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whitepaper
Student Debt
The vicious student debt Cycle
"The root problem with conventional currency is all the trust that’s required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust."
“In problem-posing education, people develop their power to perceive critically the way they exist in the world with which and in which they find themselves; they come to see the world not as a static reality, but as a reality in process, in transformation.”
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GetSmart aims to solve three crises in education: 1) tuition costs and loans 2) verifiable learning 3) student engagement.
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Student Debt
Executive Summary
GetSmart aims to completely reverse student debt and fund education worldwide by tokenizing debt-relief through a smart contract that connects collective tokenized bargaining, cryptolending, and cryptoconnected NFT badges. Offering fun, exchangeable cryptorewards (scholarships) for learning will not only turn education debt into value, but the badge-to-token multi-utility concept fueling GetSmart will:
- increase learner engagement
- verify credentials and micro-credentials
- lower risk for education lenders and parents
- benefit institutions and teachers
- open doors for minorities and women
GetSmart synergizes gamification, cryptomarkets, and credentialing into a powerful, decentralized, trustless solution accessible to all.
♦ The US Student Debt Crisis
The clearest failure of financing education is found in the good ol’ USofA, where student debt is second only to property as the largest area of debt (Forbes, 2019). Students and their families often borrow large amounts of debt that earns an average of 8.7% p.a. interest for government-backed lenders, bankrupting education borrowers for life who cannot pay due to legislation that restricts defaulted debt to ever be forgiven.
- Over 45 million Americans are in Student Loan Debt, a total of over $1.6 Trillion Dollars
- Student Loan Delinquency Or Default Rate: 10.8% (90+ days delinquent)
- Direct Loans – Cumulative In Default: $119.8 billion (5.5 million borrowers)
- Direct Loan In Forbearance: $122.9 billion (2.8 million borrowers)
The trend continues, to where the US student loan debt rose from $480.1 billion (3.5% GDP) in Q1 2006 to $1,683 billion (7.8% GDP) in Q1 2020
♦ Verifiable Credential Ownership
The one problem in education that blockchain developers have been trying to solve are the issues surrounding credentialing. The BlockCerts standard was developed to connect verifiable credentials to the immutable blockchain, increasing the transparency, validity, and transferability of credentials.
By itself, this noble aim makes it much quicker and easier to ‘prove’ a student’s achievements to an employer, government, or other institution. In Malta for example, Blockcerts were rolled out in 2019 and all qualifications are standardized and transparent – so Maltese students automatically have a record that all Maltese employers and institutions can access with permission from the student. Several other initiatives in Education use blockchain for similar solutions, including University of Melbourne, APPII, Disciplina, and Sony Education amongst others.
Sony and Fujitsu in Japan had the issue of fraudulent Japanese language test scores for new international recruits, and solved it by requiring blockchain-verified certificates from trustworthy Japanese language training providers; and after PriceWaterhouseCoopers (PwC) Research found that 37% of “bad hires” are the result of skill or credential misrepresentation, they initiated a ‘Smart Credentials’ blockchain platform. These innovative systems are centralized enterprise blockchains, however, so untenable for most institutional budgets and impossible for small providers.
♦ Student Engagement
Although the trend towards hybrid, blended, and fully-online learning has accelerated since COVID19, most institutions still fail to address the problem of engagement. Still more crippling to engagement, students who do not complete their degree still have the burden of student debt, with less access to employment. So, as PwC reported in 37% of cases, these unengaged, unqualified students resort to fake credentials and lying on resumes.
Institutions need to fill their classes to pay the bills, so many have resorted to lowering standards just to get ‘bums on seats’ and keep their academic classes going (BBC, 2020). Research shows that unengaged students do not learn, and normally fail, but due to institutional need for ‘keeping the customers happy’ the students pass anyway, and as a result the value of a tertiary certificate is no longer trusted by employers. Globally the numbers of those engaged in gaining valid, debt-free qualifications is far less than what the 21st Century requires, even with corporations engaged in university-style training.
♦ Student Debt a Global Problem
Although it is easy to decry the unsustainable costs of education in the US where the problem is most significant, student debt around the World is also significant especially when taking into account the associated costs of housing, food, and transportation. For domestic students and public universities worldwide, the cost is far less than for international students, yet in every case the financing of education comes from taxpayers, which is unsustainable in its current form. Furthermore, the cost of education in a democratic country like the USA is the main deterrent for international students wishing to study abroad and bring back a wealth of knowledge to improve their homeland. Thus upward mobility, intercultural understanding, and increasing 21st Century skills is halted due to education debt.
♦ Minorities and Women in Student Debt
Over 90% of those engaged in cryptotrading identify as men, which is understandable since men are statistically more likely to gamble, study computer science, and tweet about blockchain. Conversely, 90% of school teachers are women; and women comprise at least 50% of education borrowers. Women, like men, are in tremendous education debt. Women, like men, want to see change in education finance. But unlike men, women are not yet taking advantage of the vast potential of cryptotrading, as a result minimizing their economic opportunities.
Similar to women, even if African-Americans want to get into cryptotrading, their access to risk capital is far less than white males. In relation to student debt, the New York Times reports “recent black graduates of four-year colleges owe, on average, $7,400 more than their white peers. Four years after graduation, they still owe an average of $53,000, almost twice as much as whites.”
According to 2019 data by thinktank Demos, even 12 years after entering a degree program:
- White men paid off 44 percent of their student-loan balance
- White women paid off 28 percent
- Black men saw their loan balances grow 11 percent
- Black women saw their loan balances grow 13 percent
♦ In Sum, the current education finance system:
- Recreates oppressive centralized structures that privilege a few and keep the majority in debt for several years.
- Forces students to be indebted to the government or bank rather than become independent.
- Reinforces low-quality and poor value by preventing transparency of credentials.
- Values a highly limited set of academic outcomes and disregards social, extracurricular, and non-academic achievements.
- Devalues and demoralizes minorities, women, and low-income immigrant populations through disproportionate debt.
Solution: GetSmart
“What can be added to the happiness of a man who is in health, out of debt, and has a clear conscience?” – Adam Smith
Digital badges, as IBM found out in 2015, not only keep a verifiable and transferable record of achievement but also significantly increase learner engagement in courses. The IBM Digital Badge Program was a pilot for online learning, but as the founder David Leaser (2019) of the IBM badge system writes:
“Within weeks, student enrollments increased by 129% and the percentage of enrollees who actually completed courses increased by 226%. The number of students passing the end of course exam increased by 694% compared to the six-week period leading up to the introduction of digital badges. It’s important to note there were no other contributing factors to this success, like promotions or announcements from IBM executives.”
Furthermore, 87% of survey respondents said they were more engaged because of the digital badge program, 92% of said IBM digital badges improved their employability, and 72% of IBM managers now employ badges to recognize employees for achievement. Beyond all this great data, badges can be immutable, transparent, verifiable credentials that represent a detailed record of student engagement when transferred to a decentralized blockchain (Leaser, ibid).
Tokenization of Non-Fungible Token (NFT) Badges
“An investment in knowledge pays the best interest.” – Benjamin Franklin
What do badges have to do with tokenizing debt?
Although digital badges are a great way to increase engagement and verify credentials, they cannot reduce $1.6 Trillion in student debt. But when looking at the problem holistically, digital badges have a key utility as a delayed exchange mechanism for tradable tokens. One badge could be worth, let’s say, one token. While the students earn badges from their institutions, the tokens connected to those badges can be lent or traded on cryptocurrency markets (staked) and increase in value, much like a bank uses the savings of account holders. If students cannot exchange the badges for tokens until they graduate, then the associated tokens can increase in value exponentially during their course of study. If students have lenders, they can trade their tokens to pay down the principal and interest accrued on their loans directly upon graduation; and if the tokens are successful, potentially turn student debt into tradable assets. This mechanism does not lower tuition or the costs of education up front, but it does create a way for students to pay off some or all of their debt while reducing risk for lenders.
Who buys the badges and how do they get to students?
If lenders such as parents, governments, or banks buy tokens at a fixed rate tied to GetSmart tokens, and the institution their borrower (e.g. oldest son) attends has a GetSmart contract embedded into their LMS, then the institution becomes the custodian of the badges loaned to a specific borrower. Likewise, if the institution (e.g. university) buys badges, they can incentivize students to attend their institution with the promise of crypto-connected badges as rewards for learning. Going a step further, if institutions could buy badges at a fixed rate much lower than the current exchange value of tokens, then they could potentially make tuition low cost or free for the students that receive the badges several years later. And since our aim is to incentivize students to pass their courses, we can take it even one step further and write the smart contract to give any earned badges back to lenders if the student does not pass, and give any unearned badges to the institution to use for other students, such as those who cannot afford regular tuition.
token staking for students already defaulted or in debt
With GetSmart, education providers, token lenders and borrowers – including those who are already steeped in student loan debt – can buy tokens directly. And through an e-signature token holders can then stake any number of tokens towards a ‘debt repayment staking pool.’ For regular lenders and education providers there is no reason to join the staking pool and the token is a single utility digital asset, with a future connection to NFT badges. But for students in debt the tokens have a powerful double utility: both as an exchangeable asset and as a collective bargaining device. If the smart contract ensures a certain portion of the token earnings are periodically and fairly used to pay off the debt of token stakers, then those who are already in debt or defaulted could win big, depending on the size of their debt and the number of tokens they stake. *Remember* that if you exchange GetSmart tokens for Ethereum or another currency, you are responsible for paying taxes. Because GetSmart Token is all about lifelong and lifewide learning, we have incentivized token holders to use the tokens for educational items such as further courses or future products that accept GetSmart tokens.
Token and Badge Usage
“Learn as though you would never be able to master it; hold it as though you would be in fear of losing it.” – Confucious
GetSmart is unlike other cryptocurrencies because a large percentage of tokens are connected to badges that are sold at fixed rates to and held by qualified education providers. These badges are exchanged for tokens once a student graduates or fails. The badges go to one of three parties: 1) the graduating student 2) the student’s lender(s), or 3) the university holds them and can deliver them to other students.
While students are on courses, the tokens connected to their badges are invested or lent on crypto exchanges. All other tokens are bought, held, and traded by lenders in the GetSmart system.
♦ How to Ensure Volume
The initial Get Smart crowdfund ensures that the tokens have some exchange value with Synergetics Education, Inc. or other approved education providers. The open crowdsale to lenders and borrowers ensures the market has sufficient trade volume to make badge purchases a good future incentive for students and education institutions. The first education institutions and lenders who buy badges will thus pay very little fiat currency compared to later badge purchasers. Supporters can also LIKE and SHARE the links on Social Media!
♦ How to Determine Velocity
In this new and fun game for everyone interested in education, there is an ongoing stream of the buyers and sellers, as well as a requirement for badges to be staked until they can be exchanged for tokens. If some of the tokens are purchased and tradable by lenders and others are held in custody through purchased badges, the velocity of trade is naturally balanced between those aiming to exchange tokens immediately and those either waiting for their badges to be available for exchange or those waiting to receive relief from staking rewards. As more users buy in to the GetSmart system, the network volume increases and volatility is limited because the balancing feature of delayed badge issuance and long-term token staking always remains embedded in the utility of the tokens.
GetSmart is Managed By Trusted Professors, Finance, and Blockchain Experts Who Care About Education