Orrick has been working with Purdue University and the Purdue Research Foundation on an innovative financing program launching this fall semester to help undergraduates pay for their education. Our team has given Purdue advice on novel finance and tax-related questions involving Purdue’s “Back a Boiler” program, which uses income-sharing agreements (ISAs) instead of traditional student loans. Purdue is “the first American university to officially embrace the concept” according to The New York Times, which featured the program this past spring.
Students will receive money to cover tuition and expenses in exchange for making payments after they have graduated and secured employment. The terms are based on each student’s major and the projected salary in his or her field. Different from a grant or traditional student loan, there is no principal balance or interest, and payments can adjust with a student’s income throughout the term of the contract. When the repayment term ends, so too does the student’s obligation, regardless of whether the student has paid back the full amount. This program could be a game-changer, proponents tell the Times, by helping to “ease the often crushing debt many American college students face after graduation.”
The engagement was referred to us by our client 13th Avenue Funding, which has also been advising Purdue University on the program (and, whose CEO, Robert Whelan Jr., is quoted in the Times article).