Inequality in college access is a serious problem in American higher education, and student loans are a substantial obstacle to enrollment for some students. Evidence suggests that loan aversion, or the unwillingness to borrow to pay for college, may be especially prevalent among underserved and underrepresented students. The factors related to loan aversion are relatively unknown.

Depending on the underlying causes of loan aversion, alternative forms of financial aid, such as income share agreements (ISAs), may be more attractive for these students.

This brief is the fourth in a series about ISAs that explores how new financial aid options can open doors for more students to go to college. We conducted focus groups with 18 loan averse young adults ages 16 to 24 who were neither working full time nor enrolled in college. Participants’ responses indicate that loan aversion stems from a variety of factors, some of which may influence their views of ISAs.

This study concluded that ISAs could provide an alternative to student loans—in particular, for loan-averse individuals whose views of student debt are determined primarily by negative experiences with debt among family and friends, thereby removing one key barrier to college-going for this population.