Purdue University is taking the next step toward a program in which students could get financial help for school from so-called investors in exchange for some of their future earnings.
Purdue Research Foundation, a private, not-for-profit foundation that supports Purdue, announced Monday that it has signed a letter of intent with a financial services firm to study the prospect of implementing an income-share agreement program.
The partnership is with Vemo Education, a Reston, Virginia-based firm, which will explore with Purdue how to structure and develop such agreements, and develop policies around such a program. Vemo will do the work for free, according to a company spokeswoman.
In general, students would draw funds from an investment pool to cover their education costs in exchange for agreeing to pay a percentage of their post-graduation income for a period of time, according to PRF.
"We look forward to the guidance they'll provide to the foundation as we continue to evaluate the potential of [income-share agreements] as a useful tool for Purdue students," said Brian Edelman, chief financial officer for the Purdue Research Foundation, in a written statement.
The plan has been controversial. Proponents, including Purdue President Mitch Daniels, who calls the program "Bet on a Boiler," say the option is better than private loans, which carry the risk of students' not being able to afford their payments. There is no principal balance or interest with an income-share agreement.
But critics have compared the program to modern indentured servitude.
Purdue plans to start a pilot program soon. While Vemo doesn’t have an official contract with Purdue to establish and manage such a program, “we would expect we would continue on as the partner” if Purdue decides to move forward with the program, according to Vemo spokeswoman Kerry Schneider.
Vemo said it is in discussions with a variety of other institutions on developing similar programs, but it does not have any formal agreements to do so yet.