Income-Share Agreements: A Flexible Solution or a Risky Gamble?

In recent years, income-share agreements (ISAs) have gained attention as an alternative to traditional student loans. These agreements allow you to repay based on your future income rather than fixed payments. 

This option can be appealing for those who don’t qualify for federal student loans and can’t get private loans on their own, but action by the Consumer Financial Protection Bureau (CFPB) against several ISA providers has raised questions about these agreements’ transparency, fairness, and long-term impact. Here’s what you need to know.

How income-share agreements work

An ISA is a financial contract that enables students to get education funding through their university or a private lender. While considered loans, ISAs don’t function like traditional student loans. 

Here are the differences:

• Requirements: ISAs typically don’t require a credit check. Instead, eligibility may be based on your degree program and grade point average (GPA). 
• Income-based repayment: Instead of requiring you to repay what you owe with interest—generally by amortizing your loan over a fixed repayment period—ISAs require the student to commit to paying a percentage of their future income for a set period.
• Accommodations: You typically don’t need to make payments while you’re in school or if your income falls below a certain threshold. As a result, borrowers with higher-paying careers will typically pay more than those with lower-paying careers.  
• Payment caps: Most lenders will set a maximum amount you must repay. Once you meet that threshold, your contract is satisfied, even if you haven’t reached the end of your repayment period. 

ISAs briefly became a popular student loan alternative, but many lenders and universities that offer them have discontinued their products due to the regulatory issues they pose.  

Examples of an ISA loan

For an idea of how different ISA payments can be based on the borrower’s postgraduation income, see our two examples: Emily and Michael. 

Both borrowed $20,000 to pay for college, agreeing to pay 10% of their income for five years. Upon graduation, Emily lands a job earning $70,000 with consistent annual pay increases of 5%. 

Michael’s first job out of college pays just $30,000, and his annual pay increases are 2% per year. Here’s how the costs break down:

	Emily	Michael
Year 1	$7,000	$3,000
Year 2	$7,350	$3,060
Year 3	$7,718	$3,121
Year 4	$8,103	$3,184
Year 5	$8,509	$3,247
Total	$38,679	$15,612

They borrowed the same amount, but Emily will pay $23,067 more than Michael—that’s about $4,613 more every year. 

Do any companies offer income-share agreements? 

We found no companies offering income-share agreements in the U.S. for college education funding.

Instead of an ISA, we encourage borrowers to explore Edly, our top-rated private loan lender for income-based repayment. Edly’s loan isn’t considered an income-share agreement because it has a specific principal amount and interest, which ISAs don’t have. Edly’s loan requires repayment of the borrowed amount plus interest, whereas ISAs just require a percentage of your income and could result in different total repayment amounts based on earnings.

Because Edly’s income-based product is considered a traditional student loan, it’s more regulated and has clearer borrower protections than an ISA.

Edly

Universities and colleges with income-share agreements

Many universities and colleges that were offering ISAs have suspended these programs, particularly in the wake of the CFPB lawsuits. However, in our research, we found a couple of educational institutions that continue to provide this funding option:

School	Loan amounts	Repayment period
Lackawanna College	Not disclosed	5 years
Robert Morris University	Up to $5,000 annually	7 years

These are income-share agreements, not income-based student loans such as the one Edly offers. If you attend either of these schools, contact your financial aid office to learn more about eligibility criteria, borrowing amounts, repayment terms, and other features.

Pros and cons of ISAs

Anyone considering an ISA should consider their advantages and disadvantages, paying careful attention to transparency and the specific terms individual institutions or lenders offer. 

We recommend speaking with a financial professional before signing an income-sharing agreement. Here’s a quick look at both sides.

Pros

• Could be affordable

  If you struggle to find a well-paying job after graduation, you can expect a lower monthly payment, and in some cases, you may not even need to repay the full amount you borrowed.

• Payments are capped

  While some higher-paid borrowers may pay far more than they took out, lenders cap total payments to prevent a runaway effect. 

• Lenders have a vested interest

  Because payments are based on your income, lenders and universities may be willing to offer career services to help you find a better job after graduation.

Cons

• Can be expensive for some

  If you get a high-paying job, you could pay far more than you would with a traditional student loan.

• Limited availability

  As a newer student loan alternative, few, if any, lenders offer ISAs. Many that once did have discontinued the product in recent years.

• Transparency issues

  Transparency can be a concern, with some ISAs hiding crucial terms and conditions, as highlighted by legal actions such as the CFPB lawsuits.

Our expert’s take

Erin Kinkade

CFP®

The long-term financial impact of an ISA depends on your individual circumstances. Those seeking to fund their education using ISAs should consult a financial professional (i.e., counselor, advisor, or planner). When a repayment plan is agreed upon and followed to completion, the impact on future goals should be minimal. However, life happens, and repayment plans may need to be adjusted, which could affect future goals.

We at LendEDU want to emphasize our concerns with these products based on several legal issues.

Lawsuits and legal concerns about income-share agreement companies

ISAs have come into the legal spotlight, and several companies and schools have ceased offering them. The CFPB has taken action in multiple cases to protect students from illegal practices by ISA providers:

• September 2021: The CFPB found that ISA company Future Forward Inc. misrepresented its product by falsely claiming that it wasn’t a loan. It also failed to provide necessary disclosures, imposed unlawful prepayment penalties, and failed to comply with federal consumer financial law.
• November 2023: The CFPB and 11 states shut down ISA provider Prehired, requiring the company to cancel all outstanding ISAs and refund payments made between May 2019 and March 2023, resulting in more than $30 million in relief. The federal agency and states alleged that Prehired deceived borrowers about the nature of its ISAs and used deceptive debt collection practices. 
• April 2024: The CFPB issued an order against BloomTech Inc. and Austin Allred, permanently banning the former from all consumer-lending activities and banning the latter from student-lending activities for 10 years. Both are also on the hook for civil money penalties. The federal agency found that the two companies made false representations about their ISAs and failed to disclose key facts about the loans.
  

These ongoing legal battles cast a shadow over the ISA industry and have led to heightened concerns over transparency, accountability, and ethical practices. 

How does an ISA compare to other education finance options?

We compared income-share agreements to other options to pay for college, including two other student loan alternatives.

Finance option	Interest accrual?	Payments depend on income?
Income-share agreements	❌	✅
Federal student loans	✅	✅ (For borrowers who choose income-driven repayment)
Private student loans	✅	❌
Scholarships and grants	❌ (No repayment required)	❌ N/A
Federal work-study	Earn funds through work	N/A

ISAs can offer a unique repayment structure tied to income without interest accrual, but we recommend due diligence and careful consideration before you sign one of these agreements. 

Federal and private loans operate on a more traditional interest-based model, with varying levels of flexibility and protection. 

Scholarships and grants offer a no-repayment benefit but come with specific eligibility requirements. Federal work-study ties funding to work, representing another distinct avenue for financing education.

What our expert recommends

Erin Kinkade

CFP®

I would not advise considering an ISA until federal student loans are exhausted and education savings accounts are depleted. If you still need to fund your education, weigh the pros and cons of applying for an ISA. The interest rate environment could affect the suitability, but the most important factor to evaluate is the ISA’s reputation.

How to get an income-share agreement 

The approval process for an ISA will vary depending on the provider. But in general, here’s what you’ll need to know.

1. Shop around: Contact your school’s financial aid office to learn about ISA options, and also research offerings from private ISA providers. Focus on loan amounts, repayment periods, minimum income thresholds, payment caps, and other features that are important to you.
2. Submit an application: Depending on the lender, you may have the option to apply online, over the phone, or in person. You may need to provide basic information about yourself, including your name, school, degree program, GPA, and other important details.
3. Review and sign the agreement: Once the lender has underwritten and approved your application, review the contract’s fine print to ensure you understand what you’re getting into. Then, sign the agreement and start making payments once you’re required to—typically six months after graduation.
   

Unlike traditional loans, ISAs don’t accumulate interest. The repayment is tied to income, so if you earn less, you pay less. A reputable ISA lender may be more invested in your success because the more you earn, the more it gets.

FAQ

What percentage of my income will I pay if I enter an ISA?

The percentage of income you’ll pay varies by provider and could be 15% or less. The payment aligns with a percentage of your income, and providers may offer options to choose the best rate for your budget.

Are there caps on what I’ll repay through an ISA?

Yes, most ISAs have a capped repayment amount, limiting how much you’ll repay over the contract’s life. This cap could be a multiplier of the original funding amount or an implied APR.

What happens if my income changes or I lose my job during repayment?

ISAs are designed to be flexible with income changes. If your income reduces or you become unemployed, the provider might reduce or pause your payments. The provider might extend the terms of your contract, and the contract may include specific rules regarding changes in income.

How do ISA payments affect taxes? Are they considered taxable income?

ISA payments are typically not considered taxable income for the recipient. However, tax laws may vary, and we always recommend consulting with a tax professional to understand the specific tax implications for your situation.

Does any career or field of study qualify for an ISA, or are there restrictions?

Some ISAs are tailored for specific careers or fields of study, such as technology or healthcare. Providers may have specific courses or programs that qualify, so it’s essential to review the details with the provider to understand any restrictions.

What protections exist for students entering into an ISA to ensure fair treatment?

Protections can vary, and it’s vital to review the terms and conditions of the ISA. Recent lawsuits show that some providers may not be transparent about the terms. Always research the provider, ask questions, and consider seeking legal or financial advice to understand the agreement.

Recap of income-share agreement alternatives

Company	Loan amounts
Edly income-based student loan	$5,000 – $15,000 / academic year; $20,000 lifetime max.