Purdue, in West Lafayette, Ind., has 30,000 undergraduate students. Indiana residents pay annual tuition fees of $10,000, while students from other states pay nearly $30,000. Its average graduate emerges owing $28,000.
The income-sharing program will offer terms based on students’ majors and the projected salaries in those fields. A comparison tool on Purdue’s website lets students estimate how their own offers might look.A senior studying mechanical engineering, one of Purdue’s most popular majors, could get $15,000 in return for a commitment to pay 4.23 percent of his or her income for a bit less than eight years. Purdue estimates that the engineer would have a starting salary of about $56,000, and will be making monthly payments of $200. In that hypothetical situation, the student would eventually repay a total of $20,647.
But an English major can anticipate a starting salary of $34,000, by Purdue’s calculation. For that student, the school would offer a different package, which might require a higher percentage of income over a longer period.
Advocates of income-sharing agreements, sometimes called human capital contracts, see them as a way to spread risk and prevent students from being locked into dangerously high debt payments. “Affordability is built in,” said Robert M. Whelan Jr., the chief executive of 13th Avenue Funding, a nonprofit company that ran a small pilot test of the income-sharing model with 11 students in California in 2012 and 2013. “Student debt is a crisis, and this is an opportunity to approach it in a different way.”