26 Apr 2017
Brief

The Income Share Agreement Landscape: 2017 and Beyond

Audrey Peek, Nicole Guarino, Jessica Mason, and Matthew Soldner

Despite many uncertainties facing the nation regarding education policy, one issue seems likely to move forward in the coming years: increasing access to income share agreements (ISAs).

An ISA is a new form of private financial aid that offers students money upfront to pay for college in return for a percentage of students’ future earnings. Currently, just one traditional postsecondary institution, Purdue University, offers an ISA through its Back a Boilermaker program. At a handful of coding boot camps and specialized institutions, all students use ISAs to cover their tuition and fees. Despite this small market, buzz about ISAs is growing on Capitol Hill and in state legislatures. Substantial shifts in the ISA landscape may be on the horizon.

AIR released several studies on the potential for ISAs to help low-income students pay for college. The purpose of this fifth and final brief in a series about ISAs is to explore the current state of the ISA market and highlight opportunities and threats to its expansion.

Key Findings

  • Today’s ISA market offers two products: ISAs intended to be students’ primary source of financial aid, and ISAs intended to fill in the gaps after federal aid.
  • The ISA market has used several strategies for expansion: building legitimacy through partnerships with institutions, emphasizing how ISAs protect against a risky labor market, and promising that ISAs will improve the relationship between price and outcomes in higher education.
  • The ISA market faces several barriers to expansion: the complexity of its products, public mistrust, and unresolved legal questions.
  • Changes to the Graduate PLUS loan program may open the door to further ISA expansion.

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: 
Higher Education and Career Readiness, Higher 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: 
Higher Education and Career Readiness, Higher 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: 
Higher Education and Career Readiness, Higher Education
6 Jan 2016
Brief

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

This third brief in a series explores high school students’ and parents’ perceptions of income share agreements (ISAs) as well as their decisions about how to pay for college.
Topic: 
Higher Education and Career Readiness, Higher Education
16 Sep 2016
Brief

How Loan-Averse Young Adults View Income Share Agreements

This brief, the fourth in a series about ISAs, addresses evidence that suggests loan aversion may be especially prevalent among underserved and underrepresented students. The brief concludes 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.
Topic: 
Higher Education and Career Readiness, Higher Education, Equity in 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: 
Higher Education and Career Readiness, Higher Education

Further Reading