Jobs for the Future (JFF) drives the transformation of the American workforce and education systems to achieve equitable economic advancement for all.

Findings from their report shine a light on the racial and gender differences in Income Share Agreement terms that can significantly impact how much students prepare for college.

The findings in Jobs for the Future’s report present opportunities as Income Share Agreements gain momentum. I think this report shows a bright future for Income Share Agreements and alternative financing and will help bring about a much-needed change to the student lending system.

Limitations of the report 

It’s important to note that the report outlines some caveats and limitations to their findings. They mention that additional research is needed.

Income share agreements (ISA) have garnered significant excitement as a new tool to finance postsecondary education.

Using a proprietary data set of ISA contract holder records, JFF analyzed differences in contract terms and repayment patterns across demographic groups, finding no consistent or significant favorability toward one racial/ethnic or gender group over another.

While this data set is far more granular and detailed than what has been used in past research, it still has limitations that require JFF to present its findings with significant caveats. They acknowledge that more research is needed,  such as better data about students’ prior income, the amount financed in the ISA, the length of the intensity of educational programs, and other characteristics. 

ISAs showed no significant favoritism towards any one group 

According to the report, ISAs appear to neither disproportionately advantage nor disadvantage any racial and gender groups. In addition, they tested the relationship between contract terms and education providers and differences between various student groups focusing on race/ethnicity and gender. 

“We did not find any consistent and significant relationships in contract terms or differences in student repayment patterns across racial/ethnic and gender categories that would imply a positive or negative impact on racial/ethnic and gender equity.”

JFF Report

This spells a positive and equitable future for ISAs and alternative financing. ISAs can be a great way to open access to those that are a part of marginalized groups and balance the risk and reward of higher education between schools and students. 

Quality Education Matters

While ISA program design and quality of education matter, this report from JFF indicates a very bright future for ISA recipients and alternative financing borrowers. 

If you’re interested in offering a fair and worthwhile Income Share Agreement at your institution, download our brochure on our partner’s page. 

Income Share Agreements, or ISAs for short, are a growing alternative to traditional student loans. In the world of new financing approaches, Income Share Agreements are unique.  But many are starting to think of them as a tool to help startup founders and entrepreneurs. 

Don’t know what an ISA is? Here’s a quick overview: usually, with an ISA, your upfront payment for a service like education is deferred. Instead, you agree to pay back a percentage of your income over a set number of months. Think of it like deferred tuition but with added benefits since your repayments are linked to your income.

The percentage and period of time vary depending on ISA. For example, a student may receive tuition upfront for 5% of their income during the 48 months after graduation. ISA terms vary between ISA funders and have many benefits, but this is a basic overview. If you want to learn more about Income Share Agreements, you can check out our Ultimate Guide to ISAs. ISAs are most well-known as a tool for educators and students.

 But how might someone apply the principles of an ISA to funding for a startup?

ISAs for Entrepreneurs

Income share agreements are most commonly used to fund education and career development, but they are gaining potential for founders seeking early capital to start a business. 

With an ISA, the percentage you pay will stay the same even as your income varies. Meaning that your payments are linked directly to your income which ensures payments are always manageable. 

ISAs also include a salary floor, so your payments are paused if you’re earning under a certain amount. This feature is essential for founders who may experience periods with little to no income.

Most ISA’s also include a repayment cap, so once you reach that set total amount, you’re finished with your payments, regardless of whether or not you’ve made all the required payments. This prevents high-income earners from paying back an unfair amount.

This approach is perfect for entrepreneurs because it’s more flexible than equity-based funding options alone. It’s also an inclusive, equitable approach that serves idea and early-stage companies better than other traditional funding options. Since it’s an Income Share Agreement, your funder only wins if you win, so they’re committed to helping you succeed and giving you the tools you need to win. 

Who’s doing this now? 

Chisos is an up-and-coming company that invests in high-potential individuals from all walks of life. Chisos designed a funding model for idea and early-stage entrepreneurs: the Convertible Income Share Agreement. To learn more about their ISA program, visit their program info page.

This concept could be a game-changer for those looking to become entrepreneurs but don’t have the upfront capital to get started. What are your thoughts? 

Income Share Agreements (ISAs) are emerging as an excellent alternative to traditional private student loans. With this type of agreement, students pay nothing, in most cases, until after they complete their program. Then, once a student has finished the program and gets a job using their new skills, they pay a percentage of their income for a set period of time until they have either reached the Required Payments, Max Payment Cap, or Payment Window. 

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The rising balances of traditional private student loans are a major problem. Signing up for a traditional loan without knowing exactly how much you could be paying back or how you’ll be able to handle your monthly payments could be difficult. 

One solution that has been gaining traction among online bootcamps and colleges alike are Income Share Agreements. (ISAs). 

An ISA is an agreement where, in exchange for tuition, after graduation and as long as you’re earning an agreed-upon income, you pay a percentage of your income back to the college (or funder). Besides the absence of growing interest and generally, no upfront payments, a significant benefit of ISAs is the fact that there are certain instances when your payments are paused or deferred.  

With traditional private student loans, you have a principal, the borrowed amount, and an interest rate. You pay back the amount of the principal plus any interest you accrue while paying it back.

ISAs keep students from paying for educational experiences that don’t create value for them in the labor market, aligning the risks and rewards of education and creating better outcomes.

Are you considering signing an Income Share Agreement? Here’s what you need to look out for before you sign your agreement to make sure your payments are manageable. 

What are the ways to finish my ISA?

By far the biggest differentiating factor between ISAs and traditional student loans, other than the built-in benefits, is the way they’re satisfied. With an ISA contract, there are three distinct ways you can finish your ISA: 

1. Make the required number of payments

With an ISA, you pay back a percentage of your earnings each month for a set number of months. Each of these payments is considered one of your Required Payments. If you pay all the Required Payments, your ISA amount is satisfied! 

2. Pay the Max Payment Cap

The Max Payment Cap is built into your ISA and is the most you’ll ever need to pay towards your ISA. It is a built-in protection for high earners so that they are not punished for earning more than expected. A Payment Cap is usually some amount more than the Funded Amount (the amount the school is fronting you for their program as part of your ISA). Once your total payments reach the payment cap, your ISA is also satisfied!

3. Reaching the end of the Payment Window

The final way to end an ISA is by reaching the end of the Payment Window. The school or funder who you have an ISA with will have a set time period to collect your Required Payments or Max Payment Cap. However, if you have not reached either of those two and the Payment Window ends, you’re absolved of your ISA.  

To read a more in-depth version of how to finish your ISA payments click here!

What should I be aware of before signing an Income Share Agreement? 

1. Use the Income Share Percentage to calculate your future payments

Before you sign your Income Share Agreement you need to be aware of how much of your gross income you’ll end up paying each month. Remember this factor runs along a sliding scale with the Maximum Payment Cap and Payment Window. So, even if your ISA is only a small percentage, you’ll want to look at your Payment Window to determine for how long you’ll be paying that small percentage of your income to make sure it doesn’t add up to a huge total amount. Determine just how much you’ll be paying each month based on your anticipated salary, then compare that cost to traditional monthly student loan payments.

2. Double check your Payment Cap

This sum is the most you’ll ever pay towards your ISA. Traditional private loans cost the original balance, plus interest, which you’ll need to calculate to determine the true cost. With an ISA, there’s a much firmer, hard cap on payments, so it’s easier to determine total max costs. But make sure to know if your cap is a lot more than you were funded or just a little more. ISA caps tend to range from 1.2x to 2x more than you were funded. Be cautious with caps that are more than 2x what was funded to you, and avoid ISAs that don’t have a payment cap at all. Some programs utilize incremental payment caps, where the payment cap increases slowly over time.  This rewards students who find early career success, by making it cheaper for them to pay off their ISA earlier in their career. Make sure to calculate what your payments might look like and determine whether the payment cap is suitable for you and your future career.

3. Understand your Payment Window

The Payment Window is how long your ISA contract lasts and is the length of time you have to pay back your required payments or Payment Cap. Think of your payment window as the total contract term. At the end of the payment window, your ISA contract expires, even if you paid back less than the amount of money you received. 

To keep your ISA fair, and to prevent any potential game playing, certain situations of voluntary withdrawal from the labor force may extend your Payment Window by one month for each month of such withdrawal.  For example, if you take a 6-month vacation, your payment window may pause during these break periods, and then resume when you are ready to re-enter the labor force

The most important thing to know about your Payment Window is whether your ISA lender counts months in which your payments are paused due to financial hardships towards your Payment Window or if your Payment Window is extended in those instances.

4. Double check your Minimum Income Threshold

The main benefit of an ISA is that your payments automatically pause whenever you’re unemployed or making less than the salary floor. The best part of Income Share Agreements is that during periods of deferment, there is no accruing interest like traditional student loans. The Minimum Income Threshold is how much you have to be making before you owe payments.

If your income drops below that line your payments are paused.  An ISA’s salary floor should reflect your expected post-graduate income. Is your threshold lower like just $10,000? Or is it something reasonable for your career, say like $40,000. For example, Lambda School’s salary floor is $50,000 because it expects graduates to get starting salaries of at least that much. Think about what you’ll actually be able to afford, depending on where you plan on living, before you sign on the dotted line. 

5. Make a note of any fines and fees

Just like with traditional student loans, there are ways to get in trouble with ISAs, if you avoid making payments. There may be some penalties for not accurately reporting your income or other scenarios with your ISA. Be sure to read and understand those possible fees and make sure you avoid any of those possible scenarios. 

If you’re considering an Income Share Agreement to cover your higher education costs, then make sure to utilize an Income Share Agreement Calculator to help you figure out what your monthly payments will cost and how much you’ll pay overall. 

If you think an ISA option might be right for you, make sure you take into account your ISA terms, expected future income, and calculate what your payments will look like in order to determine if an ISA is the best option for you.

What if my school doesn’t offer an ISA?

If you’re unmoved by existing Income Share Agreement providers, you could always take on the challenge of convincing your school to start its own program. That’s where Meratas comes in.

About Meratas

Meratas is the leading Income Share Agreement (ISA) software company, providing a full-service, turnkey, SaaS platform to design, originate, and manage ISAs. We help universities, bootcamps, trade schools, and membership programs increase enrollment and open accessibility to their programs. All through the power of Income Share Agreements.

We also help those looking to get an education, up-skill, or re-skill get into the career of their dreams. All at, generally, no upfront cost. We pair individuals looking for fresh new career with the best educational programs on the Meratas platforms to reach their professional goals. If you’re looking to break into your new career, check out our student page and we’ll help you find the job of your dreams.

Want more career advice, education news, and student success tips? Follow us on Twitter, LinkedIn, and Instagram!

Although every effort has been made to provide complete and accurate information, Meratas Inc. makes no warranties, express or implied, or representations as to the accuracy of content contained herein. Meratas Inc. assumes no liability or responsibility for any error or omissions in the information contained herein or the operation or use of these materials.

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In a step forward for state regulation of Income Share Agreements (ISA), Illinois recently signed into law the Student Investment Account Act (Act).

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Income Share Agreements (or ISAs) are a different form of financing that many may not be used to. Since ISAs have built-in protections and guidelines set in place to make sure students are not overpaying for their education, the Income Share Agreement journey can look different for everyone. There are also several ISA terms necessary to know in order to fully understand ISAs.

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As soon as the initial excitement of a new job starts to subside, new graduates face the daunting question: how to pay off that huge shadow of traditional student loan debt haunting them. With an Income Share Agreement (ISA), students don’t have to worry about paying back a principle or mounting interest. However, that then begs the question: How do I fully pay back my ISA?

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There are multiple schools, coding bootcamps, and programs including Lambda School and Holberton that are helping students learn new skills and get high-paying jobs faster. Each of these programs also offer an Income Share Agreement (ISA) to open its doors and students only pay for school once they’ve found a high-paying job.

We’re pretty big fans of podcasts here at Meratas. One of the best ways to learn and better understand ideas is by listening to podcasts. We’ve put together a list of some of the best ISA podcast episodes to help you learn more about the amazing innovations taking place in higher education today.

1. a16z Podcast – Are ISAs the solution to Student Debt? 

The a16z Podcast discusses tech and culture trends, news, and the future – especially as ‘software eats the world’. It features industry experts, business leaders, and other curious thinkers and voices from around the world. In “Are Income Share Agreements the Solution to Student Debt?” Lambda School CEO, Austen Allred, dives into the proposal of ISAs:  You go to college for free, then pay back the school after graduation-but only if you’re earning a high enough salary to afford the repayments. 

Student loan debt currently stands at more than 1.5 trillion dollars, which makes it the second-highest consumer debt category besides mortgage debt. The discussion covers both the promises and the challenges of ISAs-why they’ve been relatively slow to gain traction and why some are still skeptical.

2. Making College Affordable – Exploring a new way to pay for college through Income Share Agreements.

College is expensive and the process of finding and getting into the best colleges is more complicated and competitive than ever. You owe it to yourself to become an educated consumer. Making College Affordable will show you how to gain a competitive advantage over the game of choosing and paying for college. 

In this episode, the host, Jason, explores the details of ISA and what you need to know if an ISA is the right option for you.

3. Enrollment Growth University- ISAs at the University of Utah

Enrollment Growth University is a professional development podcast for higher ed leaders looking to grow enrollment at their college or university If you’re looking for tactics, strategies, and best practices to build a step-by-step road map toward enrollment growth in higher education at your institution, this podcast is for you. 

Dr. Courtney McBeth, Special Assistant to the President at the University of Utah, joined the podcast to talk about the potential of ISAs.

4. The First 1000 –  Making ISAs available for the masses.

Matt Quinn has been on a mission to be a 10x better founder by meeting incredible founders who have gone before him to get an answer to the question: How did you get your first 1000….? Your first 1000 customers, sign-ups, fans, users, clicks, and dollars invested. The first 1000 is all about interviewing these founders. 

For the 20 million enrolled college students who have to find financing, ISAs haven’t been widely available. This podcast covers why and how they can eventually become more accessible to students.

5. Planet Money – A New Way to Pay for College

Planet Money is an amazing podcast explaining the economy. In this episode, the Planet Money team explains the concept of Income Share Agreements. However, they take you on a trip to the South American country of Chile, the recording studio of David Bowie, and eventually back to Purdue University in Indiana, where students today can use ISAs to help them pay for college.

These podcasts hold some great insights into ISAs,  so whether you’re a student considering using an ISA or working at a school or program looking to offer an ISA to their students, check into one of these to learn more about ISAs. If you’re interested in what programs offer ISAs check out our Students page!

Income Share Agreements (ISAs) have what you could call “consumer benefits” built-in to help students through tough times. Besides the absence of growing interest and generally, no upfront payments, a significant benefit of Income Share Agreements is the fact that there are certain instances when your payments are paused or deferred.

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