Income Sharing Agreements

ISA (Income Sharing Agreement) is a kind of education loan where investors pay education expenses in exchange for a share of future earnings. Key terms of the loan include:

• Income share percentage - amount of gross income to be paid every month, typically between between 2% and 10%
• Income floor - minimum income required for payments to be taken. Zero income may increase the loan duration.
• Borrowing limit - yearly and total borrowing limit over the life of the loan.
• Minimum income for payback - Most ISA providers cut payments to $0 when the user’s income falls below a given limit, but $0 payments may add to the length of the ISA.
• Payback cap – maximum amount a borrower will pay back, typically expressed as a multiple of the loan amount.
• Loan duration – Number of months that payments must be made. Loan duration may increase Number of payments the user must make towards the ISA or the length they are bound to the agreement regardless of the number of payments to make. Repayment terms typically range from 2 to 10 years. Some ISAs count months in which the user earns less than the salary floor toward the repayment term; others extend the repayment term in these instances.

Distribution of annualized yield

Distribution of payback (excluding periods without income)

Loan restructuring/default (extended period of unemployment)