Income Share Agreements (ISAs)
A financing arrangement where you receive funds now and repay a percentage of your future income for a set term — legally treated as private education loans under federal law since 2022.
An Income Share Agreement, or ISA, is a type of education financing in which a school or private lender provides funds for your education, and you agree to pay back a percentage of your future income for a set number of years after graduation. Unlike traditional loans, you repay based on what you earn rather than a fixed monthly payment. ISAs are legally classified as private education loans under federal regulation. They may appeal to borrowers who prefer income-based repayment structures or who are uncertain about their future earnings. The specific terms, conditions, and eligibility requirements for ISAs vary by program and provider. For current information about education financing options and regulations, visit studentaid.gov.
Who it's for
Students considering alternatives to traditional loans, often at coding bootcamps or vocational programs, though some colleges also offer them. Under an ISA, you receive upfront funding and agree to pay back a fixed percentage of your earned income for a set number of months or years (with a payment cap and a maximum term). IMPORTANT: The U.S. Office of Federal Student Aid (FSA) clarified in March 2022 that ISAs used to finance postsecondary education are private education loans under the Truth in Lending Act (TILA) — meaning providers must give you the same required disclosures as private student loan lenders. Consumer advocates, including the Student Borrower Protection Center (SBPC), have raised concerns about ISA pricing transparency, prepayment penalties, and fair-lending risks. Exhaust federal aid first.
How the interest rate is set
ISAs don't carry a traditional interest rate. Instead, you repay a percentage of your income — typically a few percent to 10%+ — for a set number of months, with payments paused if your income falls below a minimum threshold. The effective cost depends on how much you earn and how long it takes to reach the payment cap or term end, which can be very difficult to compare to a fixed APR loan. Under Illinois's 2025 ISA law (Public Act 104-0383), monthly payments cannot exceed 8% of income. Terms, caps, and percentages vary by provider — read the contract carefully and compare the maximum repayable amount to a standard loan.
How much you can borrow
Each ISA provider sets the upfront amount, the income percentage, the payment cap (often a multiple of the amount received, e.g. 1.5× or 2×), and the maximum repayment term. There is no single federal cap on ISA amounts.
Key terms at a glance
| What it is | A private financing contract (not a traditional loan with an interest rate) |
| Regulated as | Private education loan under federal TILA (FSA March 2022 guidance) |
| Repayment | A percentage of income for a set term, with a payment cap |
| Payments paused when | Income falls below a minimum threshold (varies by contract) |
| Illinois cap (2025 law) | Monthly payments cannot exceed 8% of income (Public Act 104-0383) |
| Federal protections | None — no federal IDR, PSLF, or forgiveness |
| Consumer risk flags | Prepayment penalties, opaque total-cost disclosure, fair-lending concerns (SBPC) |
Pros and cons
Potential advantages
- No monthly payment if your income falls below the minimum threshold — built-in income-contingent protection.
- No traditional interest rate; payments stop once you hit the payment cap or the term ends.
- Can provide access to funding for programs (e.g., bootcamps) that may not be eligible for federal student loans.
Things to watch
- Not a federal loan — no federal income-driven repayment, PSLF, or forgiveness programs apply.
- The true cost can be opaque: the effective APR equivalent depends on your future income and can be very high if you earn more than expected.
- Consumer protection concerns: the CFPB has taken action against ISA providers for misleading borrowers, and the Student Borrower Protection Center (SBPC) has raised concerns about prepayment penalties and fair-lending risks.
- ISA regulation is developing: Illinois became the first state to regulate ISAs (Public Act 104-0383, August 2025); consumer protections vary elsewhere.
- Prepayment can be expensive — some ISA contracts impose penalties for early repayment.
Sources: CFPB — Income Share Agreements; CFPB — Student Loans; Federal Student Aid — Federal Student Loans. Federal loan details follow U.S. Federal Student Aid (studentaid.gov); always confirm current rates and limits there.
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Compare student loan & refinance options →Frequently asked questions
Is an income share agreement a loan?
Legally, yes — at least for federal purposes. The U.S. Office of Federal Student Aid (FSA) clarified in March 2022 that ISAs used to finance postsecondary education are private education loans under the Truth in Lending Act (TILA), meaning the provider must give you required disclosures just like any other private student lender. Treat it as a financial obligation: read the contract carefully, understand the income percentage, payment cap, and term, and compare it against federal loan options first.
Are ISAs regulated?
At the federal level, FSA's 2022 TILA guidance requires ISA providers to give borrowers the same disclosures as private student loan lenders. Additionally, Illinois enacted the first state-level ISA consumer protection law (Public Act 104-0383, effective August 2025), capping monthly payments at 8% of income. Protections in other states vary — and consumer advocates such as the SBPC and the CFPB have flagged ongoing concerns about predatory practices by some providers. Verify current federal and state rules before signing.
Should I use an ISA instead of a student loan?
Exhaust federal student loans first — federal loans have fixed, congressionally-set rates, income-driven repayment options, and forgiveness programs that ISAs do not. If you're considering an ISA, understand the income percentage, payment cap, maximum term, and any prepayment penalty; calculate the total you could pay at various income levels and compare that to a standard private loan APR. This page is informational only — not financial advice.