Before explaining ISA I want to ask a simple question to you which is “How do you pay your Education Fee?”. General answer will be something like – In school, paying monthly either in advance or at the end of the month. In college, either per semester or per year. In both ways, You are the only person who is putting your parents’ investment at risk. You don’t know if you will get a job in the future or not. You don’t know if You will learn something which will get you a job.
What if someone told you at the start of your degree that you will only pay their fee if you get a job otherwise you will pay 0 fee. Like if you get a job because of them then you will pay a part of your salary for 2-3 years otherwise nothing. ISA is something like this.
What is an Income Share Agreement in short ISA ?
It is a contract agreement between a student and institution. Students agree to pay a percentage of their salary after getting a job in exchange for free education from the institution till they get their job. The amount you pay to the institute increases as your salary increases. This makes institutions work more on the student because if their student grows then they will grow.
ISA or Education Loan ?
First of all, an Education Loan is only to finance College fees and costs related to it. If your Credit Score is not good the chances of getting this loan is nil. You can’t do other extra courses and add it to the Education Loan. You will have to pay Education loan whether you get your job or not. If you will not pay, the person who signed as your security will have to pay. They generally are your parents. So, Education Loan has limited usage.
On the other hand, ISA doesn’t see your credit score, you don’t pay anything if you don’t get your job, no security etc.
ISA is a good option which is being used by a lot of education startups like MasaiSchool. They offer programs of Android Development and Web Development. It takes 7-8 month to complete their course and only pay their fee if you get a job above 5 Lakh per annum. Their fee is 15% of your Salary for 3 Years with maximum cap of 3 lakh total fee.
So, from the above points it’s a very good option for those who join Universities to get a job and pay approximately 10 Lakh of fee with investment of 3-4 Year. Sometimes they don’t get a job and default on their loan, making things worse for them.