Reply To: tuition and home buying

popa bar abba,

While it is encouraging to hear that the leaders in Chicago seem to be addressing the tuition costs by a shared sacrifice approach have you seen the tuition decrease? Is it in fact lower than other communities?

Because a lot of people enjoy social engineering (at least, judging by the welcome shift to the shared sacrifice approach).

I would like to entertain a capitalistic model.

Hold on to your seats.

Some of you may know about the concept of structured finance. (I.e. MBS, CDO, ABS).

You collect numerous debt obligations, like mortgages, securitize them and sell them as a Bond to investors. Each group of similar mortgages is divided into numerous tranches with associated risk ratings. Every month cash flows from the mortgages flow into the deal as interest and principle payments. The Bonds pays the investors on a monthly basis.

The benefit of this is that the school always gets the $9M, up front ,each year! All the default risk is held by the investors!

(For the finance types; I know this is a simple approach. I was a financial engineer for four years so I do know a little something about securitization. We could incorporate over-collateralization, senior-sub payment structure, ration stripping, default triggers, and exchanges to help mitigate risk from the higher tranches)