Student loan debt has become everyone’s problem. It has prompted lawmaker after lawmaker to surmise various different ways to provide debt free college. After all, the nation owes $1.3 trillion in student loans which impacts all aspects of the U.S. economy. It’s the reason Purdue University has been piloting income sharing agreements (ISA). In fact, two senators tailored their legislative efforts off of Purdue’s lead.
For the 2016/2017 school year, Purdue University began testing an ISA model called “Back-A-Boiler.” Juniors and seniors receive money for their education, and in exchange, they have to pay a percentage of their earnings upon graduation to their investor. Recently, Senators Marco Rubio of Florida and Todd Young of Indiana, both Republicans, reintroduced a bill that would enable colleges and universities to offer their students ISAs to lower the cost of a college education nationwide.
“It’s getting harder and harder for American families to afford the rising costs of college, and students are often forced to run up thousands of dollars of debt,” Rubio said when reintroducing the co-sponsored legislation. The senators said that the bill would enable college students to use their future income today to access financial backing from businesses, individuals, and nonprofit organizations.
In the Purdue University program, the first mainstream one of its kind, there is a minimum income threshold and a maximum payment cap. Graduates who take advantage of an ISA without a considerable projected future income do not have to pay.
On the flip side, potentially high earners won’t overpay. Rubio and Young said that they have been following Purdue’s model. On top of this, they have the support of Purdue President and former Indiana Governor Mitch Daniels. By Daniel’s account to Congress, “Back a Boiler” has been a success. Under Rubio and Young’s plan, interest doesn’t accumulate, and students get protections such as the caps on payments and a limit on the length of a contract.
While Rubio and Young are big supporters of this proposal, opponents argue that it favors students pursuing high wage degrees and shuts out those who aren’t. The argument goes: what investor is going to back a student pursuing a teaching degree? At any rate, the proposal in Congress has a long road uphill before it can be considered a viable candidate for a new law.