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Wednesday, March 18, 2015

Ind. Gov't. - "PU Prez Daniels proposes students trade future income for investor-paid college tuition" [Updated]

Dan Carden has the story in the NWI Times, including a link to Purdue President Mitch Daniels' written testimony to U.S. House Subcommittee on Higher Education and Workforce Training. The story begins:

INDIANAPOLIS | Can the nation's $1.3 trillion student debt burden be alleviated by permitting investors to purchase university educations for students in exchange for a cut of their future earnings?

Purdue University President Mitch Daniels believes such "income share agreements" may be part of the answer to making college more affordable.

The former Indiana governor told a U.S. House subcommittee Tuesday that Purdue is exploring opportunities for investors -- "perhaps devoted alumni," he said -- to pay for students to attend Purdue, if those students agree to pay the investors a to-be-determined slice of their post-graduation incomes for a set number of years.

"Such arrangements would create incentives for organizations to support students with mentoring and career counseling without putting tax dollars at risk," Daniels said, a Republican.

More from the story:
Critics of the idea suggest income share agreements are dangerously similar to indentured servitude or sharecropping, because the investor has an ongoing claim to the student's income and might be able to insist students work a specific job to pay their obligation.

Opponents also fear only high-paying majors might be supported keeping college unaffordable for people interested in doing necessary, but generally low-paying, jobs that often require a college degree, like social work or teaching.

[Updated March 22, 2015] Dave Bangert had a March 19th update to his earlier column. A snippit:
As for indentured servitude, the instant, two-word commentary heaped on the plan as soon as word started getting around about Daniels' testimony?

"Actually, that's just silly," Daniels said Wednesday night, while grabbing a bite to eat in the spring-break slow West Lafayette Village after returning from several days in Washington, D.C.

"Right now, if you need help paying for school, you're already paying someone back. It's just a question of who you're going to be obligated to," Daniels said. "What we're really talking about here is about giving us a chance on campuses to innovate and think of new ways to deal with the cost of a college education. It's just an idea I was using as an illustration of that. That's all."

But if the novelty of income share agreements is the key that opens that bigger discussion as Congress considers reauthorization of the Higher Education Act, which covers a host of university regulations, financial aid and student debt issues? Daniels said he's fine with that.

"And I can understand if people are asking, 'What's the catch?' " he said.

Right now, the first catch is that recent graduates are swimming in debt.

Sheila Kennedy asked some good questions about the Daniels' proposal in her March 20th column, including:
This raises some fascinating possibilities: while it’s unlikely the proposed contracts to finance an education would include a right to approve marriages, could the “investor” require the student to choose a job that paid more rather than a lower-paid one that the student preferred?

Could the investor “sell” the contract at a profit if the student did well and the negotiated percentage of her income represented a better-than-anticipated return on investment?

Could the investor require his “investment” to abstain from smoking, drinking and other risky behaviors that might threaten the duration of the student’s work life?

Posted by Marcia Oddi on March 18, 2015 09:27 AM
Posted to Indiana Government