Income Share Agreements: a New Way to Pay for College Education


With the high cost of college education, having alternate sources of tuition funding would be a great help to students on their way to a great career. Whether it would be scholarships, grants, or federal loans, students moving towards a lucrative career goal will need the help.

Traditionally, college students apply for federal loans that need to be repaid on a monthly basis for 10 to 20 years after graduation. Robert Kelchen, assistant Professor of Higher Education at Seton Hall University, says that students have a hard time paying these loans, especially as college doesn't immediately pay off after graduation.

According to data from the government, about 40 percent of graduates have difficulty in paying back their loans, even up to three years into the repayment period.

One new way for students to pay for college is through a new tuition-funding option called an Income Sharing Agreement (ISA). ISAs are not loans, and don't need to be repaid in cash after graduation. Rather, students who avail of this funding option agree to sharing a percentage of their income to the ISA provider. The amount is based on the student's major, year in school, and the amount borrowed.

ISAs are a relatively new funding option, but the concept has been catching more attention and might soon spread to many schools nationwide, reports TIME. It has been used in Latin America for more than a decade now, and in the U.S. some efforts have been made for it to be made available to students in need.

ISAs that are in effect in the U.S. have different kinds of students and repayment policies. Here are three ISAs that are currently working.

Purdue University's "Back a Boiler" ISA program will fund upperclassmen in any major. Students who avail will have different repayment rates depending on the amount taken, years in college, and major.

Education Equity also funds upperclassmen who study at one of 40 colleges in Illinois. Students must also be part of the Golden Apple Scholars teacher training program.

Clarkson University also offers an ISA in the form of the Young Entrepreneurship scholarship program. Students who avail are given free tuition for four years in exchange for a 10 percent stake in the student's business. This ISA is aimed at young entrepreneurs.

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