‘Back A Boiler’ Is Interesting Financial Alternative for Purdue University Students‘Back A Boiler’ Is Interesting Financial Alternative for Purdue University Students‘Back A Boiler’ Is Interesting Financial Alternative for Purdue University Students‘Back A Boiler’ Is Interesting Financial Alternative for Purdue University Students
  • Admissions Advisory Services
    • College Admissions Advising
    • Graduate/Professional School Admissions Advising
  • About
    • Meet Stuart Nachbar
    • Get Great Results!
    • Endorsements
  • Resources
    • Educated Quest College Profiles
    • Educated Quest College Insights
    • Educated Quest College Search Tips
    • Career Corner
  • Contact
    • Schedule a Free Consultation
✕

‘Back A Boiler’ Is Interesting Financial Alternative for Purdue University Students

Published by Stuart Nachbar at May 17, 2016
Categories
  • College Insights
  • School Profiles
Tags
  • back a boiler
  • back a boiler program
  • income share agreements
  • purdue university
  • student debt
  • student loans

About four years ago I visited Purdue University, a charter member of the Big Ten as well as one of the leading research universities in the United States, especially in the sciences and engineering. Last week, I read a USA Today story about an interesting approach to financial aid at Purdue called the “Back a Boiler” program.

Back a Boiler is a different way of covering, then repaying, the costs of a college education when there is a gap between need and financial aid.  Currently, the university is funding the program, though it hopes to attract private investment to grow the pool of money that would be available to lend.

Back a Boiler is neither a supplemental student loan such as Parent PLUS or a supplemental grant that does not need to be repaid. It is an Income Share Agreement where a Purdue junior or senior agrees to repay debt over nine years with an agreed-upon percentage of their income. The interest rate is tied to the student’s major and expected starting salary, the year the student entered into the agreement, and prior loans that the student has received. The agreement carries the same grace period as student loans. Repayment must begin six months after graduation.

There are advantages to the recent graduate. If s/he has not found a job within six months, then s/he pays nothing. Fortunately, Purdue graduates who are serious about going to work find work. Purdue has one of the best career development centers among US colleges and universities. Six years ago, recruiters who do entry-level hiring ranked it fourth in a Wall Street Journal survey, behind only Penn State, Texas A&M and the University of Illinois at Urbana-Champaign. Purdue also has one of the largest cooperative education programs in the country for business, engineering and technology students as well as one of the largest ROTC programs. More than 60 percent of Purdue undergraduate degrees granted in 2013 were in business, health sciences or science/technology/mathematics/engineering (STEM) subjects, according to College Results Online. It is fair to say that a Purdue student might be a “less risky” investment than students who attend many other colleges.

However, Back a Boiler does carry risks. It is a supplemental debt program, a debt beyond  a Federal Stafford Loan. From a distance, it makes Purdue appear to be a more affordable institution than other schools that would direct a family to ParentPLUS as a way to cover gaps between aid and need. However, home equity loans might offer lower interest rates to fulfill the same purpose. Further, the minimum amount that a student may borrow is $5,000. Imagine being a graduate with at least $37,000 in debt, the amounts borrowed through Back a Boiler as well as the amount borrowed in Stafford Loans.

A better strategy might be to find a school that will leave your family with a smaller gap to close. Purdue has actually done a good job of keeping the gap as small as possible. According to the university’s 2015-16 Common Data Set, Purdue met, on average, 86 percent of need for the full undergraduate student body. Twelve percent of the undergraduate student body received merit scholarships that averaged just under $6,600 during the 2014-15 academic year. A merit scholarship recipient from Indiana would have paid less than $6,500 in tuition and fees to attend Purdue. S/he could have done far worse cost wise. A non-resident who qualified for the aid–about a third of Purdue students come from outside Indiana–would have done okay as well. Their tuition and fees would have been less than $22,000 before other aid kicked in. And it would have been the same the next year. Purdue did not increase tuition and fees between the 2014-15 and 2015-16 academic years. However, the university has not graduated its students at rates as high as families might like. Purdue’s most recently reported four-year graduation rate was 47 percent for students who entered in 2009.

Purdue can initiate Back a Boiler because it is a unique university. Given the number of options that Purdue offers to help students finance their education as well as cooperative education and ROTC, the Back a Boiler program can succeed as long as the supplemental debts as kept to a minimum. It costs approximately $325 a month to repay $27,000 in Stafford Loan debt. This is the maximum that a liberal arts major should ever borrow, especially if s/he plans on further education. But that does not mean that an accountant, computer programmer or engineer should take on much more debt. It would keep these graduates from saving for their future as well.

Would other colleges try this? Its doubtful that many will follow Purdue’s example, unless they are similar to Purdue.

Purdue has many pre-professional majors as well as clear strengths in math and the sciences. It is also a very well endowed university with a large alumni base. Only 171 colleges can boast endowments of over $500 million, according to the National Association of College and University Business Officers; only 94 have endowments of $1 billion or more, Purdue being one of them. 

Among the well-endowed public colleges Georgia Tech would be best positioned to follow Purdue’s lead in offering an Income Share Agreement similar to Back a Boiler. Georgia Tech’s academic and career development strengths are similar to Purdue’s. The Atlanta school also has half as many students to assist while Georgia is one of the more generous states when it comes to merit-based financial aid. “Back a ‘Jacket” also has a nice ring to it.

 

 

Share
Tweet
Pin
Share
0 Shares

Sharing is caring!

  • Share
  • Tweet
  • LinkedIn
  • Email

Warning: Trying to access array offset on value of type null in /homepages/12/d437241059/htdocs/EducatedQuest/v6/wp-content/themes/betheme-child/includes/content-single.php on line 277
Stuart Nachbar
Stuart Nachbar

Related posts

SARASOTA, FL - November 13, 2015 -- College Hall and Cook Hall along the Sarasota Bay at New College of Florida (PHOTO / CHIP LITHERLAND)

February 20, 2023

How Could Change Happen at New College of Florida?


Read more
February 13, 2023

Who Should Major in Computer Science?


Read more
February 8, 2023

Original Research and the Liberal Arts


Read more

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

✕

STUART NACHBAR: ADMISSIONS ADVISOR AND EDUCATION WRITER

Hello and welcome to Educated Quest! With in-depth research, coaching and essay writing assistance, Stuart Nachbar will help you make the best-informed decisions about a college education-and beyond!

GET UPDATES FROM STUART






    Your Name (required)

    Your Email (required)

    © 2023 Educated Quest. All Rights Reserved. Site designed by Third Eye Industries