An Income Share Agreement (ISA) offers funding for college in exchange for a percentage of your income if and once you land a job.
As students seek to avoid huge amounts of student loan debt, ISAs are becoming increasingly common. For some, they’re a no-brainer. An ISA, for example, could help fill in the gaps for financial aid if you’ve reached federal borrowing limits or are attending a school that’s ineligible for federal or private loans. They are also ideal for students looking to upskill using a Bootcamp or specialty school where they might not have a traditional means of funding.
Consider an ISA as an alternative to high-interest loans, especially if you plan to enter a high-paying profession. You may get more favorable repayment terms.
In some cases, ISAs are available directly from your school, who partner with companies, such as Meratas, to administer and organize the ISA. But if your school doesn’t offer an Income Share Agreement it may be more difficult for you to find one. Before you decide on an Income Share Agreement make sure you know exactly what an ISA is and if it is a good option for you.
What is an Income Share Agreement?
An Income Share Agreement is a contract in which you receive money for your education. In return, you promise to pay the ISA provider a fixed percentage of your gross income for a set amount of time after you finish school as long as you are earning an agreed upon income.
The ISA provider will determine the different terms of your agreement based on characteristics like your college major and projected salary, or depending on the bootcamp or program you are a part of. How much you'll pay each month and overall will depend on your specific ISA's terms. So it’s important to be familiar with some features of your ISA contract:
- Income share percentage: The percentage of your monthly income you are required to pay back as part of your ISA once you begin repayment. Depending on how much funding you need, your expected earnings, and the number of payments you agree to make, the income share percentage might be as low as 2% but it could be as high as 17% or more.
- Minimum income threshold: An ISA will typically have a minimum income threshold, the minimum gross income you must earn before payments begin. Stride Funding, for example, says it doesn’t require that you make monthly payments if you’re earning less than $40,000 per year or $3,333 per month.
- Payment cap: ISAs will typically cap the total amount you must repay at 1.5 to 2.5 times the amount borrowed depending on your program. That way, if you earn more than you’d expected to after graduation, you don’t have to keep making monthly payments after hitting the payment cap.
- Required Payments - By far the most common way for one to satisfy their ISA. 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.
- Payment Window The longest your ISA contract will last. However, this could be much shorter if you make all of your required payments or reach the payment cap before that repayment term is up. Repayment terms typically range from two years to 10 years. Some ISAs will count months in which you earn less than the salary floor toward your repayment term. Others extend your repayment term in these instances.
Most ISAs are run by colleges for their own students, sometimes with private funding sources. But not all colleges offer ISAs, so students may have to find an Income Share Agreement from a few private lenders that students can use to fund your education.
As you review these ISA providers, compare terms such as minimum income threshold and repayment cap, just as you’d judge student loans by their interest rate and repayment term. By looking at the income share terms, you can help ensure you land an ISA with the company that best fits your needs.
Next to compare your options check out the companies below that you can find Income Share Agreements from.
Blair offers ISAs to students to finance their education for as low as $1,000 and as high as $25,000, no matter the major.
The ISAs come with no interest rates and repayment starts one to six months after graduation. Their ISAs range from 2 to 9 percent of your future income depending on their circumstances with typical repayment periods of around five years.
Blair finances your tuition or costs of living, and after you graduate you then pay back a percentage of your income for a fixed period of time. Blair also helps place students into jobs and offers mentorship, resume help, and interview training.
Lumni’s goal is to help you succeed in college and in your career. Instead of a loan, Lumni offers Income Share Agreements. Lumni evaluates each student based on their potential to succeed in college and in their career, not by your credit score of financial assets.
Lumni also helps you achieve your college and career goals by offering a host of additional support services. Repayment doesn’t begin until you get your first job after graduation. You can apply for an ISA through Lumni here.
Stride offers payments tied to your income through ISAs so your payments remain affordable. Stride also provides individualized attention to each student to ensure they get both an affordable education and the soft skills necessary to navigate their future.
Stride offers a 3-month grace period after graduation, and you will never make a payment when you make less than the minimum income threshold. Stride provides rates based on the degree programs you’re pursuing, not your current earnings or ability to find a co-signer. Stride offers ISAs as low as 2.0% per $10,000 funding for a 5 year duration, and you never pay back more than 2x the original funding amount. Apply for a Stride ISA here.
Align offers ISAs as a way to not only pay for education but other cash needs as well as consolidating debt, paying medical bills, or planning your wedding.
To get an ISA with Align, you'll have to apply on their website where they'll then verify your ISA needs and offer you a contract. Once you approve of the contract, just sign and the money will arrive in your account within 1-3 business days. Check out Align’s ISAs here.
With Defynance students can apply to refinance their student loans into an Income Share Agreement. Defynance will pay off the student’s debt in full and in exchange the student shares a percentage of their income for a set period of time.
Defynance does not have a minimum required credit score to apply for the ISA refinancing program. While credit score is a factor, they use forward-looking indicators that predict future earning potential. A Defynance ISA could be a useful financing method for anyone looking to refinance their student loans. Check out Defynance here.
The American student loan system has long needed a solution and these Income Share Agreement companies that are offering ISAs directly to students are helping to provide just that. Remember to do your research on your specific ISA terms so you’ll know how much you could end up paying overall. Check out our ISA page to learn more about Income Share Agreements.
Although every effort has been made to provide complete and accurate information, Meratas Inc. makes no warranties, express or implied, or representations as to the accuracy of content contained herein. Meratas Inc. assumes no liability or responsibility for any error or omissions in the information contained herein or the operation or use of these materials.