Some colleges and universities are rethinking how students pay tuition. “Income-share agreements” are one such option.
Rather than students (or more often their parent as a co-signer) taking out privately funded loans, those who agree to an income-share agreement promise to repay a portion of post-graduation income for a set number of years. In exchange, their college or university will waive all or part of their tuition.
Purdue University became the first large public university to offer income-share agreements in 2016, and the University of Utah recently announced it will do the same. Several private colleges also offer this to students, and their numbers appear to be increasing.
Purdue’s “Back a Boiler” initiative enrolled 160 students in its first year from 70 different majors, distributing more than $2 million in funds. At first, it was accessible only to juniors and seniors, reducing the risk that a younger college student may drop out, but it has since expanded to include sophomores.
Utah’s “Invest in U Program” provides eligible students up to $10,000 per semester with the commitment that they will repay 2.85 percent of their post-graduate income for three to 10 years depending on their major and amount received.
Both institutions partnered with Vemo education, a mission-driven educational technology company seeking to expand educational access to all Americans, to roll out their programs.
Despite the immediate appeal of no-interest loans, some are voicing concerns about income-share agreements — that they amount to “indentured servitude” and may force students into certain career paths.
Yet both Purdue and Utah allow for flexibility, permitting students who pursue graduate degrees, participate in voluntary service, or earn less than $20,000 a year to pause their payments without accruing interest.
What is still debatable is whether income-share agreements merely shift the conversation away from the need for colleges to truly lower their costs, rather than simply changing who pays and when.
Regardless, income-share agreements are certainly a way for colleges to risk-share with their students and communicate that they believe in the product they are offering.
Kate Hardiman is a contributor to Red Alert Politics. She is pursuing a master’s in education from Notre Dame University and teaches English and religion at a high school in Chicago.
