Searching for the Best Deal: How Students and Their Parents View Income Share Agreements

For high school students and their parents, paying for college can be daunting, particularly if student loans are a factor. Some advocates have suggested that income share agreements (ISAs) may help these families finance postsecondary education. ISAs are an alternative form of financial aid in which students pledge a portion of their future earnings in exchange for money to pay for college now. Experts and advocates have argued that ISAs can reduce the financial risk associated with student debt and signal differences in program quality through more favorable ISA terms.

This third brief in a series about ISAs explores the characteristics of financing options that students and parents desire. We conducted 21 paired interviews with high school students and parents from a wide variety of backgrounds. These participants’ views indicate possible reactions to ISAs and highlight issues that ISA funders and others will need to consider if the ISA market is to grow.

Key Findings

  • Students and parents desire flexibility, especially the ability to renegotiate the terms of an arrangement or accelerate payments.
  • Students and parents want to be able to predict how much they will pay in total. Both also are concerned that the total payment amount could be very large if students are successful.
  • Students are not open to using information about college value, as conveyed by variations in ISA terms, to make decisions about which institution to attend or which major to pursue. They highlighted nonfinancial factors, such as long-term happiness, among their considerations.
  • However, students and parents believed that others would change their decisions if presented with similar information.