The Student Debt Crisis

 

And Mia Share's Solution

Image by Tim Gouw

Student loans induce stress. 

You don't need to read the news to be familiar with the student debt crisis, as many people have seen their loved ones crumble under the weight of student debt obligations. People shouldn't have to choose between living with staggering debt for decades or lowering their future earning potential by choosing not to go to college. Neither of these options is fair, and, shockingly, high school graduates are being requested to decide between them. 

Below are some statistics about high school students' choice to pursue high education: 

  • A shocking 70% of prospective students eliminated various colleges as a result of tuition costs alone.

  • Even students who decide to borrow are ill-equipped to understand the ramifications of taking on student loans — 1 out of 7 students believe that they possess the needed skills, information, and resources to pay back their debt. 

  • In recent years, the number of students willing to take on student debt fell by nearly 20%.

These problems are only further exacerbated once students arrive at college:

  • Most students from a low-income background cannot go to the colleges they were accepted to due to insufficient funds.

  • Worse than that, 2 out of 3 student debt holders report chronic anxiety due to the stress that they experience about paying off student loans.

  • Many students who take out loans have to work during their education; however, students who work 15 hours a week or more average poor grades. This forces students into a lose-lose situation where they can either spend their free time working to pay for their education but not being able to study or studying full time and achieving high grades but being stuck with student debt later on.

  • Over half of the people who decide to take student loans are reported to “run out of money” at least three times a year.

  • Finally, 40% of all bachelor’s degrees over the last ten years recipients say they thought about leaving their school due to stress around paying for college.

These figures paint a painfully obvious narrative: student loans are failing to support people on their path to higher education. It is unclear why such an archaic, blunt tool to fund higher education is still so widespread. 

 

When starting a company, instead of taking an onerous loan, most people would prefer to sell a stake of ownership to a trusted investor. Unlike a bank that prioritizes repayment over the health of the company, investors want what is best for the company. How does this relate to the student debt crisis? This is where Income Share Agreements (ISAs) come into place. Students that have an ISA agree to pay back a fixed proportion of their income for a set amount of time or until they reach the pre-specified income cap. Unlike a bank, ISA providers care about students being successful in their career endeavors. 

Reduce Students' risk of pursuing educat

ISAs provide strong protection against unfortunate circumstances.

The chart above shows how the flexibility of ISA payments provides insurance when students earn less than expected, while also depicting the capped upside so that even the strongest students do not pay significantly more than under a student loan. It is crucial to note that under this example ISA students making less than $12,000 annually pay nothing! This means that students who are unable to make a significant income won't be forced to pay anything back, and students who face unemployment due to unforeseen reasons won't be burdened by student debt.

 

At Mia Share, we help schools create and manage ISA programs, so that the incentives of the student and the funding provider are properly aligned. ISA repayments are interest-free and linked to the student’s income, relieving the financial burden of a loan. Contact us today to create a more sustainable and affordable financing option for your school and students. 

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Defining Income Share Agreements

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The Growth of the ISA Industry