Tuition & Financial Aid
Income Share Agreement
An Income Share Agreement (ISA) is an agreement between you and a funder (which could be an educational institution, a bank, or a private company) that provides you a certain sum of money for educational expenses. In return, you agree to pay the funder—after leaving school— monthly payments for a specified period of time that are calculated based on multiplying your current income by a fixed percentage.
Monthly payment amounts change with your monthly income, because the payments are determined as a percentage of your income. Additionally, payments typically aren’t required in months when your monthly earnings don’t exceed a minimum income threshold.
You may end up repaying less than the ISA amount you received, or more than that amount (up to a capped amount), depending on your income levels during the term of the ISA.
The information that follows is intended to provide general information about ISAs, including typical ISA terms and features. The exception to this is the information about an ISA offered by Blue Ridge Bank, N.A. to WGU students. A brief overview of that particular ISA is provided below. Full details can be found on their website. The general terms and features described on this webpage may not apply to all ISA programs. Please make sure you understand the terms of your preferred ISA program before signing an agreement.
Do the Math
ISAs aren’t for everyone. When compared to traditional fixed installment payment private student loans, they can be financially better in some circumstances and worse in others. They do offer some protections if you face low-income or no-income periods after you leave school. Consider an ISA only after evaluating all federal and state financial aid and grants.
If you qualify, federal student loans might be a better financial option depending on your personal circumstances. We endeavor to help you make an informed decision. Please visit the U.S. Department of Education’s College Scorecard website to see the median earnings and median debt for WGU graduates by program of study.
After carefully reviewing any ISA program, and only if you decide it’s best for your individual circumstances, you will sign an agreement with the ISA funder. The funder pays a portion of your educational expenses (which includes tuition, fees, and expenses funded under typical financial aid) in exchange for an agreement to make payments based on a fixed percentage of your personal income (not household income) for a certain period of time (typically 3–10 years) after your grace period ends.
When you leave the university (whether you graduate or are no longer an active student—we anticipate you leaving in cap and gown!), two things occur: first, for some ISA programs, there is a 6-month grace period. During your grace period, no payments are due. Second, the funder verifies your income, typically using your last tax return, to determine a monthly payment amount.
After your grace period, you begin making payments—if you’re making more than the minimum income threshold.
When your income changes during the year—you get a raise, a higher paying position, or you lose your job, quit work to help a dependent, or go back to school, for example—you notify the funder. The funder will adjust your monthly payment amount to reflect your current income. Or the funder will expect no payment if you let the funder know that your current income is at or below the minimum income threshold.
Generally, for each month you don’t make a payment because you don’t meet the minimum income threshold, your payment term is extended by a month—but only up to a maximum number of months. Why? This ensures that your payments do not continue for an unlimited duration. ISAs typically have a built-in expiration date that applies even if your payments don’t add up to the original funding amount.
At the end of each year, typically after taxes are filed, you verify your income in what’s called an annual reconciliation. If there’s a difference between the total amount you paid throughout the year, and the share percentage of the income reflected on your tax return, you’ll either be asked to pay the difference (if it’s not quite enough), or you’ll get a refund or an account credit if you paid more than what you should have paid.
The contract typically ends in one of four ways...
- Monthly Payments: You make the required number of monthly payments. For example, if you receive an ISA that requires you to make payments for 60 months (these months may be nonconsecutive), your agreement will end when you make 60 monthly payments, even if the sum of your payments is less than the amount you received to cover your educational expenses.
- Maximum Term: You reach the end of the maximum payment term. Income share agreements have a built-in expiration date that, when reached, releases you from the contract—regardless of the number of monthly payments you have made. (And yes, that means if you never make more than the minimum income threshold, you’re never obligated to make a payment.) When you’ve paid each of your required monthly payments, your obligation is complete. For example, suppose you receive an ISA with a 5-year payment term and a maximum term of 7 years. In that case, your agreement will end when you either make 60 payments (as stated above) or when the 7-year period expires (even if you haven’t made any payments because your income was below the minimum income threshold).
- Early Termination Amount: You reach the early termination amount through regular payments or through paying the early termination amount in a lump sum (minus any payments you’ve already made) to exit the contract early. For example, in Blue Ridge Bank, N.A.’s ISA program offered to WGU students, if you received a 2.3% income share to cover $5,000 in tuition, you could make a $5,000 payment the month you graduate and end your obligation. Early termination in months 2, 3, and 4 could look something like $5,075; $5,150; and $5,230, respectively, because the early termination amount increases throughout the payment term. In Blue Ridge Bank, N.A.’s ISA program offered to WGU students, the early termination amount keeps increasing until it reaches 2x the funding amount, which is $10,000 in this example. If your ISA program has an early termination amount feature, the specific dates will be provided in your agreement.
- Overall Payment Cap: You reach the overall payment cap while you’re making regular monthly payments. If, for example, you get a high-paying job and, in the process of making regular monthly payments, the sum of your payments equals the overall payment cap amount, your obligation is complete. Your overall payment cap will be provided in your agreement.
The amount of funds you will receive or that will be paid to your educational institution on your behalf by the funder.
The percent of your personal income used to calculate your monthly payment.
If your personal income is at or below this amount in a month, you will make no monthly payment, but your term will extend on a month-to-month basis up to the maximum term.
You provide your annual tax return to the ISA funder every year so the funder can ensure you have made the appropriate payments and determine if you have paid too much or too little.
Your initial term begins 6 months after you leave the university. Once your initial term begins, you will make payments calculated based on your personal income and income share for this many months, unless your initial term is extended.
Your initial term can extend up to 36 months for months you haven’t made payments because your income was below the minimum income threshold. Some ISA funders also allow a forbearance period which may also extend the maximum term.
The amount you can pay at any time (minus payments you’ve already made) to exit your contract early.
You pay no more than this amount, regardless of personal income, number of income-based payments, or term length (excluding any fees or costs). It is typically expressed as a multiple of the funding amount.
*Specific terms used to describe these concepts may vary based on the ISA provider.
Along with providing a new option for students to make borrowing decisions based on their personal financial circumstances, ISAs features some unique payment protections:
- ISA funding amount never accrues interest;
- ISA contracts typically have an overall payment cap that establishes the maximum amount you will pay;
- Payments are paused if your income is at or below a minimum income threshold;
- ISA contracts have a defined maximum payment term, which offers you certainty that the financial obligation will end when the maximum payment term ends, regardless of the amount you’ve paid;
- ISA contracts may allow you to end the agreement at any time (by paying an early termination amount); and
- If you are an active-duty servicemember or are called to active duty from a non-active-duty status during the term of the contract, there are sometimes additional protections that apply to your payment obligations.
Payment obligations under an ISA generally end when the first of the following occurs:
- Maximum term: Your obligations under an ISA end when you reach the maximum term, even if the sum of your payment is less than your funding amount.
- Required number of payments: Your obligations under an ISA end when you make the required number of payments, even if the total amount you’ve paid is less than the funding amount.
- Overall payment cap: Your ISA obligations end when the sum of your payments equals an overall payment cap (excluding any fees or costs), even if this happens before you make the required number of payments or reach the end of your payment term.
- Early termination amount: At any time, you may end the agreement by paying this amount (excluding any fees or costs), even if you haven’t made the required number of payments or reached the end of your maximum term. An early termination amount will vary based on when, during the term of your agreement, you choose to pay.
If your income is below a minimum income threshold, you are not required to make a monthly payment on your ISA that month. For each month that your income is more than the minimum income threshold specified in your agreement, you pay the ISA funder a percentage of your personal income. Personal income is determined by the financial information you provide to the funder and is verified each year during an annual reconciliation by your tax return.
Monthly Payments = (Annual Income x Income Share)/12
Most ISA contracts require you to update the funder each time your income changes, so the ISA funder can adjust your monthly payment accordingly. Each year during an annual reconciliation, the funder will reconcile your monthly payments with your annual income stated on your tax return. If you have paid too little over the past year because you didn’t let the bank know you had an income increase, the funder will require an additional payment to make up for the amount you should have paid (the income share applied to your actual income for the year). If you paid too much because you didn’t let the funder know you had an income decrease, the funder will either issue a refund or apply the excess to future payments.
Yes, you may satisfy your ISA obligation early. In most ISAs, you may pay the lower of an early termination amount or overall payment cap specified in your agreement (plus any costs or fees) at any time to exit the ISA early.
ISAs are treated like private student loans. The maximum ISA you can be awarded would be your cost of attendance minus other financial assistance. Grants, scholarships, and other need-based aid would be considered as the best option to fund your education and would not be reduced by an ISA.
Even if you don’t graduate, you are responsible for making payments on your ISA in accordance with the terms of your agreement.
Potentially Higher Lifetime Cost: The lifetime cost of an ISA can often be more than a federal loan. The higher your income, the more your monthly payment will be. You may therefore end up paying more than the amount you received (up to a specified overall payment cap).
Fees & Increased Costs: You may become delinquent on your ISA contract if you fail to communicate your annual income each year. If your income is at or below a minimum income threshold, you are generally required to communicate before you stop making payments. Otherwise, late fees and other costs may apply. Changes to your monthly payments, even those based on changes to your personal income, cannot be made by you alone. You must first communicate with the funder. Complying with the communication expectations outlined in your contract will decrease the risk of fees and increased costs, and sometimes the funder or its servicer will send you reminders and requests for needed information. For example, Blue Ridge Bank uses Ion Tuition as a service provider to help students understand their obligations and remind them of requirements in their agreement (like annual reconciliation).
Federal, state, and local tax consequences associated with ISA contracts are not yet certain. However, upon termination of the agreement, if the funding amount is greater than the aggregate sum of your payments, then you may be required to recognize the difference as ordinary income. WGU recommends that you consult with a trusted tax advisor about the potential tax consequences associated with ISAs before entering into an ISA contract.
Blue Ridge Bank, N.A.’s ISA provides an alternative financial aid solution for current WGU students who meet the program's eligibility criteria. This ISA has student-friendly features, including:
- No payments required any time your monthly income is at or below $3,000—the minimum income threshold for this program.
- The payment term features a definite end date (the maximum term). You start with an initial payment term that may be extended for months of nonpayment or forbearance, but only up to a maximum extension of 36 months. This initial term plus 36 months may be extended for another 12 months if you are granted and take all 12 available months of forbearance.
- Early Termination Amount. Not all ISA providers provide a way to exit an ISA early like Blue Ridge Bank, N.A. does through payment of the early termination amount. Unlike a traditional payment cap, which remains the same through the life of an ISA, the early termination amount gradually increases throughout the term of the ISA. The payment cap starts at just a 1x multiple of the funding amount and increases to a maximum of 2x the funding amount. Because the early termination amount increases over time, from 1x to 2x, you may choose to end your agreement early by paying less than you would if you had an ISA with a payment cap that remains flat.
You can find out more about Blue Ridge Bank, N.A.’s program, including eligibility criteria, funding details, product features, and next steps on their website. If you’re interested in Blue Ridge Bank, N.A.’s program, please visit the Financial Services section of the student portal and select “I am interested in applying for an Income Share Agreement (ISA)” box as you complete your Select My Financial Aid Plan.