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Category: Income-share agreements

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...

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...

Boot Camps Help Graduates Get Jobs Without the Debt

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Apr 19, 2018
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Career development and mentoring, Income-share agreements

For many, a degree from an accredited university represents the promise of a successful career. But as more college graduates find themselves in major debt without any career prospects, some students are turning to a different type of institution: boot camps. Most boot camps, like MissionU and Praxis, focus on coding and connect students with internships in tech. Although graduates of these programs lack a name-brand degree, they tend to make up for it with reduced debt and high-paying jobs...

Parents' Student Loans Hurt Their Children

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Apr 17, 2018
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Student loans, Income-share agreements

As student loan debt increases, it is becoming a generational problem. The average graduate with a bachelor’s degree takes 21 years to pay off their student loans. For graduates starting their families shortly after graduation, this often means they are paying back their own debt throughout their children’s’ lives. In a recent survey, 20% of students say their parents are still paying back their own student loans. In a survey of Generation Z students, more than half expect...

Protecting the Rights of Student Loan Borrowers

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Apr 12, 2018
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Student loans, Income-share agreements

Protecting student loan borrowers may not seem like a polarizing issue, but it has caused conflict between federal and state governments in recent months. In response to the lack of federal protections for student loan borrowers, many states have put their own systems in place. However, there has been pushback from the federal government, since many government officials believe that states do not have the right to regulate student loan providers. The latest to pass a bill protecting borrowers?...

A Brief History of Income Share Agreements

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Mar 30, 2018
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Income-share agreements

Although income share agreements have become more popular in recent years, the idea dates back to the 1950s. Today, we dive into some of the most important developments with ISAs. 1955: Milton Friedman originally proposes 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. 1971: Yale University...

Forbes Profiles the Rise in Income Share Agreements

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Dec 07, 2017
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Income-share agreements, ISA investing

Published by: Forbes Author: Michael Horn Intrigue with new models of student financial aid that encourage innovation in postsecondary education and align the incentives of institutions with the interests of students is growing. In particular, Income Share Agreements (ISAs), which collect a set percentage of a student’s future income as opposed to putting a student into debt, is attracting considerable attention. But ISAs are a nascent vehicle. Although their potential to address the issues of...

Income Share Agreements & Career Mentorship: The Perfect Complement

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Nov 29, 2017
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Career development and mentoring, Income-share agreements, ISA investing

  In our previous blog, we talked about how the features of income share agreements make them a smarter alternative to traditional student loans. On a high level, the key component that makes income share agreements a fantastic alternative is that there is an alignment between you and your financier. If you were to find good and a high paying job, your investors will also do better – plain and simple. This alignment means that your financier has a vested interest in your career...

4 Alternatives to Student Loans to Reduce Future Debt

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Nov 27, 2017
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Income-share agreements

In a previous blog post, we pointed out one of the many serious implications to taking on student loans (link to that blog post). With that being said, it is also very important to know that in order to raise your household income, a college degree is very necessary. Currently, student loans are the main source of funding for a college education, and students are less aware of the alternative options. Here are 4 things you can do to reduce the number of student loans you take in: Complete your...

A New Solution to the Student Loan Crisis: Income Share Agreements Augmented with Career Mentorship

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Jul 04, 2017
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Income-share agreements, Career development and mentoring

  With a headline number of $1.4 trillion and many university students graduating OR dropping out with debt, we are facing a crisis that we cannot see. It shows up in conversations with people who have loans or whose family members and friends have loans. It shows up in news articles like this one. By the way, most student loans are federal loans, so this crisis is reflected in taxpayer costs as well. At MentorWorks, we are working on an alternative to student loans. An...

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