Where do we go from here?

EFI works with thought leaders in higher education, government policy, student advocacy and the financial community to develop a viable Income Share Agreements (ISA) program that can be broadly adopted by universities and students and be financed in private capital markets.  We believe that ISAs – obligations where repayment is tied to a student’s future income – have significant advantages over current loan based funding programs. ISAs can mitigate the risks of loan defaults and delinquencies on numerous stakeholders. They also enable students to make career choices that are driven by personal interest rather than economic necessity and can reduce the emotional and financial trauma of unmanageable debt.
 
By helping students avoid unmanageable debt, ISAs will protect credit ratings and access to credit for student recipients – positively impacting their economic futures and overall economic growth. For institutions of higher education, ISAs provide a tool for the recruitment and retention of students, a new source of funding, and a structure that improves outcomes for their graduates. From an operational standpoint, ISAs are easier to administer than federal loans, simpler to understand for students and families, and may have tax advantages over traditional loans.
 
EFI will pilot a program to track and assess use cases and develop and analyze performance data.  We are forming partnerships with other organizations that will provide complementary benefits to participating students and educational institutions.  A major objective of EFI is to create a scalable and sustainable program that can have a meaningful impact on the millions of students who borrow more than $100 billion annually.  A sustainable program will require utilizing private capital and market-based financing to benefit students and lessen the burden on taxpayers.

 

Summary of Benefits
 

For students and families

  • Alignment with ability to pay

  • Better downside protection than private loans and arguably better than federal loans

  • Does not rely on credit scoring or need a co-signer

  • Can be less expensive than many existing loan options

  • May have tax benefits

 

For colleges and universities

  • New source of funding and financial aid option for prospective or returning students

  • Enrollment management tool for recruiting and retention

  • Creates better post-graduation flexibility for students (improves student outcomes)

  • Ability to leverage school brand as a program participant (selectivity)

 

For taxpayers

  • Reduces the reliance on direct taxpayer dollars (Treasury) for access to higher education

  • Reduces the financial/economic risk presented by the existing  federal loan portfolio and increasing program cost

  • Facilitates private capital financing, freeing up government resources

For society at large

  • Better aligns interest of students and schools

  • Expands access to higher education

  • Avoids penalty for graduates who choose to have families or care for elders instead of working

  • Lightens the burden for those whose job prospects are impaired by health or other misfortunes

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