A Debt-Free Alternative to Student Loans

With Americans owing more than $1.3 trillion in federal student-loan debt, some places are offering students an alternative: Pay us nothing up front, but give us a percentage of your future income. The government should encourage the spread of this innovation -- with regulations that limit its risks.

Similar to student loans, income-share agreements require students who receive financial aid to make scheduled payments after they leave school. But unlike traditional loan recipients, these former students don't pay interest and aren't locked into servicing debt indefinitely. Instead, they have agreed to pay lenders a share of their future earnings over a fixed period, with the exact percentage dependent on their major, profession and starting salary.