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This summer marks the third anniversary of year-round Pell grants, where students can receive extra Pell funding to enroll in summer classes and complete their programs faster. Summer Pell is a critical resource, but it doesn’t begin to solve all of the affordability issues facing today’s students, including federal aid restrictions for many student populations, the pressure of costs beyond tuition (such as childcare), and lack of financing options for quality workforce training programs.
These challenges help explain why so many students struggle to afford higher education, even when enrolled in a relatively inexpensive public institution. We urgently need more and better financing options. And we can’t rely solely on federal and state policymakers to come up with new tools, given the glacial pace of legislating in Washington and the difficulty of making national policy decisions that work effectively in every context.
Which brings us to income-share agreements (ISAs), which have been hailed as a way to “fix American’s broken student loan system” and decried as “Wall Street’s Potentially Predatory Alternative to Student Loans.” The truth? We just don’t know yet.
But there are three early adopters of income-share agreements that have caught our attention:
Here’s a summary of these programs’ income-share agreement terms:
|ISA sponsor||Program costs||ISA amount||Income share||Payment term||Minimum income||Payment cap|
|Colorado Mountain College||In-district tuition and fees $2500/year; total cost of attendance ~$15,000 – 17,000||Up to $3,000||4%||60 months||$30,000||1x ISA amount|
|San Diego Workforce Partnership||Tuition $6,500||Up to $6,500||6-8%||36 – 60 months||$40,000||1.8x ISA amount|
|University of Utah||Tuition for in-state residents is $8,952; total cost of attendance ~$19,000 – $25,000||$3,000 – 10,000||2.85%||65 months||$20,000||2x ISA amount|
Recently, Lumina Foundation funded studies of each of these programs to determine their legal, educational, financial, and post-graduation effects. With so many ISA models coming online, why is Lumina interested in these three?
We see Colorado Mountain College, San Diego Workforce Partnership, and The University of Utah as important partners in helping us understand how income share agreements actually work before anyone attempts to scale them up. The lessons we learn from these ISA pioneers will help us identify some key questions that, when answered, can help resolve the ISA debate. We welcome ideas on these questions and plan to share what we find.Back to News