A taxpayer-funded interest-free loan program in Indiana has handed out nearly $1 million to college students seeking a technical education, though some supporters warn such loan plans could be misleading for students. students.
The Accelerate Indiana program was launched last fall after state lawmakers rushed to spend the state’s excess federal COVID-19 relief money during the 2021 session. The General Assembly has paid $75 million for the revolving fund without prior public discussion and gave little direction to INvestEd – the state college loan agency that oversees the program.
The amount was more than three times the amount the legislature allocated to Republican Gov. Eric Holcomb’s Next Level Jobs program two years ago.
where does the money go
Accelerate Indiana has so far disbursed $888,155 for 176 students to be used for short-term training in qualified education programs statewide, said Bill Wozniak, vice president of marketing for InvestEd. Another $138,755 is expected to be disbursed once other approved courses and programs officially begin.
An additional $193,314 was used for start-up and operational purposes, Wozniak said.
The loan dollars are intended to help Hoosiers attend worker training programs in high-tech fields such as health sciences, logistics, construction and computer science. New training programs are regularly reviewed and approved, Wozniak said.
Already, Accelerate Indiana has approved 51 programs offered by seven training providers, including Ivy Tech Community College and the University of Vincennes. The average cost of each training program is $4,279.
Three students who used loans from the fund are now entering the repayment process after a six-month grace period that is allowed after the program ends, Wozniak said.
Another 21 students are expected to reach the six-month milestone after graduation later this month.
How loan programs work
Lawmakers said their goal was to have a revolving fund that would replenish as workers made more money, paid more state income tax, and reinvested that financial windfall into the fund.
Workers can get student loans of up to $7,500 to obtain short-term certificates and other credentials. Vocational training programs must be six months or less. After the training, if a participant’s income doesn’t increase — or stays below $42,500 a year — they won’t have to repay the money.
Tech entrepreneur Scott Jones, who made millions years ago selling an early voicemail system and has since launched several other businesses, takes much of the credit for the idea behind Accelerate Indiana.
He launched his own Career Accelerator Fund in 2019 as a nonprofit pilot program. He intended to turn it over to the state, though lawmakers instead used his fund only as a template for creating the state’s own fund. Jones has since criticized the state-run program, saying the parameters set by INvestEd are “prohibitively expensive” and that Accelerate Indiana’s student loan caps are too low. He did not respond to a request for comment from the Indiana Capital Chronicle.
Jones’ nonprofit now focuses on helping students attend its Eleven Fifty Academy, a separate Indianapolis-based organization that trains students for tech-focused careers. Many programs offered by Eleven Fifty Academy are also Accelerate Indiana-approved, which means students who attend are eligible for state-sponsored interest-free loans.
Still, Jones and state officials touted Accelerate Indiana as a way to allow more Hoosiers to earn special certifications, helping them qualify for more skill-based jobs in high-stakes career fields. state request.
Indiana’s overall educational attainment has yet to meet Gov. Eric Holcomb’s goal of having at least 60% of adult Hoosiers with a grade or diploma beyond high school by 2025 Currently, that number is just over 48%.
But some critics have raised concerns that Accelerate Indiana is mimicking Purdue’s “predatory” revenue-sharing agreement regime. The university announced in June that it had suspended its controversial Back a Boiler program, which some say ties students into expensive and deceptive contracts.
Purdue describes its revenue-sharing agreement as “an innovative new way to help make school more affordable for Purdue students” and “a potentially less expensive option” than traditional student loans, noting that interest does not accrue. not on the amount borrowed through an ISA.
The Student Borrower Protection Center (SBPC), which has long been critical of West Lafayette University’s ISA program, sent a letter in March to the Department of Education and Consumer Financial Protection, saying the university had violated the Higher Education Act by “co-branding private loan products with student lenders,” and called for an investigation.
The nonprofit advocacy organization said Purdue’s ISAs left students with high interest rates and prepayment penalties that weren’t specified when signing up.
Ben Kaufman, director of research and investigations at the SPBC, said new ISA programs are “now popping up all over the country,” thanks in large part to federal COVID-19 relief funds.
“What always concerns us is, ‘What is the nature of the programs that suddenly receive money from the state? And what are the pitfalls, basically, for students who take the money? Kaufman said. “What we’re seeing in Indiana, and a number of states, is you end up with a situation where state agencies suddenly have a large amount of money that a lot of people want to put the hand, and state agencies then decide who has access to it.
Often, ISAs are used to support “low quality and fraudulent boot camps,” Kaufman continued. It’s not until students complete the programs that they realize “how much more expensive the loan really is in the long run”.
Wozniak maintained that Accelerate Indiana’s mission is “to help Hoosiers keep student debt as low as possible.” An advisory board vets training providers and courses, including with help from the Indiana Department of Workforce Development. Some programs submitted for Accelerate Indiana’s approval have been rejected, for example, although vendors can reapply if they get their proposals up to snuff.
The InvestEd spokesperson also pointed out that a “key feature of Indiana’s Interest-Free, No-Fee Accelerate ISA” is the requirement that students are never required to repay more than the principal amount. received. There are also “multiple” forbearance protections, including economic hardship, health problems and military service that do not extend the duration of the ISA, Wozniak said.
Additionally, Accelerate Indiana ISA includes borrower protection in which the final 30% of the cost of the training program is incurred only after successful completion of the program.
“I think investing in the workforce is really important. Period,” Kaufman said. “But what you don’t want is to have these underfunded state agencies that now have the very important job of administering all this money like this.”
The Indiana Capital Chronicle is an independent, nonprofit news organization that covers state government, politics, and elections.