Purdue to hold income share agreement rates flat through 2017-18

Graph on Purdue undergraduate loan debt Download image

WEST LAFAYETTE, Ind. — Purdue Research Foundation officials announced Thursday (Aug. 31) that it will hold student financial commitment rates at the 2016 level through the 2017-18 academic year for Purdue University students enrolled in the Back a Boiler – ISA Fund, an income share agreement program that provides an alternative to Federal Parent PLUS and private student loans.

When launched in the 2016-17 academic year, the Back a Boiler — ISA Fund distributed just over $2 million to about 160 juniors and seniors in 79 majors. The Purdue Research Foundation expanded the program to include sophomores for the 2017-18 academic year.

“Purdue continues to look for ways to hold education costs for students and that includes post-graduation student debt and financial commitments originating from academic expenses. This decision follows the same goal as the tuition freeze for the sixth straight year for Purdue students that President Mitch Daniels announced earlier this year,” said Mary-Claire Cartwright, Back a Boiler program manager. “Keeping the financial commitment rates to the 2016-17 rates is important to help students who need financial assistance. It means that while the interest rates have gone up for Parent PLUS and private loans, the financial obligation for students in Back a Boiler will not go up. The program also has no interest rate, so undergraduate students in the program do not accrue interest debt while attending Purdue.”

The freeze on a Back a Boiler financial commitment allows students in the program to have a financial obligation that remains at a figure determined by the 2016 Federal and private loan rates.

The financial obligation of students receiving funding is based on the anticipated income of a student as the program is not a loan and does not bear interest. When launched, the program used the Federal Parent PLUS interest loan amount of 6.31 percent and the private student loans of a 9 to 10 percent interest rate in 2016 as guides to set the terms of a student’s financial obligation.

In May 2017, the Federal Family Education Loan Program and the Direct Loan Program set the Parent PLUS interest loan amount at 7 percent for the 2017-18 academic year. Over the past 10 years, the Parent PLUS interest rates have ranged from 6.31 percent to 8.5 percent. Private student loans have varied from 9 to 11 percent over the same time period.

“We also believe it is important for students in the program to have a stable and consistent financial obligation rate,” Cartwright said.

At the time Back a Boiler launched, Purdue University was the first major research university in the U.S. to offer an income share agreement as an alternative to Federal Plus and private student loans. Back a Boiler is not recommended as an alternative for government-subsidized student loans.

The program offers students and their families an alternative financing option in which a student receives education funding in exchange for an agreed-upon percentage of post-graduation income over a set number of years. The Back a Boiler - ISA Fund payback period is about 10 years.

The Back a Boiler program is part of the university’s Purdue Moves: Affordability and Accessibility established by Daniels, who said tthat while affordability and protecting the budgets of students and their families continues to be the central priority, investing in the university’s missions and in its employees is a similarly important goal. Through larger enrollments, attention to efficiency, successful fundraising and increased sponsored research, Purdue has been able to launch a host of major initiatives. Examples include $250 million over five years for life sciences research, $150 million for engineering expansion, $26 million in scholarship funding for 2015-17 and $11 million to support international studies.

To view previous articles about Back a Boiler visit:

• Purdue invests in students’ futures with new model of financing (PBS NewsHour, August, 22, 2017)
• Why one university is sharing the risk on student debt (The Atlantic, March 15, 2017)
• Purdue’s income sharing agreement solution to the student debt crisis (Forbes, August 30, 2016) 

Media contact: Cynthia Sequin, Purdue Research Park, 765-588-3340, casequin@prf.org 

Source:  Mary-Claire Cartwright, 764-588-1051, mccartwright@prf.org