Association for Public Policy Analysis & Management

Income Share Agreements (ISAs) are an innovative scheme to finance higher education. They operate as instruments in which the financing part shares the risk of human capital investment with the student. An investor pays for all or part of a student’s education upfront and, in return, the student pays the investor a certain percentage of his/her income for a set number of years (Palacios, 2007). Supporters claim that ISAs provide strong downside protections to students, help students of all backgrounds to obtain financing, and impact college outcomes positively. Others argue that the structure of ISAs may have negative consequences due to adverse selection and moral hazard issues. Interest in implementing ISAs at the federal level in the US has gained bipartisan attention with the proposal of companion bills titled Investing in Student Success Act 2014, which as 2016 has been introduced in 24 states. Yet, little is known about the impact of ISAs in terms of education outcomes. This poster presentation proposes a study that fills such gap by combining a novel proprietary dataset on ISAs in Colombia and administrative data on the universe of students in the country. My proposed analysis aims to shed light on the role of ISAs on higher education persistence and completion, and on the factors associated with the take up of ISAs compared to government loans. The results of my study will be a point of reference for efforts associated with the design and policy evaluation of ISAs both in the US, where legislation is being introduced and proliferating, as well as in other nations considering new financing reforms in higher education.