Student Debt and Income Share Agreements­

Many Americans across the country are struggling to repay student loan debt, and many are dealing with unfair debt collection practices tied to student loans. Consumers with student loan debt vary widely in terms of age, with some debtors in their early 20s who recently graduated from college to older Americans who are working to pay off loan balances of tens of thousands of dollars—and sometimes much more—in student loan debt. While consumer bankruptcy rules could change to make it easier for people with student loan debt to receive a discharge in personal bankruptcy, until that point, people with student loan debt continue to struggle.

According to a recent article in The New York Times, for some people, student loan debt might not even be the worst of it. Some people have what are known as “income share agreements,” or “ISAs.” For some student borrowers, this alternative to taking out additional student loans can be enticing. However, for some students, choosing an ISA over a traditional student loan could end up making financial difficulties much worse in the long run.

What is an Income Share Agreement?
When we hear the term “income share” or “income shares,” many Oak Park residents assume the conversation involves family law issues and child support. However, an income share agreement is also a term that is used in relation to higher education funding. For most people, ISAs are not a complete alternative to all student loan borrowing, but rather an alternative to taking out additional loans or covering “gap” expenses.

How does an ISA work? According to an article in EdSurge, ISAs do not require students to pay tuition up front. Instead, “students pay back a portion of their income after graduating and landing a job.” With an ISA, a student typically takes out a specific ISA amount and then pays back “a percentage of their salary after graduating until the debt is settled,” or for a particular period of time. What happens if a student is not able to get a job for quite some time after college graduation? In many situations, “if students don’t land a job, they pay back nothing.” Both individual private companies in addition to colleges and universities are beginning to offer ISAs to some students.

In theory, ISAs make it so that college and universities providing them invest in students and also are responsible for students getting an education that will allow them to repay debt in the future. However, many commentators have voiced concerns about ISAs.

Potential Problems with ISAs and Student Debt
As the article in The New York Times explains, schools could begin discriminating against students in terms of what the school considers to be their likelihood to become high earners after college. Accordingly, ISAs could be offered only to students in STEM fields, while students in the humanities continue to struggle with student loan debt.

More concerning, perhaps, is the lack of consumer protections available when it comes to ISAs. As an article in Forbes clarifies, it is unclear whether any existing protections for consumers concerning debt collection would end up being applicable to ISAs. If there are no clear consumer protections, students who have ISAs could end up being harmed by the institution.

Contact a Consumer Protection Lawyer in Oak Park
If you have questions about consumer rights and debt collection, an Oak Park consumer protection attorney can help. Contact the Emerson Law Firm for more information.


See Related Blog Posts:

Bankruptcy for Student Loans Could Change

CFPB Plans New Restrictions on Debt Collectors

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