At Edifund, we look at your potential for future earnings as a basis for offering you an income sharing agreement. An income-sharing agreement is a financial contract that funds a student`s education. In return, the student pays a fixed percentage of their employment income after graduation. The percentage of revenue paid and the payment period are negotiated before the contract is signed. 8B Education Investments is the first company to provide funding to African students at global universities in the form of revenue-sharing agreements. With this innovative financing instrument, 8B contributes to the democratization of world-class education for Africans. Students attend universities they would not otherwise afford, universities diversify their international student population, and investors receive a return based on student repayments. Revenue sharing agreements (ISAs) are a funding tool that provides education funding in exchange for a defined percentage of future revenues. Once a student earns income above a certain threshold, repayment begins until the repayment limit is reached. After that, the student is free to agree. A student can also terminate their ISA commitment prior to the payment period by making an upfront payment. Students only make payments if they earn above a certain cost-of-living-adjusted income threshold.
In 2017, Mr. Hoyler, a graduate of Purdue University, received $16,000 through an ISA. He now reimburses 5.9% of his monthly income as a regional pilot for the next 8.5 years. To quote Hoyler, the ISA has become “lighter and easier to understand.” He can also be reassured because he knows that his pilot entry salary allows him to pay the ISA payments. In the case of revenue-sharing agreements, universities already play a role by working with ISA funds. Asking them to share some of the risk is an interesting way. Aren`t they the ones selling their students a bright future? ISA also brings some positive side effects. First, they offer a significant reduction in risk for students because the payments are only a percentage of their future salary, unlike the student loan, which has a fixed amount regardless of the income received. If students don`t earn enough after graduation, they may not be able to afford to pay off the debt. With an ISA, the student knows that they can still afford to pay the cost of the course.
A 6-12 month commitment from the student is required by the school, which trains new web developers and data scientists. During the course, experts of all kinds and professionals of the highest level who have gained experience in places such as NASA, Google, Apple and universities such as Stanford University are invited to teach and share their experiences. The course is free and students must repay the course in 2 years by reimbursing 17% of the annual salary, but only after the salary they receive is at least $50,000/year. An ISA is a contract between a student and an investor (or school). The investor pays the tuition and the student promises to repay a percentage of their future income for a fixed number of years. ISA 8Bs share the risk of pursuing higher education with investors and universities. Repayments from income-sharing agreements follow the student`s income trajectory, providing flexibility that is typically lacking in traditional loans. In the tech sector, it`s the other way around, there are few developers and a huge global offering driven by big tech and venture-backed startups.
These companies with huge cash are in a hurry to grow and develop innovative products to gain market share and win competition. It`s also worth noting how venture capital itself, like Ycombinator, has begun to invest in the development of these innovative new schools that take advantage of revenue-sharing agreements. Income sharing arrangements have been used to provide flexible, student-centred repayment options for student funding. Education is the key to better livelihoods. As recent studies show, your education affects factors such as your ability to find a job, your income level, and even that of your grandchildren: Editor`s note: This article was originally published on April 29, 2019 and updated on March 12, 2020. .