ISA Student Loans Explained: Pros, Cons, and How Income Share Agreements Work

An Income Share Agreement (ISA) is a type of student financing where students receive funding for education in exchange for agreeing to pay a percentage of their future income for a fixed period of time. While commonly referred to as ISA student loans, ISAs are not technically loans because they do not charge interest or have a traditional loan balance.

Instead, repayment depends on how much the student earns after completing their program.

How Do Income Share Agreement (ISA) Student Loans Work?

Most ISA student loans follow a similar structure:

1. Education Funding

The ISA provider covers part or all of a student’s tuition or training costs.

2. Income Share Percentage

The student agrees to repay a fixed percentage of their gross income, typically between 3% and 10%.

3. Minimum Income Threshold

Payments are only required once the student earns above a certain amount (often $30,000–$40,000 per year).

4. Repayment Term

ISA repayment periods usually last 2 to 10 years, depending on the agreement.

5. Payment Cap

Many ISA student loans include a repayment cap, limiting how much a student can repay in total.

Pros of ISA Student Loans

Income-Based Repayment Protection

With ISA student loans, payments automatically adjust based on income. If earnings drop, payments decrease or pause entirely.

No Interest Accrual

Unlike traditional student loans, Income Share Agreements do not charge interest.

No Credit Check or Cosigner

Most ISA student loans are available regardless of credit score or financial history.

Shared Financial Risk

Because repayment depends on income, ISA providers share the risk of a student’s career outcome.

Career-Focused Programs

Many schools offering ISA student loans provide strong career placement and job support.

Cons of Income Share Agreement Student Loans

Higher Cost for High Earners

Students who earn high salaries may repay more than they would with a traditional student loan.

Complex Contract Terms

ISA student loan terms can vary widely, making comparisons difficult.

Limited Availability

Income Share Agreements are often limited to specific schools, programs, or majors.

Fewer Consumer Protections

ISA student loans may not offer the same protections as federal student loans.

Long-Term Income Commitment

Paying a percentage of income can feel restrictive as earnings increase.

Are ISA Student Loans a Good Idea?

ISA student loans may be a good option for:

• Students without access to federal or private loans

• Career-changers entering new fields

• Bootcamp and short-term training students

• Those concerned about income volatility after graduation

However, students who expect high earnings or qualify for low-interest federal student loans may find traditional loans more affordable.

Final Thoughts on Income Share Agreement Student Loans

Income Share Agreement student loans offer a flexible alternative to traditional education financing, especially for students worried about affording loan payments after graduation. However, ISAs are not always cheaper and require careful review of terms, income percentages, and repayment caps.

Before choosing an ISA student loan, students should compare all options, including federal student loans, scholarships, and grants, to ensure they select the best financial path.