Income-share agreements (ISAs) are a new type of Student loan financing that is gaining popularity. ISAs are contracts between a student and an investor, in which the investor agrees to pay for the student’s education in exchange for a percentage of the student’s future income.
ISAs are different from traditional student loans in a number of ways. First, ISAs are not based on credit scores. Second, ISA payments are based on the student’s income, not the amount of money they borrowed. Third, ISAs have a repayment term, typically 10-15 years, after which the student no longer owes any money.
Benefits of ISAs
ISAs offer a number of benefits to students, including:
Affordability: ISA payments are based on the student’s income, so students only pay what they can afford.
Flexibility: ISAs are flexible and can be adjusted as the student’s income changes. For example, if a student’s income decreases, their ISA payments will also decrease.
Forgiveness: If a student’s income falls below a certain threshold, their ISA payments may be paused or forgiven.
Drawbacks of ISAs
ISAs also have some drawbacks, including:
Limited availability: ISAs are not widely available, and they are not eligible for federal student loan repayment programs, such as Public Service Loan Forgiveness (PSLF).
Cost: ISAs can be more expensive than traditional student loans for students who earn high incomes.
Risk: ISAs are a relatively new type of financing, and there is some risk involved. For example, if the investor goes bankrupt, the student may still owe money on their ISA.
How to qualify for ISAs
To qualify for an ISA, students must typically meet the following criteria:
Be enrolled in a qualified educational institution
Have a strong academic record
Be able to demonstrate that they have a plan to repay their ISA
How to apply for ISAs
Students can apply for ISAs through ISA providers. ISA providers are typically companies that specialize in ISA financing.
Conclusion
ISAs are a new type of Student Loan Financing that offers a number of benefits to students. However, ISAs also have some drawbacks, and they are not right for everyone. Students should carefully consider all of their options before choosing an ISA.
Here are some additional things to keep in mind about ISAs:
ISAs are only available for students who are enrolled in qualified educational institutions.
ISA payments are typically capped at a percentage of the student’s income, such as 10%.
ISAs have a repayment term, typically 10-15 years, after which the student no longer owes any money.
If a student’s income falls below a certain threshold, their ISA payments may be paused or forgiven.
If you are considering an ISA to finance your education, it is important to speak to a financial advisor to get personalized advice.
