Share Agreements (or ISAs) are a different form of financing that many may not be used to. Since ISAs have built-in protections and guidelines set in place to make sure students are not overpaying for their education, the journey can look different for everyone. There are also several ISA terms necessary to know in order to fully understand ISAs.
To help illustrate all the best parts of an , we thought it’d be a good idea to tell a story! Let’s meet Lauren and see what her ISA journey looks like:
Lauren needs $20,000 to afford the multiple expenses of college. Thankfully, the school she wants to attend offers ISAs as part of their program. Lauren signs an for the $20,000 in exchange for 12% of her for 36 months after and once she secures a job.
Because her school offers an ISA, Lauren is able to continue college and graduate without fear of the inability to pay upfront or the thought of growing interest from a traditional private . Lauren can fully focus on her education, without the pressure to get a part-time job because she doesn’t have to make any payments during school.
After , Lauren is unable to get a full-time job at an accounting firm like she was planning. To make ends meet, she finds a job at Starbucks. Her yearly is $20,000, since she used an ISA to pay for college she doesn’t have to make payments.
Why? Because ISA terms include a payment floor or , to protect students who aren’t able to get a great paying job to support themselves after . Before you begin making payments, you have to be earning more than the , which in Lauren’s case is $30,000.
After 6 months, Lauren gets a job at an accounting firm, earning $60,000. Since her is now over $30,000, she begins to share 12% of her with her school. ISAs are collected in monthly payments, so 12% of Lauren’s monthly payments are $600.
Since Lauren’s is calculated as a percentage of her , she has peace of mind, knowing her obligations remain proportional if she decides to change her career path.
After a year of working at the accounting firm, Lauren is in a car accident, rendering her unable to return to work for 3 months. With her , her payments are automatically deferred and she has no need to worry about payments or building debt as she rests and recovers.
After the 3 months, Lauren finds an even better paying job, her is now at $90,000. Since her has increased, her payments increase respectively, and her payments are now at $900 monthly payments.
Lauren’s states she needs to pay a percentage of her for 36 months. But, there is another term called the included in her . The is in place so higher-earning individuals are not punished for moving forward in their careers. Lauren’s payment ceiling is 1.2x the original amount of her ISA or 24,000. Even though she hasn’t shared her for 36 total months, the moment her payments reached $24,000 her is satisfied.
Since Lauren’s increases, she reaches the of $24,000, 34 months into her obligation. Her is over 2 months early!
We hope you enjoyed hearing Lauren’s story, and hopefully, this helps you further understand how an ISA works and how it can benefit you. Want to learn more? Click here to read more from our blog and get more info about ISAs and ways you can level-up your career!