As a bonus this would make universities better at education since the incentives would be aligned with the students.
It would be helped though if the easily available government loans were not available, though with the generally bad politics from both sides on this, I find progress there unlikely.
The fact is, the majority of students don't make their decisions of where to attend based on tangible metrics. They make their decision based primarily on the perceived "experience" they will have in college, and only after that do they filter their options based on other factors (if at all).
The problem is less with the colleges, and more with the fact that attending college has become less about academics and much more about a stage of transition into adulthood (along with a sort of last "hurrah" farewell to the lesser responsibilities of childhood)
If student failure to succeed in the market led to university failure we'd see a lot different behavior from universities.
I don't think the universities are currently selling education, they're selling prestige and network access via credentials with some education on the side at inflated rates from easy access to government non-defaultable loans.
This leads to weird behavior like all majors being the same cost and the same length along with lots of people employed by the university that don't know anything (career services where I went to school was a good example of this). There's also a lot of spending on facilities to lure students that is unrelated to education or success afterwards (since they have to compete with other universities for all of the free government loan money).
If this free money was not available there would be a check on people getting loans for majors that are not economically viable. If school's offered ISAs then the school's would provide the check. As it is currently, the student carries the burden of evaluating all of this - it's not a surprise a lot of people fail this at 16.
This incentive alignment issue is why people come out of universities and get destroyed by technical interviews, why a large amount of CS majors can't solve fizzbuzz and why people pay a lot for ultimately worthless degrees. I don't disagree with the cultural problems you describe, but I think if there's an ISA option vs. 100k in debt option more people will take the ISA option if the education actually works (and it will have to for ISA providers to survive).
There's a way to fix the systemic incentive issues and place the burden of evaluating economic viability on systems better able to handle it. This would fix a lot of the problems, but it's hard to change from within the system with the current broken incentive structure. That's why I'm excited about the Lambda School approach - I don't think universities can dig themselves out of this and I don't think the necessary changes to government loans is politically viable.
This is also why I think 'free college' is bad policy, it further prevents Lambda School like ISA approaches and cements in the current broken incentive structure.
As for free college, countries that have it don't just make it free for anyone: there is a significant filtering process that entails tracking students who don't perform academically into paths more suited to specific trades instead of college. If there's a solution to the above problem, it need to include something like that as well.
I think there's a lot of market demand for certain capabilities though - specifically capable software developers.
Maybe there's an argument that there's not enough intellectual capacity to meet this demand, but I think it's more an issue of opportunity (Lambda's student success seems to be evidence of this). I guess I'm not convinced there's oversupply generally as much as there is an oversupply of certain non-economically viable majors (because of this incentive problem).
For the free college, even with those restrictions (which are good), I'd argue it doesn't relieve the incentive alignment problem with the colleges themselves (so it harms potential ISA competitors without solving the underlying problem).
College worked out well for me, but I definitely didn't know you could evaluate a school this way when I was 17 & filing applications. I just applied to public schools with a strong reputation.
It's easy to take for granted as an adult that all this information exists. But for a teenager, the whole thing is all new.
But that information is less useful than one might naively assume. What you actually want to know is the school’s contribution, which the raw rates don't tell you. Like good ratings for primary/secondary schools, the raw rates mostly tell you about the qualities of students that end up going there; pulling out the effect, if any, of the school is much harder.
The most prestigious medical schools, engineering schools, etc. actually make a ton of money from non-tuition-based sources. Income from patent licensing, federal research grants, etc. dominate income from tuition.
Some of these schools also have endowments that are absurd multipliers of their annual expenditures.
For these schools, where the lack of tuition isn't such a near-term threat, they might actually realize that they can make more money in the long-term (and incentivize better education) by making tuition something more like an ISA.
You've seen it already, where some schools are offering "free tuition", because the value of the labor they get from their students is already greater than the tuition they charge. There's also probably some good tax benefits to writing off the expense of education, in these scenarios. https://med.nyu.edu/education/md-degree/md-affordability-fin...
Especially when you include the tax benefits, free tuition might actually be cheaper than an ISA, because enforcing an ISA requires operational overhead.
My opinion - not my area of research - is that the days of hiking tuition like they did year after year are over. Note that there's no reason this won't bring in money immediately. Students would essentially be doing an IPO and giving shares to the university. Those shares would have value to someone, and they could serve as collateral for a loan. And beyond that, there's no reason it has to be all or nothing. You could pay half tuition now and sign over a percentage of future earnings.
There's no way colleges want to do this. It's unclear to me how long they continue to operate under the current system. They're going to have to innovate.
The colleges will have no choice but to ensure their students have nice enough jobs to pay back the loans, and will quickly see attendance plummet if they can't get people in the door anymore. Remember that it's the government paying these colleges directly, not the students.
Unless they sell bonds secured on the income streams.