Purdue Income Share Agreements: A New Way to Finance College Education
With college tuition steadily increasing every year, many students and parents are left wondering how they`re going to pay for it all. Traditional student loans can be daunting, with interest rates and repayment terms that can leave borrowers feeling stuck in debt for years. However, Purdue University has come up with a new alternative for financing college education: income share agreements (ISAs).
What are income share agreements?
Income share agreements are a type of financial aid program that allows students to finance their college education by pledging a portion of their future income to pay for their tuition. Instead of taking out student loans, students enter into a contract with an investor or a school, agreeing to pay a percentage of their future earnings for a set period of time.
How do Purdue income share agreements work?
Purdue income share agreements work by having the university invest in the student`s education. The student then agrees to pay back a percentage of their income for a set period of time after graduation, regardless of whether they are employed in their field of study or not. The repayment term is typically capped at a certain amount, such as 2.5 times the amount of the initial investment.
The percentage of income that the student agrees to repay is based on their major, with higher paying majors having a higher percentage of income pledged. For example, a student majoring in computer science may agree to repay 5% of their income for 8 years, whereas a student majoring in English may agree to repay 2.5% of their income for 10 years.
What are the benefits of income share agreements?
One of the main benefits of income share agreements is that they shift the risk of financing college education from the student to the investor or the school. If a student is unable to find a job or earn a high income after graduation, they are not burdened with high monthly loan payments. Instead, the investor or school takes the risk of investing in the student`s education and hoping for a return on investment.
Additionally, income share agreements offer flexible repayment terms and do not accrue interest like traditional student loans. This means that students are able to pay back the ISA at a rate that is comfortable for them and are not stuck with high interest rates that can make repayment difficult.
Purdue income share agreements offer a new way for students to finance their college education without the burden of traditional student loans. They provide a flexible and risk-free way for students to invest in their future and pave the way for a more efficient and affordable way to finance higher education. However, it is important for students to fully understand the terms and conditions of an ISA before signing a contract and to explore all options available to finance their education.