Income Share Agreement

A small number of traditional colleges and a growing number of innovative training programs now offer their students the option of financing all or part of their educational expenses with equity, using what is known as an Income Share Agreement .Students do not have to pay any upfront enrollment charges, but will share a certain percentage of their annual income for a specified period. These ISA startups have a market to scale up, but they need innovative solutions to do that.

 When students enroll in school, they face the possibility that their education might not amplify their future earnings. If the student has financed their investment with a loan, they may find repayment unaffordable. With an ISA, the repayment is fundamentally tied to how much they earn, so they don't have to worry about high-interest loans. ISAs can expand the pool of educated and skilled manpower, and can be a win-win for both the education providers and students—ultimately benefiting the economy.

However, all sorts of unforeseen issues could arise with ISAs, as they’re still a relatively new structure which hasn’t been tested by a huge portion of the population. So, from processing applications faster, to keeping motivation of applicants up high, ISA startups will have to contend with many ideas as they grow.

In conclusion, ISA is an important institutional innovation in an important sector. It can certainly expand the pool of skilled labour in an economy. However, it is unlikely to be a magic wand that can fix all the woes.

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