A Brief History of 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 becomes one of the first colleges to offer ISAs, based on a modified version of Friedman’s idea. However, the “Tuition Postponement Option” proved less than ideal. Reflecting on the program’s end, Yale President Richard Levin says that “it was an experiment that had good intentions but several design flaws.”
2016: Purdue University begins its Back a Boiler Program, an ISA program providing students with over $5 million of funding.
2017: The Investing in Student Success Act is introduced in the Senate. This act would designate an ISA as a valid, enforceable contract that is not subject to state laws that limit interest rates or regulate future income. It would also amend the Internal Revenue Code to include an ISA as an educational loan.
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