Higher education needs a new approach to finance

Since Lackawanna College’s inception, our programs and mission have been tightly coupled with in-demand jobs in the region — jobs that provide family-sustaining wages that can encourage economic mobility for many in Pennsylvania.

But our ability to create and sustain pathways to higher education for our students demands more than just workforce relevance. It demands a commitment to controlling costs and investing in innovations that cultivate college-going aspirations in the communities we serve. Our goal has always been to make a college degree attainable, and to provide opportunity without passing on long-term debt — and long-term worry. Affordability and accessibility have been central to our approach at every step, even drawing praise from President Obama when he visited in 2013.

{mosads}It’s why we listened to students and began offering bachelor’s degrees for the first time last fall — and it’s why we announced this year that we would begin offering income share agreements to our students.

We believe that the cost of college should be based on a student’s potential, not a parents’ tax returns, and we know it matters to students when we have a stake in their success beyond graduation. Income share agreements reflect this premise by creating a more affordable option for students, reducing the up-front expense of college, and alleviating the burdens — both financial and emotional — that so often accompany student loans.

We know too many students struggle to find the money to pay for their education, even at institutions that go above and beyond to tackle affordability. Over the past two decades, the share of student loan borrowers who owe more than $50,000 has risen from 2 percent to 17 percent, according to a paper published in February by the Brookings Institution.

Student loans are an important piece of the puzzle, but the prospect of taking on so much debt can also serve as a deterrent for students and families increasingly skeptical about the value of a degree. Research shows that one-third of high school graduates consider not attending college because of the cost. Even after students earn a college degree, those worries can linger, with surveys revealing that about one-third of graduates say they regret going to college because of the debt they were left with.

Income share agreements allow students to pay for college with a set percentage of their income after graduation. The concept is about de-risking the investment students make in a college education as much as it is about affordability. And, as an added bonus, we’re hopeful that income share agreements will enable our institution to capture unprecedented data on student outcomes — including income and employment — to tailor and inform our programs and services over time.

Ironically, there exists a common misconception that income share agreements are not an ideal fit for the low-income students we are dedicated to serving, because of a perception that those students may end up pursuing careers in lower-paying fields. We believe the opposite to be true, and the data bears this out.

In fact, income share agreements level the playing field. They have no principal balance or interest. The agreement is based on a fixed percent of earnings, so the less a student earns, the less he or she must pay — easing the burden of payment for those in lower-paying fields. At Lackawanna, a student does not have to pay a cent until he or she earns at least $20,000.

With federal student loan debt now at $1.4 trillion, we’re not alone in seeing the need to identify creative funding models that reduce risk and affordability for students. Purdue University in Indiana, Clarkson University in upstate New York, and Point Loma Nazarene University in California, among others, have all announced they’re also exploring income share agreement programs.

For many students, especially those for whom the prospect of student loans poses a significant burden, we hope that the unique features of income share agreements will increase college-going aspiration and open a new, more affordable path to a college degree.

Mark Volk is president of Lackawanna College in Scranton, Pa.