Come February 15, Zach Pelka and Connor Swofford will launch what they hope is a student loan industry disruptor at their alma mater, the Wharton School of Business at the University of Pennsylvania.

It's called "Paytronage," and it's a platform where college sophomores and juniors interested in income share agreement (ISA) plans can be matched with institutional investors looking to invest in students who meet investor criteria. Pelka said it taps the type of investors who are more interested in capitalizing on Elon Musk as an entrepreneur rather than on one of Elon Musk’s companies.

An income share agreement plan is an alternative to traditional student loans. It's a private student loan where investors put up capital to cover educational expenses and students agree to pay it back with a percentage of their income.

“Students have significantly more flexibility with a fixed debt to income structure, downside protection with 60 months of potential deferment (with no penalty), and a maximum payment amount--not to mention knowing exactly when they are going to be finished paying,” said Pelka.

Pelka said he didn’t think it made sense for professionals to pay off almost the same amount of student loan debt for careers that will lead to varying amounts of incomes in the future. So the Paytronage platform is based on students’ potential income earnings. If a student changes careers after the agreement is set, Pelka said he or she wouldn't be penalized for it.

"If an investment banker left and started a company, their ISA rate would remain at the same rate they originally signed on," said Pelka. "A contract can never be changed to hurt a student, regardless of the financial event."

The founders see Paytronage as their answer to the student debt crisis currently plaguing the nation. In 2014, reports surfaced that 44 million Americans had amassed more than $1.2 trillion in student loan debt; Student Loan Hero reported in January that that figure had risen to $1.48 trillion.

Though Pelka and Swofford hope to disrupt the post-secondary education space with Paytronage, they are entering a market that has already been carved out by some universities. Purdue University, along with its partners the Jain Family Institute and 13th Avenue Funding, received media attention in 2017 for its "Back a Boiler" ISA, which capped the payment period at 10 years with no interest. Purdue's program got close to 500 contracts with students who joined the program.

Yale University piloted a program in the 1970s. But critics said its policy required a cohort to pay back investors together, causing some members in the cohort to pay back more than others.

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