Exercising Your Corporate Rights: Self-Incorporation as an Equity Alternative to Student Loans

In the United States, student indebtedness is prevalent and will become even more so after the Biden Administration’s temporary pause on student loan repayments ceases. With total outstanding student loan debt at a peak of roughly $1.7 trillion, the market for student education requires an alternative to alleviate the need for students to assume more debt to finance education costs. In the past several years, income share agreements emerged as a popularly suggested solution to supplant federal aid. Given the Consumer Financial Protection Bureau’s recent consent order, however, income share agreements have become merely another form of debt. Furthermore, bargaining power in the income share agreement relationship lies completely in the hands of investors. One hypothetical alternative is to allow students to self-incorporate and offer shares to the universities, limiting voting power and restricting the power of shareholders through the certificate of incorporation. The legal approach to income share agreements reflects leniency with respect to an individual’s signing away future rights, indicating that the regulatory framework for self-incorporation, at least at the start, would be similar. By utilizing state corporate law, students can take control while seeking active buyers of shares from university to university as each endowment fund would serve as an accredited investor for the purposes of private placement. This alternative presents an equity option as students seek to limit their debt levels when pursuing higher education. This Note seeks to explore this alternative.