Investment firm offers novel income-sharing approach to funding students' education

Mark Lowey
September 4, 2019

A novel capital investment firm co-founded by a University of Calgary professor finances post-secondary students in the same way that startup companies are provided equity.

Lumni, a for-profit fund management corporation, funds a portion of students’ tuition costs in return for a share of their future earnings. The company has provided education funding to more than 10,000 higher education students, mostly in Latin America.

Investors have put more than $50 million into Lumni funds since the company was founded in 2002, co-founder and head of R&D Dr. Miguel Palacios, PhD, assistant professor of finance at UCalgary’s Haskayne School of Business, told the Calgary Herald.

Successful applicants sign an “income share agreement,” according to the company’s website. Each contract is unique, but typically a student would agree to pay 10% of their post-education income for a fixed term – usually five to seven years.

Lumni is not offering contracts in Canada yet, but Palacios says he has heard from people interested in trying the idea here. With Canadian post-secondary students accumulating debt at an “alarming rate” and the risk of student loan defaults rising, income share agreements have potential here, observers say.

Lumni has caveats that allow high-earning participants to get out of their obligations sooner. But this means people who make less have to pay a little bit more, ensuring investors a certain return on their investment.

On average, a student obtaining funding from Lumni will typically pay more in the long run than someone who gets a student loan, said Felipe Vergara, co-founder and CEO. However, unlike with student loans, if any student finds himself or herself unemployed, he or she isn’t facing a hefty loan payment at the end of each month.

Some of Lumni’s funds are created philanthropically, with an aim to make a social impact while preserving capital. Other funds are created for investors looking for a good return. Some have returns as high as 8%, Vergara said.


Correction: A previous version of this story included a headline that incorrectly referred to Lumni as a "Calgary firm." In fact, Lumni was co-founded by a University of Calgary professor but has offices elsewhere. 

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