A 2021 Guide to Income Share Agreements: What Is an ISA and How Does It Work?
Finding a good payment plan to attend college courses or online coding bootcamps can be tricky. That’s why many people choose alternative payment methods, such as income share agreements (ISAs).
The following article will explain what income share agreements are and why they might be the right choice for you. Read below to learn about the differences between ISAs and traditional student loans, the pros and cons of ISAs, and 10 schools that offer ISAs as payment options.
What Are Income Share Agreements (ISAs)?
An income share agreement is an education payment contract that allows students to pay for their education once they graduate and earn a decent salary. The payment obligation terms and conditions of an ISA depend on the education provider. Many institutions partner with ISA providers to manage and plan their ISA programs.
Vemo Education is one example of an ISA provider. It has partnered with over 70 top skills training providers and higher education institutions, including Purdue University, to provide income share agreement financing programs. Vemo Education helps colleges manage, launch, and sustain ISAs.
An ISA contract includes an expiration payment obligation period, a payment cap, and the monthly income threshold. Stride, another ISA provider, offers plans that adhere to your earnings and do not require a co-signer.
How Does an Income Share Agreement Work?
An income share agreement is when an educational institution provides you with free education in exchange for a percentage of your future income. The ISA term agreement can require you to pay anywhere between one percent and 25 percent of your monthly income for a set time after you have graduated.
The ISA qualifying income threshold can be $60,000 per year at one school and $30,000 at another. The length of time you spend repaying the education institution, as well as the monthly amount, will depend on your salary and contract. If you lose your job, your monthly payments halt until you secure another job within the threshold.
Five Key Features of an Income Share Agreement
- Grace Period
- Minimum Income Threshold
- Income Share Percentage
- Payment Cap
- Payment Window
A grace period in an income share agreement refers to the first few months after graduation, where there are no mandatory payments. This payment-free period allows students to focus on the job search or settling into a new job without worrying as much about their finances.
Grace periods differ depending on the school but typically last two to three months. This is similar to a grace period offered by lending institutions for private loans and student loan debts. If a student does not secure a high threshold job within the grace period, then they enter a deferment status that extends their grace period.
However, time spent in a different period might decrease the amount of time you have to pay back your coding bootcamp or college. For example, if your ISA contract’s repayment period was five years and your deferment status lasts two years, then you only have three years to pay back your ISA.
Minimum Income Threshold
Minimum income thresholds protect students with low salaries or not job from having to pay back their ISAs. Most minimum salary thresholds will depend on your major, school, and state. They can range from anywhere between $30,000 to $60,000.
This means that your income share agreement payments aren’t due until you start earning a salary above a certain threshold. For instance, graduates from the Grace Hopper Program with an ISA plan don’t have to pay anything until they earn $40,000 or more every year.
Income Share Percentage
The income share percentage is the percentage of your monthly salary being deducted for your ISA payment. The school usually decides the percentage based on your future income projections. Your income share percentage isn’t just limited to your salary, but also your bonuses, salary hikes, and other promotional salary payments.
In addition, the ISA share percentage is calculated before tax. The percentage varies from school to school and can get as high as 25 percent of your monthly income. Flatiron School, for example, asks for a minimum of 10 percent of your monthly income after a six-month grace period.
A payment cap refers to the maximum amount a student will be required to pay back to the school back under their income share agreement plan. Most payment caps lie between one and three times the initial tuition cost.
So, if your total tuition fees were $15,000 and your school’s ISA payment cap was twice the tuition costs, then you will pay a maximum of $30,000. This includes your total payment period, monthly installments, and enrollment agreement interest rates. This ISA obligation is set to protect high earners from being exploited.
A payment window is a maximum time you are given to complete your ISA repayment. The period between the start of your required monthly payments and the time you reach the payment cap is considered the payment window.
The payment window, similar to the other ISA financial obligations, is decided based on your employment status and income threshold. So, if you are in deferment status or get laid off, you have to find a job and catch up on payments within the determined payment window.
How Do You Satisfy an Income Share Agreement?
An income share agreement can be fulfilled in three ways: reaching the payment cap, ending the payment window, and reaching the maximum required monthly plans. The satisfaction of an ISA will differ from school to school and will depend on your contract terms.
If your payment cap is $35,000 and you pay that within 10 months, then your ISA is fulfilled. You do not have to pay for the rest of the payment window. Similarly, if you reach your maximum payment window, your ISA will be absolved regardless of how many payments you have made.
The payment window obligation is set to protect those who lose their employment or fail to secure a high-paying job. For example, if you fall ill and stop paying on the 55th month of your 120-month term agreement, then return to work on the 110th month, your ISA still ends at the 120th month.
The third way to satisfy your ISA is to reach the maximum number of required monthly payments. This means if your ISA contract requires you to pay 10 percent of your income for 10 months, and you do so, then your ISA is fulfilled.
Income Share Agreement vs Student Loans
Income share agreements are becoming a popular alternative to loans for students attending college or coding bootcamps. This is because ISAs generally have lower interest rates and more accommodating payment conditions. A traditional student loan often isn’t a good option for low-income students as they can increase interest and don’t take salary into account.
An income share agreement, on the other hand, has term obligations including payment caps, payment windows, and income share percentages. For example, if your ISA’s payment cap was $25,000, then you will pay a maximum of $25,000 and will not be penalized if you miss payments.
Student loan debts penalize students with missed payment charges and increase the interest rates. This could easily increase your original debt from $25,000 to $40,000. Many students end up in even higher debt throughout their lives, and student debt has become a huge problem across the country.
However, ISA monthly percentages can end up costing more than student loans, and ISAs typically have a high payment cap compared to the initial funding. This, compared to the total annual loan interest rate, means your student loan can cost significantly less. Student loans and ISAs both have pros and cons, so do your research before you sign a contract.
Income Share Agreement Pros and Cons: Is an ISA Right for You?
Benefits of an Income Share Agreement
- Affordable Debts. Income share agreements are often considered affordable debt because they do not accrue interest. Under your ISA contract, you can skip the monthly required payments due to financial duress without consequences.
- Different Ways to Finish. Depending on your ISA agreement, you can satisfy your ISA from the payment window, payment cap, or required monthly payments. These obligations leave more breathing room for students.
- Minimum Income Threshold. Unlike traditional student loan debt, most ISAs will only start your repayment once you earn above a certain minimum income threshold. The amount typically lies around $40,000 per year. This helps students avoid paying more than they can afford.
Drawbacks of an Income Share Agreement
- Racial and Gender Disparity in the Hiring Process. ISA providers and schools determine the ISA income share terms depending on the student’s major and city. This doesn’t take into account issues such as the workplace hiring discrimination often faced by minorities.
- Unregulated. Although ISAs are a popular financial aid option, they are still unregulated by the federal government. This means ISA borrowers aren’t protected by the consumer protection law, and signing an ISA can be a higher risk.
- High Income Share Percentage. Although ISAs have obligations, high-income earners might end up paying way more than they would for a traditional loan. In some cases, an ISA isn’t worth it.
10 Schools That Offer Income Share Agreements
Now that you know what income share agreements are, read on to find out the top universities, colleges, and coding bootcamps that offer this option for students. We will include the minimum threshold, income share percentage, and payment windows. All information has been sourced directly from the schools.
|School||Minimum Income Threshold||Income Share Percentage||Payment Window|
|App Academy||$50,000 per year||15%||36 months|
|Clarkson University||$20,000 per year||1.48% – 1.7%||10 years|
|Colorado Mountain College||$30,000 per year||4%||60 months|
|Flatiron School||$40,000 per year||10%||96 months|
|General Assembly||$40,000 per year||10%||48 months|
|Holberton School||$40,000 per year||17%||42 months|
|Kenzie Academy||$40,000 per year||13%||96 months|
|Lambda School||$50,000 per year||17%||24 months|
|Purdue University||Differs by major and graduation date||Differs by major and graduation date||10 years|
|University of Utah||Varies||Varies||10 years|
App Academy income share agreements have a payment cap of $31,000. You need to be a US citizen or permanent resident and be 20 or older to qualify. The ISA terms require you to pay 15 percent of your monthly income for 36 months once you start earning $50,000 annually. You don’t have to pay if you don’t find a job within three years.
Clarkson University is a New York-based private research university that offers graduate and undergraduate programs in business, engineering, health and sciences, arts, and education. The undergraduate tuition and fees are around $51,128, according to its official website. This cost differs depending on your major and program length.
Clarkson University offers the Lewis Income Share Agreement (LISA) Program for undergraduate students. It has a minimum income threshold of $20,000 per year, 6.2 percent income share, and payment window of a minimum of 10 years. The school offers up to $10,000 per year of ISA funding and provides a six-month grace period.
Colorado Mountain College
Colorado Mountain College (CMC) is a public college that offers bachelor’s degrees, associate degrees, and certificates at 11 campuses across Western Colorado. The school offers programs in business, nursing, education, management, and sustainability.
The Fund Suenos ISA at CMC is offered to DACA and other qualifying students. The minimum income threshold is $30,000 a year, with you paying back four percent of your annual salary for 60 months. There is also a six-month grace period for this option.
Flatiron School is a top coding bootcamp that offers courses in software engineering, data science, and cyber security. The school’s graduates work at high-profile companies including NASA and Apple. The tuition at Flatiron School ranges between $0 to $17,000. ISAs are only available for certain programs.
The school’s ISA has a payment window of 96 months with a minimum income of $40,000 a year, a six-month grace period, and 10 percent income share. These are some of the most common terms for bootcamp ISAs.
General Assembly is a coding bootcamp that offers courses in software engineering, product management, UX design, and data science with tuition of up to $20,000. The school’s Catalyst ISA terms require a minimum salary of $40,000 per year, 10 percent income share, and a payment window of 48 months.
Only students enrolling in the software engineering immersive, UX design immersive, and data science immersive are eligible for ISAs. Since General Assembly is one of the most popular bootcamps out there, it is a great choice if you want to go somewhere with an ISA. It has career services to help you get a qualifying job.
Holberton School is a bootcamp that has over 15 campuses that provide courses in computer science fields. You can learn machine learning, AR/VR, and algorithms, as well as front end, backend, and full stack development. The course prices range between $0 and $15,000, and its ISAs have a maximum payment cap of $85,000.
The payment window for the school’s ISAs is 42 months, and they have a minimum income threshold of $40,000 per year and an income share percentage of 17 percent pre-tax. You can also get ISAs for your living expenses.
Kenzie Academy offers a nine-month software engineering program in collaboration with Amazon and a six-month UX design program. You can learn backend Java development, cloud architecture, UI and UX foundations, and how to build wireframes and prototypes.
Kenzie Academy’s ISA has a payment window of 48 months, a minimum income of $40,000 per year, and a 13 percent monthly income share percentage. Kenzie Academy also offers a tuition refund guarantee to students who fail to secure a qualifying job within 180 of graduation.
Lambda School is an online bootcamp that offers courses in full stack web development and data science. You will learn HTML, Node.js, SQL, machine learning, data visualization, and Python. It also has a free intro course if you want to learn the basics of coding.
The school’s ISAs have a 17 percent income share, 24-month payment window, a minimum income threshold of $50,000, and a payment cap of $30,000. Lambda School graduates work for top companies, including Microsoft and HP.
Purdue University is an Indiana-based top university that offers undergraduate and graduate degrees in everything from business to computer science. The university’s ISA is called the Black a Boiler program and differs according to your major and graduation date.
For example, an accounting major graduating in December 2022 will pay an income share of 3.39 percent with a minimum payment window of 10 years and a minimum income threshold of $20,000 per year. Purdue University’s website has an official income share agreement calculator so you can see what your terms would be.
University of Utah
The University of Utah is a public university that offers bachelor’s degrees, certificates, and graduate degrees in healthcare, engineering, business, and information technology. The university’s Pilot ISA program is open to all undergraduate majors and students with a minimum of 64 credit hours.
The University of Utah ISA varies by how much money you need to receive. You can get $3,000 to $10,000 depending on your needs. For example, if you have a $7,500 ISA and an income of $45,000, your percentage will be 2.97 for 90 months.
So, Are Income Share Agreements Worth It?
Income share agreements are worth it for anyone who cannot afford a coding bootcamp or a university education. However, be sure to sign an ISA contract with a reasonable payment cap, income share percentage, and payment window with regard to your specialization. ISAs are a great option for low-income students and other people with financial need.
Income Share Agreements (ISAs) FAQ
You can get out of your ISA if you meet your payment window, payment cap, or required monthly payments. Once you sign the contract, you have to continue paying, unless you lose your job or meet other unexpected circumstances.
ISAs, also known as income share agreements, are payment plans that allow you to get an education for free in exchange for a set percentage of your future salary.
ISAs are offered by many coding bootcamps, schools, universities, and colleges.
Most ISA payment caps are one to three times the initial funding. However, this figure is subject to change depending on the school.