Some Colleges Ask for Part of Future Salary Instead of Loans

 

Young people graduating from colleges and universities in the United States face increasing amounts of debt.

Some colleges however are now offering students another way to pay for their studies. They pay for a student’s education in return for a percentage of the student’s future salary.

Norwich University in the state of Vermont announced Tuesday that it will become the latest school to offer this kind of contract. The contracts are called “income share agreements.”

Norwich’s program is starting out small. It is mostly for students who cannot get other loans or those who are taking longer than the traditional eight semesters to finish their degree.

Lauren Wobby is the school’s chief financial officer and treasurer². Wobby said, “Norwich University is committed to offering this new way to help pay for college in a way that aligns⁴ incentives⁶ and helps reduce financial barriers to degree completion.”

With traditional loans, students pay back the amount they borrowed, with interest, until the loan is paid off. Students with income share agreements, however, pay the school a percentage of their salary for a period of time.

Those who support income share agreements say they give colleges a reason to help students find jobs that pay well after graduation. If students earn a lot of money, they can pay the college back sooner.

Income share agreements also seem less risky⁷ for students who get a lower-paying job or struggle to find work after graduation. If students are unemployed⁸ or earning below a set amount of money, they do not have to pay anything back.

Clare McCann is deputy director for education policy at the research group New America. She said, “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 fully⁹ explained to them.”

Possible problems with the agreements

McCann, however, said that providers of income share agreements need to be careful. They could face unexpected problems in how they choose students for the program. For example, schools could be accused of discriminating¹⁰ against students who choose lower-paying professions.

“This is one of the biggest differences between income share agreements and federal student loans,” McCann said. “Federal loans offer the same terms to all borrowers.”

Income share agreements are not a new idea. They were first proposed by Milton Friedman in 1955. Yale University experimented with the idea in the 1970s for a short time.

In the past ten years, technical training programs, such as computer-coding programs, have used income share agreements because trainees¹¹ cannot get federal student loans.

In 2015, Vemo Education, in Oakton, Virginia, began working with colleges and universities to design financial programs based on income. The company works with nearly 30 public and private colleges and universities, including Norwich University.

Vemo’s first partnership¹² was with Purdue University. It began providing money for the school’s “Back a Boiler” income share agreement program in 2016.

Andrew Hoyler, 22, graduated from Purdue last year with a degree in professional flight with the goal of becoming a pilot. Now, he is working as a pilot for American Airlines regional company, PSA Airlines.

“One of the biggest pros¹³ for the income share agreement was the fact that out-of-college pilots do not make a lot of money, especially looking at the costs for an educational program,” Hoyler said.

The terms of the agreement, such as the length of the agreement and the salary percentage, can be different for each contract.

Hoyler is currently paying eight percent of his income. Since it can be difficult to predict what a student’s future salary will be, it is also difficult to predict how much a student will pay back over time. However, most agreements do place a limit on the amount paid back.

Hoyler took out federal loans but said the income share agreement helped him avoid working several jobs while starting out last year as a flight teacher. Hoyler said he might pay more for the income share agreement over a long period of time as his salary rises, but he considers the choice worth the cost.

I’m Phil Dierking.

Words in This Story

align³ - v. to change (something) so that it agrees with or matches something else?

incentive⁵ - n. something that encourages a person to do something or to work harder?

income - n. money that is earned from work, investments, business, etc.?

per se - adv. by, of, or in itself — used to indicate that something is being considered by itself and not along with other things?

portion - n. a part of a larger amount, area, etc.?

pro¹ - n. a reason to do something?

salary - n. an amount of money that an employee is paid each year?

semester - n. one of two usually 18-week periods that make up an academic year at a school or college

1 pro   

n.赞成，赞成的意见，赞成者

参考例句：

• The two debating teams argued the question pro and con.辩论的两组从赞成与反对两方面辩这一问题。
• Are you pro or con nuclear disarmament?你是赞成还是反对核裁军？

2 treasurer   

n.司库，财务主管

参考例句：

• Mr. Smith was succeeded by Mrs.Jones as treasurer.琼斯夫人继史密斯先生任会计。
• The treasurer was arrested for trying to manipulate the company's financial records.财务主管由于试图窜改公司财政帐目而被拘留。

3 align   

vt.使成一线，结盟，调节；vi.成一线，结盟

参考例句：

• Align the ruler and the middle of the paper.使尺子与纸张的中部成一条直线。
• There are signs that the prime minister is aligning himself with the liberals.有迹象表明首相正在与自由党人结盟。

4 aligns   

使成一线( align的第三人称单数 )； 排整齐； 校准； 公开支持（某人、集体或观点）

参考例句：

• HASP SRM fully aligns with the software product lifecycle. HASPSRM完全遵循软件产品的生命周期。
• Significant employee aligns the interests of our employees and our shareholders. 员工大量持股可以使员工与股东的利益协调一致。

5 incentive   

n.刺激；动力；鼓励；诱因；动机

参考例句：

• Money is still a major incentive in most occupations.在许多职业中，钱仍是主要的鼓励因素。
• He hasn't much incentive to work hard.他没有努力工作的动机。

6 incentives   

激励某人做某事的事物( incentive的名词复数 )； 刺激； 诱因； 动机

参考例句：

• tax incentives to encourage savings 鼓励储蓄的税收措施
• Furthermore, subsidies provide incentives only for investments in equipment. 更有甚者，提供津贴仅是为鼓励增添设备的投资。 来自英汉非文学 - 环境法 - 环境法

7 risky   

adj.有风险的，冒险的

参考例句：

• It may be risky but we will chance it anyhow.这可能有危险，但我们无论如何要冒一冒险。
• He is well aware how risky this investment is.他心里对这项投资的风险十分清楚。

8 unemployed   

adj.失业的，没有工作的；未动用的，闲置的

参考例句：

• There are now over four million unemployed workers in this country.这个国家现有四百万失业人员。
• The unemployed hunger for jobs.失业者渴望得到工作。

9 fully   

adv.完全地，全部地，彻底地；充分地

参考例句：

• The doctor asked me to breathe in,then to breathe out fully.医生让我先吸气，然后全部呼出。
• They soon became fully integrated into the local community.他们很快就完全融入了当地人的圈子。

10 discriminating   

a.有辨别能力的

参考例句：

• Due caution should be exercised in discriminating between the two. 在区别这两者时应该相当谨慎。
• Many businesses are accused of discriminating against women. 许多企业被控有歧视妇女的做法。

11 trainees   

新兵( trainee的名词复数 )； 练习生； 接受训练的人； 训练中的动物

参考例句：

• We've taken on our full complement of new trainees. 我们招收的新学员已经满额了。
• The trainees were put through an assault course. 受训人员接受了突击训练课程。

12 partnership   

n.合作关系，伙伴关系

参考例句：

• The company has gone into partnership with Swiss Bank Corporation.这家公司已经和瑞士银行公司建立合作关系。
• Martin has taken him into general partnership in his company.马丁已让他成为公司的普通合伙人。

13 pros   

abbr.prosecuting 起诉；prosecutor 起诉人；professionals 自由职业者；proscenium （舞台）前部n.赞成的意见( pro的名词复数 )；赞成的理由；抵偿物；交换物

参考例句：

• The pros and cons cancel out. 正反两种意见抵消。 来自《现代英汉综合大词典》
• We should hear all the pros and cons of the matter before we make a decision. 我们在对这事做出决定之前，应该先听取正反两方面的意见。 来自《简明英汉词典》