A New Metaphor for Student Debt Burdens: Faculty Taxes. (Mike Konczal)
On the theory side, we know from the corporate finance theory literature that higher debt burdens for firms “incentivizes the company’s executives. Manager must contemplate their future obligation to repay creditors on time…this threat of illiquidity has a positive disciplining effect on management.”
And on the empirical side, we know that, from Jesse Rothstein’s work, ”that an extra $10,000 in student debt reduces the likelihood that an individual will take a job in nonprofits, government, or education by about 5 to 6 percentage points.” Both effects push people to max out earnings above, like a faculty tax would. Fascinating.