Income-share agreements, or ISAs, were pitched as a fresh answer to one of higher education’s most persistent challenges: how to help students pay for college without taking on unmanageable debt. Instead of fixed monthly loan payments, students agree to repay a percentage of their future income for a set period of time. If they earn less, they pay less. If they earn more, they pay more.
At a glance, the model appears to offer a built-in safety net. For institutions and policymakers searching for alternatives to traditional student loan agreements, ISAs have been framed as a way to reduce financial risk for students while aligning colleges’ incentives with graduates’ future earnings.
But as colleges and private providers revisit the model amid growing affordability concerns, ISAs remain deeply contested, not because the idea lacks appeal, but because its real-world performance has been far less clear.
A Model Built on Flexibility and Intuition
ISAs gained traction in the mid-2010s as part of a broader push to rethink how students finance their higher education. At a conceptual level, the model is easy to understand, and part of its appeal lies in how closely it aligns with how people think about risk.
“On paper, the idea is intuitive,” said Beth Akers, senior fellow at the American Enterprise Institute. “It ties repayment to outcomes in a way that feels more aligned with a student’s ability to pay.”
For many students, the idea of taking on fixed monthly debt carries a psychological burden that can shape decisions about whether to enroll in college at all.
“Students are often more worried about the downside risk, what happens if things don’t go as planned, than the total cost over time,” Akers said. “A product that adjusts based on income can feel safer, even if it introduces other trade-offs.”
If earnings are low, the payments adjust. If a graduate struggles to find stable employment, the financial burden may be reduced or delayed.
That framing has made ISAs particularly appealing in an era of economic uncertainty, where students are increasingly concerned not just with how much they borrow, but how repayment will feel in real life.
For institutions, the appeal is equally compelling. ISAs have been positioned as a form of risk-sharing, a way for colleges to demonstrate confidence in their programs and signal accountability for student outcomes. In theory, if repayment is tied to earnings, institutions and program providers have a stronger incentive to ensure students graduate with skills that translate into the workforce.
But Akers said the model can obscure important complexities.
“Any time you’re tying payments to income, you’re introducing uncertainty,” she said. “That can be beneficial in some cases, but it also makes it harder for borrowers to predict what they’ll ultimately pay.”
She added that while ISAs are often framed as a meaningful alternative to traditional loans, the available evidence remains limited. The model has not yet been adopted at a scale that allows researchers to fully assess long-term outcomes across different student populations, institutions, and economic conditions.
That uncertainty is part of what makes ISAs complicated: the model is easy to believe in, but harder to evaluate.
One of the most visible institutional experiments with ISAs came from Purdue University, which launched its “Back a Boiler” program as an alternative to traditional borrowing. The initiative drew national attention and was widely cited as a model for how ISAs could work at scale within a traditional university setting.
But over time, the program also drew criticism from some students and families who said the repayment terms were not as straightforward or affordable as expected. Concerns about cost, communication, and long-term repayment obligations contributed to broader skepticism.
Purdue has since moved away from offering ISAs, a shift that reflects a larger pattern: while the concept has generated interest, sustained adoption has been more difficult.
One of the most closely watched questions is whether ISAs influence how students choose their fields of study. On one hand, they might feel safer pursuing passion over income because the model theoretically provides protections to do that.
However, because terms can vary based on expected earnings, some programs have offered more favorable repayment rates to students in higher-paying fields and less favorable terms to those in lower-paying ones. That structure, critics say, could create subtle pressure on students to choose programs based on projected income rather than personal interests or aptitude.
Borrower advocates, however, argue that the gap between theory and practice has already become clear.
“There is a real risk that these products could shape educational decision-making,” said Winston Berkman-Breen, legal director at Student Borrower Protection Center, which recently rebranded as Protect Borrowers. “If you’re offering better terms to engineers than to English majors, that’s not a neutral financial product. That’s one that can influence behavior.”
Berkman-Breen added that differential pricing based on field of study may also raise broader equity concerns. Because certain majors are disproportionately associated with specific demographic groups, he said, pricing models that vary by major could have a disparate impact based on gender or race.
While ISAs have not been widely adopted enough to fundamentally reshape enrollment patterns, the structure itself has prompted questions about how financial incentives intersect with academic choice.
Do Institutions Really Have “Skin in the Game”?
Another key selling point of ISAs has been the idea that they align institutional incentives with student success. If colleges are repaid based on graduates’ earnings, the argument goes, they have a stronger incentive to ensure they are prepared for the workforce.
In practice, that alignment has not always been as strong as advertised.
According to Berkman-Breen, many ISA programs have been administered by third-party companies that pay institutions upfront for tuition costs and then assume the responsibility of collecting payments from students. In those cases, he said, the institution receives full payment regardless of whether graduates earn enough to repay the ISA.
“The idea was that schools only get paid if students succeed,” he said. “But in many cases, the school was paid on day one, and the risk shifted to the company collecting payments.”
That structure, he said, more closely resembles traditional private lending, where risk is shared between borrowers and lenders rather than directly tied to institutional performance.
What Happens if the Economy Falters?
ISAs are often described as offering protection during economic downturns because payments are tied to income. If a borrower loses their job or earns below a certain threshold, payments may be reduced or paused.
But that flexibility comes with trade-offs.
Berkman-Breen said that while low-income borrowers may temporarily benefit from reduced payments, those periods often extend the length of the agreement. In addition, once their income rises above the threshold, payments can increase sharply.
“There’s this idea that it’s always affordable because it’s a percentage of income,” he said. “But it’s based on gross income, and it doesn’t account for other expenses.”
Another point of confusion surrounding ISAs is whether they are subject to the same regulations as traditional loans.
“They’re not unregulated,” Berkman-Breen said. “They are credit products, and there are federal and state laws that apply to them.” However, enforcement remains uneven, leaving gaps between policy and practice.
Experts say the key is not whether the model is innovative, but whether it is transparent, compliant, and aligned with student interests.
Leaders should consider the following: how repayment terms are communicated to students; whether pricing varies by major or program; who holds the financial risk, the institution or a third-party provider; whether the model complies with existing lending and consumer protection laws; and how outcomes will be measured and communicated over time.
As higher education leaders weigh new financing models, ISAs present a familiar challenge: an idea that is compelling in theory, but something else in practice. The question is no longer whether tying repayment to income is appealing. It is whether ISAs are the best way to deliver on that promise, or whether existing loan structures can achieve the same goal with fewer risks for students.
