Provided by Joseph V. Curatolo
A college income-share agreement, or ISA, is a contract between a student and a college where a student receives education funding from the college today in exchange for agreeing to pay a percentage of future earnings to the college for a specified period of time after graduation. The idea behind ISAs is to minimize the need for private student loans, to give colleges a stake in their students’ outcomes, and to give students the flexibility to pursue careers in lower-paying fields.
Purdue University was the first college to introduce such a program in 2016. Under Purdue’s ISA program, students who exhaust federal loans can fund their education by paying back a share of their future income, typically between 3% to 4% for up to 10 years after graduation, with repayment capped at 2.5 times the initial funding amount. A handful of other colleges also offer ISAs; terms and eligibility requirements vary among schools.
ISAs are considered friendlier than private student loans because they don’t charge interest, and monthly payments are based on a student’s income. Typically, ISAs have a minimum income threshold, which means that no payment is due if a student’s income falls below a certain salary level, and a payment cap, which is the maximum amount a student must pay back relative to the initial funding amount. For example, a payment cap of 1.5 means that a student will pay back only 1.5 times the initial funding amount. Even with a payment cap, a student’s payment obligation ends after the stated fixed period of time, regardless of whether he or she has fully paid back the initial loan.
Joseph V. Curatolo is president of Georgetown Capital Group, 5350 Main St., Williamsville (phone: 633-9800, toll-free 1 (800) 648-8091, fax 633-9789, www.georgetowncapital.com).
Insurance services offered by Georgetown Capital Group, which is independent of Royal Alliance Associates, Inc., with separate ownership, and is not registered as a broker-dealer or investment advisor.
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