ISA: Begone, Student Debt!

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ISA: Begone, Student Debt!

Education costs are sky-rocketing. Concern over the affordability of higher education is slowly becoming a focal point for socio-economic and political discussions around the world. The current notion among the masses is that traditional universities are the only pathway into a stable and promising career. To support and fuel these dreams, many end up having to take hefty student loans to afford good education.

But, the real question is, is it worth it? Does higher education provide the value that it claims to provide? And even importantly, is it worth the money?American students owe over 1.8 trillion dollars in student loan debts (which is much much higher than the GDP of Pakistan!).

Even with a fast-growing system and ever-improving infrastructure, the lack of government funding has led to a rise in private-sector education in India, which costs significantly more. Keeping aside the costs of higher education, the ever-present disconnect between the rapidly changing work ecosystem and the stagnant syllabus is also evident. Educational institutions around the globe are struggling to keep up with the tremendous progress in science, society and technology that is taking place.

Sure, this doesn’t mean that colleges are useless. Yet. Studies show that college graduates perform relatively better compared to their non-certified counterparts.

But given the rising costs of higher education and an increasing focus on skills in workplaces, the current system of education is slowly losing traction. Our current education system, which puts an immense amount of financial pressure on young adults, needs a complete upheaval.

It’s time we rethink how we fund education and build future generations of workforces. And the newest alternative to education funding are Income Share Agreements. In the last couple years, there has been an increase in the interest for exploring alternative avenues for education. Many universities, colleges, and specialized private edu-firms (coding bootcamps) have been experimenting with Income Share Agreements.

What is An ISA?

An ISA, or an Income Share Agreement is a binding contract between a student and an educational firm, usually a private educational company or a university. The school or program provides a service (either classes, training, or course work) in exchange for a certain amount of the student’s income after the program’s completion. For example, a university may offer a student their undergraduate program free-of-cost, in exchange for 5% of the student’s income for 5 years. Usually, ISAs only take effect when the contractor is able to secure a job opportunity that pays a defined minimum salary amount. Most ISAs also have a max cap limit after which the contractor can stop paying.

One of the major drawbacks that graduates of the current education system face is that most of them come out with a degree, and a considerable student debt. These graduates lack a career opportunity that can provide them with a strong financial stability.

Getting a hefty student debt, only to end up working at entry-level jobs for the first few years after graduation puts these kids into a difficult financial situation.

Universities do not guarantee a stable job and income. And in today’s competitive work environment, higher education has become nothing more than a minimum bar for entry. Sure, this doesn’t imply that colleges are not needed to build a thriving career, just that many people see college as the only way to move forward with a successful life.

Income Share Agreements can lessen the pressure of financial risk on the student’s shoulders. If the graduates of an ISA program are unable to make a certain amount of money, they are not liable to pay back any portion of their income to the institution that taught them. On the other hand, if a graduate is able to begin their career with a relatively high salary, both the ISA lender and the graduate is able to make a profitable return.

For people who’re unaware of ISAs, it may seem daunting having to give up a portion of their income to someone else. However, for the right people, it can open up doors of opportunities that were closed to them before. Not everyone is financially capable of affording higher education, and many wouldn’t want the added burden of a student loan on them after graduation. In such scenarios, ISAs provide a win-win situation for everyone, by providing a more economical and beneficial model for higher education.

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