For decades, companies have offered more or less the same deal to Americans in search of office jobs: You pay for your own higher education and skills training, and then we’ll consider employing you. But with corporations unable to hire and hold on to enough workers to fill jobs in IT, cyber security and software … Read more
Set a few miles from the sea and surrounded by swampy state parks, Indian River Community College was for years a lone outpost of higher education on Florida’s Treasure Coast. The nearest university—Florida Atlantic—was nearly 60 miles away, a long haul down I-95 for someone seeking more schooling but bound to her community by a … Read more
Spotty internet service makes remote learning hard for many college students. So does lacking reliable access to a computer. But even students who do have Wi-Fi and digital devices for schoolwork may not be able to fully participate in their courses if the technology they have is old, outdated or not powerful enough to handle … Read more
In 2014, when Tennessee unveiled a statewide scholarship to cover tuition expenses at community colleges, the program was praised for making higher education possible for more people. It even inspired President Obama to pitch a similar federal program. But as soon as more people showed up to campuses in 2015, Tennessee higher ed leaders discovered … Read more
Students cooking ramen noodle packets in the dorm microwave have come to symbolize what is deemed to be the universal college experience. However, that image demeans the dire situation of students experiencing food and housing insecurity in higher education. But it doesn’t have to be this way. Through advocacy on campuses and in communities and … Read more
For ages, the American dream has been built on obtaining a quality education, earning a credential from a degree-awarding entity and then starting a life full of wealth and opportunity. Or at least that was the dream bestowed upon America’s new dominating workforce: millennials. Born between 1981 and 1996, during a pop culture boom of … Read more
Around the world, people are starting to turn hopeful eyes toward the new year as the fervent desire to banish 2020 grows. Many have tried to find meaning from the loss we’ve experienced over the past year. But the lessons to be learned here are not new or unique to the pandemic. If we have … Read more
When David Helene built an app to deliver cash to college students in crisis, the emergencies he had in mind were personal, like needing money to buy groceries for the week or pay bus fare to get to class. But as the platform, Edquity, was about to go live with its first partner, Dallas College, in October 2019, severe tornadoes hit northeast Texas. Buildings were wrecked, and tens of thousands of people lost electricity. Suddenly, Edquity was facing down a natural disaster. “You never want to roll out technology in an environment like that,” Helene says. Yet Edquity and Dallas College didn’t shy away from the increased need for help. During the platform’s first 24 hours in action, it received 250 student applications for aid. The tech held up. Money reached students. And Helene realized that Edquity had the potential to assist communities in crisis. “It is the right system for disaster relief and or true emergencies,” he says. Little did the Edquity team know how soon that belief would be put to the test. What felt in fall 2019 like a climax was only a prelude. “Nothing has been normal since that launch,” says Pyeper Wilkins, vice chancellor of workforce and advancement at Dallas College. “Who could imagine that the year could be what it was. The Dallas College journey with emergency aid has been crazy.” A few months after the tornadoes struck Dallas, COVID-19 swept across the U.S. College campuses closed. Students lost jobs, child care and access to dorms, dining halls and food pantries. Congress put emergency aid for students in the spotlight by giving colleges billions to spend on direct cash grants. Hundreds of colleges sought help from Edquity. The company’s staff tripled, its portfolio of colleges served grew to more than two dozen, and in November, it raised $2.77 million from investors. Edquity aimed to grow slowly and steadily this year. 2020 had other plans. As Helene puts it: “The pandemic changed everything.”Social-Service Mission, For-Profit ModelFor low-income students, small sums of money can mean the difference between skipping and attending class, or focusing on schoolwork instead of a grumbling stomach. Some colleges have started paying closer attention to this reality. At Dallas College, many students don’t have reliable access to housing they can afford, Wilkins says. At Compton College, a community college in California that now uses Edquity’s services, a 2019 survey found that more than half of students experienced food insecurity, 63 percent experienced housing insecurity and 23 percent experienced homeless within the year. To address these problems, some colleges set aside funds or solicit donations to give modest grants to students who apply for help. But from Edquity’s perspective, “these institutions are not set up to get this cash out in a way that is quick, flexible and effective,” Helene says. Leaders at Dallas College knew there was a lot of need among its more than 100,000 students, but devising a system to serve so many people with emergency aid was daunting. “How can we do it fairly? Without bias? We would have to hire about 30 people to do something like that,” Wilkins says. “We began to look for an alternative.” Edquity’s application takes students just a few minutes to fill out, and the platform informs students within a few hours whether their requests will be granted. Then, within about 48 hours, the system provides students with money—usually up to $500, depending on college policy— either through direct deposit or through pre-paid gift cards. That student-friendly design—built based on research from The Hope Center for College, Community, and Justice, whose founding director is also the company’s chief strategy officer— made the platform appealing to Dallas College, which signed up to be Edquity’s test partner. The system also attracted investment capital. By January 2020, Edquity raised about $4 million, including $2.4 million in a seed round from ECMC Foundation, Omidyar Network, Spring Point Partners, the American Family Insurance Institute for Corporate and Social Impact, Michelson 20MM Foundation and WGU Labs. Investors told EdSurge they appreciate Edquity’s mission and methods. “They are trying to tackle one of the most inefficient pieces of the social safety network that we patch together in this country and make it function for the most vulnerable people,” says Margot Kane, chief investment officer at Spring Point Partners. “It’s a lightyear’s jump in terms of efficacy and meeting real need.” The company uses a licensing model to charge its college clients based on the size of their student bodies. In addition to helping students, it aims to help institutions, too, by improving their student retention rates. That’s of special concern now—because enrollment is down at colleges across the country. “If you can help somebody, with just a small amount of money, pay their rent, buy food for their family, and it keeps them enrolled for the rest of that semester so it helps them complete—that’s what this is about. It is absolutely a retention tool,” Wilkins says.Helene and his backers think that this potential return on investment makes Edquity’s model for emergency aid more realistic than relying on philanthropy alone. “Edquity continues to prove us right that you can build a sustainable, scalable, for-profit company that is also tied to transforming and disrupting inequity,” says Shayna Hetzel, social impact investment director for equity in education for the American Family Insurance Institute for Corporate and Social Impact. Powering Pandemic ReliefA company’s growth statistics usually feel celebratory. But Edquity’s 2020 figures hint at how difficult the year has been for students and colleges. Since June, the company has processed more than 30,000 applications and helped institutions distribute $7.5 million in aid. Beneficiaries range in age from 18 to mid-70s, with a median age of 31. More than half of recipients say they’re responsible for dependents. “Forty-four percent of applicants have children,” says Wilkins of students who have applied from Dallas College. “It tells you that we are helping families.” By the end of the spring semester, business was picking up for Edquity. The company fielded more than 100 inquiries from colleges looking for better ways to support their students during the pandemic. To support its work, it received more than $1 million from the Bill & Melinda Gates Foundation. And it rolled out its platform with three new partners: Compton College, Western Governors University and United Way of King County.“It was a little scary. The technology hadn’t quite been built for scale yet. We looked at case studies across the country, and systems were crashing because they were getting so many applications,” Helene says. “We were very happy to see the technology performed exactly as it should. At our apex, we processed 8,000 applications in a single day.” Leaders at Compton had been interested in the idea of providing emergency aid to students before the pandemic, but the crisis nudged them into action—and into a deal with Edquity. “It was perfect timing for us,” says Keith Curry, president of Compton College. “I think they’re a great resource. They’ve been very helpful to us as we move forward.”Meanwhile, having survived tornadoes together, Edquity and Dallas College took their relationship to the next level. The company helped the college process the pandemic-relief dollars it received through the CARES Act. Because those funds could only go to students who met certain criteria—including U.S. citizenship—the partners developed a process for screening student applicants for eligibility. Dallas students who could receive CARES money did, and those who couldn’t received privately raised money instead. Getting students to apply for pandemic aid in the first place has been its own challenge, Wilkins says. Dallas is using social media, texts and emails to target students at times they seem most likely to fill out Edquity applications: between 6 p.m. and 6 a.m. on the weekends. In this way, Dallas has processed about 9,000 student aid applications since April and awarded more than $5 million in CARES funds. Without Edquity, Wilkins says, “I don’t know how we would have done that, especially in a pandemic when everybody is remote.” It seems as though Edquity will have plenty of work for its new employees and funding in the new year. The company has new projects, like Compton College’s plans to use the platform to expand its support to high school dual-enrollment students. And it may find increased demand if the federal government moves ahead with the additional pandemic relief it was considering sending to colleges as of late December. “We would anticipate moving very fast to support institutions with this next wave of funding,” Helene says. “Unlike in May, we feel ready to scale quickly.”Beyond its short-term effects on Edquity’s growth, the pandemic also may have shifted some attitudes in higher education about the company’s underlying philosophy—that it’s important to help people quickly and simply. “Direct relief and aid has become more accepted as a best practice,” Helene says.
Income-share agreements have emerged as a new financing option for colleges and nontraditional education programs. They’ve generated excitement among those who believe that ISAs can offer a much more student-friendly form of financing. But there are also concerns that they might not be, in part due to the fact that this is a recent trend, and in part due to the fact that ISAs are still legally in a gray area and largely unregulated.What do we know so far about from research into how ISA programs are faring? Perhaps more importantly, how do students decide to take one on, and how are they faring? And how has the pandemic—which has disrupted colleges and labor markets—impacted the momentum behind this new financial experiment?Those were the questions we posed in the latest episode of EdSurge Live, our monthly online discussion of big ideas in higher education. Our guests were:Claire Gregowicz, a digital marketing manager at CoinUp who took out an ISA to complete a program from the San Diego Workforce Partnership/UCSD extension program;
Andrew Hoyler, a first officer at PSA Airlines and the first graduate from Purdue University’s Back a Boiler ISA program;
Ethan Pollack, director of the Financing the Future Initiative at Jobs for the Future; and
Barbara Weber, vice president of school operation and school partnerships at Better Future Forward.
Listen to the conversation using the player on this page, or read a partial transcript of the highlights below, edited for clarity.EdSurge: What are students’ general first impressions upon hearing about an ISA? What do they need to make an informed decision about it?Gregowicz: I thought it was too good to be true. I read all of the fine print, understood the [income payment] threshold and percentages, and thought, what a good idea. When I told my son, the very first thing he said was: “Mom, I think this is a scam. I think they’re just looking for your social security number.” That was really like his first impression as someone who wasn’t really looking to go the college route and was really afraid of student debt.Weber: At Better Future Forward, we ask students to participate in one-on-one advising sessions with us. We talk to them about their financial aid and making sure they take advantage of all of the aid that they can possibly receive. But beyond that, we also provide some estimates for them. So if they think they’re going to make X, and their income share percent is Y, what will that scenario look like when they’re out of school? We feel that students are better informed to make a decision whether or not this is a good choice.[Audience Question]: The students who took out ISAs mentioned there were some kinks that those programs were figuring out. What were some of those?Hoyler: Purdue was really one of the first universities to go after the ISA program as a whole. There really were no guidelines, so the investors and the Purdue Research Foundation were really going into it blind. Some of those kinks they had to work out were the exact amount of the contract terms—which vary from student to student based on their projected industry that they’re going into—as well as the monthly income percentage that they’d be paying every month. I was really one of the first guinea pigs. I’m paying 7.92 percent of my monthly income for a 104-month term, and the investors were very open with me during the one time we met them at a, a dinner hosted by the Purdue president. For someone else who goes into the Purdue flight school three years down the road, their payment term and percentage might look a lot different than mine. They might be paying back money towards the ISA for a shorter period of time and even a lower percentage of their income. [Editor’s note: Purdue’s terms have, in fact, changed since Hoyler signed up for his.]These are things that they need data on to make those decisions and work out over time. They don’t have a crystal ball saying this is the right percentage or this is the exact payment term. So they’re really trying to find that middle ground of making sure it helps the students and might have certain advantages versus a Parent PLUS loan or Perkins loans, while also giving that return on investment for the investors.[Audience Question]: Do ISA programs offer more student support services than you might have had otherwise? In general, does offering an ISA also require providing a greater stack of other student supports?Gregowicz: I do think it’s required … to have somebody help me with, “What can I do with the certificate now with my skills? Where can I go with that?” I do think it is—for student success and for the success of the ISA—necessary to have those kinds of things. Before COVID, my son was working as well while he was doing this program. His car transmission died, and that was a real hardship. I reached out to the program for help, and they sent us a bus pass just so he could continue working… Even that little thing eased my son’s life so that he wasn’t stressing about it, and he could keep concentrating on his classes. Was it necessary? No. Does it help? Yes. It is a factor in the success of the ISA program.EdSurge: Ethan, you recently authored a whitepaper about “student-centered ISAs.” What does that mean, and how can they be designed?Pollack: ISAs are powerful tools. They can be used for good. They can be used for ill. Or they can be intended to be used for good and accidentally be used for ill. I think of them as similar to cars—they can be very dangerous, but they can also be enormously helpful.One thing that is really important is making sure students understand what they’re signing up for. ISAs should have clear terms and disclosures that try to conform as much as possible to the Truth in Lending Act, so that comparisons can be made between ISA and other types of financial products.Students should also not bear most of the risk. The promise of ISA is that the risk is being shifted from the student onto the providers, either the schools, the third-party providers, investors … and the design of the ISA and operation of the ISA should be consistent with that promise. That means limiting excessively long payment windows [and other terms].Finally, the quality of the education matters. There’s a difference between the education and how you finance the education. A lot of the criticisms I’ve seen of ISAs come from students who have had bad experiences—not with the ISAs, but with the underlying quality of the education. We certainly don’t want predatory schools to be using ISAs to help them become more successful… We want to make sure that ISAs are lifting up the good schools and make it more difficult for the bad ones to operate.EdSurge: The pandemic has impacted both colleges and labor markets. How has that affected the momentum behind ISAs? Pollack: A lot of ISA funds are modeled in a way that they are assuming a certain rate of financial return, or at the very least financial solvency. With a recession, and with students potentially not getting the jobs the providers thought they would be getting, that kind of throws a bit of a wrench into some of those solvency plans. If a school set up a fund thinking they were going to be solvent in a few years, this might get pushed by another few years or so.
At an event in April 2019, Diane Jones, the Education Department’s principal deputy undersecretary, said the department was considering an experiment to help colleges offer income-share agreements (ISAs), a form of financing where students who borrow money promise to pay back a percentage of their future income as repayment.While those plans never materialized, colleges are nevertheless pushing forward.In October, Robert Morris University launched its “Colonial Fund,” which lets students borrow $5,000 through an income-share agreement. Last month, nine historically Black colleges and universities announced plans to offer a similar income-based financing option through a nonprofit funded by Robert Smith, the private-equity billionaire who also paid off the student debt of the 2019 graduating class of Morehouse College.To date, about 60 U.S. colleges offer ISAs, estimates Tonio DeSorrento, CEO of Vemo Education, which designs and services such agreements for universities and vocational educational programs.More common among private vocational programs, income-share agreements are increasingly offered by colleges and universities. Yet with little data on outcomes from ISAs and with labor markets upended by a pandemic, the exercise remains very much an experiment in higher education.Still, DeSorrento estimates that over 1,000 ISAs have been awarded by colleges through Vemo, which is considered the largest ISA service provider for them.The college with the biggest experiment in ISAs is Purdue University, which in 2016 became the first major public college to offer ISAs. To date, its program has disbursed $17.9 million across more than 1,600 contracts, and university officials are fundraising for Purdue’s third ISA fund. About 400 of its ISA contracts are in repayment status, meaning the students have graduated and landed a job earning above $20,000, which is the income threshold beyond which students must pay back.Despite being one of the first programs to offer ISAs, Purdue officials are hesitant to tie them to graduation rates, which has generally improved over the years. “I don’t think we have enough data to make that connection with income-share agreements,” says Mary-Claire Cartwright, chief information office of the Purdue Research Foundation who manages the ISA program.Other programs have been slower to attract students. Invest in U, launched by the University of Utah in January 2019, has awarded just 59 ISA contracts totalling $360,000, according to a university spokesperson. Three recipients have graduated and are making repayments.Some programs are deliberately small. Colorado Mountain College, whose ISA fund is specifically offered to DACA students who aren’t eligible for federal aid, supports 20 students a year, according to its chief operating officer Matt Gianneschi. Since 2018 it has awarded ISAs to roughly 30 students, three of whom graduated this past June.Do Students Share the Excitement Over ISAs?Researchers say it is too early to draw conclusions about whether ISAs have delivered on their promise in higher education: offering an affordable financing alternative that aligns the interests of schools and students around making sure they graduate and get good jobs. But what colleges are learning is whether students understand ISAs and how they decide to take one on.A study funded by the Lumina Foundation that is expected to be published next fall looks at how students are participating in ISA programs at the University of Utah, Colorado Mountain College and the San Diego Workforce Partnership, which provides job-training programs for adults.So far, “initial ISA enrollment has been slower than expected” across the three programs, shares Terri Taylor, strategy director for innovation and discovery at Lumina Foundation. “In some ways that’s actually good, because I think what everyone is realizing is that although the general concept of an ISA might be somewhat easy, actually getting the terms right is pretty hard.”And as it turns out, getting students to understand those terms, and how they differ from loans and other financing tools, is a common hurdle.Initial disbelief and skepticismEver see an offer that sounds too good to be true? That’s how many students feel when they first hear about ISAs, says Jason Taylor, an assistant professor in the department of educational leadership and policy at the University of Utah who has been researching students’ perception of ISAs for the forthcoming Lumina study. (He is of no relation to Terri Taylor.)“This is a new financial tool for students, and students have mixed perceptions and don’t understand it well,” says Jason Taylor. “Students are inundated with emails and promotions offering to help them pay for college, so already they approach it with an initial skepticism.” That skepticism is not uncommon, echoes Samantha Zucker, a design researcher who has done user studies for ISA programs. “Students generally start in disbelief” when hearing about them for the first time, she says. Especially wary are those who are financially vulnerable. “Low-income students are getting served a ton of scams everywhere. They’re getting phone calls, often selling some student-loan scams on the phone,” she adds. “They’re used to these things being too good to be true, so when you tell them about an ISA, generally that is their first reaction.”“But honestly, I’m generally happy to see that they don’t trust it right off the bat,” says Zucker.Claire Gregowicz, who along with her 20-year-old son took out an ISA to attend an UCSD Extension program offered through the San Diego Workforce Partnership, recalls that her son “initially thought it was a phishing scam” when they first read about the ISA. Before signing up, they met with a program manager who talked through the terms to assuage their concerns.Part of the problem lies in the marketing language, which can border on hype. Websites, podcasts and op-eds tout ISAs as a powerful alternative—even the solution—to student debt. Such claims have caught the attention of consumer-protection advocacy groups like the Student Borrower Protection Center, which has found marketing language that it contends is deceptive and predatory.Is it a loan? Debt? Something else? To students, it’s kind of the same.Are ISAs a loan? Debt? A contractual agreement? An obligation?Strong opinions have emerged among opposing sides of this question, which remains unsolved from a legal standpoint. The answer is important, as it has implications about whether ISAs are subject to consumer protection laws and information disclosures that traditional loans must abide by. Several bills have been proposed by Congressional lawmakers in recent years in an effort to establish legal guardrails for ISAs. But such measures haven’t gained traction, meaning that ISAs continue to exist in a legal gray area.To students, though, the legal technicalities may not matter as much.“From our interviews, students definitely conceptualize this as a type of debt or loan. They understand that they took out the money, and have to make payments back” that could amount to more than what they took out, says Jason Taylor.Ironically, offering an alternative to a loan was one impetus for starting an ISA fund at University of Utah, which is in a state known to have a debt-averse culture. Utah undergraduates borrow less money than their peers in other states—even if it means that they may not finish college. “Our particular student population were just unwilling to take on debt,” says Courtney McBeth, who helped launch the Invest in U fund and is now a senior vice president at Strada Education Network. “Our juniors and seniors, in particular, would prolong their studies, and it became the case where our eight-year graduation rates were higher than our six year rates. So we just had this long tail of students taking a long time to graduate.”Of the 59 University of Utah students who have taken out an ISA, just 13 have other sources of financial assistance, according to a university spokeswoman. Though that figure is based on a small sample, that percentage is much lower than at Purdue University’s ISA program, where 91 percent of students also have other financial aid.To understand how ISAs work, students need to get how loans work.ISAs are often marketed as a better alternative to loans. But in order to understand the differences, students first need to understand how loans work.“We realized early on that in explaining an ISA, you also have to explain how loans work and what’s happening with their loans,” says Zucker. “Students are really fixated on interest rates, and how much they will pay back over time … They’ve all heard horror stories from their teachers and others who all have debt that they’re going to be paying off [for what feels like] forever.”That was the case for Kaliah Little, who says her father is still paying off Sallie Mae loans in his fifties. It was one of the reasons Little decided to take out about $22,000 in an ISA through Better Future Forward, a nonprofit that partners with college-readiness organizations to offer ISAs to students. That money helped her attend and graduate from North Park University, in Chicago, this month. Little, who previously interned in finance work, said she was able to grasp the differences between ISAs and loans fairly quickly, but understands that’s not the case for others. “What does it mean to pay interest on loans, and the principal, and how does that amount differ from a portion of your income—that’s what can be hard to figure out,” Little says.When ISAs and loans are compared side-by-side, “students tend to get stuck in the difference between the interest rate and income percentages,” Zucker adds. “Those two things often end up getting conflated.” Having an advisor compare and explain repayment scenarios proved helpful, says Latifat Soyan, a junior majoring in business marketing at University of Illinois-Chicago who also took out an ISA from Better Future Forward. Before signing the agreement, she had an advisor show her a spreadsheet with a side-by-side comparison “breaking down ‘this is how much you’re taking out, this is how much you would pay back under different scenarios,’” she recalls.Uncertain about her job prospects after she graduates, Soyan feels some relief in the fact that she won’t have to make repayments unless she earns at least $30,000. “When I looked at it in that way, it seems this option is more considerate of my circumstances versus private loans, which aren’t going to pause my payments or stop interest from accruing if I don’t have a job.”Because income changes over the course of a career, it is difficult to make precise forecasts of one’s monthly payments under an ISA. Comparison calculators, including those created by Vemo, have been the target of complaints that say their salary data is outdated. (The company says it has since updated the information.)On the upside, most ISA contracts specify the cap on how much a borrower will pay, or how many repayments must be made, in order to fulfill the obligation.The clearest, albeit oversimplified, way to explain the difference to students, as Zucker found from her research and shared in a report, is:When you take out a loan, you’re paying back a set amount of money over an unknown amount of time. With an ISA, you’re paying back for a set amount of time, an unknown amount of money.The pandemic has made ISAs less financially competitiveOfficials at Purdue and other colleges say ISAs are no replacement for federally-subsidized loans. But they add that ISAs are usually designed to beat Parent PLUS loans or private loans, in terms of how much a student is likely to pay back overall.Except that may no longer be the case. Among the impact of the pandemic was a general lowering of interest rates across the board, and those for Parent PLUS loans have dropped from 7.1 percent to 5.3 percent.According to Purdue University’s ISA comparison tool, which projects total repayment costs based on one’s major and anticipated graduation date, total ISA repayments are higher than ParentPLUS in many scenarios. Similarly, University of Utah’s ISA website currently shows that the estimated total ISA repayment for one scenario is higher than Parent PLUS, and even more than a private loan. (Until last week, it also had a calculator that offered comparisons based on major and graduation date, but that has since been removed.)While there are important differences in repayment terms between ISAs and Parent PLUS loans, the fact is that when it comes to total cost, ISAs may not have the competitive edge. In addition, the federal department of education has extended loan forbearance and temporarily set interest rates to zero for federal loans in response to COVID-19.In normal times, one of the selling points for ISAs is the income threshold below which students do not have to make repayments. At Purdue, that bar is set at $20,000—which is low. But for Andrew Hoyler, who entered Purdue in 2014 in pursuit of a pilot career, “I knew right off the bat that after graduation, the starting pay for pilots would not be great,” he says. Regional pilots start off making as little as $20,000 a year. “I knew of pilots who had been living on food stamps.”Knowing that his starting salary prospects would likely be low, Hoyler, an out-of-state student, took out $21,000 through ISAs. He graduated in 2017, and was working for PSA Airlines when the pandemic hit, forcing him to return to Purdue to teach. He has been paying 7.83 percent of his monthly income, and his monthly payments have ranged from $174 to $334.Hoyler says he would not recommend ISAs for students who plan to enter high-paying professions and can pay off their loans faster. But they could be a good option “for people who may not know what they want to do, or maybe plan on going into a lower-paying field for a couple of years. Or for those who just need some time to figure out what you want to do.”