Feb 25, 2021
In this Perspective, the authors examine the income share agreement (ISA), through which students can obtain funding for postsecondary education in exchange for a share of future income. Benefits include increased access to postsecondary education and less risk for those who do not obtain well-paying jobs. However, the lack of regulation may incentivize ISA-offering programs to create contracts that further entrench economic inequities.
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.