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But it remains to be seen whether ISAs are sustainable in the long run.
Mitch Daniels, of Purdue, who believes the university program could be a national model, notes that the program is still small and that the exact financial formula needed for its operation remains to be determined.
"For this to become a viable additional option … we need scale," he said. "And we need other schools and many other students to participate so that the market of potential investors will record the history of repayments and that we all learn more about how effective this process is. "
The Purdue program is funded by the University Research Foundation with the support of private investors.
Another concern is that programs are generally not regulated, unlike traditional student loans. While Purdue and Lambda School both provide upward and downward protection for students, nothing requires it.
Programs also do not address the underlying problem: tuition fees in colleges increase about twice as fast as the inflation rate. While Purdue has managed to freeze tuition fees for seven consecutive years, the average net cost of a four-year public university has risen by 30% over the last decade, according to College Board.
"Honestly, the most important thing that can happen is that other schools pay attention to what they claim in the first place," Daniels said. "You never had to borrow money that was not billed to you."
Disclosure: NBCUniversal and Comcast Ventures Invest in Acorns.
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