Young Black woman looking at papers with postsecondary financing options

Students pursuing education or training beyond high school can find it challenging to sort out options for paying for their programs. Often, students and their families take on debt. For many borrowers, repaying a loan can be a strain on an already tight budget. Students’ educational challenges were further complicated by the COVID-19 pandemic.   

To explore these issues, the Fed gathered experts in 2021 to discuss improvements and developments in paying for postsecondary education. Following are key takeaways from six topics covered at the event. Watch the videos below to experience the conference on demand.  

Benefits and risks of income-share agreements  

Income-share agreements (ISAs) are contracts between students and financers. Students receive money to pay tuition in exchange for a percentage of the student’s future income.  

Unlike a typical loan, the amount students are obligated to repay depends on their earnings after graduation. This setup can provide students with repayment flexibility.  

ISA supporters believe the agreements can be particularly useful for students who are not well-served by the existing federal financial aid system. Those enrolled in workforce training programs are an example. 

However, some argue that ISAs resemble loans but currently lack the same consumer protections. As a result, students may not be aware of ISA costs. Such information would be disclosed as an annual percentage rate if it were considered a loan. 


Innovations & Developments in Financing Postsecondary Education & Training Conference: Income-Share Agreements panel discussion: Experts discuss the benefits and risks of income-share agreements during this conference hosted by the Division of Consumer & Community Affairs and the Federal Reserve Board of Governors, March 24, 2021 (video, 39:56). Open transcript in new window.

Work experience and apprenticeship programs

Incorporating paid internships and apprenticeships into a student’s education can help  

  • prepare students for workforce success  
  • reduce the amount of debt the student must borrow

California’s Cajon Valley Union School District helps students prepare for careers via its World of Work program. The program shows students different career options, builds both hard and soft skills, and connects students with professionals in their fields of interest. After high school, “work colleges” incorporate paid internships into their degree requirements.  

Combined with scholarships, grants, or federal work-study income, part-time work can significantly reduce borrowing. Some employers specifically engage students with company tours, paid internships, job rotations, and tuition assistance. 


Innovations and Developments in Financing Postsecondary Education and Training Conference: Work Experience and Apprenticeship Programs: During this conference hosted by the Division of Consumer & Community Affairs and the Federal Reserve Board of Governors, panelists discuss work experience and apprenticeship programs, March 24, 2021 (video, 1:01:25).Open transcript in new window.

Impact of the pandemic on college education 

The COVID-19 pandemic has had an immense impact on higher education students, instructors, and schools. However, many of postsecondary education’s challenges long predate the pandemic. For example, college completion rates remain disappointingly low, particularly for low-income students. Additionally, many schools are lacking technology. This was especially evident when classes shifted to virtual environments.  

The pandemic “shock[ed] us into realizing that we need new designs, new systems, [and] new investment models,” said Arizona State University president Michael Crow


Innovations and Developments in Financing Postsecondary Education and Training Conference: In this conference hosted by the Division of Consumer & Community Affairs and the Federal Reserve Board of Governors, Arizona State University president Michael Crow discusses how the university adjusted to the pandemic, March 24, 2021 (video, 25:13). Open transcript in new window.

Other panelists added that the pandemic reduced funding for higher education. Declines in enrollment during the pandemic, particularly among minority students, raised concerns about a missing generation of college students. Schools serving financially vulnerable populations faced challenges shifting to virtual learning. Lower-income students often lack access to broadband internet and computers. As classes shift back to in-person environments, pandemic-related impacts will linger. Students may continue to struggle with compromised health and food and housing insecurity. 


Innovations and Developments in Financing Postsecondary Education and Training Conference: Perspectives on Postsecondary Education During and After the Pandemic: During this conference hosted by the Division of Consumer & Community Affairs and the Federal Reserve Board of Governors, panelists discuss the impact of the pandemic on students, community colleges, and state budgets, March, 2021 (video, 1:12:38). Open transcript in new window.

Reauthorization of the Higher Education Act  

The reauthorization of the Higher Education Act will have a significant impact on higher education. Among other things, the law authorizes the programs that provide loans and grants to postsecondary students. A lot has changed about higher education since the law was last reauthorized in 2008.

  • Inflation-adjusted tuition and fees have increased 22 percent. 
  • Outstanding student loan balances have nearly tripled. 
  • For-profit college enrollment has gone through a boom-and-bust cycle.  

Momentum was building for reauthorizing the act in 2019. However, the pandemic shifted the focus to relief efforts. Federal student loan payments were suspended and programs for emergency grant aid for students and schools were set up.

Still, the pandemic relief laws made several notable changes to current policy. These changes include:

  • categorizing student aid from the US Department of Defense as federal education dollars at for-profit colleges, which closed the “90/10 loophole” that had for-profit colleges aggressively recruiting veterans.
  • increasing the maximum Federal Pell Grant award. 
  • delaying development of a new servicing system for federal student loans.  

The current administration has also taken executive actions. Students can more easily claim disability discharges of federal student loans. 


Innovations and Developments in Financing Postsecondary Education and Training Conference: Developments in the Reauthorization of the Higher Education Act: During this conference hosted by the Division of Consumer & Community Affairs and the Federal Reserve Board of Governors, New America’s Wesley Whistle discusses developments in the reauthorization of the Higher Education Act, April 7, 2021 (video, 28:31). Open transcript in new window.

Establishing a matched-savings program in Arizona  

Matched savings programs help low-income individuals save by matching contributions they make to a savings account. These programs typically aim to help savers meet goals such as buying a home, starting a business, or attending college. Earn to Learn is an Arizona-based program that helps low-income students pay for college. The program matches savings on an 8:1 basis. Qualifying students must save $500 each academic year. In return, $4,000 is matched. As a result, students have $4,500 each year to apply to tuition, books, housing, and other costs.

The program began with partnerships with several four-year public universities in Arizona. It then expanded to include several community colleges and two-year and vocational programs. Notably, the completion rate for students in the Earn to Learn program is on track to reach 85 percent. That is significantly higher than the average completion rate for students. In addition, the vast majority complete their programs with minimal student loan debt.

Earn to Learn’s CEO Kate Hoffman highlighted one of the program’s significant benefits. It teaches “core financial skills and knowledge that ultimately translate into changing behavior . . . break[ing] the cycle of multigenerational poverty.”

Panelists praised the Earn to Learn model and the legislation that would create a national pilot based on it. They noted that engaging students in saving for their education prepares them to persist and complete their programs. Panelists also highlighted the program’s benefits for improving access to higher education for women and students of color and helping to develop a qualified workforce.


Innovations and Developments in Financing Postsecondary Education and Training Conference: Establishing a Matched Savings Program in Arizona: During this conference hosted by the Division of Consumer & Community Affairs and the Federal Reserve Board of Governors, panelists discuss the origins and accomplishments of a matched-savings program in Arizona, April 7, 2021 (video, 1:11:51). Open transcript in new window.

The role of federal support for student aid

The conference’s final session focused on federal actions and priorities for postsecondary education.

Julie Morgan from the Department of Education noted that state disinvestment in public higher education has shifted much of the cost onto students and families. At the same time, stagnant wages and inequities in the labor market have required workers to obtain higher credentials to earn higher-paying jobs. In response, the administration proposed dramatically expanding Federal Pell Grants and making public colleges tuition-free for families earning less than $125,000 per year.

Panelists suggested the following additional policy changes:

  • Simplifying the repayment options for federal student loans to help borrowers choose options that are best for them.
  • Increasing grant aid and state investments in higher education to reduce student debt and help close racial and economic gaps in college enrollment and graduation.
  • Forgiving up to $50,000 of student loan debt per borrower to assist struggling borrowers, who are disproportionately people of color.

This summary captures only a small share of the many insights and perspectives of the conference’s discussions. Contact PJ Tabit with any questions or for more information. 

Views expressed during the conference are those of the speakers and do not represent the position of the Federal Reserve Board or Federal Reserve System. 

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