3 Dec 2015
Brief

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.

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, 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: 
Education, Higher Education
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, 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: 
Education, 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: 
Education, Equity in Education, Higher 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, Higher 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

Peek Audrey 2017.jpg

Audrey Peak

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, Higher Education

Further Reading