“With Americans owing more than $1.3 trillion in federal student-loan debt, some places are offering students an alternative: Pay us nothing up front, but give us a percentage of your future income. The government should encourage the spread of this innovation — with regulations that limit its risks.
Similar to student loans, income-share agreements require students who receive financial aid to make scheduled payments after they leave school. But unlike traditional loan recipients, these former students don’t pay interest and aren’t locked into servicing debt indefinitely. Instead, they have agreed to pay lenders a share of their future earnings over a fixed period, with the exact percentage dependent on their major, profession and starting salary.” – Bloomberg
Some innovative ideas appear on the horizon that could shake up the student loan industry. One idea that I really like is a debt free alternative to student loans and some colleges have begun offering them already. And although they probably will never fully replace traditional federal or private student loans they offer an idea of a great alternative for those in lucrative career choices.
An income based sharing program.
The concept is really simple. If you enroll in a lucrative career choice you agree to pay a certain percentage of your future salary to the university (or private lender) in exchange for paying for your education. This differs from current repayment lending programs in that their would be no caps or limitations on the length of repayment. Allowing for more lenders to take part, or universities to get directly involved.
Also it would allow for future employers to potentially recruit directly from universities and preselect students who are more likely to succeed at their careers and not default on their education.
With American’s owing more and more debt I believe it’s time to start looking at new loan programs, new ways of paying for education than our current broken system.
This is just one idea. Currently congress has a couple of bills it is looking at to bring this to fruition.