The Ave
Published in

The Ave

A guide to Income Share Agreements (ISAs)

How they work, the history behind them, the current landscape, and where they’re headed.

What’s an ISA?

Income Share Agreements (ISAs) are a debt-free alternative to loans. Instead of going into debt, a student receives interest-free funding directly from a benefactor or fund. In exchange, the student agrees to share a percentage of future income with the lender.

The five parts

An Income Share Agreement consists of five main parts:

  • Income Share: A percentage of pre-tax income, due monthly. Think of the Income Share like “equity.”
  • Payback Period: The maximum number of months for which a borrower owes income.
  • Payback Cap: The maximum amount a borrower can pay back, expressed as a ratio of the principal. For example, a payback cap of 1.5x means a borrower can pay back up to 150% of what they borrowed.
  • Minimum income threshold: The pre-tax income amount at which monthly payments drop to $0.

How it works

A borrower begins payments once employed, and continues making payments until their Payback Period expires, or they reach the Payback Cap. Payments are equal to their Income Share times pre-tax income.

  1. Their terms are set such that their income share is 2% for up to 100 months with a 1.5x payback cap.
  2. After graduating, the student receives a job making $60,000 per year. At this salary, their monthly payments are equal to $100 per month.
  3. The student will make their payments for 100 months, or until they pay back $15,000 (1.5 x $10,000). It’s possible they may pay back less than they borrowed. In this example, they’ll pay back exactly $10,000.

The history of ISAs

Milton Friedman

In 1955, Milton Friedman proposed the idea of an equity investment in an individual, allowing investors to buy “shares” in future earnings.

Yale University

In the 1970s, Yale University ran an experiment based off Friedman’s idea. Instead of individual contracts with fixed payback periods or payback caps, Yale created the program so that each participant continued making payments until the fund as a whole was returned.

ISAs Today

Purdue University

In 2016, Purdue University launched Back a Boiler, a dedicated $2 million fund offering upperclassmen at the university to fund their education with ISAs. Since then, they’ve raised another $10.2 million for “Fund II,” and issued 759 contracts totaling $9.5 million in funding disbursed to over 120 unique majors.

Lambda School

While Lambda School wasn’t the first coding bootcamp to offer ISAs — that award goes to App Academy, founded in 2012 — Lambda has become one of the leaders in the space thanks to its founder, Austen Allred, and the team taking to Twitter to share their brand’s success stories.

Startups in the space


Chicago-based Align, originally launched as Cumulus Funding (founded 2011), offers borrowers Income Share Agreements to pay for anything, whether it’s debt consolidation, medical bills, or wedding expenses.


Founded in Chile in 2002, Lumni is the largest (and oldest) company in the space. They’ve issued ISAs to over 10,000 students, and been recognized for their “excellence in social impact” by the World Economic Forum, Bloomberg, the Clinton Global Initiative, and more.

Vemo Education

Vemo Education was founded in 2015, and is based in the DC-metro area. Vemo works with universities, colleges, and coding bootcamps to launch and manage Income Share Agreement programs.


Founded in 2018, Avenify is the only peer-to-peer lending platform for ISAs on the market. With Avenify, retail investors and alumni can invest in students, and students can borrow up to $15,000 to pay for school.

The legal landscape

While there are no formal rulings on ISAs (yet), there have been numerous pieces of legislation proposed at both the state and federal level to set standards for how ISAs are issued and regulated.

Investing in Student Success Act (H.R.3432, S.268)

The Investing in Student Success Act has been proposed in both the US House and Senate.

California Assembly Bill 154

This year, Assemblyman Randy Voepel proposed Assembly Bill 154, which would allow students at the University of California and California State Universities to borrow for school using Income Share Agreements in lieu of student loans.

Criticisms & concerns

Adverse selection in ISAs

Argument: Because ISAs are potentially more risky than a student loan and don’t require the same qualifications as a loan, those looking to borrow with an ISA are likely to be a more risky investment.

The cost of education is the problem, not debt

Argument: The value of a college degree is decreasing and isn’t worth the investment or time. We should be incentivizing colleges to lower their costs to more accurately reflect the value, instead of building solutions around it.

ISAs are just indentured servitude

Argument: Requiring a share of income in exchange for working sounds like indentured servitude.

ISAs are unregulated

Argument: ISAs are unregulated, and don’t provide the same consumer protections student loans do.

Lack of transparency into how much may be paid back

Argument: Because ISAs are 100% income-based, students don’t have a clear understanding of how much they’ll end up paying back when they borrow.

Further reading


The New York Times: No Tuition, but You Pay a Percentage of Your Income (if You Find a Job)


Student Selection into an Income Share Agreement



The Avenify team’s thoughts on higher education, income share agreements, and investing in student success.

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store