Income Share Agreements on Campus: A Practice Guide

Next fall, students at Purdue University may have a new way to pay their tuition: income share agreements (ISAs). ISAs are an alternative form of higher education financing in which students pledge a fixed percentage of future earnings in exchange for money to pay for college. ISAs present a new challenge to the nation’s colleges and universities, which do not have guidance from the U.S. Department of Education (ED) or professional associations on how to treat ISAs. These administrative concerns are pressing. Without guidance, Purdue and other institutions will have to decide how to include ISAs in students’ financial aid awards and how to report these funds to ED. 

This second brief in a series about ISAs explores a) the likely impact of ISAs on how campus financial aid offices will award student aid, and b) the implications of ISAs for campus reporting on student aid with help from the National Association of Student Financial Aid Administrators (NASFAA). NASFAA asked a small group of its members to share their experiences with ISAs on campus and, absent that, how they planned to award and report on this type of aid.

Key Findings

  • Although none of the financial aid officers we contacted had any real-world experience with ISAs, most responded that, hypothetically, they would package ISAs as estimated financial assistance and report them as private student loans.
  • Depending on how financial aid officers interpret ED guidelines about financial aid award packaging and on the size of the ISA, ISAs could displace need-based and non-need-based aid, such as federal student loans.
  • If ISAs were reported as private student loans, students, administrators, and the public will be unable to discern how many students receive ISAs (and the terms of these agreements), and comingling reporting on ISAs with that of other forms of aid, such as private loans, makes existing data about those products less useful.