For those who might be interested, here is the Cliff's Notes on how ISA's actually work:
1) They are an ALTERNATIVE to traditional student loans, for those students who prefer them over traditional student loans. They all have every right and ability to use traditional student loans and PLUS loans if they choose.
2) The process works by: Depending on how much they borrow, the student enters into an agreement to pay back an annual amount equal to a % of their income, for a fixed period of time - typically something like 5% for 7 years - something like that, obviously depending on the amount borrowed (and I think most have a maximum limit of somewhere around 10% of income). That is a much shorter term than for traditional student loans.
3) This protects the student if they graduate, and cannot find work that pays a lot of money (they also often include exceptions if the student goes through a period of unemployment)
4) The "250% limit" is a protection put in for students who end up earning very high salaries (where maybe the 5% would be a very high number) and says that no matter how much they earn, if they ever reach a payback equal to 250% of the initial amount borrowed they are done early, and don't have to repay any more. On the other hand, a student who ends up earning "not much", pays very little (But is still considered fully paid, and out of debt. I believe at Purdue anything under $20,000 or so per year pays nothing at all, but still has it "count" as a repayment year).
The end result is that it holds the University (or any third parties they bring in) accountable - they have "skin in the game" (which is something that many folks, including those on this board, have often said should be the case). In the case of Purdue? Purdue graduates around 60-70% of their students with degrees in Engineering or other STEM fields (which, of course, tend to be higher paying). Good for everyone. Those who graduate in a field (whether it be some non-marketable ____ Studies degree, or any other degree), and for whatever reason, don't earn much, end up paying back very little.
As to Purdue in particular, I believe the latest figures show that 2/3 of ALL their (in-state?) graduates end up leaving school with 0 debt - traditional student debt or any other type (including the ISA program). Those that do, and used the ISA, are out of debt much quicker. Yeah, that's terrible.
The reason they don't offer them anymore (at Purdue anyway) is due to pressure from the Student Loan lobbyists and the politicos who chant for "Free School" (even though Purdue has one of the absolute best track records for NOT burdening their graduates with excessive loan debt. Yep, some real geniuses there in Washington). FWIW, there was never a real large number of students using the ISA (probably, more than any reason, because their tuition costs were so low to begin with) - so they, Purdue, probably weren't in much of a mood to deal with the ********.
A panacea? No, certainly not. But an OPTIONAL alternative that some might like? Sure. An option that, to at least some degree, puts both the University and the Student on the same side of the table - making BOTH benefit when they graduate kids with very marketable and economically viable degrees, and the University pays the price if they crank out recipients of worthless diplomas? Absolutely. Some would think that is a good thing
For those who are interested, hope that helps.
