Just under 900 students attend the private college in Olathe, Kansas, and three-quarters of them borrow to pay for their education. According to Tarquin Nemec, almost half of those who live in Maine and take out a student loan also take out a second loan from Maine lender.

Lyon College students have taken an Honor Pledge every year for almost three decades, promising not to cheat or plagiarize. This year, the institution is making a promise to students: if you enroll here, we’ll help you pay off your student debt in the future.

The Lyon Pledge, a debt repayment help program created by tiny liberal arts institutions in Batesville, Arkansas, would give graduates who don’t obtain a job with a respectable wage a check to cover their student loans.

“Cost and debt concerns may be a barrier for students,” says Matt Crisman, the college’s executive vice president. “We were searching for a means to help kids and their families afford a liberal arts education in this region,” said the organization.

Lyon joins a group of over 200 universities throughout the nation that assists students in repaying their debt after graduation. Many institutions are taking a more proactive role to try to limit the burden of student debt, whether by increasing grants to make debt-free degrees a reality or by policies that make borrowing less risky, such as these loan repayment programs, in the face of growing apprehension about the reliance on loans to pay for college.

Consider these a (limited) money-back guarantee for college: If you borrow (then graduate and have a job), you’ll receive help paying down your student loans if your income is less than a particular amount, usually about $45,000.

Lyon collaborated with Ardeo Education Solutions, an Illinois-based firm that conducts similar loan repayment aid programs, often referred to as LRAPs, throughout the nation to make its guarantee. Ardeo charges colleges a fee, usually about $1,000 per borrower, while the programs are free for students.

“Some students are just concerned about student debt,” says Peter Samuelson, creator of Ardeo. “That’s where LRAPs are most effective.”

What are debt repayment help programs, and how do they work?

Many of Ardeo’s around 180 college customers only provide the debt payback guarantee to specific categories of students, frequently based on academic areas or demographic groups they’re attempting to attract. Around 15% of lenders will provide it to any student who takes out a loan.

More than four out of ten Lyon College students qualify for federal grants, and virtually every student gets a college scholarship to help defray the cost of tuition. Despite this, 70% of students take out loans, borrowing an average of $25,300 (excluding private and parent loans).

There’s a sliding scale to qualify for assistance after graduation. Graduates who make less than $20,000 will have their full tuition paid. Following that, payments fall until reaching $44,000. According to official data, a recent Lyon graduate is between $25,000 and $30,000.

The schemes function like an insurance pool: a college pays for the borrowers it wants to be covered, and Ardeo can afford to pay out for those who need it years later since not everyone will need it. According to Ardeo’s calculations, between 25% and 35% of borrowers will fulfill the income requirements for assistance in any given year among its customers. So long as a graduate’s wage stays below the earnings limit, there is no limit on how long they may get assistance.

Qualifying graduates must pay their debts every month and then submit evidence of payment to Ardeo for quarterly reimbursement cheques. The guarantee covers federal student loans, parent PLUS loans, and private loans.

LRAPs have been around since the 1980s, when they were first introduced to law schools, which are still quite popular. At the undergraduate level, however, the offer is considerably newer. Since 2009, Tufts University has established a donor-funded LRAP that gives around $475,000 each year to graduates who apply.

The majority of undergraduate LRAPs are now offered via Ardeo, founded in 2008. While Ardeo has thus far only worked with tiny Christian universities (typically with less than 1,000 students), it has just signed on its first public college, the University of Wisconsin-Platteville, and Butler University in Indianapolis, which has a student body of roughly 5,000.

Colleges use LRAPs to attract students.

Ardeo supports LRAPs as a safety net for students and an enrollment tool for institutions, as well as a marketing opportunity to entice new candidates or persuade those who have been admitted but have not yet enrolled. According to internal research conducted by Ruffalo Noel Levitz, an enrollment consulting business, 16 percent of students at eight Ardeo-partnered colleges would not have enrolled if the LRAP offer had not been made.

The poll findings at MidAmerica Nazarene University (MNU) are much better. MNU would not have been affordable for them if they hadn’t been able to take advantage of the Pioneer Pledge, the university’s debt repayment help program, according to university polls.

Starting next year, when the guarantee will cover first-year students through seniors, the university will invest roughly $300,000 to provide students who borrow some assurance that they would be able to make future payments.

“We want to safeguard kids who don’t have as much earning potential as others or who pick lower-paying employment because it’s what they want to do,” Whipple adds. He says that the institution wants to send graduates out into the world to do good and that student debt should not get in the way of that.

Abigail Skofield’s family attended Huntingdon College in Indiana because of a debt payback aid program. Although the private Christian institution was more costly than the public university where she spent a year, it was a better match for her.

She knew she wouldn’t be able to make a lot of money with the topics she wanted to study, so the expense would have been a deal-breaker if she didn’t have the assurance. She finished in 2017 with a bachelor’s degree in cross-cultural and religious studies, a minor in teaching English as a second language, and a $90,000 debt.

Skofield, now 26, has used her Ardeo reimbursement checks to pay for a range of costs, but she’s primarily utilized the money to pay extra toward her loans to shorten her payback period.

She adds, “It’s made a significant impact.” Her debt currently totals about $50,000.

Should universities spend more money on debt repayment help or scholarships?

Ardeo bases its college fees on an actuarial formula that considers the school’s central mix and student borrowing and results. Annual rates for students vary from around $600 to $2,200 throughout the company’s clientele.

Colleges sometimes complain that their programs are costly. Ardeo, on the other hand, intends to strike a balance between keeping the cost reasonable for universities and charging enough to sustain meaningful advantages for students who need them, according to Samuelson.

Pacific Lutheran University officials evaluate every year whether the money spent on the college’s LRAP, available to most entering students since 2018, would be better spent on scholarships.

Officials at the Tacoma, Washington school have concluded that the debt repayment aid program is the best option thus far.

Mike Frechette, dean of enrollment management and student financial services, says, “We believe this is something that might assist them more financially in the long term, rather than a tiny stipend while enrolled.”

If the institution used the money set aside for the LRAP to fund scholarships, each student would get an extra $1,000 award.

He adds, “It’s nothing to sneeze at.” “However, it will not remove their need to borrow.”

When Molly House, a sophomore at Pacific Lutheran, was filling out her financial aid papers before her first year, she discovered about the school’s LRAP. She credits her parents for having enough college money to finance her first two years without the need for student loans. However, she would have to borrow money for the last two years of her education.

She had no idea what she wanted to do when she began college. After graduating with a double degree in philosophy and gender, sexuality, and race studies, she hopes to attend law school. On the other hand, the guarantee was great for someone like her, who didn’t know where she’d work or how much she’d make after graduation.

“Knowing it was there gave me freedom when I didn’t know what I wanted to pursue,” she explains.

LRAPs are a kind of risk management plan.

The programs do, however, have limitations. For starters, repayment help is only available if you’ve graduated, which up to 40% of students nationwide fail to accomplish within six years. Student debt scholars have long emphasized that students who drop out of college experience the most severe impacts of unmanageable debt before completing their degree.

Even if you do graduate, you will only be eligible for assistance if you earn less than the amount specified by your institution. If you make more than that, you leave the program, and if you lose your job or accept a lower-paying job later, you are no longer protected by the program. Furthermore, there is no cost-of-living adjustment, so if you go to college in a less costly place but transfer to a more expensive city, you may soon lose your guarantee.

However, according to Ethan Pollack, director of Financing the Future, an initiative of the nonprofit Jobs for the Future that focuses on innovative ways of paying for postsecondary education, loan repayment assistance programs are still a promising effort at mitigating the risk students face when they borrow.

“If you were asking someone to spend five or six figures in anything else,” Pollack adds, “you’d purchase insurance for it.” The exception is college.

“If it doesn’t work out, you’re left with this responsibility,” he explains.

Bri Gallagher found college to be beneficial. She picked Spring Arbor University, a small liberal arts institution in Michigan, over a public school in part because the loan guarantee gave her and her family the confidence to borrow more money to attend her first choice school.

She majored in English, acquired significant contacts, completed a couple of internships, and ultimately landed her ideal job as a book editor. She’s not sure whether it would have been feasible if it hadn’t been for the LRAP.

Gallagher, who is now 26 and works as an acquisitions editor at Harper Collins, borrowed $80,000 and credited the loan aid with saving her life while doing low-wage jobs immediately out of college. It enabled her to relocate to Colorado and support herself while working as a copy editor for a non-profit.

She took advantage of the program for a year and a half until her income increased too much for her to qualify, and she paid off the rest of her debts in June of this year. She claims she wouldn’t have been able to accept the job in Colorado if she hadn’t had the aid, and she may not have obtained the position she has today if she hadn’t received the support.

“Having that money allowed me to continue living out there and working toward my goal.”

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