How Yale's 'Failed' Income Share Experiment Worked for Me

"In 1973, I applied to Yale on a lark. I started my college experience at the University of California, Santa Cruz. Years earlier, my father had made me a deal: He would pay for my college, but only if I attended a school in the UC system. But halfway through the first semester of my sophomore year at UCSC, I dropped out to work on Tom Bradley's mayoral campaign. After the victory, I expected to return to UCSC, though I did apply to transfer to Yale. When I was accepted, I had no idea how to pay for it," Blair Levin writes for Real Clear Education

"Then I got an unusual offer. In exchange for a percentage of my income after graduation, Yale would front me the cost of tuition. And so I became a part of Yale's famed 'Income Share' experiment, derided by some as a failure, but — despite its flaws — quite beneficial to me. And, as it turns out, it's a concept that's regaining traction today.

In recent months, a growing cohort of colleges and universities — from big state schools like Purdue University to small private institutions like Lackawanna College — have adopted income share agreements (or ISAs) as an alternative to certain student loans. Proposals for a revamped Higher Education Act, likewise, call for 'risk-sharing' between institutions and students — an idea that, with good reason, enjoys support on both sides of the aisle.

As college costs continue to grow, and the student debt load approaches $1.5 trillion, higher education is beyond the reach of a growing number of students. Some reports suggest that as many as 25 percent of academically qualified low-income students apply to no college at all. My experience suggests that ISAs might help to address the deterrent effect of high tuition. They might also offer a more progressive approach to allocating the financial burden between students and institutions — and among recent graduates.

Like many aspiring students, I knew that a traditional loan was a financial burden difficult to discharge. And, like most, I had fears about my ability to compete and succeed at an elite institution. Although I generally understood that an Income Share Agreement would obligate me to payments, it mitigated both the immediacy and the permanence of debt. I knew I would have an obligation to make payments, but I also knew that I would have more choices to make in terms of employment. And so, the promise of Yale's ISA program helped to spark — or at least elevate — my higher education aspirations.

The ISA worked well for me after graduation as well. After completing law school, I was able to take lower-paying, public-interest positions. I was able to pursue work that I was passionate about without the burden of fixed principal and interest payments from a traditional loan. If my income dropped below a certain threshold, no payments would be required.

Ultimately, though, while the spirit of Yale's program was generous — and in some ways laid the groundwork for today's more thoughtful initiatives — the program's design proved unsustainable."

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Publication Date: 5/16/2018

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