The Department of Education Income Share Agreement: What You Need to Know

The cost of higher education in the United States has skyrocketed in the past few decades, leaving many students with a mountain of debt upon graduation. The Department of Education has explored alternative solutions to this problem, including income share agreements (ISAs).

ISAs are an alternative to traditional student loans, where students agree to pay a percentage of their future income in exchange for funding their education. The Department of Education recently announced its intention to pilot federal ISAs through the Educational Quality through Innovative Partnerships (EQUIP) program.

The EQUIP program allows institutions to partner with non-traditional education providers to expand access to higher education. The program will provide funding for students to enroll in programs that are not eligible for traditional federal student aid but have the potential to provide graduates with high-paying jobs.

The ISAs offered under the EQUIP program will be regulated by the federal government, which means students who enroll in these programs can have peace of mind that they will not be taken advantage of by unscrupulous lenders. Additionally, ISAs are not considered debt, so they will not negatively impact a student`s credit score.

However, ISAs are not a one-size-fits-all solution. The percentage of income that students agree to pay back can vary widely, from 2% to 15% and beyond. Students should carefully consider their future career prospects and earning potential before agreeing to an ISA.

ISAs are also not eligible for some of the protections and benefits that traditional student loans offer, such as deferment, forbearance, and loan forgiveness programs. Students who are interested in ISAs should research the terms and conditions of their agreements carefully and be aware of any potential risks.

While ISAs are not a perfect solution to the student loan crisis, they do offer an innovative alternative to traditional student loans that could benefit both students and lenders. The Department of Education`s pilot program will provide valuable data on the effectiveness of ISAs and could pave the way for wider adoption in the future.