Income Share Agreement (ISA)
What Is an Income Share Agreement?
An Income Share Agreement (ISA) is a financing instrument in which a student pays no tuition upfront. Instead, after graduation and employment above a specified salary threshold, the student pays a percentage of their income for a defined period, up to a total repayment cap.
Core components of a typical ISA:
- Income share percentage: The percentage of gross income paid each month (commonly 10-17%)
- Salary threshold: The minimum salary at which payments begin (commonly $40,000-$50,000)
- Payment cap: The maximum total amount repaid regardless of income share (commonly $20,000-$30,000)
- Payment window: The maximum number of months over which payments are made (commonly 24-48 months)
If the graduate does not find employment above the salary threshold, no payments are due. If the payment cap is reached, no further payments are due regardless of remaining income.
The CFPB Enforcement Action (April 2024)
In April 2024, the Consumer Financial Protection Bureau issued a consent order against BloomTech (formerly Lambda School) and its CEO. The CFPB found that:
- BloomTech’s ISAs were consumer credit products subject to TILA and the Consumer Financial Protection Act
- BloomTech had not disclosed APR, finance charges, and total repayment amounts as required
- BloomTech had made material misrepresentations about job placement outcomes
This consent order was a watershed moment for the entire bootcamp industry. ISAs that do not comply with TILA disclosure requirements are now explicitly illegal under federal consumer protection law. Bootcamps that continue to offer ISAs must structure them as retail instalment contracts with full TILA disclosures.
Source: CFPB press release, April 2024
The True Cost of an ISA
ISAs are not free money if you succeed. They are insurance with a premium. The premium is the difference between the total repayment under the ISA and the upfront tuition cost.
Example calculation:
- Upfront tuition: $20,000
- ISA terms: 15% of income for 48 months, capped at $28,000
- If starting salary is $80,000: 15% = $12,000/year = $1,000/month. You hit the $28,000 cap in approximately 28 months.
- Net cost of the ISA vs upfront: $8,000 additional total cost
The ISA is cheaper than upfront only if you do not get a job above the threshold. If you succeed, you pay the premium. The premium is the price of the insurance against failure.
ISA vs Retail Instalment Contract vs Private Loan
After the 2024 CFPB enforcement action, bootcamps that previously offered ISAs have mostly restructured into one of two instruments:
Retail Instalment Contract (post-CFPB ISA equivalent): Functionally similar to an ISA but structured to comply with TILA — discloses APR, total finance charge, and total cost. This is now the legally compliant version of what ISAs were.
Private Student Loan: A conventional loan from a third-party lender (Climb Credit, Ascent, Funding U) with a fixed or variable interest rate. Simpler and more familiar, but you owe payments regardless of employment status.
Questions to Ask Before Signing Any ISA or ISA-Equivalent
- What is the disclosed APR?
- What is the total finance charge?
- What is the maximum total amount I will repay?
- What is the exact salary threshold at which payments begin?
- What happens if I am employed but below the threshold?
- Does the time cap run from graduation or from first payment?
- What happens to the balance if the payment cap is not reached within the time window?
- Is this instrument compliant with TILA disclosure requirements?
Never sign a financing agreement without receiving written answers to all of these questions.