Income-share agreements are making a comeback, but are they a smart bet?

Income-share agreements (ISAs), in which students pay reduced tuition up front for a portion of their salary after graduation, are part of the new strategy to expand access, increase affordability, and reduce the risk students run in paying for college, according to Vemo Education, a company that handles income-based student-financing solutions. And a growing number of colleges and universities have recently implemented ISAs as a new, student-centric model that aligns costs with outcomes.

Unlike student loans, ISAs have a fixed number of payments. This may result in a student paying less or more than the total tuition reduction they received during enrollment, but the income-share agreement is always capped at an amount that will not exceed some multiplier (e.g., 1x, 2x, 2.5x).

ISAs let universities show that they stand behind their “product” by taking on part of the risk to finance it. However, if a student doesn’t make a minimum income, no repayments are required. On the other hand, if the student exceeds income expectations, the university receives a bonus on its investment—up to a point.…Read More

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