Colleges are increasingly turning to ways to help potential students afford tuition sticker shock, including what's known as "income share agreements," the AP's David Jordan reports.
Why it matters: The student loan crisis is real, and only getting worse — with spillover effects on the broader economy.
- That's compounded by declining state taxpayer support for public universities and the increasing demand for credentials for entry-level work.
- "In contrast with traditional loans, in which students will simply pay down the principal and interest until there is nothing left, students with income share agreements pay back a percentage of their salary for a set period of time."
- The lower your salary, the lower your payments. Most agreements are paid back within 10 years or less, which gives students an interest rate between 8.7% and 21%, per the Wall Street Journal.
- "Those touting the programs say they give colleges greater incentive to help students find high-earning jobs after graduation, because a higher salary means the school may recoup its investment in a shorter period of time."
- The latest example is Norwich University in Vermont. "Norwich’s program is starting out on a small scale, mainly for students who do not have access to other types of loans or those who are taking longer than the traditional eight semesters to finish their degree," the AP reports.
The other side: "But because employment and salary determine repayment, it’s possible providers could be seen as discriminating against recipients who choose lower-paying professions."