Dive Brief:
- Purdue University will become among the first to offer college financing plans that allow students to pledge a portion of their future income to supplement federal loans and grant aid.
- MarketWatch reports the income share agreement, known as the "Back a Boiler" program, would require a history major going into his senior year to pay 3.97% of his future income for nine years to pay back $10,000, ultimately spending about $13,500, less than students end up paying for high-interest private loans.
- ISAs can be discharged in bankruptcy, affording students more flexibility based on where they end up, but some are concerned they will steer students toward higher-earning majors, or obscure their true costs for students who don’t understand them.
Dive Insight:
Income share agreements come in three forms. In a philanthropic fund, individuals donate to support students through a revolving door of money. As the students make payments, they fund their successor’s agreements. Private investors can also participate in ISAs, expecting a return on their investment with the students’ future earnings. Purdue’s program will function as a third institutional model, designed to cover its own expenses and keep providing future funding to students who qualify.
Marco Rubio advocated the income-share model in his candidacy for president. Income-based repayment of federal loans may prevent ISAs from gaining steam, but the outcomes of the Purdue program will certainly contribute to the model’s future.