Are Income-Sharing Agreements the Answer?

by Brett E. Kennedy, Managing Director

Purdue University has pioneered a new model helping pay for the costs of college. With their Back a Boiler – ISA Fund, the Purdue Research Foundation is offering Sophomores, Juniors and Seniors at Purdue the chance to receive money for a Purdue education and in return they agree to pay back a percentage of their income after graduation. The awards range in amount from a minimum of $5000 per regular academic year to a maximum dependent on student loan debt and prior Income Share Agreement (ISA) commitments.

These Income Share Agreements do combine with other aid that is offered including scholarship, grants, work-study and student loans. Is this the answer to rising college costs across both the public and private college sector? While I applaud Purdue for this kind of innovation and a willingness to experiment in funding of college, I wonder how will an Income Share Agreement be different in perception than a student loan.

In the media, I hear a great deal about a student loan crisis and there are reports that student loan borrowing is impacting the ability of some would be homeowners to make a home purchase. Will an Income Share Agreement be any different? In Purdue’s model, the amount you pay back is determined by how much income you make. Will the students taking out Income Share Agreements see this as a good option to achieve their higher education goals or will this eventually be seen as another debt placed on the backs of students by colleges?

Is the bigger concern the skyrocketing costs of higher education in the face of largely stagnant wages, significant income equality and the economic uncertainty faced by many Americans? Is the bigger concern the declining funding of higher education by both the the federal government and the state governments?

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