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Read about ISAs, mentors, and current financial news.

The Income Share Agreement (ISA) as an investment hedge – why is it safer?

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Sep 05, 2019
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ISA investing, Income-share agreements

The ideal investment for a financial investor is one that moves with the market in a good economy and against it (or not change much with it) in a bad one. Finding such an investment is hard. The best that investors can typically do is to invest a portion of their assets that are not very correlated (i.e., move less in tandem with) the market. So that when your other assets are tanking in value, there is something in your portfolio propping up the returns. This is the underlying theoretical...

Understanding the True Cost of Student Loans

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Jul 09, 2019
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Student loans, Income-share agreements

Working with student loans can be a stressful and difficult process, especially when it comes to understanding the actual cost of everything involved. It may look reasonable initially - borrow money, then pay it back - but there are actually more than a few potential complications along the way. Like an iceberg, many of the hazards involved in taking out a loan are under the surface. There are several factors involved in determining interest, both at the time of taking out the loan and while...

Student Debt can Hurt Job Prospects. Income Share Agreements can Help.

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May 06, 2019
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Income-share agreements, Student loans, Career development and mentoring

Figure 1: Average MentorWorks ISA Income Prediction Error after Grace Period. Higher prediction errors reflects higher than expected income. Source: MentorWorks EdCap (www.mentorworks.io) An important effect of student debt that has not received a lot of attention is that it reduces the amount of time available to finding a job and leads to compromises during job searches. Students have to make debt payments after graduation and must find employment as soon as possible, rather than search for a...

Which is more like indentured servitude: Income share agreement or student loan?

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Apr 24, 2019
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Income-share agreements, Student loans, Social justice

 We have heard the concern that income share agreements (ISAs) can be like indentured servitude. At face value, this seems plausible, given the notion of “income sharing” embedded in the name of this financing option. I would like to dispel this criticism of ISAs in this note, including the substantive nature of this argument and the aspects driving this perception. In simple terms, an educational income share agreement is an obligation, but not a loan, where a student gets...

Will Income Share Agreements (ISAs) only work by cherry-picking “STEM” programs? The reality is quite different.

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Mar 02, 2019
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Income-share agreements, Student loans

Update (3/2019): I had a great conversation with Will Quist at the 2019 Life Capital conference and acknowledge his well taken point. That is, in the discussion that follows, we are assuming that ISAs have a cap. The question of what kind of cap structure is optimal in ISAs goes beyond the scope of this article. A big thanks to Will for an insightful point! ---------------------------------------------------------------------------- Income share agreements (ISAs) have started to become a...

ISA Investment 101: Resource for ISA Investors

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Jan 08, 2019
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ISA investing

Since Purdue University established its income share agreement (ISA) program in 2016, ISAs are becoming more prominent in higher education. The opening up of this market creates a new asset class opportunity for investors. It also provides a space for impact motivated investors who also want a financial return to invest in education and diversify their portfolios. However, there is very little by way of information for accredited and institutional investors looking to invest in this space. This...

ISA Investment 101: The Basics of Investing in ISAs - The When, How, and Why

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Jan 08, 2019
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ISA investing

    Q: How did ISAs come about? What is their history? Although income share agreements have become more popular in recent years, the idea dates back to the 1950s. Milton Friedman originally proposed the concept of income share agreements in his essay “The Role of Government in Education.” In the essay, he outlines an “equity investment” in which investors can buy a share in an individual’s future earning prospects. In 1971, Yale University became one of...

ISA Investment 101: What Are Income Share Agreements?

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Jan 08, 2019
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ISA investing

What are income share agreements (ISAs), and how are they different from student loans? In simple terms, an income share agreement is an obligation, but not a loan, where the investor receives a fraction of income from a student during the payment term. The investment is a hybrid investment, in the sense that investors do get upside returns for a range of income levels. ISA terms can vary significantly across programs and investors, but there are some common elements. The following are some...

ISA Investment 101: Active Investment and the MentorWorks Approach

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Jan 08, 2019
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ISA investing

The predominant ISA opportunities currently available are passive financial investments. An important aspect of this is that the school shares in the risk of outcomes by participating in the investment. This is certainly a viable argument, and one that we believe. Based on long years of experience by the co-founders of MentorWorks in the higher education environment, however, we believe that there are limits to this effect. Educational institutions want to provide the best possible outcomes for...

ISA Investment 101: Due Diligence

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Jan 08, 2019
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ISA investing

In our time as angel investors, we have conducted due diligence through a relatively extensive process, with multiple checklists, reference checks, expert conversations, and document checks. Christopher Mirabile, Managing Director at Launchpad Venture Group describes due-diligence as an investment process: “Diligence is the fancy word for the process you use as an investor. A good process can help improve your returns.”  Due diligence is very contextual, however. Thankfully, the...

ISA Investment 101: Key Risks in ISA Investing

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Jan 08, 2019
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ISA investing

ISA investing strategy, like any other investment option, has risks. Having invested in early stage companies as angel investors, the co-founders of MentorWorks take risk and risk mitigation very seriously. Our ISA investment risk assessment strategy is similar to some angel investment risk assessment ideas. As an aside, Christopher Mirabile and Ham Lord, Managing Directors at Launchpad Venture Group, have a great article for angel investing risk assessment that we highly recommend. We give full...

ISA Investment 101: How Does Active ISA Investment Compare to Angel/VC Investment?

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Jan 08, 2019
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ISA investing

  There are some parallels between active ISA investing and angel investing. The fund and support approach that MentorWorks promotes is consistent with the angel or VC investing framework. That is, you fund a well-run startup and then you provide expert advice and guidance as well as connections to help the startup do well. The investor then shares in the part of the upside generated from this support. MentorWorks’ career augmented ISA program works along the same dimension. We fund...

ISA Investment 101: Where Do I find ISA Deals to Invest In?

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Jan 08, 2019
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ISA investing

The ISA market, much like angel investment or VC market, does not have a systematic platform to invest through. The one notable exception is Angellist, which started out as a listing platform for early stage startup equity deals.    Many schools are using their own capital to set up ISA programs, and hoping to sell or issue new ISAs after they reach a certain point. However, balance sheet based ISA financing is not a particularly great model for an educational institution with fixed...

Student Loans and Their Impact on Career Choices

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Dec 17, 2018
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Student loans, Income-share agreements

In an era of skyrocketing tuition costs and repeatedly slashed public education budgets, increasing numbers of American students have resorted to taking out loans in order to fund their education. Doing so saddles the student with a heavy burden of debt; the total accumulated student debt in the United States has been recently valued at approximately $1.5 trillion and rising,1 accounting for roughly 10% of all documented household debt.2 Statistics for students graduating in 2016 reveal that the...

Mentor Spotlight: Moe Bachouti, Career advice for Class of 2018

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Jun 18, 2018
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Career development and mentoring

Moe Bachouti   As the class of 2018 put on their caps and gowns to receive their diploma, they start an exciting new chapter in their lives. For many of them, this marks the end of their formal education and the start of their continuous lifelong learning. Moe Bachouti from Cambridge College speaks about how his constant thirst to learn from different people throughout his life has shaped him to become the person he is today. Below is a transcript of our conversation, it is lightly edited...

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