An alternative student loan program currently only available to Purdue University students might soon be opened up to more student borrowers in the nation and state.
Senators Marco Rubio (R-FL) and Todd Young (R-IN) introduced a bill to make a Purdue program known as Back-a-Boiler, which allows individuals to invest in a college student’s education, available statewide.
At Purdue, about 160 students are partaking in the program which is backed by the Purdue Research Foundation (PRF). It allows private investors to participate in an income-sharing agreement, essentially financing a student's education. An ISA differs from a traditional loan because students don’t pay interest on the total amount funded. In addition, the payment schedule would be based on a student's major and a percentage of their expected future income.
For example, according to the Purdue site, if a student is a history major with an ISA of $10,000, he or she would pay 3.97% of the estimated $35,000 salary for 9 years based on the anticipated salary in that field upon graduation. At the end of 9 years, he or she would have paid back $13,655, fulfilling the terms of the ISA.
With this program, if a student has difficulty after graduation finding a job, they wouldn’t have to make a payment until they were working. If a student needed to find a part-time or low-paying job, then his monthly loan payment wouldn’t be as high.
Indiana lawmakers are hopeful that making this program available statewide will help combat the student loan debt problem that is plaguing the entire country. Americans owe $1.3 trillion in student loan debt. Large payments loom over borrowers and keep them from buying a house, starting a family, and following their passion.
Image Copyright John Feister.