One of the most popular benefits of federal student loans is the ability to join an Income-Driven Repayment (IDR) plan. With private loans, on the other hand, your payments remain the same regardless of how much you earn.But while IDR plans have made federal student loans overwhelmingly popular, what happens if you hit your annual or aggregate federal loans borrowing limit? Are there any borrowing options besides federal student loans that offer income-based repayment? And what happens if you want a more flexible repayment option, but don’t want to be paying your loans for 20+ years?It turns out that the answer is yes. Income Share Agreements (ISAs), like the ones offered at Stride Funding, are alternatives to student loans. With an ISA, you commit a percentage of your income to repayment. If you’re wondering whether an income share agreement could be right for you, keep reading our full Stride Funding review to learn more.
An income share agreement is a funding option where a person agrees to repay a set percentage of their income in the future in exchange for money today. ISAs are a relatively uncommon way to fund an education, but they may make sense for people who are averse to taking out traditional debt.
ISAs are generally offered by schools. But Stride Funding is one of the few companies that offer income share arrangements regardless of the school that you attend. Since it is a unique form of financing, it’s important to understand some of the fine print associated with Stride Funding’s ISA. These are a few details to understand:
To qualify for a Stride Funding ISA, you’ll need to be a US citizen attending a US school. Also, Stride ISAs are currently only being offered to the following students:Finally, you’ll need to be enrolled at a 4-year college or university, or an accredited PA school, to qualify for a Stride Funding income share agreement.
Stride Funding offers income sharing arrangements that last from 2 to 10 years following graduation. The repayment period starts after a grace period of three months.
The percentage of income you repay depends on the amount you borrow. Each income share agreement is different, so Stride doesn’t provide strict guidelines. The percentage is based on your expected future income following graduation. One example is that a Nurse who “borrows” $10,000 will repay 3% of their income for 5 years.Higher expected earners (such as computer science engineers) may see lower percentages. People expected to earn lower compensation (teachers, journalists, etc.) may be required to share a higher percentage of income.
If you’re earning less than $40,000 per year ($3,333.33 per month), you don’t have to make any payments whatsoever. That means you keep your money during your lower earning years, but you’ll repay Stride when you earn more.
You can fund up to $25,000 per year of school through Stride Funding. Stride limits your repayment to twice what you fund. That means a person who borrows $30,000 will never repay more than $60,000, no matter how much she earns.
If you’ve exhausted your federal student loan options, an ISA could be a better choice than private student loans. You get the benefit of income-based payments (which private loans can’t match) while still having the guarantee that your repayment period won’t last any longer than 10 years.But is the ISA from Stride Funding a better deal than federal student loans? For undergraduate borrowers, probably not. If you’re a graduate student, though, it could be worth comparing an ISA to Grad PLUS loans, which have the highest interest rates of all federal loans. However, if you plan to go into public service (military, government, teaching, non-profit work, etc.) and may later qualify for PSLF, you’ll definitely want to stick with federal loans, even if a Grad PLUS loan is your only federal loan option.