Abstract Welfare capitalism is going through a deep crisis, and alternative models to welfare state capitalism such as liberal socialism and property-owning democracy are once again becoming prominent in public debates. The aim in this article is to compare the merits and the limits of liberal socialism and of property-owning democracy through the specific case of the distribution of educational capital, by comparing two educational systems: the Pay It Forward (PIF) system and the Tax-subsidy scheme (TS) system. Based on the analysis of these two educational systems, we provide three arguments in favor of liberal socialist institutions in general and the PIF educational system in particular: (1) the individual common assets argument, (2) the principle of reciprocity argument, and (3) the predistribution argument.