What’s It Like to Have an Income Share Agreement? We Asked the Students.

As the student loan debt crisis grows exponentially and college tuition prices continue to soar, many students are considering alternative financing options that help pay for degree and certificate programs and minimize the risk of burdensome loan payments. Income share agreements (ISAs) have emerged as one of the most controversial options. To better understand how people experience this new type of education finance, Jobs for the Future (JFF) interviewed students who have used ISAs.

We found that students hold varied and nuanced views on ISAs, with a majority mentioning the need for greater government oversight. Many said borrowers need stronger protections from unfair provider practices and assurances about the quality of their educational program.

ISAs differ from traditional loans in that repayment terms depend wholly on the borrower’s income level rather than a set dollar amount. Under an ISA, an individual makes monthly payments only if their earnings exceed a specified threshold. If so, their payment will equal a set percentage of their income. Their financial obligations end once they make a certain number of payments or a specified period of time elapses, regardless of how much they have paid. Many ISA obligations end when a student’s total payments reach a specified cap, often a multiple of the amount they initially financed. ISA contracts specify each of these terms, which can vary by provider and sometimes by academic program. Currently, ISAs are offered at a limited number of U.S. colleges; they’re more common in shorter-term career technical programs.

JFF’s Financing the Future team interviewed 14 students who used ISAs to finance their education to learn more about alternative financing models and their impact on the lives of borrowers. The students were from a variety of socioeconomic, racial, and geographic backgrounds and had enrolled in a variety of education programs, from four-year degrees to shorter career technical programs. We found students through multiple sources, including consumer advocates, ISA providers, and posts on Reddit. Despite our best efforts to speak with students with varied experiences with ISAs, the interviewees are not a representative sample of ISA users.

These conversations aimed to better understand student attitudes toward their experiences with ISAs and how their ISA—and the education it financed—affected their lives, either positively or negatively. To that end, we asked each student about their financial literacy, citizenship status, motivations to use an alternative financing option, and how ISAs were promoted by their chosen programs.

We also asked about each student’s level of satisfaction with their ISA once they began repayment, whether they received financial counseling for the ISA throughout their enrollment, and whether they would recommend ISAs over traditional loans to future students. These interviews revealed four key lessons about student experiences with ISAs.

Many students reported a positive experience with ISAs. They offered a variety of reasons for their satisfaction, including helping students access education, flexible repayments that are proportional to income, ease of accessibility for international students and others who are ineligible for federal loans, and supportive customer service.

Ernesto is one of the interviewees who said he appreciates ISAs:

“I like the part of ISAs that, when you start paying back, that money is used to fund other students, which is something that I really liked . . . I like to think of it as I’m taking financial help because with my work in the future, I will be able to help other students as well. I like to think of it as the gift that keeps on giving.”

Ellie recounted her positive experience using an ISA:

“It’s very flexible in the sense that you don’t feel trapped by it, which is one of the things that I really feared about going into higher education prior to the ISA program.”

But a significant number of students were dissatisfied with their ISA experience, citing a variety of reasons. They noted their difficulty in understanding agreement terms, high monthly costs of repayment, poor customer service, and (in the case of school-based ISAs) the poor educational quality of certain programs, which left students feeling unprepared to get jobs.

Krystin emphasized how the repayment terms on her ISA were not written clearly:

“I would say in the beginning, I definitely did not understand what I was signing myself up for. I read through the paperwork. They had a lot of jargon. It is definitely not written in layman’s terms.”

Among students who said they were dissatisfied by their experience with ISAs, two themes emerged that described vastly different experiences. One group was dissatisfied students who attended traditional four-year bachelor’s degree programs and said their education experience was valuable, which they said had led to high earnings. However, their high earnings led to higher monthly ISA payments. Most of these students reported they regretted not having used a more traditional loan that would have charged them lower monthly payments.

The other group of dissatisfied students attended short-term career programs, such as coding boot camps. They said they were generally dissatisfied because they felt that their education had not translated into higher earnings, and they were therefore unhappy to be paying back an ISA that financed an education they didn’t think was worth it. Many of these students acknowledged that if the education they received had been better quality and had led to a higher-earning job, they would have been comfortable with the structure of their ISA.

Somreth said he was dissatisfied with the ISA he used to finance his coding boot camp, which totaled about $40,000 in tuition for a five-month engineering immersion program. But he said that if the education he received had resulted in higher earnings that justified the high tuition or if the tuition cost were lower, then he’d feel differently about the ISA:

“So the fact that my boot camp is like $40K—I don’t think that was worth it in terms of the value. I did get some value out of it, but it was not valued at $8,000 a month. That’s kind of insane.”

When asked if he would have preferred to finance his education with a traditional loan instead of an ISA, Somreth explained that both options have their drawbacks and advantages:

“I would feel like, if [the loan I used] was more traditional and it had interest on top of the 40K, I think that would actually be structured a little bit worse than the ISA because at least with the ISA, they do require hard monthly payments, but it depends on where your income bracket’s at. I’m not saying it’s entirely bad. I think if it’s structured in a certain way to actually help the student and be . . . flexible with the repayments, I think that that could be something of value for others in the future.”

Most students mentioned the importance of having stronger regulation to protect future students from adverse provider practices and ensure students receive quality career or educational training. Though the regulation of ISAs is fairly new, the introduction of the ISA Student Protection Act of 2022 in the U.S. Senate is a promising step toward achieving needed protections for student borrowers. In addition, federal and state policymakers should consider requiring postsecondary programs to adhere to stronger quality standards centered on student outcome data.

Joey said the lack of regulation of ISAs and education or training institutions is a problem:

“There’s little regulation on these unaccredited schools. . . . If I could do it again . . . I’d probably hit up a place that had some kind of accountability to the government. . . . And so overall, no, [the program was] not worth it for me.”

Looking Ahead

Ultimately, these conversations reveal the importance of listening to the experiences of students, who often have insightful feedback. It is particularly important for ISA providers to build formal processes to solicit student feedback and adjust the design of their programs to better center students and equity. Financing the Future intends to add to this research by continuing to interview students about their experiences and gather deeper insights on other forms of innovative education finance.

If you want to share your experience with an ISA, outcome-based loan, deferred tuition agreement, or other alternate financing option, please email Rekeik Meshesha at rmeshesha@jff.org.