A generation of students weighed down by $1.6 trillion in student loans. Colleges in dire financial straits. Employers struggling to find workers with the skills they need. Innovative approaches, including new financing models, are necessary to address these problems. Income Share Agreements, or ISAs, have the potential to address each of these challenges in turn. But a lack of federal regulation is holding back the growth of the nascent ISA market.
In an ISA, rather than paying tuition up front, students give up a percentage of their future income for a set period of time. Typically, students only pay if their income is above a certain threshold, and often the total repayment amount is capped. This means that if students don’t have income, they don’t have ISA payments. This, in itself, doesn’t lower the cost of college, but it does reduce the risks that students face in getting a degree.
Colleges that provide ISAs create for themselves a financial incentive to ensure strong student outcomes—something our current Title IV funding system fails to do. If colleges earn more when students make more, they are likelier to align their curriculum with workforce needs, make sure students have the skills necessary to succeed, and help students navigate the job market. This helps students, but it also has the potential to revolutionize the business model of college—and in turn, to help employers navigate the demands of a high-skill, 21st-century economy.
For these reasons, the Christensen Institute, along with other stakeholders, has signed the following letter urging Congress to adopt sensible, bipartisan legislation regulating the ISA market.