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The eNewsletter articles on this page provide valuable information on timely and interesting financial issues across a variety of subject areas, including retirement, investments, personal finance, annuities, insurance, taxes, college, and government benefits.


   
Mergers & Acquisitions: What's in the Deal for Investors?
How Does the Federal Reserve Affect the Economy?
How to Recover from a Mid-Life Financial Crisis
What is a college income-share agreement?
How much money should a family borrow for college?


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What is a college income-share agreement?

A college income-share agreement, or ISA, is a contract between a student and a college where a student receives education funding from the college today in exchange for agreeing to pay a percentage of future earnings to the college for a specified period of time after graduation. The idea behind ISAs is to minimize the need for private student loans, to give colleges a stake in their students' outcomes, and to give students the flexibility to pursue careers in lower-paying fields.

Purdue University was the first college to introduce such a program in 2016. Under Purdue's ISA program, students who exhaust federal loans can fund their education by paying back a share of their future income, typically between 3% to 4% for up to 10 years after graduation, with repayment capped at 2.5 times the initial funding amount.1

A handful of other colleges also offer ISAs; terms and eligibility requirements vary among schools.

ISAs are considered friendlier than private student loans because they don't charge interest, and monthly payments are based on a student's income. Typically, ISAs have a minimum income threshold, which means that no payment is due if a student's income falls below a certain salary level, and a payment cap, which is the maximum amount a student must pay back relative to the initial funding amount. For example, a payment cap of 1.5 means that a student will pay back only 1.5 times the initial funding amount. Even with a payment cap, a student's payment obligation ends after the stated fixed period of time, regardless of whether he or she has fully paid back the initial loan.

1 U.S. News & World Report, September 26, 2018
 
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* Michael J Hall is an Investment Advisor Representative of and offers Securities and Investment Advisory Services through Woodbury Financial Services, Inc., Member FINRA/SIPC and Registered Investment Advisor. Insurance services offered through RHD Financial, which is not affiliated with Woodbury Financial Services, Inc. Neither RHD Financial, nor Woodbury Financial Services, Inc., offer tax or legal advice. 

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