University Business May 2017 - 41

CAMPUS FINANCE

TUITION PARTNERS

6

GETTYIMAGES.COM: ENISAKSOY

need-to-know points
about income-share
agreements and how they
can help to finance college

By Elaina Loveland

F

irst-generation college student
and recent UC Berkeley grad
Ulises Serrano, an aspiring higher ed administrator, will enter graduate school this fall without any student
loan debt. That's thanks in part to the
income-share agreement (ISA) used to
finance the first two years of his postsecondary education at Allan Hancock
College in California.
For Serrano and 10 others, the
community college had piloted the
ISA concept via the nonprofit 13th
Avenue Funding. Grants and scholarships covered the rest of his undergraduate education.
Serrano dreams of helping others
with access and equity in higher ed.

UBmag.me/tuition

www.universitybusiness.com

"I have a sense of ease right now,"
he says of the fact that his only student loans will be from grad school.
While he still must pay part of his
eventual salary back to the ISA investor, the terms are much more flexible
than with a loan, Serrano adds. For
example, ISA funding doesn't accrue
interest, and there's no set amount
to pay back-students agree to pay a
percentage of future income for a set
number of years.
The ISA concept has been in existence since the 1950s, when American
economist Milton Friedman wrote
about the possibility. The idea, which
many describe as selling stock in yourself, is now an emerging hot topic
within the higher ed financing debate-with politicians such as Marco
Rubio and Chris Christie bringing up
ISAs as one way to potentially ease the
current student debt crisis.

What is an
income-share agreement?
An income-share agreement (ISA) is
an alternative to using student loans
to finance higher education. Rather
than a loan, a student agrees to pay
a percentage of their future income
for a set number of years back to the
investor, which could be a university
that funds its own ISA or a pool of
investors that has launched an ISA.
For example, a student could sign an
agreement for $10,000 and agree to
pay 3 percent of their income back to
the original investor over a 10-year
period, which would fulfill the agreement. There is no set amount to pay
back, like a loan, nor does interest
accrue; repayment is over an agreed
upon time period.

May 2017 | 41


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