Mar 11, 2017 06:58 AM EST
Higher education these days also mean higher tuition fees and the possibility of accumulating huge student loan debts. However, Purdue University has created an innovative yet controversial way for students to finance their college without getting into debt. The solution: selling a share of their future income to a backer.
Purdue University the income the income-share agreement or ISA as an alternative form to pay for college. Instead of taking on a loan, a backer pays for the student's tuition. In return, the student signs an agreement to sell a percentage of his income in the future to the backer.
Only launched last year, there are other universities who are interested in starting their own ISA programs. Mitch Daniels, Purdue University's president, said that they are partnering with Vemo Education, a tech company, in helping spread this alternative form to other schools. Those schools who want to adopt the ISA program are going to use Purdue as a model and Vemo's technology to make the program more accessible to students who are interested.
Daniels admit that ISA is not the complete solution to the student loan debt problem but it is a helpful alternative to students. Jason Delisle, a resident fellow at the American Enterprise Institute, said that ISA has a small market at the moment but it is already catching on.
Despite the promise it holds, there are also concerns surrounding it. One of those concerns include the possibility of the student paying more than they paid in school. For example, the ISA term is basically 10 years and if a student gets in a job that pays well, the percentage deducted from his income over the course of 10 years might be more than what he paid for college.
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