An interest-free loan program funded by Indiana taxpayers has dished out nearly $1 million to students seeking technical training, although some advocates caution that such lending plans could be misleading to students.
The Accelerate Indiana program launched last fall after state lawmakers rushed to spend the state’s surplus of federal COVID-19 relief money during the 2021 session. The General Assembly wrote in $75 million for the revolving fund without prior public discussion, and gave little direction to INvestEd — the state’s college loan agency overseeing the program.
The amount was more than three times what the legislature appropriated to Republican Gov. Eric Holcomb’s Next Level Jobs program two years ago.
Where the money is going
Accelerate Indiana has so far disbursed $888,155 for 176 students to use for short-term training at qualified education programs around the state, said Bill Wozniak, INvestEd’s vice president of marketing. Another $138,755 is scheduled to be disbursed once other approved courses and programs officially begin.
An additional $193,314 has been used for startup and operational purposes, Wozniak said.
The loan dollars are intended to help Hoosiers complete worker training programs in high-tech fields like health sciences, logistics, construction and IT. New training programs are routinely reviewed and approved, Wozniak said.
Already, Accelerate Indiana has approved 51 programs offered by seven training providers, including Ivy Tech Community College and Vincennes University. The average cost for 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 following program completion, Wozniak said.
Another 21 students are scheduled to reach the six-month, post-completion mark later this month.
How the loan programs works
Lawmakers said their goal is to have a revolving fund that will replenish as workers make more money, pay more in state income tax, and have that financial boon reinvested in the fund.
Workers can get student loans of up to $7,500 to earn short-term certificates and other credentials. The job training programs must be six months or less. After training, if a participant’s income doesn’t increase — or stays below $42,500 annually — they won’t have to pay the money back.
Tech entrepreneur Scott Jones, who years ago made millions from selling an early voicemail system and has since started several other companies, largely takes 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, although lawmakers instead only used his fund as a model to create the state’s own fund. Jones has since been critical of the state-run program, saying parameters set by INvestEd are “prohibitive,” 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 to attend his Eleven Fifty Academy, a separate Indianapolis-based organization that trains students for tech-oriented careers. Numerous programs offered by the Eleven Fifty Academy are also approved by Accelerate Indiana, meaning students who go there qualify for the state-sponsored interest-free loans.
Still, Jones and state officials have touted Accelerate Indiana as a way to enable more Hoosiers to achieve special certifications, helping them qualify for more skills-based jobs in the state’s high-demand career fields.
Indiana’s overall education attainment has yet to meet Gov. Eric Holcomb’s goal of having at least 60% of adult Hoosiers with a quality degree or credential beyond high school by 2025. Currently, that number is just over 48%.
But some critics raised concerns that Accelerate Indiana mimics Purdue’s “predatory” income-share agreement scheme. The university announced in June that it had paused its controversial Back a Boiler program that some say binds students in expensive, deceitful contracts.
Purdue describes its income-share 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 on the amount borrowed through an ISA.
The Student Borrower Protection Center (SBPC), which has long been critical of the West Lafayette university’s ISA program, sent a letter in March to the Department of Education and the Consumer Financial Protection, arguing that the university 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 were not made clear at signing.
Ben Kaufman, director of research and investigations at the SPBC, said new ISA programs are now “cropping up all across the country,” largely the result of federal COVID-19 relief dollars.
“What we’re always concerned with is, ‘What is the nature of the programs that are suddenly getting state money? And what are the catches, basically, for the students who take the money?” Kaufman said. “What we’re seeing in Indiana, and in a number of states, is that you end up with a situation where state agencies suddenly have a big pot of money that a lot of people want to get a hand in, and the state agencies then have to decide who gets access to it.”
Oftentimes, ISAs are used to support “low quality and fraudulent training 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 committee closely vets training providers and courses, including with the help of the Indiana Department of Workforce Development. Some programs submitted for Accelerate Indiana approval have been rejected, for example, although providers can re-apply if they get their proposals up to par.
The INvestEd spokesperson also emphasized that a “key feature of the zero-interest, no-fee Accelerate Indiana 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-related issues and military service that do not extend the duration of the ISA, Wozniak said.
Further yet, Accelerate Indiana ISA includes a borrower protection in which the final 30% of the training program’s cost is only obligated after successful completion of the program.
“I think that workforce investment is really important. Full stop,” 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, not-for-profit news organization that covers state government, policy and elections.