With a dearth of safe returns in the conventional financial markets, some investors have opted to back the future earnings of Swiss students as a safer bet.
People who finance the studies of the next generation of workers stand to make a five per cent return on their capital, and make a positive contribution to society, according to the Studienaktie investment scheme.
The system also promises to help cash-strapped students fund their courses without having to work part-time or extend their studies.
But the students’ union association believes the investments could increase pressures to perform and would prefer that the cantonal systems of scholarships be harmonised to provide better cover.
Studienaktie was started five years ago by St Gallen University graduate Lars Stein as a means of improving the financial situation of students.
“When I was a student I found myself in financial difficulty,” he told swissinfo.ch. “I realised that the only collateral I had to raise funds was my future income.”
Official statistics from last year showed that three quarters of Swiss students relied on part-time jobs to fund their studies with only 16 per cent receiving subsidised fees. Most funding of studies derives from parents who earn enough to afford it.
“Switzerland is a land of part-time working students and many do not receive grants because they are too old, are on postgraduate courses or are a different nationality,” said Stein.
Studienaktie hopes to partially fill the gap by bringing together students and people with spare money to invest.
Investors are invited to commit a minimum SFr1,000 ($1,200) and are promised a cut of the students’ initial salary when they graduate.
Studienaktie calculates the amount that needs to be invested to best realise a potential return of five per cent on the investment based on the likely future earnings of the student.
The calculation is made in such a way that the potential return is consistent no matter what type of job the student ends up in.
“This represents a better return than a normal savings bank account [typically one to two per cent at present],” said Stein. “Investors also benefit from the social return of helping people make their own way.”
Some investors may be put off by the risk that a student fails to find work or can only get employment in a lower paid job than expected. On the other hand, returns could reach 15 per cent if the student lands a better position than anticipated.
Around 80 investors have so far shelled out SFr500,000 ($600,000) to help finance 53 Swiss students.
One of those investors, economics professor Claude Siegenthaler, told Swiss public radio that the scheme presented a viable alternative to the shaky financial markets, still troubled by the after effects of the financial crisis. Siegenthaler was also impressed by a potential rate of return that beat standard savings accounts.
“This is an unconventional way of working your money that is not offered by the financial markets,” he told the Espresso programme. “Any investment that I can personally influence is very attractive.”
“Studienaktie is a new movement that develops society by bringing together various people with the same educational goals.”
Such schemes exist in other parts of the world, most notably the Lumni investment plan that started in Colombia nine years ago and has now spread to Central America and the United States, raising some $17 million (SFr14 million) to fund student studies.
While the Swiss Students’ Union did not condemn such schemes outright, the body told swissinfo.ch that such funding could present problems not associated with scholarships.
“We believe that an improved system of scholarships would work better as this would negate the pressure on individual students to get a good job after their studies to pay back the investment loan,” said spokesman Lorenz Bort.
“Creating external pressures to perform is not in tune with the goal of funding studies.”
The students’ union plans to hand in an initiative early next year that would force a harmonisation of the scholarship system. The 26 cantons currently run their own schemes that vary in the amounts paid out and how many students receive financial aid.
“Studying should not be a problem for people who do not get money from their parents,” Bort told swissinfo.ch. “It is also not right that some students have to prolong their studies because they have to work to survive financially.”
Students and money
A Federal Statistics Office study last year found that 75% of students had to find part-time work to fund their studies in 2009.
Half of the respondents to the study said they worked between 36 and 55 hours per week.
Only 16% of students received grants with most relying on parents for financial support.
In 2009, students in lodgings had to find SFr1,870 ($ 1,880) on average a month, while those living at home had a budget of SFr1,210. In both cases this was SFr100 less than the previous time the study was conducted in 2005.
Some 20% of high school graduates go on to complete a university degree. Of those who go to university, 90% end up with a masters degree.
Official statistics show that the unemployment rate of university graduates is 5.8% in their first year on the job market and 2.3% after five years.
One year after graduating the average salary is SFr75,000-80,000 ($86,000 - 92,000) but within five years it rises by up to 22 per cent.end of infobox