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Income Share Agreements

Most people are familiar with student loans as a means of paying for college. But taking out a traditional student loan is not the only option when it comes to borrowing money for school. Growing in popularity, income share agreements, or ISAs, are another means of getting the funds you need to cover your tuition and fees. Let’s explore this option further.

What are Income Share Agreements

An income share agreement is basically a contract where you receive the money you need to pay for school in exchange for a percentage of your future salary. They basically allow you to ‘borrow’ money for tuition and fees, similar to student loans. The main difference lies in the repayment structure, which may be more appealing to some students.

Apply for a Stride Funding ISA

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Best for Private Funding
Interest Rates

Payments based on a fixed percentage of future income

Lower (or no) payments when you're unemployed or underemployed.

Repayment Terms

Payments based on a fixed percentage of future income for up to 60 months after graduation

Only pay when earning more than the minimum income threshold ($30k or $40k depending on program)

Payments stop early if you ever hit the payment cap (2.0x your initial funding amount)

How Do Income Share Agreements Work?

When you borrow money via an income share agreement, you will not be charged an interest rate as you would with a federal or private student loan. Instead, you commit to paying a percentage of your future income for a set period of time.

ISA payments are based on a fixed percentage of your income, and we should stress that not every program or field of study will qualify because there needs to be some assurances that individuals will be able to pay the money back . Whereas traditional student loan payments are based on your loan balance, ISAs base your payment on a fixed percentage of your earnings. Some ISAs also have a minimum income threshold, meaning you will not have to make payments during periods of time when your income falls below that threshold.

Note: Income-Driven repayment options for federal student loans are also based on your income, but interest still applies.

With ISAs, you will not accrue interest, and most plans will only require repayment for up to 10 years. If your ISA has a minimum income threshold, you will not be required to make payments if your income is below that amount. But any period when your income falls below the income threshold may or may not be counted towards your total repayment time. Remember each ISA is different, and just as with student loans you will want to do your homework to understand what you are committing to.

Pros and Cons of Income Share Agreements

Pros Cons
Your repayment term is limited to ten years, but will likely be five years or less Your repayment term is limited to ten years, but will likely be five years or less If you earn a high wage, you may end up paying back far more than you borrowed (in some cases it could be double)
No minimum FICO or current income requirements No minimum FICO or current income requirements Since an ISA is not considered a loan, you may not be able to refinance the debt. Also, your future earning potential will be a big factor.
You will not accrue interest on the money you owe Taking out multiple ISAs could require you to pay a significant percentage of your income during repayment You will not accrue interest on the money you owe Taking out multiple ISAs could require you to pay a significant percentage of your income during repayment
ISAs do not require a cosigner Periods of unemployment may not always be counted in your total repayment term
Repayment terms are not as rigid as they are with private student loans (i.e., if you are unemployed, you will not be making payments. Private student loans do not always offer this protection, though some may offer brief periods of deferment). Repayment terms are not as rigid as they are with private student loans (i.e., if you are unemployed, you will not be making payments. Private student loans do not always offer this protection, though some may offer brief periods of deferment). ISA funders may not offer ISAs to all students. There may be major or degree requirements.
Because payments are tied to income, payments remain affordable  
Payments are flexible and easy to budget as they always represent a percentage of your income  

How are the Terms of an ISA Determined?

Eligibility, income percentage, and length of your repayment term will all be determined by your ISA funder. Your ISA funder will evaluate your career plans, education history, program of study and plans for the future in order to determine eligibility and terms.

How to Get an Income Share Agreement

Some schools offer their own income share agreements (which may be limited to certain programs). If you’re looking at an ISA offered by your school, contact your financial aid office for more information.

If you are looking to use an outside ISA funder, the process works similarly to that of student loans, where your school would certify the funds as they would with a private student loan lender.

Student Loans with No Credit

While an ISA is not technically a student loan, it may be a great option for students who do not have the credit or a creditworthy cosigner to qualify for a private student loan. While ISA funders may run a credit check to ensure you don’t have adverse credit, there is no minimum FICO score or income to qualify.

However, your area of study and future earning potential will play a large part in your eligibility.

Note: An ISA is not technically a student loan, meaning you will not be eligible to refinance the debt as you would with a private student loan.

Featured ISA Provider

Recommendation
Best for Private Funding
Interest Rates

Payments based on a fixed percentage of future income

Lower (or no) payments when you're unemployed or underemployed.

Repayment Terms

Payments based on a fixed percentage of future income for up to 60 months after graduation

Only pay when earning more than the minimum income threshold ($30k or $40k depending on program)

Payments stop early if you ever hit the payment cap (2.0x your initial funding amount)

Keep Reading About Paying for College

Best Private Student Loans for September 2021

Student Loans Without a Cosigner

Student Loans for Borrowers with Bad Credit

Introduction to Parent PLUS Loans

Private Student Loan Interest Rates

How to Pay for Medical School

How to Pay for Law School

Student Loans for Graduate School

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