Lifting the Curtain on Income-Share Agreements

Inside Higher Ed

For a certain corner of higher ed, income-share agreements have emerged as the most exciting innovation to finance a college degree.

The contracts obligate students to pay back a portion of their future income for a set number of years rather than take out student loans to cover unmet financial need. The concept was first tested in short-term programs like coding boot camps but increasingly is being pushed as an option for students at traditional colleges as well.

The annual Education Finance Conference in Washington, D.C., this month attracted nearly 200 attendees for a series of sessions focused mostly on ISAs, a 40 percent increase in turnout from the year before.

Sheila Bair, the president of Washington College and former commissioner of the Federal Deposit Insurance Corporation, told attendees her preference was to “ditch debt completely” in favor of a federal ISA program. And Senator Todd Young, an Indiana Republican, told the crowd that ISA supporters have shifted opinion on financial products “no one wanted to go near” until recently because they were viewed as predatory financial instruments.

“Let’s demonstrate that it works,” said Young, who has co-sponsored legislation to establish a new regulatory framework for ISAs. “And it will work — people will love it.”

The rhetoric and the headlines often suggest that income-share agreements are a key part of the solution to staggering amounts of student debt. But the organizations that are making ISAs a reality on the ground for college students can be more circumspect about the new model.

“Nobody has an income-share agreement problem at a college. They have some other problem they’re trying to fix,” said Tonio DeSorrento, CEO of Vemo Education… (continue reading)