Back a Boiler, Purdue's controversial income share agreement program, suspended
Back a Boiler, Purdue University’s controversial income share agreement program, has been paused.
A message posted quietly to the university’s website said the program is unavailable for the 2022-23 school year. The program, championed by outgoing university president Mitch Daniels, recently came under fire for practices that an advocacy group alleged were illegal.
In the agreements, students pledge a share of their future income for a set length of time. They're controversial for what, to many borrowers, amounts to extraordinarily high interest rates and astronomical pre-payment penalties. Many borrowers end up paying back more than 2.5 times what they originally borrowed.
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Earlier this year, the Student Borrower Protection Center sent a letter to the U.S. Department of Education and the Consumer Financial Protection Bureau, asking them to intervene.
Speaking to IndyStar last month, Ben Kaufman, director of research and investigations with the Student Borrower Protection Center, said recent communications from both agencies make it clear that what Purdue’s doing with the Back a Boiler program is wrong.
“We lay out we think pretty clearly why this is risky for people, why it violates the law and why (the education department) can and needs to use the very robust tools already at its disposal to rein in this practice,” Kaufman said, “and basically put on the table everything up to Purdue losing access to Title IV funds.”
Title IV is a part of the Higher Education Act that allows students access to federal financial aid. Losing access to it would be “catastrophic,” Kaufman said.
It's unclear when, exactly, the program was suspended. Purdue did not immediately respond to a request for comment Friday but previously denied any allegations of wrongdoing.
It was the first major research university in the nation during the modern era to offer an income share agreement (ISA) program — something that had been largely relegated to non-degree-granting entities, such as computer coding boot camps.
While Purdue has marketed the Back a Boiler program as an alternative to private student loans, the CFPB has said that income share agreements are private student loans. The federal agency responsible for consumer protection in the financial sector recently cracked down on another ISA provider for falsely representing that its ISAs are not loans and do not create debt.
That prompted the U.S. Department of Education to remind the nation’s colleges and universities about the rules around how they may interact with private student loan and credit products – rules that the Student Borrower Protection Center say make what Purdue is doing illegal.
Last month, five Purdue graduates and their families spoke to IndyStar and said they felt duped by the program and the way Purdue marketed it. They said they didn’t know that the investors were hedge funds and other institutional investors. Families said they were told it was Purdue alumni, wanting to give back and help out the next generation of Boilermakers.
The program, which launched in 2016, was available to students starting in their sophomore year. According to the university's website, more than 1,600 Back a Boiler contracts have been signed. Purdue enrolls roughly 10,000 new students each year and serves nearly 50,000 students annually.
Call IndyStar education reporter Arika Herron at 317-201-5620 or email her at Arika.Herron@indystar.com. Follow her on Twitter: @ArikaHerron.
This article originally appeared on Indianapolis Star: Back a Boiler, controversial Purdue income share agreement, suspended
