University Business May 2017 - 42

CAMPUS FINANCE
The ISA has its critics, too. David
Bergeron, senior fellow for postsecondary education at The Center for American
Progress, advises caution, especially when
a student combines an income-share
agreement with federal loans. ISAs result
in more debt for students, "even though
they're telling you it isn't a loan," says
Bergeron, also former acting assistant secretary for postsecondary education at the
U.S. Department of Education, during
the Obama administration.
Debate about the value of incomeshare agreements aside, colleges and universities are beginning to explore them
further. Following are six points higher
ed leaders should know.

1

There's only one large-scale ISA offered at a U.S. university-for now.
While the ISA concept could mean a
company dealing directly with students,
it's generally considered something that's
available only via an institution-and
Purdue University in Indiana is the one
known current example. Purdue launched
its ISA initiative in fall 2016 under the
name Back a Boiler, giving a nod to the

TUITION PARTNERS
school mascot and nickname for fans.
Since then, 160 students received
funding totaling approximately $2.2 million; Purdue self-funded the ISA for the
launch but may try to attract investors in
the future. Participating students represent 79 academic majors and come from
six of Purdue's colleges, including Engineering, Polytechnic Institute, Health
and Human Sciences, Liberal Arts, the
Krannert School of Management, and
Agriculture.
"One of the concerns critics have is
that people would want to cherrypick and
offer it only to students who are likely to
earn a lot of money, but we wanted to
make it available to all students," says Ted
Malone, executive director of financial
aid. Ultimately, the students who chose to
participate turned out to be "very representative of what Purdue as a whole looks
like," he adds.
For 2016-17, juniors and seniors were
eligible, and in 2017-18, sophomores
with declared majors will also be allowed
to participate.
In 2015, a combined Purdue University and Purdue Research Foundation

More income-share agreement programs on the way
ISA provider 13th Avenue, which is currently talking to several institutions about setting up ISA pilot programs, has found that funding is a key
challenge. "The schools are interested, but they are reluctant to fund the
program so we are busy trying to raise money," says Casey Jennings, chief
operating officer.
ISA provider Vemo Education and the Jain Family Institute, a nonprofit think
tank that supports the development of ISAs, are also in the exploratory
phase with a handful of higher ed institutions interested in making the
investment to launch their own ISAs.
A few announcements about new programs are expected in the future.
Washington College in Maryland, for example, has announced it is considering an ISA program funded by donors. Students would use the fund to
pay for classes and, after graduation, payments from those students would
replenish the fund.

42 | May 2017

team worked with the Jain Family Institute, a nonprofit think tank that supports
the development of ISAs, to select a master servicing partner for Purdue's Back a
Boiler ISA program. That partner, Vemo
Education, helped design the ISA and
provides its operational tasks: making
sure everybody gets the right disclosures
on time, that they sign all the contracts,
that status is tracked carefully, and that
future employment is verified.
In addition to launching Back a
Boiler, Purdue President Mitch Daniels
announced a four-year tuition freeze to
further a college affordability goal.
Zachary Meyer, a senior at Purdue
studying financial planning who plans to
graduate in December 2017, is participating in the Back-a-Boiler program with
a $10,000 ISA.
"My payment adjusts to my income, so
I know I will always be able to afford my
payments," he says. "If you're not making
enough money, they aren't expecting you
to start paying it back until you are on
your feet."
Meyer also will never have to pay back
more than the cap (two-and-a-half times
the original amount).
Purdue has gotten a lot of inquiries
from other institutions about the ISA
initiative. In response, the university and
Vemo have agreed to assist other institutions considering implementing ISA
agreements.

2

ISAs are not for every student.
Casey Jennings, chief operating
officer of 13th Avenue Funding, says risk-not affordability-is a
key factor in the cost of college. "For
low-income students who have to borrow multiples of their family's wealth, it
is extremely risky because they may default, and worse yet, if they don't graduate, they still have a loan to pay back,"
says Jennings.
In 2016, 1.1 million Americans defaulted on a federal student loan, which is a 14
percent increase from the preceding year.
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