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16 Sep 2016
Brief

How Loan-Averse Young Adults View Income Share Agreements

Audrey Peek, Jessica Mason, and Matthew Soldner

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.

PDF icon How Loan-Averse Young Adults View Income Share Agreements (PDF)

Related Work

15 May 2017
Spotlight

Income Share Agreements: An Alternative to Traditional College Financing

Many students rely on student loans as a way of covering college expenses and for many, loan repayments exceed their ability to repay, leading to financial distress or default. Income share agreements are an income-driven college financing option in which an investor provides a student with the funds required to pay for college and, in return, the student promises to pay a percentage of their income for a number of years after leaving school. These resources offer a better understanding of how, and for whom, income share agreements may work.
Topic: 
Education, Postsecondary Education
30 Sep 2015
Brief

The Potential Market for Income Share Agreements Among Low-Income Undergraduates: An Issue Brief for Policymakers and Advocates

This first brief in a series about income share agreements looks at the potential of ISAs to serve low-income undergraduate students by examining the underwriting criteria used to select ISA recipients, estimating the size of the ISA market given its current structure and funding providers, and estimating the number of students who might plausibly be offered an ISA in an expanded market.
Topic: 
Education, Postsecondary Education
3 Dec 2015
Brief

Income Share Agreements on Campus: A Practice Guide

The second in a series about income share agreements, this brief addresses the likely impact of ISAs on how campus financial aid offices will award student aid and the implications of ISAs for campus reporting on student aid, drawing on expertise from financial aid officers and the National Association of Student Financial Aid Administrators.
Topic: 
Education, Postsecondary Education
26 Apr 2017
Brief

The Income Share Agreement Landscape: 2017 and Beyond

This final brief in a series about ISAs explores the current state of the income share agreement market and highlights opportunities and threats to expansion.
Topic: 
Education, Equity in Education, Postsecondary Education
30 Sep 2015
News Release

Despite Buzz, Income Share Agreements Unlikely to Aid Most Poor Students Looking for Alternative to College Loans, AIR Study Finds

A relatively new college funding model designed as an alternative to loans is unlikely to help most students, particularly poor students who need it most, according to a new study. The AIR study examines the potential of income share agreements, which essentially allow investors to buy stock in students, to combat the college loan crisis that is leaving thousands of graduates and drop-outs each year with crushing debt.
30 Sep 2015
Blog Post

Getting Bullish on Income-Driven College Payments

In this blog post, AIR scholar Audrey Peek explores income-share agreements (ISAs), a private form of financial aid that offers cash for college now in return for a percentage of students’ future earnings over a set time. Peek contends ISAs are an innovative way to pay for college that might benefit some students, but which aren’t likely to reach their full potential without fundamentally rethinking who they could serve and how funders are repaid.
Topic: 
Education, Postsecondary Education

Further Reading

  • The Income Share Agreement Landscape: 2017 and Beyond
  • Income Share Agreements: An Alternative to Traditional College Financing
  • Income Share Agreements on Campus: A Practice Guide
  • The Potential Market for Income Share Agreements Among Low-Income Undergraduates: An Issue Brief for Policymakers and Advocates
  • Searching for the Best Deal: How Students and Their Parents View Income Share Agreements
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Jessica Mason

Jessica Mason

Researcher

Topic

Education
Equity in Education
Postsecondary Education

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