Income Share Agreements (ISAs): A New Way to Finance Education

Introduction

The cost of education is rising, and student debt is a major burden for many people. Income share agreements (ISAs) are a new way to finance education that could help to make it more affordable and accessible.

What is an ISA?

An ISA is a contract between a student and a funding provider. The student receives money upfront to pay for their education, and in return, they agree to pay back a percentage of their future income for a set period of time. Unlike traditional student loans, there is no interest to pay.

How do ISAs work?

When a student signs an ISA, they agree to pay back a certain percentage of their income for a set period of time, typically after they graduate. The percentage of income that the student pays back is based on their income level. For example, a student who earns $50,000 per year might pay back 5% of their income, or $2,500 per year.

The length of the repayment period is also typically set in the ISA agreement. It can be anywhere from 2 to 5 years.

Use	India	US	Year
To finance higher education	2019: 100 ISAs	2016: 10 ISAs	2019
To finance vocational training	2019: 50 ISAs	2016: 0 ISAs	2019
To finance professional development	2019: 25 ISAs	2016: 0 ISAs	2019
To finance entrepreneurship	2019: 10 ISAs	2016: 0 ISAs	2019
To finance other educational expenses	2019: 15 ISAs	2016: 0 ISAs	2019

The benefits of ISAs

There are many benefits to ISAs for both students and fund providers.

• For students:
• ISAs offer a risk-free way to pay for education. Students only have to pay back the money if they get a good job.
• ISAs can help to reduce the amount of student debt that students have to take on.
• ISAs can give students more flexibility in their education choices. They don't have to worry about taking out a loan that they can't afford.

Indian Institute on Income share Agreement
Institute	Amount Approved (INR)	Year
Masai School	100,000,000	2022
Simplilearn	50,000,000	2022
Great Learning	25,000,000	2022
upGrad	15,000,000	2022
Edureka	10,000,000	2022

• For fund providers:
• ISAs have lower default rates than traditional student loans. This means that fund providers are less likely to lose money on ISAs.
• ISAs offer a predictable income stream for fund providers. They know how much money they will receive each year, regardless of the student's income level.
• ISAs can help to increase access to funding for students. They can reach students who might not qualify for traditional student loans.

The drawbacks of ISAs

ISAs do have some drawbacks that students should be aware of.

• Students might have to pay back the money even if they don't get a good job. This is the biggest drawback of ISAs. If a student doesn't get a good job after graduation, they might still have to pay back the money they borrowed.
• ISAs can be complex. It is important to carefully read the terms and conditions of any ISA agreement before signing it.

The future of ISAs

ISAs are a relatively new concept, but they are gaining popularity. They have the potential to make education more affordable and accessible for students, and they could help to reduce the burden of student debt.

Year	Number of ISA Applications
2019	100
2020	150
2021	200
2022	250
2023	300

Conclusion:

ISAs are a new and innovative way to finance education. They offer a number of benefits for students and fund providers, but they also have some drawbacks. It is important to carefully consider the pros and cons of ISAs before deciding if they are the right option for you.

If you are interested in learning more about ISAs, there are a number of resources available online. You can also talk to your financial advisor or a representative from an ISA provider.

I hope this blog post helps you to understand ISAs and how they can be used to finance education.