Income share agreement, or ISA, is a relatively new concept in Portugal that has been gaining traction in recent years. It is an alternative way of financing higher education, allowing students to pay for their education by committing to share a percentage of their future income for a certain period after graduation. In this article, we will take a closer look at income share agreement in Portugal, how it works, and its advantages.
How does an ISA work?
In an income share agreement, students receive funding for their education in exchange for a certain percentage of their future earnings for a specified period of time. The percentage of income share and the duration of the agreement differ from one institution to another, but the general idea is to provide students with a flexible and affordable payment alternative that aligns with their financial capabilities.
The agreement only takes effect after graduation and employment. Students will only be required to pay a certain percentage of their income once they have secured a job that meets minimum earning requirements. This approach ensures that the risk is shared between students and investors.
What are the advantages of an ISA?
One of the advantages of an income share agreement is that it is an alternative way of financing higher education that is not limited to traditional student loans. This approach provides students with the ability to pay for their education without incurring any debt, which is especially important given the rising costs of a college education.
Another benefit of an ISA is that it aligns the interests of students and investors. Investors only receive a return on their investment if the student is successful and earns an income above the minimum earning threshold. This approach ensures that the interest of investors and students is aligned, which is not always the case with traditional student loan financing.
Lastly, an ISA provides students with a flexible payment alternative as it is based on their income. This means that students only pay a percentage of their income, which makes it a more affordable option for students who may not have the resources to make traditional student loan payments.
An income share agreement is a flexible and affordable payment alternative that provides students with an alternative way of financing their higher education. In Portugal, it is a relatively new concept that has been gaining traction in recent years. With its numerous benefits, it is no surprise that more students are opting for an ISA to finance their higher education.