Clarkson University is one of the colleges pioneering income share agreements.
Ashley Waldron—Courtesy of Clarkson University
By Kim Clark
Updated: November 28, 2016 2:41 PM ET | Originally published: November 23, 2016

As of late 2016, just a handful of schools and investors are providing tuition money to undergraduates in return for a percentage of their future income. But the concept has been getting a lot of attention and seems to be catching on.

Each of the programs currently in effect accepts different kinds of students and has different repayment rules.

For example, two Income Share Agreement (ISA) programs are open only to upperclassmen.

Purdue’s Back A Boiler will fund Purdue upperclassmen in any major, but the income share payback rates and time period vary with the amount of money the student takes, and the students’s major and year in college.

The only undergraduate applications for ISAs currently being accepted by Education Equity are for upperclassmen who attend one of about 40 Illinois colleges and who are part of Illinois’ Golden Apple Scholars teacher training program.

A different option aimed at entrepreneurs is offered by Clarkson University. The Potsdam, N.Y., college’s Young Entrepreneur scholarship offers four years of free tuition in return for a 10% equity stake in an applicant’s business. Unlike the other programs, Clarkson sets no time limit on the repayments.

The following chart estimates the total costs of three ISA options for students who go on to earn an average of $50,000 a year over their repayment period. Two of the programs—Education Equity and Purdue—allow students to choose how much to take, so we’ve used $10,000 (about the cost of one year’s tuition at Purdue) as the example. You may pay less (or more), depending on the amount of funding you receive and your eventual earnings.

Program What you get % Years Cost
Clarkson University 4 years of free tuition – $190,000 10% N/A $150,000
Education Equity Inc. $10,000 3.25% 10 $16,250
Purdue University $10,000 (1 year of tuition) 2% to 5% <10 $13,500

*The preceding has been updated to correct the percentage of income charged by Education Equity Inc.

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