Latin America’s big education innovation

Here’s an interesting innovation that is taking place in Latin America: A company is paying for the college education of thousands of students in exchange for their commitment to pay back a small percentage of their salaries when — and if — they get a job.

Lumni, an education investment fund that describes itself as “a pioneer in human capital financing, ” has already paid for the university studies of 7, 000 young people in Chile, Colombia, Mexico and Peru. It has also started a pilot program with 27 students in the United States.

The big question is whether it is a great alternative for the millions of students who can’t afford a good higher education, or a risky deal that, without proper regulation, could turn students into modern-day indentured servants.

Unlike with bank loans, students who get a job after graduation under the new income-share agreements only pay a fixed percentage of their income — typically between 10 and 15 percent — for a period that most often doesn’t exceed six years. The students’ obligation is complete at the end of the mutually agreed period regardless of the sum they paid, company officials say.

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