Example Say a student wish to study an engineering course in 5 years time. This student will be able to afford fees say 16,000 per annum in year 5. The current fee is 18,000 per annum. The interest rate is around 4.5 % and the standard deviation of this particular course over the last 5 years is 5 %.

Using our system, the premium works out to be 5224.25 which represents 29 % of today's cost. This is a 'neutral value' where it does not take into account factors like demand for the course, desirability of the student etc which may even add up to a higher value.

Depending on University's policies, if the student is unable to gain admission to the course, the university might wish to consider refunding this amount or a partial amount. This is a business decision but as one can appreciate, the said university was able to raise funds which would otherwise cost them in the mid-term.

In the same vein, the university can make it attractive by instituting policies that favor such a funding mechanism. For example if two potential candidates having achieved the same entrance score but having only one place, then the student having the option would be admitted since by contract the student has the right but not an obligation to exercise (ie pay the 16,000) where such right is dependent on receiving an admission offer.