Income share agreements can be a wonderful resource for those looking to fund their education. While ISAs are fairly new, they are already changing the way people think about student debt. While there are many good things about income share agreements, they can also be confusing. Don’t worry! Career Karma has you covered. Check out our ISA pros and cons list!
Pros
No looming loan payments – A percentage of your income is taken out automatically once you’ve gotten a job! No worries about paying a large loan payment if your income isn’t enough to cover it!
Better incentives for schools and programs to help students find jobs – If you don’t get a job, they don’t make money! Schools have a major incentive to help you get a job so they can get a return on their investment.
Diversity of cost – Let’s say after you get out of school, you get a job making $50,000. Your classmate Billy gets a job making $100,000. Regardless of what you make, both of you would still be paying the same percentage. Even though you’d be making less money, your education would cost significantly less than Billy’s.
You only pay when you’re employed – This is a major leg up over traditional student loans. Some ISA’s even guarantee that if you don’t obtain a job within a certain time frame, you don’t have to pay anything at all!
Minimum income requirement for payments – Most ISAs require that you are making at least $40,000-50,000 before a percentage is taken from your paycheck. This is definitely not the case for traditional loans!
Cons
Some ISAs have tricky fine print – This could include higher repayment caps, higher percentage rates for projected low-income majors, and more.
Diversity of cost – Remember the example from above: if Billy is paying a percentage of his $100,000 salary, an ISA might not have been the smartest choice for his funding, as he will be paying significantly more than someone with a lower salary.
ISAs don’t have the same protections as federal loans – Federal programs include public service forgiveness, low-income consideration, and other protections.
Few schools offer ISAs – ISAs are fairly new, and there isn’t much regulation yet.
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