Dec 13, 2016 07:00 AM EST
‘What’s The Catch In Income Share Agreements?’ – Students and Parents Suspicious, Report Says
Income Share Agreements, the hot new way for students to pay for college education, is as controversial as it is promising. While the new college-funding option is lauded by students, their parents are actually suspicious about it, news reports say.
Income Share Agreements (ISAs) are a more flexible way of paying for college education. Unlike traditional student loans that require a monthly repayment regardless of a graduate's income status, students have a more flexible way of paying back: by giving a share of their income every month for a specific period of time.
What's more, ISAs are considered to be a safer option. Students who availed of ISAs but are unable to earn up to a specific amount after graduating will not be forced to pay anything for that time being. This is quite the opposite of traditional student loans that require a fixed amount whether or not the graduate earns
Although the concept of a safer, more flexible way to pay for college appeals to many, some students and parents aren't that optimistic about it, TIME reports. According to a focus group research conducted by the American Enterprise Institute, many are suspicious of ISAs given that it's relatively new, and appear to be a "very safe" option.
"Initial gut reactions from students ranged from suspicion - wondering where the 'catch' was - to cautious optimism that income share agreements are a financial product that would work for them," the paper read. "The most common questions were about flexibility of the agreements with regards to length and how the cap system works."
Some students are worried about possible "surprises" that they might get when they avail of ISAs.
"I don't love the idea, but I don't hate it... I feel like there's something that would surprise me," Maura, a student from Boston, said.
For others, the idea that one doesn't have to pay when he doesn't earn enough is already tempting.
"I think it could demotivate some people... They might not try as hard." Zachary, also from Boston, said.
"I'm gonna have a low income job, so it sounds safer for me." Danny, a student from Columbus, said.
For others, the idea of having to stick to a long-term contract without the option of pre-paying is scary. They say that they might feel "locked up" in a commitment far longer than they expect to live. Many of them said they'd rather pay larger amounts in shorter time periods so that they won't have to stick to a longer commitment.
Read the report here.
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