Is Purdue University’s ISA the Beginning of the End of the Student Loan?

Finding ways to ease the student loan debt crisis from CNBC.

via CNBC:

  • Purdue University says it is the first four-year institution in the country to offer an income-sharing agreement, or ISA.
  • Under Purdue’s Back a Boiler program, graduates make payments for 10 years after graduation.
  • The percentage graduates pay depends on their major and the amount of funding they receive. The less they make, the less they are required to pay.
  • ISAs are also attracting attention in vocational schools.

More than 20 million students are enrolled in American collegesand universities, according to the U.S. Department of Education, and most of them are making an incredibly risky bet. If they cannot get a decent job after graduation, they are still on the hook for potentially crippling student loan debt. But a new college financing arrangement is aimed at reducing that risk. Instead of taking out loans, the student agrees to pay back a portion of his or her income for a set period after they graduate.

Purdue University says it is the first four-year institution in the country to offer the option, known as an income-sharing agreement, or ISA. Under Purdue’s Back a Boiler program, graduates make payments for 10 years after graduation. The percentage graduates pay depends on their major and the amount of funding they receive. The less they make, the less they are required to pay. And if they do not work, they do not pay anything.

“It gives them certainty and some protection and safety. They’re not going to have that much money borrowed, piling up, compound interest whether they’re doing well or not,” said Purdue President Mitch Daniels, who is a former Indiana governor and White House budget director under President George W. Bush.

 

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