This week, I had the opportunity to interview the incredible founder of Mos, Amira Yahyaoui. Amira created Mos to solve the student loan crisis in America.
At the time of our interview, there were over 45 million Americans loaded with over $1.64 TRILLION in student loans. The average American carried $35,359 in student loan debt – a number that has increased 26% over the last 5 years and continues to rise.
Student loans have a strange quirk relative to most other debt instruments: nondischargeability. This means that when an individual declares personal bankruptcy, student loans are not automatically discharged. This structure treats student loans in the same way that it treats loans incurred by fraud, felony, and alimony-dodging. The decision to make student loans nondischargeable dates back to the complete overhaul of the US Bankruptcy Code in 1978. Although the data at the time showed a discharge rate of less than 1% for federally insured student loans in bankruptcy proceedings – there was an imagined crisis that students would take advantage of the program.
Meanwhile, as is the case in most leverage-fueled bubbles, college tuition fees have dramatically increased - 213% over the last two decades. Where has this liquidity flowed? Unfortunately, not into academic improvements. Instruction-related expenditures as a percentage of total university spend actually declined from 41% to 26% over the last 3 decades. Meanwhile, fixed asset expenditure (ie: like LSU’s $85M lazy river) and administrative costs are on the rise.
In addition, higher tuition fees have not translated into better results. For the first time in nearly 30 years, college graduates are more likely to be un or underemployed compared relative to overall workers. As costs rise and prospects decline, the university system in America is threatened.
COVID19 has only accelerated the damage. If our current unemployment rate remains near 11.1%, it will vastly reduce the possibility of student loan repayment. In addition, many universities have chosen not to open campuses to students this fall, yet most of these universities (ie: Harvard) refuse to reduce tuition fees.
Taking on student loans seems to be a poor choice for most students who now lose the opportunity to leave home to strengthen their social networks and have fewer jobs available on the other side. Some expect this will lead to a rapid decline in university attendance. As NYU Stern Professor Scott Galloway highlights in this interesting spreadsheet, many universities will not survive in a post-COVID world.
This Week’s Podcast:
Solving the Student Loan Crisis with Amira Yahyaoui, Founder & CEO @ Mos
“99% of the universities (and often the best choices) in other countries are free. They are mostly public institutions… [but] the problem is not that education in the US costs money, the problem is HOW students are asked to pay for it.”
- Amira Yahyaoui
Amira Yahyaoui came on Look Up! this week to discuss the student loan crisis in America (highlighted above). We also touch on her activism in Tunisia, immigrant founders in Silicon Valley, DACA, Black Students Matter, and her transition from NGOs to for-profit enterprise.
If you’re building technology that will have a massive positive impact, I’d like to connect!
What I’m Reading
IDEAS
Memes in Digital Culture, Limor Shifman
Story Telling Advice from the Creators of South Park, Nathan Weller
MARKETS
Return of the SPAC, John Street Capital
Central Banks Have Become Irrelevant, Russell Napier
Elon Musk, Blasting Off in Domestic Bliss, NYTimes
STARTUPS
The Value of the Velvet Rope: Effects of Hype and Exclusivity on Launch Strategies, Gaby Goldberg
Fast Social Media Strategy, a Tweetstorm by Matthew Kobach
POLITICS
China Has Blown Its Historic Opportunity, Arvind Subramanian
CRYPTO
The Successful Launch of KarmaDAO, Andrew Lee
Aggregation Theory Applied to DeFi, Deribit Insights
Venturing Deeper into the Crypto (DeFi) Idea Maze, Sunny Aggarwal
COVID19
Opinion: Herd Immunity May Be Closer Than You Think, WSJ
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