4 ms·

Some universities have started doing income share agreements. They front the tuition cost for a portion of your future income. Depending on your degree program,

Some universities have started doing income share agreements. They front the tuition cost for a portion of your future income. Depending on your degree program, they will take X percentage for Y years. Purdue was in the news for being one of the first: https://www.purdue.edu/dfa/types-of-aid/income-share-agreement/index.html https://www.purdue.edu/dfa/types-of-aid/income-share-agreeme... Planet Money had a nice podcast about how they work: https://www.npr.org/sections/money/2019/03/29/708152566/episode-903-a-new-way-to-pay-for-college https://www.npr.org/sections/money/2019/03/29/708152566/epis...

rblatz 7y ago
How does that work for people who receive a large portion of their compensation in things like equity in a private company that is extremely hard to value? Would these plans result in the proliferation of odd compensation schemes to get around these repayment plans?
- azhenley 7y ago
  I'm not exactly sure. These programs are still in there trial phase anyway. The one program that I looked into had a relatively low cap on it, like $60,000, so they only take a cut of the first 60k. Plus the majority of people (i.e., outside of engineering) don't get equity anyway.
- afarrell 7y ago
  Couldn't they just look at Adjusted Gross Income?
- SeanAppleby 7y ago
  Couldn't you just use income reported to the IRS? Then any odd payment scheme to get around repayment terms would necessarily be tax evasion, which is much more serious and lets you lean on the IRS for enforcement and legislation.
  - Accujack 7y ago
    Many forms of what you call "tax evasion" are in fact legal in the US. Lots of very, very wealthy people have no "income" at all, which means they don't pay taxes. The problem is that "income" is narrowly defined (for a reason) so things like someone owning a large corporation which triples in value over a year making them a billionaire on paper don't even show up on taxes because officially that person hasn't "made" that money until they sell the corporation. Even when they do, it's taxed at a lower rate than "income" because it's a different "kind" of money.
- oarabbus_ 7y ago
  It's based off salary, not equity.
C1sc0cat 7y ago
Mm factional indenture lovely NOT
scottishfiction 7y ago
This is how student loans in the UK work. "You’ll repay 9% of your income above the repayment threshold – earn less and you won’t repay. Once you leave your course, you’ll only repay when your income is above the repayment threshold. The current UK threshold is £25,725 a year, £2,143 a month, or £494 a week." [0] [0]: https://www.ucas.com/student-finance-england/repaying-your-student-loan https://www.ucas.com/student-finance-england/repaying-your-s...
- davidclark22 7y ago
  The US has a similar repayment program called Pay As You Earn (PAYE). It ties your payment amount to 10% of your income that is above 150% of the federal poverty level. This only applies to federal loans (not private loans) and requires opt-in, which probably causes a lot of people to not do it. https://studentaid.ed.gov/sa/repay-loans/understand/plans/income-driven https://studentaid.ed.gov/sa/repay-loans/understand/plans/in...
- jointpdf 7y ago
  I haven’t seen this mentioned in this thread yet, but there are income-based repayment plans for US loans. There are different plans, but it works much the same way as above, roughly: if you earn above a income threshold (~$20k), then you pay 10% of your income until a) the loan is repaid or b) 20 years have passed (remaining balance is discharged. But, you have to apply for these programs, and many people don’t know they exist and loan servicers have incentives to keep people on traditional repayment plans. It’s not a cure-all: you can still default, and there are cases where you can end up repaying more than a traditional loan. Nevertheless, it should be the [/puts on sunglasses]...default option. https://studentaid.ed.gov/sa/repay-loans/understand/plans/income-driven https://studentaid.ed.gov/sa/repay-loans/understand/plans/in...
  - ummonk 7y ago
    The problem is that the federal government (with taxpayer money) is acting as a middle man here. So universities don't have an incentive to make their students employable. If universities were getting paid directly based on income, that would create the right incentives.

rblatz 7y ago

How does that work for people who receive a large portion of their compensation in things like equity in a private company that is extremely hard to value? Would these plans result in the proliferation of odd compensation schemes to get around these repayment plans?

azhenley 7y ago
I'm not exactly sure. These programs are still in there trial phase anyway. The one program that I looked into had a relatively low cap on it, like $60,000, so they only take a cut of the first 60k. Plus the majority of people (i.e., outside of engineering) don't get equity anyway.
afarrell 7y ago
Couldn't they just look at Adjusted Gross Income?
SeanAppleby 7y ago
Couldn't you just use income reported to the IRS? Then any odd payment scheme to get around repayment terms would necessarily be tax evasion, which is much more serious and lets you lean on the IRS for enforcement and legislation.
- Accujack 7y ago
  Many forms of what you call "tax evasion" are in fact legal in the US. Lots of very, very wealthy people have no "income" at all, which means they don't pay taxes. The problem is that "income" is narrowly defined (for a reason) so things like someone owning a large corporation which triples in value over a year making them a billionaire on paper don't even show up on taxes because officially that person hasn't "made" that money until they sell the corporation. Even when they do, it's taxed at a lower rate than "income" because it's a different "kind" of money.
oarabbus_ 7y ago
It's based off salary, not equity.

C1sc0cat 7y ago

Mm factional indenture lovely NOT

scottishfiction 7y ago

This is how student loans in the UK work. "You’ll repay 9% of your income above the repayment threshold – earn less and you won’t repay. Once you leave your course, you’ll only repay when your income is above the repayment threshold. The current UK threshold is £25,725 a year, £2,143 a month, or £494 a week." [0] [0]: https://www.ucas.com/student-finance-england/repaying-your-student-loan https://www.ucas.com/student-finance-england/repaying-your-s...

davidclark22 7y ago
The US has a similar repayment program called Pay As You Earn (PAYE). It ties your payment amount to 10% of your income that is above 150% of the federal poverty level. This only applies to federal loans (not private loans) and requires opt-in, which probably causes a lot of people to not do it. https://studentaid.ed.gov/sa/repay-loans/understand/plans/income-driven https://studentaid.ed.gov/sa/repay-loans/understand/plans/in...
jointpdf 7y ago
I haven’t seen this mentioned in this thread yet, but there are income-based repayment plans for US loans. There are different plans, but it works much the same way as above, roughly: if you earn above a income threshold (~$20k), then you pay 10% of your income until a) the loan is repaid or b) 20 years have passed (remaining balance is discharged. But, you have to apply for these programs, and many people don’t know they exist and loan servicers have incentives to keep people on traditional repayment plans. It’s not a cure-all: you can still default, and there are cases where you can end up repaying more than a traditional loan. Nevertheless, it should be the [/puts on sunglasses]...default option. https://studentaid.ed.gov/sa/repay-loans/understand/plans/income-driven https://studentaid.ed.gov/sa/repay-loans/understand/plans/in...
- ummonk 7y ago
  The problem is that the federal government (with taxpayer money) is acting as a middle man here. So universities don't have an incentive to make their students employable. If universities were getting paid directly based on income, that would create the right incentives.