Colleges ask for share of future pay in lieu of loan

MONTPELIER, Vt. — As more students balk at the debt loads they face after graduation, some colleges are offering an alternative: We’ll pay your tuition if you offer us a percentage of your future salary.

Norwich University in Northfield, Vermont, announced this month that it will become the latest school to offer this type of contract, known as an income-share agreement. Norwich’s program is launching on a small scale, mainly for students who do not have access to other types of loans or are taking longer than the traditional eight semesters to finish their degree.

“Norwich University is committed to offering this new way to help pay for college in a way that aligns incentives and helps reduce financial barriers to degree completion,” said Lauren Wobby, the school’s chief financial officer and treasurer.

In contrast with traditional loans, students with incomeshare agreements pay back a percentage of their salary for a set period. Those touting the programs say they give colleges greater incentive to help students find highearning jobs after graduation because a higher salary means the school might recoup its investment in a shorter period.

For some students, income-share agreements are seen as less risky, especially if the students end up in a lower-paying job or struggle to find work after graduation. While students are unemployed or earning below a certain threshold, they don’t have to pay anything back.

Income-share agreements were first proposed by Milton Friedman in 1955, and Yale University briefly experimented with the idea in the 1970s. In the past decade, technical training programs, such as coding boot camps, have used this type of funding, largely because participants do not have access to federal student loans.

In 2015, Vemo Education began working with accredited colleges and universities. The Oakton, Virginia-based company now works with nearly 30 public and private colleges and universities, including Norwich University.

Vemo’s first partnership was with Purdue University in 2016, financing the school’s “Back a Boiler” income-share agreement program.