Frequently Asked Questions
What is an income share agreement?
An income share agreement (ISA) is a financial obligation in which a student receives funding for education-related expenses in exchange for paying an agreed upon percentage of income over a defined number of months. It is not a traditional loan or grant, and there is no principal balance or interest rate. ISA payments flex with changes in an individual's income and life circumstances. ISAs pay today’s tuition with tomorrow’s earnings.
What are the benefits to students?
ISAs are flexible, innovative funding tools that provide students an alternative to traditional educational loans. ISAs adapt to life changes and do not add to debt burden. While student loans are based on a principal amount and accrue interest, ISAs are based on a student’s future income. Debt incurred through most student loans may create substantial risks to students if they cannot afford their payments during and after college, whereas ISA payments adjust according to levels of income. This ISA program is specifically designed to fill funding gaps so students can enroll full time, complete their degrees faster, and begin earning sooner.
What are the key contract terms for an ISA?
There are five key contract terms in an ISA:
Income share: percentage of monthly income a student agrees to pay.
Payment term: maximum number of monthly payments required to fulfill ISA obligation.
Minimum Income threshold: income below which payments are paused.
Payment window: maximum time window for the ISA. If your ISA is in good standing, the obligation ends when the payment window is over even if you’ve paid less than the initial funding amount.
Payment cap: maximum amount a student can be obligated to pay; expressed as a multiple of the ISA amount.
How much funding is available per student?
In the pilot phase of the G-Co ISA, undergraduate students in all majors who are within 64 hours of completing a degree are eligible to receive $3,000 to $10,000 in ISA funding. A student may receive up to two ISAs each year—one for the fall/spring academic term and one for the summer term. ISAs can be used to fill funding gaps after any grants and scholarships are awarded.
What is the difference between an ISA and a student loan?
Both ISAs and loans are a way to pay for educational expenses without upfront costs.
An ISA payment obligation is based on income and there is no principal balance or interest. With an ISA, students pay a percentage of their monthly income for a fixed number of months. In comparison, a traditional loan payment is based on a principal amount borrowed, accruing interest and fees, regardless of your earned income. With a loan, students repay a set amount that is based on the principal balance, interest and fees, and the payment window can be extended.
ISA payments self-adjust by income level and therefore, by design, are affordable according to your income. With loans, payments remain the same even if income goes down or is lower than expected, exposing students to the risk of being unable to make loan payments.
When earnings are below a certain threshold (i.e., monthly income of $1,667, annual salary of $20,000), no ISA payment is due. Payments are suspended until income surpasses $20,000. With a loan, interest usually accrues and the future financial burden increases for each month a borrower is unable to make payments. With some loans, a borrower may still be required to make payments even when income is low.
What are the tax implications of an ISA?
ISAs are not currently reported on a 1098 T.
The federal, state and local income tax consequences of ISAs are not yet certain. Upon the maturity or termination of an ISA, if the aggregate amount of funding credited to your account is greater than the sum of payments you made during the payment obligation, you may need to recognize the difference as ordinary income. We recommend you consult with a trusted advisor about the consequences of entering an ISA.
What are the risks to students?
Failure to communicate your income: If you fail to communicate your annual income or experience difficulty making payments, then your account may become delinquent and eventually go into default. This can be avoided by maintaining communication and complying with the terms of your ISA contract.
Students earning higher than average salaries: If you earn significantly more than the average salary for your major, you may pay more than others in the program, but never more than the 2x payment cap (e.g. you have $3,000 ISA, your payment cap would be $6,000). Conversely, should you earn less than your peers, you would pay less.