NEWS: A New Kind of Student Loan

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Revolutionary “income share agreements” could change the face of student loans forever, but what are they all about?

In a year in which it was confirmed that delinquent student debt has risen to an all-time high, U.S. Republican Senator Marco Rubio has presented important plans for a potential alternative to the traditional student loan. Typically, students must begin repaying their student loan immediately after or even before graduating – their success in finding employment is disregarded. Given the recent economic turmoil, many postgraduates have found themselves struggling not only to pay back the money they owe, but to find a job in the first place.

With “income share agreements”, students will instead be able to sign off a percentage of their future earnings to private investors or organizations in exchange for education financing. Upon graduating, they will then be free from repayments until they find work, relieving them of the financial pressures that many students find themselves in upon graduating. Repayments will then be taken out of their salary once they become employed, which also offers a degree of convenience in that borrowers don’t have to worry about managing their finances and meeting repayment dates.

For the first time, lenders will be investing in the individual rate than the idea – what they are studying, what their plans are for a future career – and will for the first time be provided with some kind of guarantee, perhaps even resulting in lower rates. Perhaps most importantly of all, lenders will also find themselves with a vested interest in the post-college success of an individual. They will hold an interest in how a student’s career later develops, rather than whether they are meeting their repayments. “Income share agreements” are an exciting prospect, perhaps offering a brighter future for soon-to-be college bound students everywhere.

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