September 29, 2021
The Consumer Financial Protection Bureau (CFPB) recently issued a crackdown on an industry providing a new financial product, income share agreements (ISAs), that can help students to better manage the cost of college. Many observers of the higher education space anticipated this would happen eventually. Despite the potential for ISAs to improve the educational, professional, and financial outcomes for students — especially those who are economically vulnerable — the Biden administration seems keen on halting the growth of this industry.
The emerging ISA industry is offering a safer alternative to private student loans, many of which have high interest rates and no post-graduation protections like federal student loans do. ISAs are contracts in which students receive funding to pay for their education in exchange for a portion of their post-grad salary. Purdue University was the first major research university to offer ISAs to their students as an alternative to pay for college without accruing debt. ISAs have since expanded to several other universities, like the University of Utah, and private colleges.