Education Dive

Dive Brief:

• Income share agreements, where institutions help students pay for tuition so long as the borrower gives up a certain percentage of income following graduation to pay back the costs, are gaining traction within the industry.
• Purdue University led the trend in 2016, with its “Back A Boiler” program, which covered fees of about $12,000 on average. Since then ISAs have gained attention from as smaller institutions such as Clarkson University in New York and Lackawanna College in Pennsylvania, reports the Economist. The publication notes one analyst believes 12 or more colleges will follow that trend this fall.
• Though the share of ISAs is still small with about 3,000 to 5,000 American students using them to cover about $40 million in tuition, writes the Economist, the idea is gaining popularity particularly as concerns over institutional accountability and student debt rise. ISAs are seen by many institutions adopting them as a way to ensure graduates see decent return on investment and aren’t saddled with debt.

Experts say ISA programs benefit everyone involved. Students pay often pay less overall and make contributions relative to their income. And, cash-strapped colleges (especially those confident that their students will do well) can make more connections with investors, who may feel more compelled to make a good faith investment students’ futures by supplying ISA funds.

Lackawanna College announced it will offer the agreements this fall and Norwich University, a military university in Vermont, this month said it would introduce ISA programs. Norwich is partnering with Vemo Education, a ed-tech company that has contracted to help design and service about $23 million to fund similar income share agreements, including at Purdue.

On the other side, some critics charge the agreements can be oppressive for participants and that they are largely unregulated. Two bills in Congress that would set caps on borrowing and keep lenders from demanding payment if student income falls below a certain level have been stalled in committee. Though, schools may still feel compelled to use them, particularly as more students are dissuaded from enrolling in college for fear of not being able to pay back loans.