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: 5, Insightful) by bziman on Wednesday December 02 2015, @02:46AM
By providing cheap loans at all, you're making it easier for people to go to college, even if perhaps they shouldn't. And you're also driving up the cost of college for everyone - because the more money that is available, the higher the costs. Regardless of intentions.
We should put a much stronger focus on trade schools and apprenticeships. Most people are NOT academically inclined. Many of my undergrad IT students were barely literate, but they got automatic admission into the local community college, and graduated (because the community college has extremely low standards), and then get automatically admitted to the public university where I taught. Many of them failed my classes, but would have passed another professor's class, because keeping enrollment (and revenue) up is a priority. I'm sure you can say "oh, you must not have been a good teacher", and maybe not. But on the first day of class, I gave a quiz that only tested the required prerequisites. And every student who failed that had a fair opportunity to drop the class, but most refused, because they couldn't have their education and career set back. None of them wanted to hear that perhaps engineering wasn't the right choice for them. Years later, I've had many come back and thank me for encouraging them to switch to things like graphic design or information systems.
But many of them shouldn't have been wasting money in college to begin with. There are many, many perfectly honorable, and even high paying jobs that do not require a degree. Here in Colorado, we're desperate for skilled laborers. You wait weeks for a plumber or electrician or mechanic or sprinkler technician. Each of which make on the order of $75 an hour, no college required! And if you need a carpenter or a general contractor, you're lucky if you can get one at all, if you have a job that's less than $100,000. Under a hundred grand, and you can't even get a call back. We NEED people who can do real work. We don't need more people with expensive, but basically meaningless college degrees.
I hope this all changes one day. Send more people to trade school. Only send people to college who are really into academics and who will become doctors, lawyers, teachers, engineers, etc. But two things will be required: turning off the loan spigot and more importantly, ending the stigma against skilled trades. We'll see.
(Score: 1) by anubi on Wednesday December 02 2015, @03:18AM
I sure get the idea there are a lot more engineers out there than needed, and a helluva lot less good mechanics.
If I had a do-over, I would have done my other passion and become a really good grease monkey, and not had to deal with management types. I know several really good independent auto mechanics and they are doing far better than I am. They are free to do the job right as they answer to the customer, not some manager whose loyalty is to maximize benefits to investors at the customer's expense.
"Prove all things; hold fast that which is good." [KJV: I Thessalonians 5:21]
(Score: 0) by Anonymous Coward on Wednesday December 02 2015, @05:33AM
Oh how green the grass looks over the fence. Yes I'm so sure mechanics get to do as they please without some corporate suit who owns the chain of the dealership/service station that the mechanic works at having to drill him how to up-sell at every oil change....
(Score: 2) by darnkitten on Wednesday December 02 2015, @08:00PM
I guess it depends on where you work. My town of around 700 has two independent garages, and both of them have waiting lists and do fairly well.
Interestingly, one of the reasons we have two mechanics is that some people patronize one-or-t'other due to family history; eg., my great-grandfather fought with-/stole from-/was robbed by- his great-grandfather, so I can't possibly use his garage, etc.
Small rural towns.
(Score: 2, Insightful) by anubi on Thursday December 03 2015, @08:12AM
What I am seeing is this independent diesel mechanic who is helping me with the old Diesel van I just picked up. I envy his freedom to do a job right.
If I had not known this man, there was no way I was going to buy such a van - as I have a lot to learn on how to feed and take care of this beast.
I guess I am still full of resentment of having to be subordinate to the men of the suit that seemed only to look out for "number one". I guess I am kinda OCD on doing it right if I am going to do it at all. I did not enjoy the embarrassment of presenting half-assed work that merely "met spec", when I knew I could do much better. Why oh why do companies want the "A" student if they will not allow him to do an "A" job and use management techniques to enforce mediocre work?
"Prove all things; hold fast that which is good." [KJV: I Thessalonians 5:21]
(Score: 2) by Gravis on Wednesday December 02 2015, @05:43AM
I would have done my other passion and become a really good grease monkey
i dunno, spending a lifetime managing engineering design flaws doesn't seem like much fun. when you are building something, you can at least rip out things that are badly designed and replace them with something sane.
(Score: 1) by anubi on Thursday December 03 2015, @07:59AM
Yes, I often get miffed with existing designs and roll my own. Mostly with my own stuff. Showing initiative at the workplace was often viewed as a terrible time wasting activity.
Latest case: I am discovering this old diesel van I just bought has a lot of aging issues with its instrument panel. Although I am extremely impressed by the mechanical robustness of this beast, the prospect of trying to get all the idiot lights, gauges, and assorted controls to work properly again seems too much like an exercise in futility, and I will still end up with lacking instrumentation I really want..... so why not use an off-the-shelf HMI ( Human-Machine Interface ) touchscreen panel and build my own dashboard display?
Big deal... Off-the shelf HMI, Modbus interface via Arduino to I2C where I can acquire/control anything to my heart's content. Now, this one I can put all the diagnostics and whatever else I want right in the program, so things like a glow plug failing or engine temperature pyrometers not falling withing expected zones can be flagged and displayed on the main display as a pop-up. Otherwise, the HMI will look a lot like any other dashboard... speedometer, mileage, trip miles, tach, fuel gauge, oil pressure, oil temp, voltage, clock, etc. All GUI. All diagnostics available by merely touching the screen.
Being the HMI is a standard industrial display interface - modbus - compatible with SCADA, I can program this thingie to make all sorts of modal displays for handling out-of-bound conditions on sensors I normally do not think warrant continuous monitoring. As well as special situations involving maintenance modes or anti-theft functions. Why have OBD reader? Just touch the little icon on the screen and I get whatever sensor readings I want right on the dash display. Logged onto a USB stick if I want.
The mechanic I am working with is surprised I am taking this on. As far as I am concerned, the old Diesel van is so simple that all the HMI will really do is display information, not really control anything but an electric fuel pump I am having him put in to replace the old and leaky mechanical fuel pump originally on the engine. I also may like to manually shift the E40D transmission in a diagnostic mode. I will discover as I go along. I wanted to learn how to use a fancy GUI interface to my line of Arduino-compatible microcontroller boards anyway. I do hate to spend all that time developing something useless. So why not learn as I go on this old van, which I am falling in love with anyway.
I am for all practical purposes retired, so I can finally be creative.... to build my dream and do it right, regardless of how much time it takes. I know what I am doing is really outside the realm of big companies who have the money to pay another guy a hundred times my salary to hire managers to tell me I am taking too much time to do a job right and why don't I simply cut every corner and just put something out that looks good.
"Prove all things; hold fast that which is good." [KJV: I Thessalonians 5:21]
(Score: 0) by Anonymous Coward on Wednesday December 02 2015, @03:46AM
Many freshly minted college graduates look for jobs that are
1. Fun, e.g. involves travel abroad, work in a resort area, or sports/exercise
2. "Creative", e.g. work in music, art, publishing, cooking
3. Makes the world a better place, e.g. political advocacy, or aid for developing countries
Unfortunately, most of those jobs don't pay very much, unless you happen to have really good connections.
If you can pay off your student loan obligation no matter what job you land, you might as well pick one that satisfies one or more of the above criteria. So let's say your school gets 15 percent of $20K for six years. That works out to $18K (pre-tax, from the student's POV) - a great deal for the student, assuming the school is not a diploma mill - but lousy for the school.
(Score: 1) by anubi on Sunday December 06 2015, @08:12AM
Freshly minted? I am for all practical purposes - retired, but all my career I have looked for exactly what you posted. Especially being allowed to be creative.
If my heart is not in it, I do a really lousy job. I can't help it. When my heart is not in it, it shows.
"Prove all things; hold fast that which is good." [KJV: I Thessalonians 5:21]
(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.
(Score: 1, Interesting) by Anonymous Coward on Wednesday December 02 2015, @04:27AM
I for one have been paying income based student loan payments for a few years now. That is government loan based repayment and one of the few options available to students taking out loans. How is this income contingent plan different from the pre-existing income contingent repayment plan?
(Score: 0) by Anonymous Coward on Wednesday December 02 2015, @02:59PM
Are you not from the US, because this is unheard of in the US.
(Score: 2) by DeathMonkey on Wednesday December 02 2015, @05:49PM
I think the difference is that you have to repay a fixed amount. The income contingent plan takes a fixed amount of whatever your income is for the term. So, what they get re-payed could be more, or less, than the actual borrowed amount.
(Score: 2) by SanityCheck on Wednesday December 02 2015, @05:46AM
by partnering with Vemo Education, a Reston-based financial services firm
<sarcasm>I am at all not skeptical of this scheme... I am so sure that this is about helping students pay for college and not because some MBA plugged numbers into an Excel somewhere that predicted they could get a higher yield on their endowment money by doing this instead of shoving it into the stock market.</sarcasm>
If you think that the primary goal of Higher education institutions in the U.S. is to provide education and uphold academic excellence, then you have not been paying attention the last 20 years.