[With an ordinary student loan] my nominal monthly payment is set, but my income could change or disappear completely (making security a monthly repeat of bad news). In the case of an income-involved contract, it is the opposite: I do not know what my monthly nominal payment will be over the lifetime, nor the total amount I will pay, but I know I can always afford it. [11] The public debate on Oregon`s plan has sparked renewed interest in equity-based funding models, including a leading summit on The New America Foundation`s Income Participation Agreements[8] and a strategy paper from the American Enterprise Institute. On April 9, 2014, Senator Marco Rubio announced the introduction of legislation in the U.S. Congress that would “expand” the use of income participation agreements. [1] [9] [need to be updated] From now on, there are no documented cases of discrimination on the basis of race or sex with ISA agreements, but some fear that the potential for discrimination will increase if ISA becomes a more popular model. [3] Although anti-discrimination laws in most financial markets would likely apply to ISA investors, the issue has not yet been fully resolved. Some proponents argue that ISAs are less discriminatory than loans: the United States allows its citizens to have income participation agreements. Income participation agreements are characterized by a percentage of future income for a given period of time. They can function as non-voting shares in a company where the individual student is treated as a business. In the U.S. system, this usually involves the investor transferring funds to an individual in exchange for a fixed percentage of their future income. [3] [4] Other features of income participation agreements may: (a) a fixed period for income participation (b) an income exemption if the borrower is not liable for a specified income and/or c) a redemption option in which the borrower may pay a certain fee for the exit of the contract before the full term.

Some ISA investors offer different students different terms based on their likelihood of success, while others offer the same conditions to all students. Potential investor groups could include for-profit businesses, non-profit altruist organizations, alumni groups, educational institutions and local, state or federal governments. [3] In the 1970s, Yale University tried a modified form of Friedman`s proposal with several cohorts of students. At Yale, all members of the cohort agreed to repay a percentage of the salary until the balance of the total cohort was paid, instead of entering into individual contracts for a certain number of years. However, the system left students frustrated with paying more than their fair share by being forced to pay on behalf of their peers who were not ready or unable to repay their loans. [6] Given that investors are encouraged to allow students to pay a smaller share of their income when enrolling in quality, low-cost education programs, ISAs allow for a more efficient allocation of financial resources between universities. [3] A participation contract (or ISA) is a financial structure in which a person or organization provides a recipient with something valuable (often a fixed amount of money) that, in return, agrees to repay a percentage of its income for a certain number of years.