Income Share Agreements and Related Programs to Finance College or Career Training


Income share agreements (ISAs) are designed to help students pay for and attend postsecondary education and career training programs. With an ISA, students receive financial support to help cover the cost of their education and, in return, agree to pay a fixed percentage of their future income over a predetermined time period. ISAs are gaining popularity as an alternative financing vehicle, but there is little research to guide practice and policy.

Although student loans have helped millions of students attend college, federal loans often do not fully cover students’ unmet need, and they are not available for many training programs. Close to five million student borrowers, moreover, are currently in default. Many students never complete their programs, while others attend programs that do not lead to good-paying jobs. These problems are often rooted in historical and systemic racial discrimination and biases, and they disproportionately affect students of color and low-income students.

MDRC is working with multiple partners to learn whether ISAs and related programs to finance college or career training can be viable alternatives to some existing financing options (such as private loans or Parent PLUS loans) and if they can help reduce systemic inequities in higher education and career training. Key goals for this work are to understand whether the programs can: increase affordability and access for students of color and students from low-income backgrounds; improve completion and earnings; ensure transparency and understanding of financial obligations; and create a sustainable and scalable financing model.

With the support of the Ascendium Education Group, MDRC collaborated with the Partnership for Education Advancement to develop an ISA Playbook to help guide colleges and universities implementing ISA programs that are paired with enhanced student supports. MDRC is now working with the Student Freedom Initiative to provide technical assistance to nine Historically Black Colleges and Universities (HBCUs) offering an income-contingent funding option for education costs to eligible students using the playbook. MDRC has also partnered with Social Finance, a nonprofit that develops funding strategies to measurably improve lives, to launch a research agenda for ISA-based programs at career training providers in multiple sectors and places around the country.

Agenda, Scope, and Goals

MDRC’s goal is to advance learning and inform practice and policy for ISAs and related programs that are designed to improve outcomes for students of color and low-income students.

ISA Playbook: With the support of the Ascendium Education Group, MDRC worked with the University of North Carolina at Charlotte, Columbia College Chicago, and the Partnership for Education Advancement to develop an ISA Playbook. The playbook includes a series of guides, activities, and tools to help institutions set eligibility criteria, define a target student population, develop educational materials about the ISA program, develop training for staff to help students make well-informed decisions about financial aid options, and implement enhanced student support services as part of the program.

Student Freedom Initiative: MDRC is partnering with the 501(c)3 public charity Student Freedom Initiative, which provides holistic services: (1) internships, (2) tutoring, mentoring, and other student services, (3) HBCU capacity-building, and (4) an income-contingent alternative to traditional fixed-payment obligations, called Student Freedom Agreements. MDRC is providing technical assistance to the Student Freedom Initiative in its roll-out of the Student Freedom Agreements for juniors and seniors majoring in science, technology, engineering, and mathematics (STEM) at nine HBCUs starting in 2021. As an option to Parent Plus Loans, under a Student Freedom Agreement, a student would receive funds to pay for a portion of his/her educational expenses in return for monthly payments in the future that are based on the student’s income after leaving college. These monthly payments are designed to provide an equivalent and perpetual benefit for future students. Using the ISA playbook, MDRC is supporting the design and implementation of the Student Freedom Agreement communication strategy and staff training at participating HBCUs. Lessons learned from our efforts will be used to expand the program to minority-serving institutions with STEM programs that choose to participate in any of the four components of the Student Freedom Initiative’s program.

Career Impact Bonds:MDRC is partnering with Social Finance to design and implement a learning agenda for the UP Fund, a $50 million portfolio of impact investments in Career Impact Bonds (CIBs). The Career Impact Bond is a financing model that provides education and wraparound support services for people looking to upskill or reskill. The Career Impact Bond is designed to advance economic mobility for people who face barriers to education and employment like low incomes, criminal justice involvement, and immigration status. Social Finance is launching 8-12 Career Impact Bonds around the country across a range of in-demand industries, such as information technology, skilled trades, health care, and green energy. The Career Impact Bond brings together financing, short-term vocational training, and supportive services so participants can enroll in training programs at little to no upfront cost. Those who gain employment and whose earnings reach a predetermined earnings threshold following graduation repay program costs through income-based monthly payments with fixed repayment terms and payment caps, all of which are outlined in a Student Bill of Rights. As the learning partner, MDRC is working with students, alumni, staff, and research partners to design and implement a research agenda to study Career Impact Bonds, the student experience, and student outcomes.

Design, Sites, and Data Sources

MDRC’s work focuses on: (1) applying evidence-based technical assistance to support programs and (2) designing and implementing a robust learning agenda to learn about students’ experiences and outcomes.

Student Freedom Initiative: MDRC is providing technical assistance to help the HBCUs implement Student Freedom Agreements, design and support communication to students and families, and train HBCU staff. The nine HBCUs are: 

  • Claflin University 

  • Clark Atlanta University 

  • Florida Agricultural and Mechanical University 

  • Hampton University 

  • Morehouse College 

  • Prairie View A&M University 

  • Tougaloo College 

  • Tuskegee University 

  • Xavier University of Louisiana 

Career Impact Bonds: MDRC plans to conduct a 10-year evaluation of CIBs, collecting and analyzing data from the participating CIBs about students’ experiences from the point at which they learn about the CIB opportunity through the duration of their ISA repayment period. These data will include student demographics, support service utilization, program experiences, and student outcomes that include program completion, employment and earnings, and students’ program and post-program life experiences. Social Finance has launched CIBs at the following four providers and will add up to eight more: 

  • General Assembly 

  • Acuitus 

  • Alchemy Code Lab 

  • American Diesel Training Centers