Purdue University, located in Indiana, is pioneering a new way for students to fund their education through Income Share Agreements (ISAs). These agreements allow students to receive money to pay for their tuition and in exchange, they agree to pay a portion of their future income for a set period of time after they graduate.
ISAs are different from traditional student loans because they do not accrue interest and repayment is based on the student`s income rather than a fixed rate. This gives students a level of flexibility and protection against debt that traditional loans do not offer. For example, if a student graduates and is unable to find a job or earns below a certain income threshold, they can have their payments reduced or even eliminated.
Purdue University was the first university in the United States to launch an ISA program in 2016. Since then, the program has gained popularity and has expanded to other universities across the country. Purdue has partnered with Vemo Education, a company that helps design, launch, and manage ISA programs, to offer this innovative funding option to its students.
The program at Purdue is called the Back a Boiler – ISA Fund. Students can receive up to $10,000 per year for up to four years to pay for their tuition. In exchange, they agree to pay 1.57% of their post-graduation income for 10 years for every $1,000 they receive. This means that if a student receives the maximum of $40,000, they would agree to pay 6.28% of their income for 10 years after graduation.
The program is available to both undergraduate and graduate students, but there are some eligibility requirements. Students must be enrolled full-time and have a minimum GPA of 2.5. They cannot be in default on any federal student loans or owe a balance to the university. Additionally, international students and students in certain majors (such as education or nursing) may not be eligible.
ISAs are still a relatively new concept, and some critics have raised concerns about their potential impact on low-income students. If students are obligated to pay a portion of their income for an extended period of time, they may be hesitant to pursue lower-paying careers such as teaching or social work. However, proponents argue that ISAs can actually benefit low-income students by offering them an alternative to high-interest loans.
Overall, Purdue University`s ISA program is an innovative and forward-thinking way to make college more accessible and affordable for students. As ISAs continue to gain popularity, it will be interesting to see how they shape the landscape of student financing in the years to come.