non-abusive and fair terms where the peon does eventually (and even quickly) earn his way out of debt.   The practice of peonage can be benign and states can regulate the practice to prevent the abusive and exploitative terms.   Instead, we outlaw all forms of debt-obligated employment in order to avoid any risk of return of these abusive arrangements.

This may be the most realistic approach to solving the earlier problems, but it has the consequence of introducing a lender third party between the employer and employee.   We still have debt-obligated employment, but the obligation is to a disinterested third party.  The third-party lender has an incentive to discourage early payback of the loans in order to earn more interests and late-payment penalties.  I imagine that a benevolent employer would have the opposite incentive of early payback of the loan to improve his balance sheets.

We do allow some peonage forms of employment in exchange for job training.  Such similar arrangements of committed contracts for labor are permitted in military or in celebrity fields (entertainment or sports).   I suspect labor laws prevent its availability in general because of the risk of returning to the abusive practices of peonage.   In my scheme of alternative education, the schools will own a certain percentage of future income from its former students.  This is at least a mild form of debt-slavery.  For a set period of time, the schools retain ownership of a portion of the student’s income.  Despite the association with peonage, I think this can work out in the student’s favor by providing easier access to affordable education.

If such arrangements are currently outlawed, there can be a good a case for permitting them as a superior option to the current method of debt-financing college education.

Financing education through third-party debt is also a form of peonage because it obligates the former student to earn income to pay back debt for an education may be increasingly at odds with his current interests.   The peonage aspect occurs when the only reason the former student is working is because of that debt obligation.

I think a superior arrangement would be to eliminate the third-party disinterested lender by allowing the school itself to extend the debt with terms based on a fraction of future income for a period of years.   The school will have the incentive to prepare the student for well-paying and stable employment.   The student benefits from accessing a more promising career even though he still retains the burden of paying back that debt when his interests have changed.   In my scheme, the student benefits because the schools terms for financing will have access to a portion of income for a fixed number of years.   At the end of that period, the student is released from any further obligation no matter how much he contributed earlier.   In contrast the current system of student debt from third-party lenders can have the student paying back debt from education received decades earlier.

In this scheme, the schools will need some protection from free-riders who obtain education but either avoid work entirely or take work that pays much less than expected for the education.   The terms of the agreement may include an incentives such as requiring the student to return for retraining and thus a renewal of a payback period if he does not obtain a job exceeding a lower-limit of compensation.  The states may allow such terms but with certain restraints to avoid students becoming permanently indebted to the school.   Perhaps the state will allow only one iteration of retraining and re-obligation.

Alternatively, the school can set higher entrance requirements using academic and personality assessments to select students more motivated to get and maintain good paying jobs.  I imagine the nature of these school’s education being far more intense than semester-based schooling.  This intensity of schooling will discourage students unmotivated to seek the best jobs.   If someone is not motivated to hold a professional job, he is unlikely to be motivated to commit to the more demanding educational burdens of these schools.

The above discussion is my imagining of a different approach to providing and financing education.   I think this has some merit but I haven’t done much research into how to make it work.  However, in my observations in the current job market, I am noticing a trend that may be leading to a similar arrangement.  This trend is occurring particularly in the software job markets with contract employers offering trained individuals to businesses for a set hourly fee that is larger than the fee they extend to the individuals doing the work.   In these arrangements, the working individuals work as non-employee (1099 tax status) who get only a fixed hourly rate with no benefits of paid time off and no employer contributions to health-insurance or retirement.  Sometimes the company will make arrangements to provide additional benefits through voluntary group plans but this is not the same as the obligatory benefits required of full-time employers.

The intermediary company provides only a minimal service of handling tax administration and other regulatory requirements and to negotiate terms for new assignments.  This service justifies their mark-up of the individuals billing rate to the ultimate customer business.   This industry is becoming increasingly competitive as a result of increasing maturity of software technologies making the skills more like a commodity than individualized specialties.  Meanwhile, the software technologies are changing rapidly so that existing skills applied to a current assignment are quickly obsolete and irrelevant for future assignments.   In that past these companies can abandon the now obsolete worker and seek out a new more currently trained individual.

The problem for these companies is that the pace of change in the software industry is so fast that there is little or no pool of available workers skilled enough in the newest trends to be relevant to employers.   For the few qualified individuals that do exist, there are a many competing contracting firms seeking his time.   Meanwhile, the companies have earlier staff that successfully satisfied customers with now obsolete skills.   The trend is for the companies to provide training in the latest technologies to qualify for the next engagement.

This training investment is different from earlier practices of paying for continuing education that an individual undertakes on top of his billable time to a client.   The older practices burdened the individual with the risks of taking the initiative in training for something that he perceives as relevant and the company will reimburse only a few such courses (sometimes one every year or so).   The risk is that the training may turn out to be irrelevant to the current market.

The emerging approach is for a company to recognize an immediate demand for a certain capability and then invest in its membership to train them to match the job requirements.   The company will provide training at no cost with with pay to its valued members in order to produce the precise capabilities currently requested by clients.   The company takes the risk of identifying the right skills and investing in the training.   In exchange, the member takes a commitment to complete a contract term (of several months to a year).   This commitment is informal in order to comply with labor laws.   However, the incentive to complete the full term is to have continued access to future work by this company or by its competing labor-contracting firms.

Also, I am seeing a trend where this trend involves proprietary in-house training instead of using external training companies that normally cater to full-time employees with employer-paid continuing education.  The in-house training can be more focused on the specific needs of the contracting business and be tailored for the specific needs of particular clients.   This starts to appear to be similar to my imagined education concept where the contracting firm offers an education program in exchange for a fixed-term commitment for access to a certain percentage of the student’s future earnings.   The model is growing out of the contract-labor business model of markup of billable labor hours of short-term contracts for labor to specific clients, but the transaction is very similar.   I see this in the software related fields but it may also emerge in other fields as well.

The education can come internally within contracting companies instead of education companies.  The education is financed by future earnings instead of past earnings (cash) or debts.  This may be a natural evolution for meeting the labor needs of the current economy.   This evolution happens to have at least a similarity to peonage.