Are Income Share Agreements Fair?

A Close Look at the Potential Risks and Benefits of an Emerging Financial Aid Option

by Melanie A. Zaber, Elizabeth D. Steiner

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In this Perspective, the authors examine the income share agreement (ISA), a novel mechanism for students to finance postsecondary education by obtaining funding for school in exchange for a share of their future income. Benefits include increased access to postsecondary education, increased support for completion of job-aligned programs, and a reduction of risk for those who do not obtain well-paying jobs after completing or dropping out of their programs.

However, ISAs pose unique risks stemming from their lack of regulation and standardization. Programs may be incentivized to misrepresent students' expected earnings; outcomes-based pricing may lead to inequitable contract terms by race, ethnicity, or gender; and less-reputable programs may use ISAs to profit from misinformation. This Perspective will be of interest to students considering ISA financing, program administrators debating how to implement their ISAs, and policymakers seeking to establish a regulatory framework for ISAs.

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Funding for this research was provided by gifts from RAND supporters and income from operations. The research was conducted within the RAND Lowy Family Middle-Class Pathways Center with RAND Education and Labor.

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