> If you're a talented student with reason to expect high future income (and your education isn't already paid for with merit aid), why would you choose equity over very cheap debt?
How much equity? How much debt? The amount of equity depends on the student's expected future income as well as the cost of school; the amount of debt depends only on the cost of school and the risk of default.
An equity stake in such a student has a higher value than an equity stake in a mediocre student, so if an investor can tell what students look most promising, they'd have an incentive to offer education money in exchange for a smaller amount of equity. If the equity stake is small enough, then the lower risk (to the student) relative to loans may well cause the student to choose to sell equity rather than take out a loan.
How much equity? How much debt? The amount of equity depends on the student's expected future income as well as the cost of school; the amount of debt depends only on the cost of school and the risk of default.
An equity stake in such a student has a higher value than an equity stake in a mediocre student, so if an investor can tell what students look most promising, they'd have an incentive to offer education money in exchange for a smaller amount of equity. If the equity stake is small enough, then the lower risk (to the student) relative to loans may well cause the student to choose to sell equity rather than take out a loan.