If you’re going to college this fall, instead of taking out a student loan to help pay tuition, how about getting some money up front from your school? But there's a catch: Your school will take a percentage of your income for a set amount of time after you graduate.
That's the idea behind income-share agreements, and Norwich University will try out the concept with some students starting this fall.
VPR's Henry Epp spoke with Lauren Wobby, Norwich University's chief financial officer and treasurer. Listen to their full conversation above.
Unlike traditional debt payments, which stay the same regardless of a debtor's income, the amount students will have taken from their salary after graduation will change with their income.
"So, if there's a rough patch in their employment and their income level has dropped, so will the percentage of their sharing," said Lauren Wobby, Norwich University's chief financial officer and treasurer.
Wobby said students could end up paying more than they were initially given by the university if they earn a higher salary. However, she said Norwich's programs will cap the amount students can pay.
Wobby explained that Norwich will offer two income-share agreement programs starting this fall: For one program, students will only pay back the amount they were given; the second will cap student payments at two times their tuition reduction.
Norwich is working with Vemo — a private, for-profit company — to start the income-share agreement programs. However, the school is using its own money for the agreements.
"There is a risk, and we've certainly considered it," Wobby said, "but the far greater risk to us is a student start at Norwich and not complete. That's the risk that we want to avoid. And this program, we believe, will help overcome that."
Wobby said Norwich hopes the program is successful, but said there's nothing stopping the school from ending it if it doesn't work.
