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Intuition on ISA Pricing

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An income-share agreement (ISA) is a contract between a student and an ISA provider. The provider pays some amount of money towards the student's education in exchange for a share of the student's future earnings after graduation. ISAs are generally defined by five values, all effectively set by the provider before the contract is signed: the initial payment amount, the ISA percentage, the payment cap, the duration cap, and the income threshold. Upon signing, the provider pays the student (or really pays the school on behalf of the student) the initial payment amount. When the student finds employment after graduation that pays above the income threshold, she pays the agreed-upon percentage of her income to the provider each month. These payments are made until either the total amount paid by the student exceeds the payment cap ot the total number of payments exceeds the duration cap. For example, consider an ISA with an initial payment amount of $10,000, an ISA% of 5%, a maximum repay

a11ce.com/isa.html What is an ISA? An income-share agreement (ISA) is a contract between a student and an ISA provider. The provider pays some amount of money towards the student's education in exchange for a share of the student's future earnings after graduation. ISAs are generally defined by five values, all effectively set by the provider before the contract is signed: the initial payment amount, the ISA percentage, the payment cap, the duration cap, and the income threshold. Upon signing, the provider pays the student (or really pays the school on behalf of the student) the initial…

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