A New Way Emerges to Cover College Tuition. But Is It a Better Way?

"Nestled along the San Diego coastline, Point Loma Nazarene University is a world away from Wall Street. But the Christian liberal arts college is at the forefront of financial innovation. Last fall, Point Loma began offering some of its 4,500 students money to pay for college in exchange for a percentage of their future earnings. The model, known as an income share agreement, requires colleges and students to take a chance on each other, a shared responsibility that attracted Point Loma," The Washington Post reports. 

"'It sends a message to the student that we’re in this with you,' said George Latter, vice president of finance and administrative services at Point Loma. 'And unlike a grant, you have the prospect of these funds coming back in and creating a revolving form of financing.'

Income share agreements, commonly called ISAs, have generated a lot of buzz since Purdue University introduced its program in 2016. A handful of small companies and nonprofits have piloted programs or offered contracts, with the model gaining the most traction with short-term training programs. But traditional colleges and universities have lagged behind. Until now.

Several private colleges are exploring income shares, according to Vemo Education, a Reston, Va., financial services firm that helps create the contracts. In the last month alone, Lackawanna College in Scranton, Pa., and Clarkson University in Potsdam, N.Y., have entered the market.

Some schools — including Point Loma, Lackawanna and Clarkson — are using their own money, while others are working with outside capital. The schools are tailoring agreements to meet the needs of their students, and in the process they are addressing some of the concerns surrounding ISAs.

As adoption of the model expands, it could shift financial aid beyond loans and grants. But some student advocates worry that the concept does nothing to make college more affordable and could prove just as harmful as any other form of debts.

'I’m very concerned if we are saying it’s a positive that on top of people coming out with federal students loans to repay, we’re going to take another bite out of their income by adding an ISA obligation,' said Jessica Thompson, policy and research director at the Institute for College Access & Success, an education nonprofit."

NASFAA's "Headlines" section highlights media coverage of financial aid to help members stay up to date with the latest news. Inclusion in Today's News does not imply endorsement of the material or guarantee the accuracy of information presented.


Publication Date: 1/3/2018

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