Student loan debt makes up a large percentage of the national debt. The student loan portfolio currently equals more than $1.75 trillion spread over 43 million borrowers, as of 2022. These loans compound and gain interest over time, making them impossible to pay back if there was a change in financial circumstances. Students want more tuition options, and the offerings of Income Share Agreements (ISAs) are considerable compared to traditional student loans. This increasing visibility and popularity of ISAs have been met with confusion and uncertainty.
What are ISAs?
An ISA is an agreement to receive funding in exchange for a payment over a fixed period of time. These payments are a percentage of your post-graduation income, and the payments adjust according to your salary. The upside to these agreements is that payments are dependent on the student’s success. If a student’s earnings are high, they will owe a high payment and if the student’s earnings are low, they may not owe a payment during that pay period.
Protections in Place
While ISAs have many benefits, some of their more notable advantages over traditional loans are the payment cap, repayment window, and minimum income threshold. With Mia Share, the repayment terms and cap are clearly stated in your contract. Prior to signing the contract, students are informed of the terms and conditions of the agreement. The payment cap refers to the maximum amount a student will repay, they will never have to pay more than the cap stated. The payment window is the maximum length of time or monthly payments required to fulfill an ISA.
The minimum income threshold is set by the institution and clearly states the minimum earnings necessary to start making payments towards your ISA. This gives students a headstart on finding a suitable job prior to making payments. If they fall under the minimum income threshold, a payment does not have to be made during that pay period.
Potential to Expand Access and Human Capital
ISAs hold great potential for expanding affordability and equity in post-secondary education. New legislation on these agreements calls for the same protections used on existing federal consumer credit guidelines. Supporters of ISAs want to see the continued expansion of ISAs to demonstrate the power it holds toward educational accessibility. To increase human capital, through the development of education and workforce training, it is crucial to promote high-quality and affordable post-secondary education.
A valuable alternative to private student loans has been long overdue in the US. Traditional private student loans have caused too much debt and stress in the lives of those with them. If you have questions regarding ISAs and the implementation of this tuition solution at your institution, reach out to Mia Share and change the lives of future students to come!