As more students are concerned about how they will afford traditional loan repayments, schools and programs are beginning to think of different ways to finance the cost of tuition. Income Share Agreements can be a great alternative for students.
If you’re not familiar, here’s how they work. In exchange for deferred tuition, students pay back a percentage of their income after graduating and landing a job. Most colleges cap the total amount that a student eventually pays back.
Schools and especially programs like coding or UX/UI bootcamps have begun to offer this type of financing to their students. Specifically for bootcamps, who do not normally qualify for Title IV funding, Income Share Agreements give students a way to afford to attend.
Colleges also are offering ISAs to help students who have used up their traditional financial aid options and to help ease remaining costs. Advocates say the financing method puts more responsibility on the school to help students succeed, and provides an alternative to loans and traditional student loan debt.
If you’re thinking about offering your own Income Share Agreement at your program, it’s important to know your goals and have a plan of action ready. Continue reading to learn how to design a great ISA program.
1. Figure out your goals with your ISA program
What are your goals for your ISA program? Your goals behind your ISA contract will influence how you design your program and the terms offered to students.
Are you using the program to help open doors to students and increase enrollment? Are you filling in a gap in your financial aid offerings? It’s important to know if your ISA is helping to support students who need more financial aid than what your program already offers.
For example, Purdue University launched its ISA program to help cover a gap in its funding for students. So students who have exhausted their scholarships and grants don’t need to turn to the private student loan market. Take all of these factors into consideration when deciding whether or not an ISA program might be right for your school.
Or perhaps one of your goals for your program is to put skin in the game to align risks for students. With many student loans, the student takes on almost all the risk of the debt. With an ISA you are able to confidently signal to students that the skills the student will learn through your program will allow them to find a job in their field, or gain enough skills to find another suitable position. This also adds to your reputation and shows you are willing to share the risks and rewards with the student. Whatever your goals for your ISA program may be, make sure to identify what they are before beginning to offer your ISA program.
2. Fair for your students but still profitable for you
Your ISA should be, of course, fair for your students, but it’s also important that your ISA is generating enough money to keep the program running, and keep your tuition from rising. It's important to prepare for every situation you can when designing an ISA program.
Setting fair ISA terms from the Income Threshold to your Income Share Percentage is extremely important to ensure your ISA is successful. One other thing to keep in mind is that if you're trying to create a fair set of terms across different fields of study, then you may need to vary the terms of the ISA by field of study because expected income is going to vary.
For example, the University of Utah, offers its Income Share Agreement for students in 18 majors, from chemical engineering and economics to communications and special education.
3. Start with the cost of your program then go from there
To start designing your program we suggest you first know the exact amount your ISA is equal to, whether that be your entire tuition or just a portion. After you know that, you can start to adjust your Income Percentage or the max payment cap to make sure the program will still be profitable for your program while being fair to your students.
4. Make sure you can educate your students on the ISA option
Although Income Share Agreements are a great alternative to student loans they’re not perfect for every student. Depending on their degree, an ISA may not be the right fit for specific students. Students should be very familiar with key terms such as minimum income threshold, max payment cap, payment window, and required payments before they choose to use an ISA. They should also be aware of the exact amount they could be potentially paying back in the long run.
We suggest you have a dedicated page on your website to educate students on ISAs or at least a section on your website that links back to other ISA materials. For example, at Purdue University students who apply for the program are required to read about the ISA and take a quiz about the cap and the downsides so they fully understand what they are signing up for.
Here’s an ultimate guide to Income Share Agreements that will walk you through all the details of ISAs to share with your students.
5. Have a plan for managing your ISA program
When it comes to offering your own Income Share Agreement at your program, it can be difficult to know where to start. It's important to have the right tool and right plan to carry out the program. One that can manage and keep track of all of your students as well as their payments. When looking for an ISA management tool make sure that it has the capacity to verify the student’s income, keep an active record of payments, and automatically adjust the student’s payments and payment cap should their income change. A good ISA product should be able to seamlessly track all of these things with multiple students through each phase of the student’s ISA journey.
It’s also important to have at least one person on your admissions team familiar with Income Share Agreements and how your specific ISA program works. There will be times when the student loses his or her job and their ISA needs to be put into deferment. The Meratas team is always more than willing to help you with any questions you may have about your terms, but it’s still important to have part of your team well versed on your ISA program.
Quality education does not have to be financed with traditional student loans that accrue more interest over time. Income Share Agreements are a great alternative and supplement to student loans! But, trying to manage ISAs in-house can be difficult.
Meratas partners with schools and boot camps that offer training for today’s important skills in different careers. From student applications through collections, our full-service software will make running your Income Share Agreement program easy. Meratas' intuitive, ISA platform can handle all the above and more. You can focus on your program’s specialties while we handle the payment side of ISAs. If you would like to schedule a call to talk about how an ISA could be a great addition to your program’s financial aid, check out our Partner’s page!