Going to college, whether a student gets an education or not, has become exceedingly expensive. Many people, thinking that a degree from a prestigious institution is essential to success in life, borrow heavily to pay for their degrees. But there is an alternative to college loans — Income Share Agreements (ISA), where investors put up the needed funds in exchange for a commitment by the student to pay back a percentage of his or her earnings after graduation.
The ISA concept has been around for at least 15 years, but it has not really caught on. One reason might be looming legal uncertainties about these contracts, and there are currently bills in the House and Senate that would eliminate the uncertainties. In today’s Martin Center piece, I look at the legislation. So far, neither bill has advanced, but the GOP leadership ought to push them. Getting students out of the habit of thinking “federal loans are always available” and into the habit of thinking “I need to be worthy of an ISA” would be a big move in the right direction.
Purdue University has begun a pilot ISA program and, while it is not meant to replace student loans, it opens up the ISA prospect to more students. That a major research university is taking this step is encouraging.
The best feature of ISA funding is that it injects market sensibility into college financing. Students who have good prospects will find it easier to enter into these contracts; students who seem aimless or intent on one of the SJW-type majors will find it hard or impossible.