Finding Our North Star in the Discussion About Income Share Agreements (ISAs)
As income share agreement (ISA) programs have become more widespread in recent years, there has been a greater focus on whether these programs are adding value for students and our system overall. In a piece published this week, for example, EdSurge managing editor Tony Wan looks at ISA programs from the perspective of students who have participated in them.
This is a discussion that deserves more attention — we should be asking whether ISAs are living up to their stated promise. That said, I have often observed how quickly discussions like these can get bogged down in the intricacies of various tools, uncertainty about what problems we’re trying to solve, or both. When that happens, it is hard to find common ground — particularly when things get heated.
As we move forward, then, it would be helpful to come closer to a north star understanding of what “good” even means in the context of student finance. With a definition of success, we can then evaluate tools or proposed reforms against that benchmark.
Defining our north star
At Better Future Forward (BFF), we’ve used three principles — we think of them as a triangle we must hold together — as the north star for our programs:
ACCESS: All students committed to advancing their education should have access to the financial support they need to focus on their education, graduate, and do so on time. Access to support should not be based on a student’s family circumstances or limited to just the highest-achieving academically. Support should be available for supplies and living expenses as well as tuition and fees. The experience should be simple, flexible, and transparent.
PROTECTION: To afford education, students should not have to risk their future financial health. Any payment obligation should have two critical safeguards. First, a student’s obligation should end after a reasonable time, no matter how much he or she has paid. Second, payments should never be more than a manageable fraction of after-school income. If there’s a gap, the funder — public or private, institution or other entity — should bear that loss.
SUSTAINED through OUTCOMES: Ensuring proper financial support and protection are necessary. But unless students are getting a strong educational experience — and supports to be successful — we will still be setting students up to fail — just with less financial risk. A well-designed student financing program must therefore consider the value of the underlying education the student is receiving. Ultimately, a student finance program should be sustained not through something like a cosigner, but because students are graduating and transitioning into meaningful jobs that offer economic security.
More specifically, our programs support broad access for students with limited financial means. Students receive funding to cover any aid gaps, including living costs. After school, they make payments linked to their after-school income (when earning above $30,500) for a fixed time or until their payments hit a cap. This protects students with low after-school earnings. Payments back from students who are reaching economic self-sufficiency then sustain the program for future students.
Unless students are getting a strong educational experience — and supports to be successful — we will still be setting students up to fail — just with less financial risk
Critically, we partner with aligned community organizations and institutions built to help students succeed. As mentioned above, this cannot be about financial support alone. Through partnerships, we ensure students have all their needs met.
Applying this north star to student finance broadly
More broadly, we believe these principles should serve as a north star in evaluating different approaches to student finance, public and private. On the public side, these principles are evident in reforms over the past half-century: Federal financial aid, for example, was built to try to equalize access to financial resources. The introduction of income-driven repayment (IDR) options added critical, albeit imperfect, protections for federal student loans. Finally, the shift in focus from access to completion was driven by a recognition that policy needed a greater emphasis on institutional quality and outcomes.
Our public programs still do not fully live up to these principles — and reforms guided by these principles are desperately needed. We must increase public investments in higher education, with a focus on reducing equity gaps. We must strengthen income-driven repayment options to protect all students. Finally, we must continue working to improve how we hold institutions accountable for outcomes.
We shouldn’t stop there, however. Our civic, philanthropic, impact investing, and market institutions have vast resources we can better harness to ensure the system lives up to these goals. However, in applying these principles, we can see how existing tools are not up to the task. Private student loans fall short both in access and protection. Scholarships are protective but — due to the difficulty of scaling them — only provide access to a lucky few. As a result, private institutions wishing to advance equity goals are hamstrung for lack of better tools.
We must increase public investments in higher education, with a focus on reducing equity gaps. We must strengthen income-driven repayment options to protect all students.
BFF’s mission is to prove out a new model that makes it possible to harness our country’s vast private resources toward equity and opportunity — working in complement with improved public programs. And we wish to do so at a scale that has not historically been possible with our civic and philanthropic institutions. This will require effort, creativity, and innovation. And it is achievable — but only if we have a strong sense of what we’re aiming for.
Better Future Forward (BFF) is a nonprofit education finance organization. We use income share agreements (ISAs) to help students with limited financial resources access and complete post-secondary education.
