To pay for college, more students are promising a piece of their future to investors – The Hechinger Report
As the Department of Education announces an experiment with income share agreements, the debate about these financial tools is growing louder
WEST LAFAYETTE, Ind. — One day in 2017, Lauren Neuwirth sank into a chair in her university’s financial aid office feeling out of options. She was finishing her second year at Purdue University in northwest Indiana, a school she’d chosen for its top-ranked engineering program. Neuwirth, who grew up near Milwaukee, was working two jobs to cover her living expenses and quickly running through the money her mother had set aside for college. Federal student loans only covered some of Purdue’s pricey out-of-state tuition. She worried that to remain in school she’d have to take out expensive private loans or join the Army.
But then Purdue offered her another way to pay. Investors — including wealthy alumni, a hedge fund and the Purdue Research Foundation — would front her $50,000 to cover two years of college. In exchange, she’d owe them 14.8 percent of whatever income she earned in the eight years after she graduated. Neuwirth agreed. Last fall, her fifth and final year as a double major in food science and biological engineering, she received a job offer from the agribusiness Cargill at a salary of $56,000. If all goes as planned, she’ll eventually return a healthy profit for those investors.