The search for alternative ways to finance college is a laudable and understandable goal. With student debt surpassing $1.3 trillion nationally, it’s clear the postsecondary payment status quo isn’t tenable. But fixing this problem requires real reform of the factors that cause college to cost so much, not a niche financial product that will largely benefit the more affluent.
Proponents of a new debt instrument — called an “income share agreement” —like to say it’s not a loan. The underlying mechanics, however, are still the same. A student receives money upfront, and has to pay those funds back over time. All that’s different is how the payments are calculated. Instead of carrying a balance and an interest rate, borrowers have to repay a set percentage of their income for a period of years. The whole thing may sound friendlier, but failing to pay up will have consequences.The above excerpt was originally published in USA Today .