Student loan debt in the United States is estimated at $1.5 trillion. What if, instead of taking out a loan, you agreed to pay a percentage of your future income in exchange for someone else paying for your education up front?
It’s called an income share agreement, and the concept could soon be used in San Diego to get more people into tech jobs.
“We frankly have a talent shortage in our region,” said Andy Hall, chief operating officer of the San Diego Workforce Partnership. “At the same time, I believe that we have a very large opportunity gap for many people in low-income neighborhoods, many people of color, who don’t have the same access to opportunities early on to step into some of these jobs.”
Beginning in July, the partnership plans to pay for 100 San Diegans to earn certificates in Java programming, web design, data analytics and business intelligence through UC San Diego Extension. After the nine-month program, the students would repay 3 to 5 percent of their income for a set number of years — and that’s only if they earn more than $45,000 a year when they’re done with their training.
“If the education doesn’t work for me and I end up making no wages or low wages because I don’t get a job or there’s a recession, I end up paying zero,” Hall said. “If the education does really well for me, I end up paying a lot more. So it’s linking the cost of education for the student with the value.”
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Repayment is capped at 106 percent of the training cost — about what you’d pay after interest for a federal student loan, Hall said. If the terms pencil out at less than the cost of training, that’s OK.
Unlike with private loans, the partnership is also keeping the fund open to students with criminal records or bad credit.
“We’re really looking for people who might have some technical competency and always have been interested in technology, but because of life circumstances and financing, maybe never took that traditional trajectory of high school, to a four-year college, to a tech career,” Hall said.
The program would be regulated by the California Department of Business Oversight. Hall said students are further protected because their risk is pooled. Rather than deal with benefactors one-to-one, students will get assistance from a fund with multiple donors.
The partnership has raised more than a million dollars and hopes to have $5 million by the summer.
