Facebook and PayPal's Peter Thiel Pays College Students to Drop Out

May 26, 2011 — -- PayPal cofounder Peter Thiel knows a thing or two about finding the next big thing.

Thiel was the first investor in Facebook and predicted the dotcom crash and the housing bubble. Now he believes the next big thing to burst is higher education, and he's willing to put his money on it.

"Learning is good. Credentialing and debt is very bad," he said. "College gives people learning and also takes away future opportunities by loading the next generation down with debt."

The 43-year-old with a net worth of $1.5 billion recently started a $2 million fund to get college students younger than 20 to drop out of school and start a business with $100,000 each.

"We ended up picking 24 people to try to get them to work on very specific projects that would push the frontiers of science and tech in areas ranging from biomedicine to computers to robotics," Thiel told ABC News.

Even though Thiel has a law degree from Stanford, he's still questioning the value of a college education. New York Magazine recently rated the worthlessness of a college degree as "one of the year's most fashionable ideas."

"Facebook was started in 2004. That was the right time to start that company," said Thiel, whose $500,000 investment in Facebook is now worth about $2 billion. "If all the people had finished their college education and waited till 2006, it would have been too late."

College students Eden Full and Jim Danielson say they are not willing to take that chance. They've dropped out of college and put their ideas and inventions on the fast track with Thiel's financial backing. Full said she worried that someone would beat her on her idea for new solar panels, so she passed on a degree from Princeton.

"These panels are so unique," she said, "I need to get them out there now."

Danielson, who turned an old Porsche into a fully electric car while in high school, put the breaks on Purdue.

"I feel like the electric vehicle industry is changing rapidly, and if I passed up this opportunity and waited till I finished my college degree, a lot could be changed," he said. "I could miss the boat on electric vehicles."

Sixty-five percent of Americans have student loan debt, and the typical college student leaves school $24,000 in the hole. According to The New York Times, by the end of the year, the total is expected to surpass the trillion-dollar mark -- that's more than credit card debt in this country.

"The price of education on a college level has gone up by a factor of more than 10 since 1980," Thiel said. "Adjusted for inflation, it's gone up by about 300 percent -- more than housing and tech stocks did in the '90s or housing [in] the 2000s. It's quite possible for a person to go to a top-tier private school and end up with a quarter million in debt."

PayPal: 'Very Basic Idea' Nets Thiel $55 Million

Thiel has already been credited with transforming the world. He said PayPal, which he cofounded in 1998, "was a very basic idea: take dollars and email and try to combine them."

That combination turned out to be a winning one. Ebay bought PayPal in 2002 for $1.5 billion; Thiel made $55 million. He used some of that to invest in promising startups, most famously in Facebook. Although others say he bankrolls big, eccentric ideas that he thinks will save the world, Thiel calls it "breakthrough philanthropy."

"Technology is fundamentally about going from zero to one," he told ABC News. "If you do something new, it will always look a little bit strange."

He's donated millions to promote research into reversing the aging process to extend human-life expectancy. "I enjoy my life," he said. "I certainly would like to live longer."

He also funds the Seasteading Institute, which is devoted to creating self-governing communities in the middle of the ocean.

"Seventy percent of the planet is covered with water, and there's so much we can be doing with oceans and it was one of the frontiers that people have more or less abandoned," Thiel said. "It's pretty far in the future but closer than say building cities on the moon."

Thiel has become the poster boy for Silicon Valley libertarianism, the belief among many entrepreneurs that government hinders innovation. Openly gay, Thiel endorsed Ron Paul for president in 2008 and has donated heavily to Republicans.

"I probably am a bit of an outsider in many ways," he said. "That has good things and bad things about it. It does have the tremendous benefit of forcing you to think about what's going on fundamentally with institutions, with our society and then for for ways to make them better."