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By AGENCE FRANCE PRESSE, NEW YORK, USA, April 30 – US students are turning to a new strategy to avoid the debt trap that has captured millions of people, promising a share of their future income to pay for their education rather than borrow .
And they are protected since they are not obliged to make payments if they can not find a job after graduation and as long as their salary stays below a certain threshold.
To date, these "revenue sharing agreements" or ISAs are only offered by a few universities and training centers, such as computer coding schools. But they are attracting more attention as the student debt crisis worsens.
This debt, which now stands at $ 1.5 trillion in the country, is forcing many Americans to postpone or abandon their dreams of becoming homeowners and major purchases, which in turn will weigh on the economy.
It's thanks to an ISA that Paul Laurora will be graduating as a chemical engineer from Purdue University, Indiana, on May 11th.
Despite state-subsidized loans, his own savings and a contribution from his parents, the 22-year-old has found himself running out of money after only two years of study. Tuition fees and registration fees amounted to $ 40,000 per year for students outside Indiana.
Undocumented students
When a bank refused to grant him a new loan, he started selling goods on eBay and even considered leaving the school to hold a job for a semester or use the retirement savings of his parents. But he then heard about the ISA option.
"I did not want to stop halfway just because I could not afford it. That would have been the worst of reasons, "he told AFP.
Thanks to ISA, the university has given him about $ 30,000, which he will pay 9.6% of his salary for a period that will depend on his level of income.
Purdue University was the first major public college to offer ISA. Since 2016, 759 students have spent about $ 9.5 million on their studies.
Other institutions have followed suit, each with its own characteristics. Colorado Mountain College reserves this program for undocumented immigrant students who can not access government-sponsored loans.
Private training centers have also opted for such grants, such as the General Assembly, which offers intensive computer training for 40 months at $ 40,000.
Students who sign an ISA do not pay anything, but pledge to pay 10% of their salary for at least four years if they earn at least $ 40,000 a year, or 1.5 times the cost of their studies.
"They recognize that they are doing very well, they will pay more," said Tom Ogletree, who is responsible for ensuring that the school remains accessible to as many people as possible. "But they will not be penalized in case of problems and, unlike a loan, they will not be forced to repay."
Students can suspend their payments if they have to stop working for personal, family or health reasons.
"Life is coming," he said.
And because the school can not recover the fees as long as the student has not worked and can fulfill the contract, it is in the interest of the institution to ensure the student's professional success, said Ogletree.
Tonio DeSorrento, founder of Vemo Education, a company that helps schools design their own ISA contracts, said some institutions fund ISAs themselves, while others use grants, endowments, and "investors". impact ".
Wall Street looking
But experts warn that this new financing system, which also exists in Latin America, is not a miracle solution. Some institutions may use them to attract more students, at the risk of fueling higher tuition and tuition fees.
ISAs also reinforce inequalities as better terms are offered to more lucrative majors students, says Jessica Thompson of the Institute for College Access and Success, which helps make higher education more affordable and accessible.
On the other hand, "federal loans serve as equalization," she said.
But these new contracts have attracted the attention of Wall Street.
Edly, a new platform, allows accredited investors to bet on pre-selected college programs. He has already raised $ 2 million for the Holberton Computer Engineering Training Center in San Francisco.
For investors looking for new investments, ISAs offer a relatively attractive return, said Charles Trafton, co-founder of Edly.
ISA legislation is not clear, although Congress and several states are debating different approaches.
But "once we have a federal regulation, schools and investors will know all the rules of the game and the adoption rate will go even faster than today, and it increases rapidly," said Trafton.
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