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The Ultimate Guide to Income Share Agreements
Income Share Agreements or ISAS are an alternative financing option that helps students pay for college. While ISAs are synonymous with innovative education organizations like coding bootcamps, the idea is actually not new!
In fact, the concept of the Income Share Agreement dates back to the 1950s when economist Milton Friedman proposed the idea in The Role of Government in Education. The basic idea of the ISA is simple: instead of paying tuition or taking out loans, students are promising to pay back a future percentage of their salary. This allows them to obtain an education without putting up as much money up-front, and rather repaying it when they have an increased salary potential.
Jump ahead to:
- How do ISAs work?
- Benefits of income share agreements
- Downsides of income share agreements
- Schools with income share agreements
- Frequently asked questions about income share agreements
Keep on reading to learn everything that you need to know about Income Share agreements!
How do ISAs work?
Nothing, or very little, up front
If you’re using an ISA at a coding bootcamp or comparable institution, the school you’re attending will cover the vast majority, or all, of your educational expenses. You won’t pay anything as you go through school, making it a very affordable option for students who are spread thin financially.
If you want to further your career without spending years saving up for a degree, this is a very appealing option. You’ll begin improving your earning potential right away and leave the repayment until later.
Keep in mind, this may not apply if you take out an ISA for a standard four-year college education. Although you won’t have to pay any of your ISA up-front, you probably won’t be able to borrow the entirety of your educational funds on an ISA. These degrees are more expensive and have less predictable income outcomes.
Contingent on your landing a job
ISAs only come into effect once you’ve landed a job through your new degree credentials. So, you won’t begin repayment until you start seeing your wages rise. Some schools have certain requirements for graduates to ensure that they are actively searching for a job. Make sure to read the fine print of your agreement to see what happens if you are unable to land a job post-grad.
What is an ISA cap?
ISA caps are the maximum amount that you will be required to pay back under an ISA. So, if you end up earning extremely high wages, you may end up paying back the entirety of what you borrowed after only a few years. In this case, an ISA cap will come into place and you won’t have to pay any more.
Any reputable ISA should contain some sort of cap, and most should be between 1.5-2.5 times your original borrowed amount. So, if you borrow $100,000, you should not have to pay back any more than $250,000 in total, regardless of how high your wages end up being.
Are ISAs widely available?
ISAs are a burgeoning field that are increasing in scope every year. Though they gained in popularity through their adoption by programs such as coding bootcamps, they are becoming more available for colleges as well. That being said, they still tend to favor pre-professional, specialized education, such as computer science, nursing, medical school, engineering, and the like.
Also see: Stride Funding ISA review
Benefits of income share agreements
Only pay once you start earning
The biggest benefit of Income Share Agreements are that students only need to pay back their ISA if they get a job and earn a certain amount of money. Unlike student loans, which must be paid back in almost all circumstances, Income Share Agreements have contingencies for employment and earnings.
Incentives for the educational institution
Because ISAs flip the education financing model, the school has a vested interest in recouping their investment which means that they will be very motivated to help you find a good, well-paying job after college. This can put the onus on the institution or ISA-granting organization to help you connect with post-graduate employment opportunities.
This creates an incentive for an educational institution offering ISAs to ensure their program is rigorous and prepares you for the workforce. They may also invest resources in networking infrastructure and pipelines into positions at specific corporations.
Downsides of income share agreements
Lack of availability
The biggest downsides to Income Share Agreements is that they may not be widely available for all schools and majors. Certain ISAs will only be for specific areas of study. For instance, Avenify aims to support nursing students.
ISAs are less available for majors in fields such as humanities, arts, or social sciences. This is because these degrees are more versatile and generally provide a less specialized education. As a result, less ISAs are available, and those that are often have less favorable terms of repayment, requiring higher percentages of your salary and/or longer repayment periods.
ISAs prioritize and favor specialized education tracks because they can predict graduates’ future salaries with more accuracy. As a result, you’ll get the best deal out of an ISA if you are studying a more pre-professional track in school.
Less regulation
ISAs also lack some of the regulations and legal protections of federal student loans. We always recommend that students read the fine print and consult with the ISA provider if they have any specific questions as every Income Share Agreement is different.
Make sure to shop around among ISAs and compare your agreement terms with the industry standard. If an ISA asks for a larger share or larger time frame than other options, they may be taking advantage of you. In this case, you may be better off taking out more traditional student loans.
Potential to pay more than you would with loans
Another potential downside to ISAs is that you may actually end up paying more in total than you would with student loans. Student loans require that you repay a specific, set amount. On the other hand, ISAs ask for a percentage of your income for a set time after graduation. So, the more you earn, the more you’ll end up paying to your ISA provider.
If you feel confident that you’ll land a high-paying job after your program, you may want to consider student loans over an ISA. Try finding the wage you can expect, and sitting down to calculate how much you’d end up paying back under your ISA terms. Then, look for your best student loan options, and see how much you’d end up paying back with interest. It might just be a better deal to go with loans.
That being said, if you feel unsure about your ability to land a job after graduation, or that your salary will be high, an ISA is a great alternative to loans.
What are some schools with income share agreements?
Both schools and private companies like Stride Funding may offer Income Share Agreements. Here are a few schools that are currently offering the ISA option for students:
Flatiron School (Online, USA, UK)
The Flatiron School offers specializations in Data Science, Software Engineering, and UX/UI Design. Flatiron has campuses everywhere from London to Atlanta to Seattle. Students also have the option to complete their coursework online!
Lambda School (Online)
Lambda School is an online coding school that has multiple tracks so students can specialize in everything including iOS or Android Development, Data Science, Full Stack Web Development, and UX Design.
Holberton School (Global)
Holberton School offers project-based courses in everything from Web Development to Virtual Reality to Machine Learning. The college has campuses around the world including San Francisco, CA, New Haven, CT, Columbia, and France. Holberton School alumni have landed jobs at top companies like Tesla, Facebook, Google, and Pinterest.
Make School (San Fransisco, California)
Make School is unique because students who graduate will also receive their Bachelor’s Degree! Because of this, students will also receive a strong liberal arts education to complement their technical training.
Purdue University (West Lafayette, Indiana)
Purdue University in West Lafayette, IN has an Income Share Agreement program called “Back A Boiler.” The Purdue ISA is a little bit different than others because it is not currently meant to pay 100% of the university’s cost of attendance. Instead, the Income Share Agreement is intended to replace student loans in a student’s financial aid package.
Thinkful (Online)
Thinkful is a boot camp that focuses on 1:1 mentorship for all students. The program matches every student with a seasoned industry professional, which is a great way to learn! Thinkful allows students to focus on software engineering, product design, data science, and data analytics.
Frequently asked questions about ISAs
Can I get an ISA with a bad credit score?
ISA providers typically do not take credit score as a make-or-break factor. Some won’t look at it at all, while others use it as one part of a many-faceted equation. You are more likely to get an ISA with a low credit score than you are private student loans.
Some ISAs will consider, however, your history with student loans. If you have defaulted on student loans, some providers, such as Stride, will not grant you an ISA.
What types of programs offer ISAs?
ISAs are a burgeoning field that are beginning to enter many different spheres of academics. They are most popular in coding bootcamps and certificate programs. Some providers are also beginning to offer them for four-year undergraduate degrees.
Because the ISA model is based off of the idea that your post-graduation income is predictable, it is in these situations that ISAs work best, Programs that prepare you specifically for one profession, such as web design, nursing, or coding, are more likely to have favorable ISA terms. Because they don’t view you as a risky investment, they’ll be willing to offer an ISA for a lower percentage of your pay, and for a shorter time.
What’s the best ISA?
The answer to this question will vary widely on the student and their interests. Many certificate programs and coding schools have their own ISAs, so your best ISA will be the one your school offers. Most ISAs are pretty specialized, so your best bet is to reach out to the financial aid office at your school or program and express your interest in ISAs.
They will let you know of the options that are out there, and might even help you compare the benefits and disadvantages of each. Find an ISA that suits your repayment schedule and has terms that work for you.
Are there other educational options with no up-front cost?
Yes, there are! One great option is the apprenticeship. Not only are there no up-front costs with an apprenticeship, but they pay you to learn. Traditionally, apprenticeships have prepared students for high-paying blue-collar work such as plumbing, welding, and manufacturing. But the apprenticeship model is gaining popularity in the tech space. For students interested in white-collar work, check out Google’s apprenticeship program.
Another option to attend school without any up-front cost is through a full-ride scholarship. Though they can be difficult to earn, they relieve a tremendous financial burden from your education. You can also make school affordable through a combination of smaller scholarships, federal and private loans, and work-study. Try out our free scholarship search tool to find custom-matched scholarships, tailored to your demographics, location, interests, and more. Good luck!
Keep reading
Interested in digging deeper into income share agreements? Read about the benefits of coding bootcamps, which often offer income share agreements. You can also read about more alternative college financing options, such as tuition repayment plans.
