Purdue Experiments With Income-Contingent Student Loans

HughPickens.com writes: Danielle Douglas-Gabriel writes in the Washington Post that Purdue University is partnering with Vemo Education, a Reston-based financial services firm, to create income-share agreements, or ISAs, that its students can tap to pay for tuition, room and board. In return, students would pay a percentage of their earnings after graduation for a set number of years, replenishing the fund for future investments. Purdue president Mitch Daniels calls the contracts a constructive addition to today's government loan programs and perhaps the only option for students and families who have low credit ratings and extra financial need. "From the student's standpoint, ISAs assure a manageable payback amount, never more than the agreed portion of their incomes. Best of all, they shift the risk of career shortcomings from student to investor: If the graduate earns less than expected, it is the investors who are disappointed; if the student decides to go off to find himself in Nepal instead of working, the loss is entirely on the funding providers, who will presumably price that risk accordingly when offering their terms. This is true "debt-free" college."

However some observers worry that students pursuing profitable degrees in engineering or business would get better repayment terms than those studying to become nurses or teachers. "Income share agreements have the potential to create another option for students looking to pay for college while seeking assurances they will not be overwhelmed by future payments," says Robert Kelchen. "However, given the current generosity of federal income-based repayment programs and the likely hesitation of those who expect six-figure salaries to sign away a percentage of their income for years to come, the market for these programs may be somewhat limited."

Comments

Punishing people who get degrees we need the most

[TFoo]

Want to pursue a STEM or other high-paying degree? No problem, but you have to pay a lot more for your degree.

ok

[argStyopa]

"... some observers worry that students pursuing profitable degrees in engineering or business would get better repayment terms than those studying to become nurses or teachers..."

And that sounds completely REASONABLE.

TAANSTAFL, people.
I know you really want a giant grant so you can get that PhD in Russian Literature but you know what? To live, you need money. To have money, you need to have a job. Life is work, and work is (usually) shit. If you're staggeringly lucky, you get to do something you love for pay. More often, you rationalize whatever enjoyment you can out of what gig you can get.

But you're simply not entitled to do what you want, and have someone else pay for it. I'm sorry if your parents never taught you that. We can talk all day long about the bullshit costs of colleges, and I'll entirely agree with you. My dad? Full ride as a football player in 1955 to the U of MN, this was noted in the paper as worth $300/year.
I went to the same school in 1986-1990, and my college education cost about $3600-$4500 annually as I recall.
My son going to the same school this year, it's about $25k/year.

Using RoI calculators on the web, my dad's tuition this year would be $2600.
Mine would be $9800.
That's absolute horse shit, and personally I suspect at least part of it has to do with ample grants and easy loans since the mid 1980s. Clearly, it's not going to teachers.

Re:Punishing people who get degrees we need the mo

[ranton]

THIS. Seriously, treating 18+ year olds as children incapable of making their own informed choices is one of the reasons that student loan debt is an enormous problem.

We don't treat them as children incapable of making their own informed choices. If that was the case they couldn't enter into these contracts in the first place.

No one is even asking for that. They merely want laws governing student loans to take the disparity in maturity and available information between an 18 year old and a bank into account.

Re:Punishing people who get degrees we need the mo

[_Sharp'r_]

Unfortunately, the current social sciences at U.S. Universities is more likely to turn out a 26 year-old government social worker who thinks all parents are idiots who need her detailed supervision and spends her free time in "safe spaces" demonstrating for vague left-wing causes in the hopes of finding an enlightened boyfriend who'll stay longer than one night.

If instead, it were to actually "teach people critical thinking, how to argue and write persuasively." and produce "well-rounded individuals who can go on to be successful in a number of fields.", then the ISA market will value that future success and ability to repay in the future appropriately.