• 146 days Could Crypto Overtake Traditional Investment?
  • 151 days Americans Still Quitting Jobs At Record Pace
  • 153 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 156 days Is The Dollar Too Strong?
  • 156 days Big Tech Disappoints Investors on Earnings Calls
  • 157 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 159 days China Is Quietly Trying To Distance Itself From Russia
  • 159 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 163 days Crypto Investors Won Big In 2021
  • 163 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 164 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 166 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 167 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 170 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 171 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 171 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 173 days Are NFTs About To Take Over Gaming?
  • 174 days Europe’s Economy Is On The Brink As Putin’s War Escalates
  • 177 days What’s Causing Inflation In The United States?
  • 178 days Intel Joins Russian Exodus as Chip Shortage Digs In
Biggest Job Gains in History, but It’s Not Enough

Biggest Job Gains in History, but It’s Not Enough

The U.S. economy added 467,000…

Another Banner Year for Billionaires

Another Banner Year for Billionaires

Unsurprisingly, last year was very…

  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