Suppose your ISA requires you to pay 5% of your post-degree income over a 10-year repayment period. If your salary started at $52,000 and increased by 4% each year at age 10, you first paid $217 per month and a total of $31,216. If this ISA required 18% over two years, you would first pay 780 USD per month and a total of 19,904 USD. Mark Kantrowitz, editor of SavingForCollege.com, clearly breaks down costs in CNBC`s article. Suppose, under an ISA, a student receives $30,000 in advance for teaching and then pays 12% of his or her income for 10 years. If the student gets a job, the initial salary is expected to be $50,000. If they receive a 2% increase each year, the student would end up repaying 65,700 $US. “This corresponds to an interest rate of 18.4 percent,” Kantrowitz said, while the federal interest rate for student loans is only about 5 percent. Vemo has worked with dozens of colleges to implement ISA programs, although only a handful have publicly announced the programs to date.
Students enrolled in two- and four-year colleges participating in federal aid programs still represent only a fraction of the largest market place for income participation agreements. Most contracts are still awarded to alternative suppliers such as the General Assembly. As that changes, Vemo plays a big role. But newcomers and sophomores have more time to wait for economic consequences. If you are further away from the beginning of your career, you are balancing the benefits of the income participation agreement due to the recession and the risk of giving up a percentage of your future income. Keep in mind that you don`t know the total cost of an ISA when you sign up. Joining a boat camp is never a decision that should be taken lightly. How can you be sure it works for you? Is it worth the price and uprooting of your life? How do you know what you should choose, especially if placement rates and job guarantees are not what they seem at first glance? It`s a minimum wage. What`s your salary to pay? The salary floor of an ISA should reflect your expected postgraduate income.