James Altucher’s advice for young people is to skip college

The
student debt problem hit a depressing milestone in
2018.
Larry
Downing/Reuters

• Americans owe $1.5 trillion in student loan debt, and
  the problem isn’t going away as tuition rates climb and the
  demand for college degrees remains high.
• James Altucher, a tech investor and self-help guru,
  says young people should consider letting wealthy individuals
  or organizations invest in their future for a percentage of
  their future earnings. This way they could pay off their
  loans.
• The idea has ignited criticism over the years from
  people who say “human capital contracts” are a modern form of
  identured servitude, or slavery.
• We asked Altucher why he thinks this idea could fix the
  student debt problem.

In Startupland, where college dropouts have a reputation for
becoming Silicon Valley royalty, one wealthy tech investor has a
bit of unsurprising advice for young people.

Skip college, says James Altucher. It’s a rip off.

But if you decide a higher education is a critical part of your
future success, Altucher says he has a wild idea that can save
young people from crushing tuition debt.

In a
blog post that originally appeared on Quora, Altucher, a hedge fund
manager, author, and self-help guru, posited that young people
would be much better off if they let high net-worth individuals
or organizations invest in their future for a stake in their
success.

“What if I graduate college and then say, ‘I will sell off 10% of
all of my future earnings,'” Altucher
said in the post.

“This creates an exchange where I can invest in kids that look
like they have bright futures (or some organizations can do it
for charitable reasons) and then I get a piece of all the
earnings of the kids I invest in,” he said, adding that investing
in young people could be a “great source of income for older
people in a low-interest rate environment.”

Altucher explained in his post, “It can also help kids monetize
their future income (the way a company does every single day) to
help pay down their student loan debt.”

Americans owe $1.5 trillion in student loan debt,
surpassing auto loan debt ($1.1 trillion) and credit card
debt ($977 billion) in the US. According to Altucher, the problem
isn’t going away as tuition rates climb and the demand for
college degrees remains high.

James Altucher, an
investor and self-help guru, self-published a book titled “40
Alternatives to College” in 2012. In a Quora post, he outlines
why he thinks outstanding student loan debt is the biggest
problem facing the US.
Frazer
Harrison/Getty Images for Airbnb

His controversial solution has been floated before.

In 2013, a new crop of startups let people forge “human capital
contracts,” in which an individual raises money from investors in
exchange for equity in themselves. Borrowers, who were often
referred to as “talent” or “upstarts,”
could potentially earn $20,000 for every one percent of
future income they were willing to pledge. They might use the
money to pay off their college loans or cover living expenses
while they start a business.

Human capital contracts never took off they way
their adherents hoped. Critics said they weren’t loans, but
“a form of tech-enabled ‘indentured servitude,'” Vice wrote in
2013.

Altucher, who is perhaps best known as the face of the
“bitcoin genius” ads that are all over the internet, proposed
putting a cap on the number of years that the borrower has to
give away part of their earnings, so they aren’t on the hook for
the rest of their lives.

“What’s not consensual is student loan debt,” Altucher said in
respose to the criticism.

“In a weird way, students feel like they have to go to college,
because they’ll either disappoint their friends or their peers or
their future employers or their parents,” he said. “So they feel
forced to go to college, and they are forced to take student
loans, and then the government will take those wages from you —
without your consent — for the rest of your life, because it’s
the only debt you can’t get rid of in bankruptcy.”

Currently, it is nearly impossible to have your student loan debt
forgiven by declaring bankruptcy. To be successful, the borrower
must hire a lawyer, which can be expensive, and
prove that being forced to repay their student loans poses an
“undue hardship.”

Could
you identify the next Mark Zuckerberg or Susan Wojcicki at 21
years old?
Brian
Snyder/Reuters

Other critics are not convinced that investors can tell a person
is going to be successful based on what they’re like as a college
student. They also run the risk that their investment has low
returns — or worse, becomes worthless — in the event the person
suffers a career-killing move, such as a
sexual harrassment scandal, or serious illness.

In 2013, one of those companies specializing in human capital
contracts, called Fantex, gave investors the ability to buy and
sell interests in professional athletes. It
shut down last year after lackluster interest from investors
and little trading activity proved fatal.

A college professor of sports management warned of the company’s
potential pitfalls for investors in a 2013 interview with

The New York Times: “You are potentially one hit away from
losing your money. On any given Sunday, anything can happen to
any player.”

Altucher admitted that not all bets would give great returns,
though he’s optimistic.

“Sure, some of these ‘investments’ will not work out, but some
will, creating a source of income for older generations and
removing the debt of younger generations, allowing them to be the
entrepreneurs and innovators they were meant to be,” Altucher
said.

“Will this happen? I don’t know. Why don’t you make this
business? Be a billionaire.”

You can
read Altucher’s post in full on Business Insider.