WASHINGTON –With total U.S. student loan debt having surpassed $1 trillion recently and college costs continuing to outpace inflation, there’s been a growing exploration of alternative methods that students and their families can utilize to finance college.
This past Friday, the higher education-focused Lumina Foundation and the New America Foundation, a Washington-based think tank, highlighted income sharing programs during a public forum titled “A Future With Zero Education Debt.” The proponents discussed income sharing agreements, also known as debt-free college financing options, including the initiative known as the “Pay-It-Forward” program. This past summer, the state of Oregon approved legislation that authorizes a “Pay-It-Forward” pilot program, which is the first state-approved plan.
In general, income sharing agreements provide either funding for college expenses or tuition-free education grants to students in exchange for a set percentage of the student’s post-college salary over a certain period of time.
“We’ve got to find new and different ways to help students,” Lumina Foundation president and CEO Jamie Merisotis told forum attendees. “We’ve got to do so soon, and, from the Lumina Foundation’s perspective, if we’re serious about achieving our nation’s [degree] attainment goals, we can’t simply tinker at the margins.
“We’ve got to find ways to significantly change the paradigm,” continued Merisotis, “and focus on new ways to literally deliver more higher education to more people better.” He noted that Lumina wants to help facilitate a rigorous investigation of whether income sharing agreement plans are viable.
Armed with careful economic arguments, five proponents—each representing a distinct income sharing agreement program—touted plans that would either reduce or eliminate the use of conventional student loans by a given student. Three of the five represented private companies each explained how their respective firm develops agreements with prospective college students that cover college costs in exchange for a set percentage of the student’s post-college salary.
