WEST LAFAYETTE, Ind. (WLFI) — Data shows Purdue University's groundbreaking income share agreement program is seeing steady growth. The university has gained national attention since 2016 for a way it's trying to stop the student loan crisis.
Now, Purdue President Mitch Daniels says for Back a Boiler to have continued success, more schools need to buy in.
The Federal Reserve reports about 45 million Americans have student loan debt, and 2017 Purdue graduate Charlotte Herbert is one of them.
"It is unreasonable for anyone to carry this much debt at the beginning of their career," Herbert said.
She is among 850 students who currently have contracts with Purdue's income share agreement, Back a Boiler. Her first three years were funded by traditional student loans. However during her senior year in 2016-17, Purdue rolled out the ISA option. She took the opportunity.
Rather than taking out a loan with interest, Herbert is paying back the money as a percentage of her post-graduation income.
"The primary thing I like about it, is that it has an end date," said Herbert. "In my traditional loans, I have 'x amount' I have to pay back and it has interest. The ISA has a fixed 10 years. I have 102 months of 'this is when you're done.'"
An ISA has no principal balance or interest. Its payments adjust with the student's income over the life of the contract. Payments do not begin until six months after the student has graduated and is employed earning a minimum annual salary of $20,000.
Critics argue students are betting against themselves in an income share agreement. If they think they're going to get a high-paying job, then they could pay back more than they borrowed.
"On an individuual level, I see where that's coimg from," said Herbert. "But you have to think about it in a more community-based mindset. This is a program that will only work if money goes back into it. If I do amazing and pay back three times what I borrowed, I've made this program possible for another two or three people. At that point, I'll be able to afford it. Because if I'm pulling in six figures a year, I'm doing well no matter what my repayment is."
"There's the potential for this phenomenon to get much bigger than just Purdue," said Daniels.
Daniels knows for this concept to get bigger, the sample size needs to grow. That's why he's trying to get the attention of other universities.
"We need to see this growing interest in excitement about the concept translated into more schools, a variety of schools joining us," Daniels said.
"We are the test case," said Herbert. "There is no data on this. There is no information. This is a new thing."
Earlier this month, more than 25 schools were welcomed to Purdue for a conference on how to implement an income share agreement. Right now, there are four other schools with the program including the University of Utah, Norwich University, Clarkson University and Lackawanna College.
"I think a few more schools should implement it, and I think other schools should look into other solutions so we can compare them in 10 years and see what's working," Herbert said.
However if a college education wasn't so expensive in the first place, she said Back a Boiler wouldn't even need to exist.
"A high school education is provided to everyone because we deem it as necessary," Herbert said. "But college education isn't, even though it has become equally necessary for most people. It's [Back a Boiler] kind of a Band-Aid on a bigger problem. But the nice thing about Band-Aids is that you're not bleeding all over the place."
Herbert works for an engineering company in Lafayette as a tech writer. She pays about 10-percent of her salary to the ISA.
As we reported in December, the Purdue Research Foundation raised $10.2 million for its second Back a Boiler fund. It's expected to fund the program for the next three years.
More than $16 million has been invested into the two funds. When the program started, $2 million was distributed to about 160 juniors and seniors. In 2017-18, the Purdue Research Foundation expanded the program to include sophomores.