Income Share Agreements (ISAs) are loan alternatives. ISA providers offer free or discounted tuition (and in some cases living expenses) to students during their education or training program. Once those students graduate and land a job, they pay a set percentage of their income back over a set period of time.
In many ways, the ISA works like a bet. The ISA provider bets that you’ll out-earn the amount you borrow. If you do, you pay them back more, sooner, or both. If you don’t earn enough, you don’t pay the tuition back.
Income share agreements have been growing in prevalence in recent years as ways to fund an education. In particular, “bootcamp” style programs (such as coding bootcamps) are increasingly offering ISAs to help students fund their education.
While ISAs aren’t specifically loans, they carry certain stipulations that students need to understand that makes them very similar to student loans (and the CFPB regulates them as student loan lenders). In this article, we'll cover ISA basics and where you can find the best ISA providers.
Table of Contents
Key Factors For Evaluating Income Share Agreements
When To Consider An ISA
Where To Find Income Share Agreements
Your School Or Program
Private ISA Lenders
Key Factors For Evaluating Income Share Agreements
ISAs aren’t like traditional private student loans. To make sure you’re getting a good deal, you’ll want to look at all of the following factors.
- Allowable majors - Some ISAs restrict users to certain majors or programs.
- Underwriting criteria - Most ISAs will not require a credit score or a current income. However, they will consider your future earning potential.
- Borrowing limits - ISAs limit the amount you can borrow in a single year and over the course of your lifetime.
- Minimum income for payback - Most of the best ISA providers cut payments to $0 when your income falls below a given limit. But $0 payments may add to the length of your ISA.
- Payback period - This is either the number of payments you must make towards the ISA OR the length you’re bound to the agreement regardless of the number of payments you make.
- Share of income required - This is the percentage of your gross income that the ISA lender will receive during the payback period.
- Payback cap - This is the maximum amount you will pay during repayment. The typical payback cap is expressed in multiples of the amount borrowed.
When To Consider An ISA
ISAs aren’t for everyone. Although ISAs typically offer downside protection, the effective interest rate can be very high. Most people should maximum their federal student loan options (especially subsidized student loans) before taking on an income share agreement.
However, an income share agreement may be a valuable alternative for people who don’t qualify for federal student loans or as an alternative to private loans. For example, undocumented individuals may qualify for an ISA even though they don’t qualify for federal financial aid.
Additionally, many “bootcamps” or short training programs aren’t fully accredited. That means students in the program will need to use savings or private loans to pay for the program unless the program offers an ISA.
Where To Find Income Share Agreements
Finding an ISA can be a challenge. ISAs are a less common form of education funding and only a few schools promote them heavily. But here are a few places to look for ISA providers.
Your School Or Program
The first place to search for an ISA is your school or training program. Most schools that offer an ISA will give some information about it on their financial aid page.
In many cases, the ISAs that schools offer are administered by a private bank or lender. These programs may be subsidized by the school to make them a more attractive financing option.
In fact, some of the top ISA providers only offer income-sharing agreements through schools and not directly on their own platform. Edly is an example of this.
Private ISA Lenders
Private ISA lenders issue income share agreements directly to students. Most of these lenders only issue to juniors or seniors in undergraduate programs, graduate students, or candidates in bootcamp programs.
Each lender will have different allowed programs, but most focus on computer science, nursing, engineering, data science, and other “in demand” fields of study. We cover the best private ISA lenders below.
3 Best ISA Providers
The ISA providers listed below lend directly to individuals and are currently accepting applications from US-based students. There are several larger ISA lenders that work directly with schools to offer ISAs. However, those companies don’t advertise the terms of the ISAs directly to borrowers.
Edly
Edly, a private company offering Income-Based Repayment (IBR) loans, wants to create an alternative loan scheme to fund that gap. Their private IBR loans have built-in protections to adjust the loan repayment schedule to fit each borrower’s unique income limitations. Borrowers who have income that falls below $30k per year pay nothing until their earning power is restored.
Edly says that students in high-income potential majors are no more likely to receive a loan than lower-income potential students. And it also plans to expand its eligible academic program list to a wide range of majors beyond STEM, business, and healthcare by the end of the year.
- Allowable majors - Nursing and STEM majors. You must be pursuing an Associate’s, Bachelor’s, Masters or PhD.
- Underwriting fees - 0%
- Borrowing limits - Up to $20,000 per semester,
- Minimum income for payback - $30,000 per year
- Payback period - 60 periods with payments
- Share of income required - Max 23% APR
OPEN AN ACCOUNT
READ THE REVIEW
Stride
Stride was one of the first major ISA providers to lend directly to students. It’s goal is to help students avoid debt and fund education.
With relatively high borrowing limits, Stride is appropriate for graduate school students including those pursuing an MBA or a secondary health education degree (such as a Nurse Anesthetist degree). Also for undergraduate juniors and seniors.
- Allowable majors - Nursing and STEM majors. You must be pursuing an Associate’s, Bachelor’s, Masters or PhD.
- Underwriting fees - 2% of the amount borrowed (If you borrow $10,000 you’ll receive $9,800).
- Underwriting criteria - Credit history is not required.
- Borrowing limits - Up to $25,000 per year
- Minimum income for payback - $30,000 per year
- Payback period - 60 periods with payments
- Share of income required - Up to 15%
OPEN AN ACCOUNT
READ THE REVIEW
Align
Align bills itself as an alternative to a personal loan and it considers your current income when allowing you to borrow. This ISA could be a good way to fund living expenses during an internship or while moving to start a new job.
- Allowable majors - Not considered an educational loan, so all majors allowed
- Underwriting fees - None
- Underwriting criteria - Consider income, education, credit history and other factors
- Borrowing limits - Up to $12,500 per year
- Minimum income for payback - No minimums
- Payback period - 2-5 Years
- Share of income required - Up to 10%
- Payback max - No maximum
Final Thoughts
ISAs can be a great option for students who cannot qualify for federal student loans or other low-cost options. While most schools don’t offer these programs, students can check with the private ISA providers above to see if an ISA works for them.
In addition to the best providers listed above, you may want to check whether Edly, Blair or Avenify are allowing new students to apply for funding. These companies have historically allowed some students to apply for ISAs but the applications are either closed or the FAQ pages are down at this time.
All three of these companies are taking a peer-to-peer lending approach to college financing, so accredited investors may be able to invest through each of these companies. You can see our Edly review for investors here.
Overall, ISAs aren’t our top choice for paying for college but they can be worth considering if you've hit your federal student loan limits. We especially like that they align student goals (high career incomes) with investor goals (high returns) better than traditional private student loans.
