- The University of Utah last week announced it is launching an income-share agreement (ISA) for students in select majors who are close to graduation. Students can receive up to $10,000 per semester in exchange for a portion of their income once they finish college.
- Participants owe 2.85% of their income after graduation for up to 10 years, depending on how much money they received and their major. They can freeze payments if they enter graduate school, participate in voluntary service or have full-time jobs that pay less than $20,000 a year.
- The university is funding the initiative, called Invest in U, with $6 million from donors, investors and its own coffers. Student income payments will support the program.
U of Utah cast the program as one way it can help students overcome financial barriers that could delay or even block their path to graduation. It joins a handful of other colleges to offer ISAs.
In 2016, Purdue University became the first major research university to offer the option for its students. Its program, called Back a Boiler, allows those who have used up their federal loans to take out money in return for roughly 3% to 4% of their future salary, according to U.S. News & World Report. Since then several colleges have followed suit, including Colorado Mountain College, Clarkson University and Norwich University.
Though the terms among their ISAs differ, the colleges tout the model as a way for students to avoid taking on debt they can't pay back. Because of this, some expect the model will become an increasingly attractive option for students who are wary of taking out high-interest private loans.
However, ISAs are still a little-used option. Only about 3,000 to 5,000 U.S. students have used them to pay for roughly $40 million in tuition, The Economist reported.
One potential roadblock to ISAs' widespread use is that colleges may be hesitant to offer them if their students aren't getting good jobs after they graduate. After all, the publication noted, current efforts are investor-backed, and investors are more likely to work with institutions where post-graduate employment is predictable, such as in vocational programs.
Some nontraditional forms of postsecondary education have seen quicker adoption of ISAs. The Lambda School, an online coding boot camp, has used ISAs since it launched in 2017. It's one of more than a dozen other coding schools that offered similar ISAs or deferred tuition programs last year, a sign the model is gaining traction.
Despite ISAs' growing popularity, they are not without critics. New America's Clare McCann and Sophie Nguyen point out the "effectively unregulated" model could end up being a bad deal for some students. With ISAs, they write, "borrowers could easily wind up paying well over what they would with a federal student loan for the same amount of upfront money."