Consumer advocates have expressed concern about an initiative by some legislators and industry members to ensure that ISAs are treated differently from credit in the eyes of consumer protection legislation. They are concerned, for example, that ISAs, if not properly regulated, could discriminate against borrowers. As the conditions of an ISA are generally based on forecasts of a borrower`s future income, investors in these products can attract students to majors with probably higher returns – the same areas, which are whiter and male-dominated – with more favorable conditions. “Because the terms of an ISA are generally based on forecasts of a borrower`s future earnings, investors in these products can attract students to majors with probably higher returns – the same areas that are whiter and male-dominated – with more favorable conditions.” In smaller institutions such as Messiah College, which is located in rural Pennsylvania, administrators view income-involved agreements as a tool to help a segment of students fill aid gaps after reaching the limits of federal grants and loans. According to the complaint, the tool also underestimates both a potential client`s income at graduation and the growth rate of that income. Projecting a graduate`s income is essential to understanding the cost of an ISA, since payments are made as a percentage of the consumer`s income. Carlo Salerno, vice president of research at Campus Logic, said neither approach to income-participation agreements is intended to fully address the problem of increased funding. (Salerno previously launched a platform that allowed students to market directly to investors for financial support and was a former supporter of the income participation model. CampusLogic announced a partnership with Vemo in June.) There are several pros and cons to an income-participation agreement. Your school, the cost of higher education and your specific financial situation can help you decide whether an income participation agreement is right for you – or whether it`s better to choose traditional student loans. Nevertheless, the new lending model is gaining momentum.
While one university offered revenue shares four years ago, according to Vemo, there were about 76 program programs in 2019. Consumer groups say comparison tools use misleading information about the repayment terms of Parent Plus loans, which inflates the cost of credit and makes ISAs more attractive. They also say that Vemo uses outdated and low entry-level salaries for college graduates who offer ISAs, making ISAs cheaper to pay too low costs. And Vemo also conceals the calculation of a student`s estimated income growth during the repayment period, so its agreements appear cheaper than conventional credits, according to the complaint.