Income share agreements: Assessing the latest big idea for fixing the U.S. student loan crisis
Aarthi Swaminathan
June 8, 2020
The American student loan system — described by former officials as “an abomination” and a “trillion-dollar black hole” — currently includes 44 million borrowers holding $1.6 trillion in debt amid a pandemic and an economic crisis.
One of the solutions being floated involves income-share agreements (ISAs), a type of financing where a student pays for education by paying a percentage of their income after graduation.
“Over the last several years, we’ve certainly seen a resurgence and the interest in using income-share agreements to finance higher education, and potentially for other uses as well,” Joanna Darcus, a staff attorney at the National Consumer Law Center, told Yahoo Finance. “And that the interest is primarily driven by financial companies, FinTech platforms, venture capitalists, and some institutions who are interested in exploring the model.”
While not a new idea, politicians and experts are currently debating the pros and cons of ISAs.
