To Cut Through the Noise of the ISA Debate, We Need Facts
Income share agreements have both critics and fans. We think there’s a need for strong empirical evidence with clear outcomes.
Financing the Future is excited to feature guest commentary from experts and practitioners in the field. Our goal is to elevate research and knowledge about new approaches to financing education and training, and to encourage innovative providers to center learner interests and racial, gender, and economic equity. Today we welcome Eli Bildner of Rivet School, and Ben Castleman, who served as an outside evaluator for the organization’s Pay it Forward income share agreement (ISA) program. The opinions expressed in guest blog posts are the authors’ own.
As income share agreements (ISA), which tie students’ tuition payments to future earnings, grow in popularity, they have attracted an increasingly impassioned chorus of advocates and detractors. Critics lambast an “an idea so staggeringly bad — morally, financially, factually — that respectful treatment wouldn’t do it justice.” Evangelists hail ISAs as “the future of education” and “a way to eliminate student debt,” and saying they enable “the American Dream as a service.”
To us—a nonprofit leader and a professor of education—there’s a crucial ingredient missing from this debate: empirical evidence.
Do ISAs actually expand student access to education, as proponents claim? Do they propel students to better academic and labor market outcomes? Do they affect student employment decisions or increase student financial well-being upon program completion?
Simply put, we don’t really know. Despite a groundswell of interest in ISAs, the evidence base surrounding this financing mechanism remains anemic.
There’s a small body of research into the theoretical characteristics of the ISA model, risks of adverse selection and moral hazard, and student and parent opinions. Other academic work has examined the related (but distinct) subject of income-driven repayment (IDR) loan plans—exploring barriers to IDR enrollment and impacts on loan outcomes, among other topics. But mostly absent from this early evidence base are true field experiments—randomized controlled trials assessing the causal impact of ISAs on key student outcomes.
We believe this should change, and at Rivet School we’re trying to do our part.
There’s a crucial ingredient missing from the ISA debate: empirical evidence.
Last spring, alongside the launch of our Pay it Forward ISA program, Rivet School implemented an exploratory randomized controlled trial (RCT) to assess whether students randomly offered the opportunity to sign up for an ISA realized better (early) academic outcomes, relative to students assigned to a control group without access to the ISA.
Rivet School’s program enables “post-traditional” students like working adults and parent learners to earn a job-focused bachelor’s degree in as little as two to three years, and for around $10,000 in average out-of-pocket cost. The majority of Riveters are students of color (around 90 percent), first-generation students (around 75 percent), or parents (around 55 percent), and most students work full-time in frontline retail or service roles, or in entry-level administrative or school-based jobs.
While the average Rivet School student receives some Pell Grant funding, many of our students do not. To offer our students an alternative to out-of-pocket payment (and to traditional student loans), we decided to design and launch an ISA program. Students who applied to our Pay it Forward program were first assessed against a set of basic eligibility criteria, and then randomly assigned to an experimental group (which received ISA access) or to a control (which did not).
When we looked at our data a year later, we were encouraged by our results: despite a small sample of 40 students, we found that students offered an ISA enrolled at a higher rate compared with control group students (91 percent versus 76 percent), and that ISA students were significantly more likely to persist in the program (92 percent versus 65 percent). Finally, we found that students selected for ISA access made faster progress toward their bachelor’s degree relative to the control group. (You can find a full write-up of our study, methodology, and results here.)
Given constraints of sample and time, we view these outcomes as directional and suggestive, not definitive. For Rivet School specifically, however, these results reinforce our conviction that an ISA financing option is something that students want and benefit from. And we’ll be paying attention to longer-term outcomes in our ISA group—involving program completion, job placement, and post-program earnings.
We also hope that the spirit of this work carries beyond Rivet School, and reminds us that while theoretical debate can be healthy, we shouldn’t neglect the value of empirical inquiry. We’re looking to research initiatives like Financing the Future at JFF to help ensure that a decade down the line, when scholars and policymakers are heatedly debating the role of ISAs in student finance, they’ll do so armed with the facts.
 The building blocks of the Pay it Forward program were fairly typical of a postsecondary ISA program, and included a threshold (the amount under which repayments were deferred or forgiven), a cap (an aggregate maximum repayment amount), a term (number of monthly payments required), and an income share (percentage of post-program income students commit to repaying). The specific terms of our Pay it Forward pilot were as follows:
● Income share: 0.6 percent per $1,000 borrowed
● Payment threshold: $40,000
● Payment cap: 1.5x amount borrowed
● Payment term: 72 repayment months, plus 48 months of deferment
● Other features: Grace period (6 months), hardship forbearance (12 months), discounted prepayment