Ameritech Financial Asks: Are Income-Share Agreements Better Than Traditional Student Loans?

Young man on college campus

Income-share agreements, where colleges pay students’ tuitions if they promise to pay back a portion of their future earnings, have increasingly begun popping up across the country. Originating in the 1950s and experimented with in the 1970s, income-share agreements are offered as an alternative to traditional student loans as colleges and students grapple with the student loan debt crisis. Millions of Americans are adversely affected by this debt, which, though providing the education necessary for improved career and salary opportunities, delays many lifetime milestones such as getting married, buying a car or home, and even retirement. For those already overburdened by student loan debt, Ameritech Financial can assist borrowers navigating the sometimes complex federal programs such as income-driven repayment plans (IDRs), which might lower monthly payments based on income and family size.

“We welcome alternatives to the standard method of going to college, which typically includes going deeply into debt,” said Tom Knickerbocker, executive vice president of Ameritech Financial. “But for those already struggling with student loan debt, we can help you find the right federal program and assist you in applying for and maintaining enrollment in IDRs.”

Introduced as a concept in 1955 by renowned economist Milton Friedman, income-share agreements incentivize colleges to help students secure high-paying jobs since higher salaries result in faster repayment. For students, income-share agreements can be a safer bet. If graduates struggle to find work after graduation, those who earn below a certain threshold are not required to pay anything back until better employment is secured. And if graduates find a great job, payback is capped at a certain amount, rather than time, so that students don’t have to pay more than their education was worth.

One possible weakness to the program is that colleges, needing to hedge their financial exposure, may only offer these agreements in areas where high-paying jobs are highly likely, possibly discriminating against students who are less prepared academically and working toward less financially viable careers. Another negative is that default penalties are severe. For example, after nine months of non-payment, Purdue’s income-share agreement plan stipulates recovery can be up to 2.5 times the original amount the student received and includes seizure of tax refunds and making students responsible for legal fees.

Many Americans without access to alternatives, though, have taken on student loan debt that is beyond their ability to keep up with and struggle daily with balancing repayment and everyday household expenses.

“I like how these plans encourage colleges to help students find good-paying jobs,” said Knickerbocker. “But I also see that, in a way, these agreements are much like traditional loans but without federally available options, such as IDRs. Our company helps borrowers apply to enroll in IDRs which can help them avoid default, even ending in forgiveness in 20 or 25 years of enrollment.”

About Ameritech Financial

Ameritech Financial is a private company located in Rohnert Park, California. Ameritech Financial has already helped thousands of consumers with financial analysis and student loan document preparation to apply for federal student loan repayment programs offered through the Department of Education.

Each Ameritech Financial telephone representative has received the Certified Student Loan Professional certification through the International Association of Professional Debt Arbitrators (IAPDA).

Ameritech Financial prides itself on its exceptional customer service.

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To learn more about Ameritech Financial, please contact:

Ameritech Financial
5789 State Farm Drive #265
Rohnert Park, CA 94928

Source: Ameritech Financial

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