ISAs 101

How do ISAs work?

Sample ISA Terms

Income Share Agreements (“ISAs”) are a fast growing alternative to private student loans. A properly structured ISA aligns the interests of the student, the school and potential investors.

We believe that ISAs provide a more affordable and flexible way to finance education when compared to private student loans.

By investing in ISAs and further promoting the development of school ISA programs, Edly believes that ISAs can fill the education funding gap (the difference between the cost of higher education and the amount of federal student loans and grants available to students).

This number is large as confirmed by the $119 billion in private student loans outstanding (source: Measure One Private Student Loan Report, Q3 2018).

Private Loans vs. ISA

The two charts below illustrate the cumulative payments made overtime by the student under a private student loan vs a $40,000 ISA salary (Graph A) and a private student loan vs a $60,000 ISA salary (Graph B).

In both cases the private student loan requires the student to start paying earlier than an ISA and results in payments over a longer period of time. In contrast, the ISA delays payments until the student starts earning the minimum income threshold and caps the student at a total number of payments and a total payment amount.

Graph A represents a student earning $40,000 and demonstrates how the student benefits greatly compared to the payments it would have owed under a private student loan. ISA payments were not required until the student’s salary met the minimum income threshold and no further payments were due after the 60 month payment window.

Graph B depicts the cashflows for a student earning above the minimum income threshold at the start. The student pays up to the cap in month 49 and no longer owes payments under the ISA.

Edly offers an alternative to student loans that’s designed to be more affordable and accessible for students.

Understanding ISA investments

The key driver of an ISA investment is the employment outcome of the students. Because investors are getting a share of the students’ earnings, they earn greater returns if students have good employment outcomes.

Edly makes available to investors tools to help analyze ISA investments.

Evaluating schools’ historical outcomes is essential. These outcomes give important clues for future performance (although past performance is no guarantee of future returns).

School “skin in the game”

Because the school is the party best able to influence student outcomes (through admissions, education, and job placement) Edly has structured its ISA platform so that returns for schools and investors are directly aligned with the success of the students (“skin in the game”).

Edly uses a variety of methods to achieve this goal, including delaying payments to schools until after investors have met their IRR target.

Historical outcomes are provided by schools and are available on the edly website.

Investors should review information provided by edly about the schools, some of which have been graduating students for several years and some of which are relatively new.

Start investing in higher education.

Have more questions?

Learn more about investing with Edly, check out our FAQ, or get in touch.