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Danielle Douglas-Gabriel writes in the Washington Post that Purdue University is partnering with Vemo Education, a Reston-based financial services firm, to create income-share agreements, or ISAs, that its students can tap to pay for tuition, room and board. In return, students would pay a percentage of their earnings after graduation for a set number of years, replenishing the fund for future investments.
Purdue president Mitch Daniels calls the contracts a constructive addition to today’s government loan programs and perhaps the only option for students and families who have low credit ratings and extra financial need. "From the student’s standpoint, ISAs assure a manageable payback amount, never more than the agreed portion of their incomes. Best of all, they shift the risk of career shortcomings from student to investor: If the graduate earns less than expected, it is the investors who are disappointed; if the student decides to go off to find himself in Nepal instead of working, the loss is entirely on the funding providers, who will presumably price that risk accordingly when offering their terms. This is true “debt-free” college."
However some observers worry that students pursuing profitable degrees in engineering or business would get better repayment terms than those studying to become nurses or teachers. "Income share agreements have the potential to create another option for students looking to pay for college while seeking assurances they will not be overwhelmed by future payments," says Robert Kelchen. "However, given the current generosity of federal income-based repayment programs and the likely hesitation of those who expect six-figure salaries to sign away a percentage of their income for years to come, the market for these programs may be somewhat limited."
(Score: 2) by jmorris on Wednesday December 02 2015, @04:16AM
This scheme will get outlawed pretty quick. The reality it will expose will burn too many of the powerful who can stop it.
1. If there is a direct financial interest between funding education and post graduation income they will not long leave the details to the whim of the student or fate, You can bet they will be taking a much more involved interest than the typical job placement people in a Uni. They will be carefully picking students and grooming them for positions they will have in mind for them.
2. To amplify the above, they will be carefully picking students. Can you imagine anything more horrible? Picking students based on statistical models that predict success post graduation. Are you needing a safe space yet? Do I need to try to insert a photo of a puppy here? Do I have to spell it out? Some students are more promising, all are not unique but equal snowflakes. Some desire to pursue more profitable majors. So some will offered sweet deals while others will have to take the increasingly bad government deal. There will almost certainly be horrible inequalities along forbidden lines of race, gender, cultural background, political bent and other and mental illness issues.
3. If they can make people sign binding agreements to turn over a portion of income, what other conditions could they attach to improve their odds of a profit. The mind boggles. Are all the civil libertarians reaching for smelling salts yet? What is they start requiring they can pretty much direct your life for a few years after graduation, instead of having a few job offerings in mind which the grad can pick or not, what if it more like a military enlistment where you go where they send you. What happens when somebody notices the similarities to indentured servitude? But both lender and student will both be driven to these measures as students want the best deal and the lender wants the highest chance of profit.
(Score: 2) by NotSanguine on Wednesday December 02 2015, @06:28AM
3. If they can make people sign binding agreements to turn over a portion of income, what other conditions could they attach to improve their odds of a profit. The mind boggles. Are all the civil libertarians reaching for smelling salts yet? What is they start requiring they can pretty much direct your life for a few years after graduation, instead of having a few job offerings in mind which the grad can pick or not, what if it more like a military enlistment where you go where they send you. What happens when somebody notices the similarities to indentured servitude? But both lender and student will both be driven to these measures as students want the best deal and the lender wants the highest chance of profit. [emphasis added]
I have an idea about that. For a variety of reasons, I need to sign a user agreement with a service provider, which seems to be designed to maximize their rights and my responsibilities and minimize my rights and their responsibilities.
I'm considering modifying some of the 4pt font text in the PDF they sent me, to "require officers of the corporation to submit to pubic hair removal by my hand, at my discretion and in a manner of my choosing."
I suspect that no one will even notice until I show up at the company HQ with my tweezers and straight-razor.
Then again, perhaps that clause is in the 50 or 60 pages of T&Cs that were included by reference in the "agreement."
Is that the sort of thing that you worry about?
No, no, you're not thinking; you're just being logical. --Niels Bohr
(Score: 0) by Anonymous Coward on Wednesday December 02 2015, @03:35PM
There is already a program in place that does this. No cost tuition, room and board. And all you need to do is sign up for 5 years of working for something that could get you killed. And there is a very detailed interview and selection process where all details of your life are examined, your acedemics are gone over in great detail, and you submit to a very thorough physical exam and physical performance tests. This program is very selective. And it's backed by the government. Heck the selection process involves your state representatives and senators.
What is it? The Military academies.
(Score: 2) by jmorris on Wednesday December 02 2015, @04:38PM
The government itself is always exempt from any regulation it imposes on us. But yea, that is sorta where I was going, that sort of commitment but you pick from several offers from private entities. Could be good, could be bad, without a doubt the widespread use of something like that would remake our society in ways few would even attempt to predict.