Sick of Student Loans? Some Schools Are Accepting Parts of Future Earnings Instead

Norwich University will offer its students an income share agreement as an alternative to traditional repayment of education-related debt. The agreement will allow students to forgo loans and instead pay a portion of their future earnings over a set period.

The military university hails the program, which it announced earlier this week, as an “initiative aimed at improving affordability, student retention, and degree completion.” Lauren Wobby, the school’s chief financial officer and treasurer, said, “Norwich University is committed to offering this new way to help pay for college in a way that aligns incentives and helps reduce financial barriers to degree completion.”

To offer the payment option, Norwich University has partnered with Vemo Education, which has provided an estimated $23 million to fund income share agreements at other colleges.

Vemo Education touts its funding project as a way to increase upward social mobility. Co-founder and CEO of Vemo Education Tonio DeSorrento commented, “In many cases, the college degree remains a prerequisite for social and economic mobility—but rising costs and questions about affordability often lead students to underinvest in their higher education or not finish their degree program.” Social mobility may not be the only goal. When Purdue introduced ISAs, the institution saw return of 5-7%. Vemo has since partnered with the university.

Some others in the academic community are wary of the payment system, expressing doubt that it will make higher education substantially more affordable.

“I’m very concerned if we are saying it’s a positive that on top of people coming out with federal student loans to repay, we’re going to take another bite out of their income by adding an ISA [income share agreement] obligation,” Jessica Thompson, policy and research director at the Institute for College Access & Success, told The Washington Post in January after Point Loma Nazarene University instituted a similar repayment system.

Some voice concerns that discriminatory practices will be directed against students who choose to study subjects deemed less profitable by institutions. “If income share agreement providers aren’t careful, they can definitely see unintended consequences in discriminatory terms toward students. This is one of the biggest differences between income share agreements and federal student loans,” said Clare McCann, deputy director for education policy at the New America Foundation.

The Economist reports, “The share of income signed over ranges from 2% to 17%, with students in high-earning fields, such as medicine or engineering, usually paying a smaller share of earnings for a shorter time than students of literature or fine art.” Typical ISAs are structured to be paid over a period of ten years, but the payment period varies depending on the individual student’s agreement.