Colleges are increasingly allowing students to pay for their tuition with future earnings via income share earnings, according to a Sunday report.
Private colleges like Lackawanna College in Pennsylvania and Clarkson University in New York have adopted income share agreement programs, pioneered by Purdue University in 2016, according to The Washington Post. Vemo Education, a firm which creates the contracts, says others are exploring the system.
Income share agreements diverge from traditional loans in that they are not subject to interest and do not need to be paid off after a certain period of time. Students agree to pay a certain percentage of their income for a stipulated number of years. The program at Christian school Point Loma Nazarene University, for instance, is charging participating students 2 percent of their income for six years for each $5,000 borrowed.
“It sends a message to the student that we’re in this with you,” said George Latter, Point Loma’s vice president of finance and administrative services. “And unlike a grant, you have the prospect of these funds coming back in and creating a revolving form of financing.”
“I’m very concerned if we are saying it’s a positive that on top of people coming out with federal students loans to repay, we’re going to take another bite out of their income by adding an ISA obligation,” Jessica Thompson, the Institute for College Access & Success’ policy and research director, told WaPo.
But others are concerned that the program could accentuate preexisting divides in the “great equalizer” of education.
“If you’re making a bet on students by their major, there’s a chance of reinforcing existing inequalities,” said Mark Huelsman, a policy analyst for left-wing think tank Demos. “There are massive racial disparities in returns on a college degree.”
The Daily Caller News Foundation reached out to Vemo for comment, but received none in time for press.
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