https://www.instagram.com/p/Bg1Au-LFbnU/?hl=en&taken-by=norwichuniversity
https://www.instagram.com/p/BjNd0O7lvUM/?taken-by=norwichuniversity
https://www.instagram.com/p/BgjtVIpB8pV/?taken-by=norwichuniversity
https://www.instagram.com/p/BldBxizA2MP/?tagged=studentincome
People go to college in order to get a job, meaning that all the money you spend on tuition, books and whatever else is ultimately an investment in your future. Still, a lot of people out there might want to wait until they already have a steady income before they make such an investment, but that would create a paradox, wouldn’t it? You’d think so, but here me out. Some colleges out there might be interested in being paid with their students’ future salaries instead of tuition. Confused on how that works? Let me explain.
How does this work?
One of the latest schools to offer such a payment option, Norwich University in Vermont recently announced that it would offer students this type of payment option, also known as an “income share agreement.” Norwich’s program will start out on a small scale, with only students who are not eligible for payment plans or those who are taking longer than the traditional eight semesters to finish their degree.
Instead of a traditional loan, which would have students pay down the principal and interest until there is nothing left, students in the program pay back a percentage of their salary for a set period of time. As you may have guessed, this might even influence schools to ensure that their students are hired within high-earning jobs after graduation just so they can pay back their “tuition.” On the other side of the fence, students involved in these programs find college enrollment less risky, especially in a world where it can be hard finding a high-paying job, or a job in general, after graduation, making it hard or even impossible to pay back their loans.
As mentioned, Norwich University is just one school to offer such a program. Income share agreements were first proposed by Milton Friedman in 1955, with Yale experimenting with the idea during the 1970’s. Over the years, this payment plan proved popular with technical training programs, such as coding boot camps, since participants do not have access to federal student loans.
What are people saying about this programs?
According to the Los Angeles Times, through the Associated Press, Lauren Wobby, the school’s chief financial officer and treasurer, issued the following statement over the payment contract:
“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.”
Clare McCann, deputy director for education policy at the New America Foundation, also noted the appeal of paying for college when you actually have the money, but warned that its appeal might ultimately limit the number of students eligible for such programs:
“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.”
“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.”
“Federals loans offer the same terms to all borrowers.”
