How to Build an Income Sharing Agreement Product

Is it just me or does it seem like we&#x27;re now one step closer to turning people into companies with shares that can be bought and sold? It feels like a small step from ISAs for education funding to ISAs for all kinds of funding instead of traditional loan agreements and at that point you might as well sell shares of yourself to the highest bidder so they can trade your future income on a secondary market. (Note this is reminiscent of some aspects of the novel <i>The Unincorporated Man</i>).

It used to be society wanted people to have an education and that people with degrees would get higher paying jobs which resulted in a net benefit to society through higher taxes.<p>Now education is just looked at as a way to in debt young people for the rest of their lives. Because 1M people default on their student loans every year and the bubble is on the verge of popping, the parasites are looking to own 10% of every dollar you make to finance your education.<p>The problem isn&#x27;t that an API doesn&#x27;t exist to automatically debit 10% from the people you own, the problem is an education doesn&#x27;t get you a job anymore, much less a high paying job.<p>Instead of owning peoples labor via API, why not consider the 1 Presidential candidate who is campaigning to forgive all existing student debt and make college free moving forward by god forbid...taxing the same banks the taxpayers bailed out from bankruptcy just 10 years ago.

The currently proposed legal framework for ISA&#x27;s[0] seems like it would make ISA&#x27;s dischargeable in bankruptcy, which would likely cause all sorts of issues with people signing up for them, using them to pay for tuition, and then immediately taking on as much delinquent debt to declare bankruptcy. That seems like a very perverse incentive for schools to deal with, since degree&#x27;s are permanent but bankruptcy only stays on your credit report for a bit.<p>[0] <a href="https:&#x2F;&#x2F;www.forbes.com&#x2F;sites&#x2F;alisongriffin&#x2F;2019&#x2F;07&#x2F;18&#x2F;a-rare-bipartisan-bill-takes-on-student-debt&#x2F;" rel="nofollow">https:&#x2F;&#x2F;www.forbes.com&#x2F;sites&#x2F;alisongriffin&#x2F;2019&#x2F;07&#x2F;18&#x2F;a-rare...</a>

I generally like the concept of ISAs.<p>The current system in the US incentivizes colleges to provide an exclusive &quot;luxury&quot; <i>experience</i>, regardless of cost. Here the incentives are more properly aligned.<p>In addition, ISAs place a natural cap on college cost. Where cost could previously grow without bound (all loans are backstopped by the federal government), now cost is tied directly to the prevailing wage of the graduate. To the extent that wages signal the needs of the economy at large, I&#x27;d assume that ISAs would increase the number of graduates in in-demand fields at the cost of some fringe benefits.<p>The big losers in this equation are the lesser-paid but still socially valuable professions such as teaching. However, it&#x27;s unclear to me that these skills could not also be delivered at significantly lower cost (as they were several decades ago).

The biggest downside to the rise of ISAs is the decline of the humanities. There are some majors where the cost of educating the student is simply more than the school would earn in a lifetime of work, but they still have value to society. We would need some way to account for that in a world where ISAs fund all education.<p>How do we incentive schools&#x2F;lenders to fund people who want to study art and literature? Or should we?

Alternatively, <a href="https:&#x2F;&#x2F;leif.org&#x2F;" rel="nofollow">https:&#x2F;&#x2F;leif.org&#x2F;</a> can manage all of this for you.<p>Disclosure: I work at Leif

I find it interesting the recent rapid rise of ISAs. I remember back in 2013&#x2F;14, hearing Upstart pitch to my college for their ISA program. From what I recall, their pitch fell mostly on deaf ears. You can still see their ISA agreement online funnily enough: <a href="https:&#x2F;&#x2F;www.upstart.com&#x2F;funding_terms" rel="nofollow">https:&#x2F;&#x2F;www.upstart.com&#x2F;funding_terms</a> But they discontinued it in 2014: <a href="https:&#x2F;&#x2F;slate.com&#x2F;business&#x2F;2014&#x2F;05&#x2F;upstart-pulls-income-share-agreements-in-favor-of-traditional-loans.html" rel="nofollow">https:&#x2F;&#x2F;slate.com&#x2F;business&#x2F;2014&#x2F;05&#x2F;upstart-pulls-income-shar...</a><p>It&#x27;s not clear to me why the market pull for ISAs has grown so much recently, although I am happy to see it as an alternative to debt. Perhaps it&#x27;s the increasing student loan debt burden in the US? Perhaps capital markets opening up to ISAs as an investment vehicle as well?

Relevant podcast about baseball players forming pools to share their earnings: <a href="https:&#x2F;&#x2F;www.npr.org&#x2F;2019&#x2F;10&#x2F;25&#x2F;773493342&#x2F;episode-947-some-of-the-money-ball" rel="nofollow">https:&#x2F;&#x2F;www.npr.org&#x2F;2019&#x2F;10&#x2F;25&#x2F;773493342&#x2F;episode-947-some-of...</a>

How gross. Seems like a poorly thought out product -- isn&#x27;t my incentive here as a borrower to avoid making documentable income?

So... share-cropping, basically?

And we&#x27;re basically back to where we were 300 years ago, where you had to give part of your income to your feudal lord.

Only reason (as a college student) don’t like ISAs is because they take up to something as ridiculous as 10 million over a 10 year period (if you do happen to make that much). I think ISAs may find a place for a greater majority of America though.