Risk-sharing could be the solution to student loans

Madison Rexroat

Taking on student loan debt isn’t the only way to pay for a college education. Though not new, income-share agreements (ISAs) are becoming more and more appealing as students, parents, schools and policy-makers try to figure out how to create a better system of financial aid.

Income-share agreements provide students financial aid to cover college-related expenses and in return, students agree to pay back to the school a percentage of their post-graduation income for a set period of time. Unlike student loans, ISAs are interest free and capped, whether the total payment amount ends up being more or less than the original loan. 

If a student is very successful, the school will receive up to 250 percent of the original amount. If a student can’t find a job after graduation or earns less than a certain amount, the college will not receive money.

ISAs are traditionally formed between private lenders and students, but school-funded ISAs hold schools more accountable for the quality of education they offer.

As of now, only 7 percent of students have ever even heard of an ISA. Needed or not, there are limited protections for students thus far, but as more is understood about the process, ISAs will likely become more regulated and gain popularity among schools.

To read the full article in The Atlantic, click here.