Higher education as a whole is changing, and so is the way students and families pay for college.
In a Tuesday afternoon session, Dennis Wentworth of Goal Structured Solutions (GS2), Inc. and Ted Malone of Purdue University discussed the new and emerging trends in financing a postsecondary education, including sponsor loans, risk-sharing programs, and income-share agreements.
“Your students are probably going to start asking questions – are there better alternatives?” Wentworth said. “You have a lot of students and families that face significant challenges in terms of finding funding for college. You have certain groups of students that lack access to the traditional credit markets for one reason or another. Then you have some students on your campuses that have literally exhausted all their federal aid.”
In these situations, some policymakers, higher education leaders, and lawmakers are taking more interest in different ways to pay for college. One idea is risk-sharing, the belief that schools should be held more accountable for the outcomes they have. Wentworth outlined a few proposals on the topic, such as one from the Institute for College Access & Success (TICAS), which would financially reward schools that serve low-income students well and enroll more low-income students. The proposal would also provide “risk-reduction plans” for at-risk schools, sanctions for some at-risk schools, and Title IV eligibility loss for schools that pose the most risk.
Malone also shared his institution’s experience with income-share agreements (the “Back a Boiler” program at Purdue), which are programs through which a third party provides funding to students, who then repay the amount with a percentage of their income for a fixed amount of time. The amount repaid could be less than the original amount received, or more, depending on how the student fares later on in life. But navigating the new program can be tricky, Malone said, because there are no laws governing how to implement or regulate income-share agreements.
“I considered my place on this to be the voice and the watchdog for students because as many people do, my mind had jumped to the worst case scenarios,” Malone said.
But Malone said he was reassured when his institution said they wanted to create a viable alternative that would do no harm to students, and no harm to the reputation of the institution.
“We wanted them to be protected – that they didn’t get something terrible,” Malone said.
Malone said the university made comparisons with alternatives, such as the Parent PLUS loan, to make the financing a similar cost. Officials made sure to include clear disclosure, reasonable terms, reasonable fees, and reasonable rates. Within the structure of financial aid, the income-share agreement would ideally enter as an option after federal student loans and before federal parent loans.
“We did feel like we had an obligation to provide a lot of education,” Malone said.
Malone also pointed out that the way Purdue structured its program could actually expand opportunities for students. Whereas students with large amounts of debt and fixed payments might feel pressured to take a higher-paying job over another with a lower salary that they might want more, those with income-share agreements could have more flexibility because payments would be dependent on income.
Moving forward, Purdue is looking into whether to expand the number of students, add other grade levels, or add summer awards.
Publication Date: 6/27/2017