Income-share agreements have emerged as a financing option for colleges and education programs. They’ve proven to be a more student-friendly form of financing.
An Income Share Agreement works differently than private student loans; students don’t have to worry about paying back a principle or mounting interest. Besides the absence of growing interest and generally, no upfront payments, a significant benefit of Income Share Agreements is the fact that there are certain instances when your payments are paused or deferred.
ISAs keep students from paying for educational experiences that don’t create value for them in the labor market, aligning the risk and rewards of education and creating better outcomes.
Because of how different ISAs are in regard to repayment, it’s important to educate students on the different ways to pay back their ISA. We have a whole guide on how to finish paying an ISA. After reading this post, if you have any other questions about Income Share Agreements, check out our ISA page.
The Payment Window
One way to satisfy your ISA is by reaching the end of the Payment Window. Before we go any further it’s important to know that the most common way to satisfy one’s ISA obligation is to make the required number of monthly payments. With an ISA, you pay back a percentage of your earnings each month for a set number of months. Each of these payments is considered one of your Required Payments. There’s also a Max Payment Cap, which is the most you could possibly ever pay towards your ISA. It is put in place to protect high earners from overpaying through the Required Payments.
The school or lender who you have an ISA with will have a set time period to collect your Required Payments or Max Payment Cap. This time period is called the Payment Window. However, if you have not reached either of those two and the Payment Window ends, you’re absolved of your ISA obligations.
This is a protection built into your ISA to help you in case you’re without a job for an extended period. For example, let’s say your ISA states the school has 48 months to collect your Required Payments or Max Payment Cap. Let’s say that 12 months into your ISA, you unfortunately become unwell. Consequently, you can no longer work. Let’s say again that you don’t end up getting work until month 45 of your ISA. You make a few more payments but then reach month 48.
Even though you only made 15 payments and didn’t pay back the entire Max Payment Cap, since the 48 months of your ISA Payment Window are up, your ISA is finished. This form of ISA termination is more on the rare side since it is less likely to be without work for a period that long but again, this is a built-in protection to ensure students aren't making payments for several years or even decades after their program ends.
One thing to be aware of before you sign your ISA contract is that a payment window can, in some cases, be extended. This varies from ISA to ISA and is ultimately up to the school or lender the student has an ISA with on whether or not they want to include measures to extend the payment window. Be sure to read your contract carefully before signing so you are aware of how long you could potentially be paying back your ISA.
If you’ve ever wondered how to finish paying your ISA through the Payment Window, hopefully we’ve been able to answer all those questions! If you’re ready to jump into a new career using the power of an ISA, check out all the amazing online training programs that offer an ISA on our student's page here! If you’re interested in offering an Income Share Agreement at your program click here to schedule a meeting with one of our ISA specialists.