• 11 hours The Shroom Boom Is Here To Stay
  • 1 day Biden Will Be A Boon For Solar Stocks
  • 3 days The Gold Rally Has Finally Run Out Of Steam
  • 4 days Citibank Analyst Predicts $300k Bitcoin By End Of 2021
  • 6 days Bitcoin Lives Up To Its Safe Haven Status In A Big Way
  • 7 days 14 Million People Will Lose Unemployment Benefits On December 31st
  • 8 days Why 12 Million American Millionaires Isn’t Good News
  • 9 days Big Oil Is Paying The Price For Investing In Renewables
  • 10 days The Banking Industry’s $35 Billion Gravy Train Could Disappear
  • 11 days Did Amazon Just Democratize Prescription Drugs?
  • 13 days The Private Space Race Just Got Very Real
  • 14 days Short Sellers Are Willing Big In This Turbulent Market
  • 16 days SpaceX Gets Go-Ahead To Send Humans Into Space
  • 17 days Saudi Arabia Lost $27 Billion In Oil Crash
  • 17 days China’s Big Tech Takes A Hit As Regulators Crack Down
  • 18 days Black Friday Could Be Retailers’ Only Hope
  • 19 days Why You Should Not Dump Your Stay At Home Stocks Just Yet
  • 20 days The Real Reason Why Uber And Lyft Stocks Have Soared Nearly 50%
  • 22 days Bitcoin Heads Towards $16,000 And No One’s Cashing In
  • 23 days Elon Musk’s $250 Tesla Tequila Is Already Sold Out
Will Big Oil's Plastic Bet Pay Off?

Will Big Oil's Plastic Bet Pay Off?

Big oil’s major bet on…

Uber And Lyft Look To Go Electric

Uber And Lyft Look To Go Electric

Uber wants to become part…

Why You Should Not Dump Your Stay At Home Stocks Just Yet

Why You Should Not Dump Your Stay At Home Stocks Just Yet

Despite the euphoria surrounding the…

  1. Home
  2. News
  3. Breaking News

Is This The Solution To The U.S. Student Debt Crisis?

College

Colleges are offering an alternative to students who don't want to be saddled with hefty student loans, or those who don't qualify; pay us a percentage of your future salary over a set period of time. 

Norwich University announced Tuesday that it will become the latest school to offer this type of contract, known as an income share agreement. Norwich’s program is starting out on a small scale, mainly for students who do not have access to other types of loans or those who are taking longer than the traditional eight semesters to finish their degree. -AP “Norwich University is committed to offering this new way to help pay for college in a way that aligns incentives and helps reduce financial barriers to degree completion,” said Lauren Wobby, the school’s chief financial officer and treasurer.

The income-sharing agreements are said to give colleges greater incentive to help students find high-earning jobs post-graduation, as they have a vested interest in seeing their students enter into high-paying jobs which means they would recoup their investment in a shorter period of time. 

For many students, income sharing agreements are considered less risky, especially if they are unable to find work after graduation, or end up in lower-paying jobs

Related: Google Wins Bragging Rights With New Subsea Cable

“Taking on the debt through a contract, where you don’t take on a debt per se but instead will repay a portion of your future income, has a certain appeal to students when the concept is fully explained to them,” said Clare McCann, the New America Foundation's deputy director for education policy.

That said, colleges providing income-share agrements will need to be careful that they don't appear to discriminate against those who choose lower-paying jobs. 

“If income share agreement providers aren’t careful, they can definitely see unintended consequences in discriminatory terms toward students. This is one of the biggest differences between income share agreements and federal student loans,” McCann said. “Federals loans offer the same terms to all borrowers.”

The notion of income sharing agreements has been around for over 60 years, however they began in earnest in 2015: 

Income share agreements were first proposed by Milton Friedman in 1955, and Yale University briefly experimented with the idea in the 1970s. In the past decade, technical training programs, such as coding boot camps, have used this type of funding largely because participants do not have access to federal student loans.

In 2015, Oakton, Virginia-based Vemo Education began working with accredited colleges and universities. The company now works with nearly 30 public and private colleges and universities across the country, including Norwich University. -AP

Vemo's first contract was with Purdue University, financing their "Back a Boiler" income sharing agreement program in 2016. 

“One of the biggest pros for the income share agreement was the fact that out-of-college pilots do not make a lot of money, especially looking at the costs for an educational program,” said Andrew Hoyler, 22, who graduated from Purdue last year with a degree in professional flight. He now works for American Airlines regional carrier, PSA airlines. 

Related: China’s Trail Of Unsustainable Debt

While the terms of the agreements can vary, Hoyler is currently paying 8% of his income to the program.

Hoyler took out federal loans but said the income share agreement helped him avoid working multiple jobs while starting out last year as a flight instructor. Hoyler said he may end up paying more for the income share agreement in the long run as his salary rises, but deemed it a worthy trade-off.

For students who can’t make ends meet with scholarships, grants and federal loans, income share agreements can meet that need for students who otherwise would turn to federal loans to parents or private loans. -AP

“The schools are doing it now because they want alternate financing models,” said Vemo CEO Tonio DeSorrento.

By Zerohedge.com 

More Top Reads From Safehaven.com

Back to homepage

Leave a comment

Leave a comment