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An income share agreement (ISA) is a type of college financing in which you repay the funds you receive using a fixed percentage of your future income. While ISAs can be useful for some students who lack other funding options, it’s important to fully understand how these agreements work, since you can potentially end up owing a lot more than you borrow.

Read on for a closer look at income share agreements, including their pros and cons, who might consider them, and how they compare to other types of college financing.

What Is an Income Share Agreement?

With an income share agreement (ISA), you receive money to pay for college and contractually agree to pay it back using a fixed percentage of your post-graduation income for a set period of time. ISAs are offered by some colleges. They are also offered through several private lenders.

The income percentage and terms of an ISA will vary depending on the lender. Typically, the repayment percentage will range between 2% and 10% of the student’s future salary, and terms can be anywhere from two to 10 years.

Unlike other types of student loans, ISAs do not accrue interest. However, students commonly end up paying back more than the original amount that they borrowed.


💡 Quick Tip: Fund your education with a low-rate, no-fee SoFi private student loan that covers all school-certified costs.

How Income Share Agreements Work

Typically, you start repaying an ISA after you leave school and pass a specific income threshold, often $30,000 to $40,000 per year. If you earn less than the threshold in any month, you can waive your requirement payment that month. Some ISAs will count months in which you earn less than the minimum salary toward your repayment term, while others will extend the length of your loan.

You can typically exit your ISA at any time, provided you’re willing to pay the maximum repayment cap for your plan upfront.

With an ISA, your payment rises when your salary rises. However, the repayment term and total repayment amount are usually capped. The cap is the most you’ll have to repay under your ISA. With many plans, though, the cap can be as high as two (or more) times what you borrowed.

Income Share Agreement Example

To illustrate how an income share agreement might work, let’s say you sign an ISA agreement for $10,000 with the maximum number of monthly payments of 88, an income percentage of 4%, an income threshold of $30,000 (or $2,500 per month), and a payment cap of $23,000.

In this case, you would pay 4% of your income for any month you earn at least $2,500 and continue to do so until you make 88 payments or pay a total of 23,000 — whichever comes first. If you only earn the minimum, you will end up paying back $100 a month for 88 months for a total repayment of $8,800 (which is less than what you borrowed). However, if you make $55,000, you’ll pay $183 per month for 88 months, for a total repayment of $16,133, which is $6,000 more than you borrowed.

Keep in mind that the income percentages, terms, and repayment caps can vary considerably from one ISA provider to the next.

Recommended: How to Pay for College With No Money Saved

The Advantages of Income Share Agreements

Some of the pros of income share agreements include:

•   ISAs typically do not require a cosigner or good credit, so they can be easier to qualify for than other types of financing.

•   Payments won’t exceed a certain percentage of your monthly income.

•   Your ISA contract could expire years earlier than a traditional student loan.

•   Schools that offer ISA programs are incentivized to help you earn the highest paying jobs.

•   Depending on your future income, you may end up paying less than you would pay with a traditional student loan.


💡 Quick Tip: Even if you don’t think you qualify for financial aid, you should fill out the FAFSA form. Many schools require it for merit-based scholarships, too. You can submit it as early as Oct. 1.

Potential Pitfalls of Income Share Agreements

There are also some significant cons to ISA loans that you’ll want to keep in mind:

•   In some cases, the ISA provider will cap payment more than twice the amount you receive.

•   Unlike other types of student loans, there’s uncertainty regarding how much your loan will cost.

•   In many cases, an ISA could cost more over the long run when compared to federal or private student loans.

•   Income-driven repayment plans are already an option with federal student loans, and federal loans also offer the potential for student loan forgiveness.

•   ISAs are not widely available and may be restricted to certain majors or programs.

Who Should Consider An ISA?

Income share agreements can end up being costly, especially if you enter a high-earning field and the ISA has a high payment cap. However, you might consider looking at ISA if:

•   You’ve maxed out federal loan options but are unable to qualify for private student loans.

•   You have a poor credit score and would receive high rates on student loans.

•   Your school offers an ISA with reasonable terms and a low payment cap.

•   You’re planning to earn a degree in a field that doesn’t have steep salary growth potential.

If these scenarios don’t apply to you, you’re likely better off using federal student loans to pay for higher education, or even private student loans if you have good credit. Before signing up, you’ll want to compare your options side by side and run the numbers to see which is the better deal.

Recommended: Private Student Loans vs Federal Student Loans

Considering Private Loans

You generally want to exhaust all your federal options for grants and loans before considering other types of debt, but if you’re looking to fill gaps in your educational funding, it may be worth considering private student loans before signing an ISA.

Private student loans are only offered through private lenders, and come with either fixed or variable rates. For borrowers with excellent credit, rates may be relatively low. Unlike federal loans, however, undergraduate private student loans often require a cosigner. The cosigner is an adult who agrees to take full responsibility for your student loans if you default. Cosigners are almost always required by private lenders since undergraduates have not had much time to develop a credit history.

If you expect to have a high salary after graduation and/or can qualify for a low rate on a private student loan, you could end up paying less than you would for an ISA.

The Takeaway

An income share agreement, or ISA, is an agreement between the borrower and the school or a lender that states the borrower will receive funds to pay for college and then repay those funds based on a certain percentage of their future salary for a set amount of time.

While ISAs may sound like a different type of college funding, they are, essentially, loans. And in many cases, you will end up paying back significantly more than what you borrow.

Generally, you would only want to consider ISAs after exhausting any undergraduate federal student loans and aid available to you. It’s also a good idea to compare ISA offers with traditional private student loans before deciding on the best funding option for your situation.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

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SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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Saving money is a common goal. Who doesn’t want more cash available to air out one’s budget, pay off debt, sock away for a future dream (whether that’s a month spent on the Amalfi Coast or an early retirement)?

Saving money is important for an array of reasons. It can allow you to pay for significant expenses without running up high-interest credit card debt.

It can offer peace of mind, since you know you can navigate rough times without hardship. And having more money in the bank can give you freedom of choice. You might leave a job you frankly hate without waiting until you land another one. You can also likely afford some luxuries for yourself and your family.

That said, you may fear that saving money means living so frugally that there’s never a fancy coffee or weekend getaway in your foreseeable future. But in truth, saving money can be fairly painless if you’re smart about it.
Here, learn some clever, simple strategies for how to save money each month.

1. Tracking Your Weekly Spending

Looking at your spending on a weekly basis can feel more manageable than trying to keep track of a month’s worth of spending at a time.

That’s not to say that you shouldn’t budget on a monthly basis, but breaking your timeline into smaller segments can simplify the process.

You can track spending (including every cash/debit/credit card transaction and every bill you pay) by using an app, jotting down every purchase, or collecting all of your receipts and writing it all down later.

You might then set a certain day of the week to look over the week’s spending. This can be an enlightening exercise. Because spending can be so frictionless these days, many of us don’t have a real sense of how much we are actually spending on a day-to-day basis.

Just seeing it all laid out in black and white can immediately make you think twice before you buy something nonessential and inspire you to become more intentional with every dollar.

💡 Quick Tip: Tired of paying pointless bank fees? When you open a bank account online you often avoid excess charges.

2. Creating a Simple Budget

Once you’ve mastered tracking your cash flow, and have a good idea as to your spending habits, you may want to take it one step further and set up a simple budget.

A budget is nothing more than setting limits for spending in different categories. To get started, you’ll want to list all of your monthly expenses, grouping them into categories, such as groceries, rent, utilities, clothing, etc.

If your goal is to save some money every month, you’re going to want to set a budget for yourself that includes an allocation to saving.

Next, you may want to tally up all of the income you’re taking home each month (after taxes), and see how your monthly spending and monthly income compare.

If spending (including putting some money towards savings) exceeds income, the next step is to look at all your expenses, find places where you can cut back, and then give yourself some spending parameters to stick to each week.

3. Automating Savings

If you do nothing else to get yourself on the savings path, consider doing this.

Automating savings is a great way to remove a huge barrier to saving — forgetting to put that money aside, then ultimately spending it.

The reality is, we all live busy lives and while we may have every intention of stashing away cash, there are many reasons why it’s hard to save money. It often doesn’t happen without a plan.

Automating is an easy way to save money without ever having to think about it.

The idea is to have money moved from a checking account and into a savings account on the same day each month, perhaps soon after your paycheck is deposited.

This way, the money is whisked from the checking account before it can be spent elsewhere.

If you are new to automating or have an irregular income, it’s okay to start with smaller dollar amounts. Likely, you won’t even notice that the money is gone from your account, and you’ll be able to increase that amount over time.

You can set up automatic transfers to your savings, retirement, and other investing accounts.

4. Planning Your Groceries

Here’s another easy way to save money: Spend less on groceries by making a meal plan and a shopping list before you go to the store.

Without a list, you may be tempted to buy things that look good but that you don’t need or can’t use. Plus, you may end up having to go back to the store later, where you may be tempted to buy more things.

You don’t have to be a pro at meal-planning. It can be as simple as picking a few recipes that you want to make throughout the week (making large enough portions to provide for leftovers is another way to save).

You can then write a list of the ingredients that you’ll need, making sure to check your cabinets and use what you have first. Doing so is a life skill that can save you money.

You may also want to list exactly what snacks and/or desserts you plan to buy, so you’re not overly tempted once you get to the chips or cookies aisle.

Another way to save money on groceries is to cut back on pricier items, such as meat and alcohol, and to go with store or generic brands whenever possible. With tactics like these, you could be saving money daily.

5. Negotiating Your Bills

Some of those recurring bills (such as cable, car insurance, and cell phone) aren’t carved in stone.

Sometimes you can get a lower rate just by calling up and asking, particularly if the provider is in a competitive market.

Before calling, you may want to do a little research and know exactly what you are getting, how much you are paying, and what the competition is charging. You may also want to get competing quotes.

Even a small reduction in a monthly bill can save significant cash by the end of the year.

If you are experiencing hardship, you may also be able to negotiate down your electric and/or other utility bills by calling and explaining your circumstances. It never hurts to ask. The same holds true with doctor’s charges: You may be able to negotiate medical bills as well.

6. Actively Paying Down Credit Cards

This might sound more like spending than saving, but if you’re currently only paying the minimum on your credit cards, a big chunk of your payment is likely going towards interest. Chipping away at the principal can feel like a tall mountain to climb.

If possible, consider putting more than the minimum payment towards your bill each month. The faster those credit cards are paid off, the faster you can reallocate money that was going out the window (and into interest) into savings.

Can’t seem to make a dent in your credit card debt? You might want to look into a zero-interest balance transfer offer, using a lower-interest personal loan to pay off the debt, or finding a debt management plan.

7. Canceling Subscriptions

It can be all-too easy for money to leak out of your account due to sneaky subscriptions.

From unused gym memberships to shopping subscription programs, subscription bills (even small ones) can rack up quickly because they come every single month without fail.

The first step is to cancel any of which no longer serve you. Try to be honest with yourself: Are you likely to start going to the gym? Could you work out at home instead?

If you’re looking to save money faster, you might consider making a sacrifice on a subscription that you do enjoy. For example, maybe you pay for Netflix, Hulu, and Disney+. Is it possible to use just one or two, instead of three? That could be a good way to save on streaming services.

8. Renewing Your Library Card

If you’re a reader and love books, one creative way to save money is to dig out your library card, or if you don’t have one, stop in to apply for a card.

The library can be a great resource for more than books. For example, you can often access magazines, newspapers, DVDs, music, as well as free passes to local museums.

These days, you can typically get many of the benefits of being a card-holder without ever actually going to a branch. You can often get audio books and e-books, as well as access to online publications and online entertainment (via services like Hoopla and Kanopy), all from your computer or phone. Cost: Zero.

9. Shopping for Quality

Buying well-made, durable items instead of cheap, trendy, or single-use items may mean spending a little more up front.

But this can be a shrewd money move that can save you a bundle over the long run because you won’t have to repeatedly make the same purchases.

Buying a few classic, well-made pieces of clothing you will wear for a few years, for example, can end up costing less than picking up eight or ten cheaper, trendier items that you’ll end up replacing next year.

It may also pay off to spend a little more for appliances that are known for being reliable and lasting a long time and have great customer reviews, than buying the cheapest option.

Shopping for quality takes some education and practice, but it can be a worthwhile skill that your wallet will appreciate.

10. Pressing Pause on Big Purchases

Making impulse purchases can wreck a budget. That’s why if you’re tempted to buy an expensive item that is more of a “want” than a “need,” you may want to give yourself some breathing room, and allow the initial rush to wear off.

For example, you might tell yourself that you’ll wait 30 days and if, after the waiting period is over, you still want the item, you can get it then.

During that time you may lose interest in the item. If, however, you still want it in a month, that’s a good sign that this purchase will add substantial value to your life, and isn’t just a fleeting desire. If you can make room for purchase in your budget, then go for it.

This helps you make spending decisions from a slower, more thoughtful place, and can be a huge help in learning to budget and save money.

11. Round up Purchases

A painless and fun way to save money can be by rounding up purchases. You can do this in one of two ways.

•   The old-fashioned way is to pay for things with cash and keep the change in a jar. Then, at the end of a week or a month, deposit that change into your savings account.

•   Today, there are a variety of apps that allow you to round up purchases. That extra money can then be put into savings or invested. Check with your bank; they may offer a program like this making for a seamless experience.

12. Look into Refinancing Your Loans

Interest rates go up and down, and there may be an advantage to refinancing your loans if you can find a lower rate and/or a shorter term. Doing so could save you considerable money in interest over the life of the loan, whether that’s a mortgage, car payment, or student loan.

13. Bundle Your Insurance Policies

You may be able to whittle down your bills by combining your insurance policies (typically home and auto) with one company. Typically, when you do so, you can reap a solid amount of savings.

14. Gamify Savings

Many people find it helpful to give themselves monthly challenges to save money. It can make the pursuit of spending less more fun and can get your competitive spirit going.

For example, one month, you could vow not to get any takeout coffee and put the savings in the bank. The next month, you could vow to not take any rideshares and instead walk or take public transportation. Again, you’d put the cash saved in the bank.

15. Go Fee-Free

It can be wise to take a look at your financial institution and see how much you are paying in fees. There can be everything from overdraft charges to out-of-network fees to foreign transaction costs. In addition, your account might be hit with monthly maintenance or minimum balance fees. All of that can add up.

You might want to shop around for a new banking partner if you’re getting assessed a number of these charges.

Why Saving Money Is Important

Why go to the trouble of pinching pennies like this? Saving money is important for several reasons.

•   It can help you build wealth.

•   It can give you security.

•   It can reduce money stress.

•   It can help you achieve short- and long-term financial goals.

•   It can allow you to navigate bumpy times (such as job loss).

•   It can give you breathing room to splurge at times on the fun stuff of life.

Finding a Good Place to Grow Your Savings

Even if you’re only putting a small amount of money into savings each month, over time, that account will grow.
One way to help it grow faster is to park the money in a place where you won’t accidentally spend it and where it can earn more interest than a typical savings account.

You might consider opening up a high-interest savings account, money market account, online savings account, or a cash management account.

You may find that separating your savings, and watching it grow, keeps you motivated to save.
In some cases, you may be able to create “buckets” within your account, and even give them fun names, such as “Sushi Tour in Japan” or “My Dream House” that can help keep you motivated.

The Takeaway

Saving may not seem nearly as fun as spending, but it can give you the things you ultimately want, whether that’s a posh vacation, a downpayment on a new home, or a comfortable retirement.

And, there are plenty of ways to save money that don’t require sacrifice. You can use a mix of short-term strategies (like spending less every time you go to the supermarket) and long-term moves (like paying down debt and buying higher quality goods) to achieve your goals.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

FAQ

What is the 50/30/20 rule?

The 50/30/20 budget rule says that, of your take-home pay, 50% should be allocated to needs, or basic living expenses and minimum debt payment; 30% should be for wants, or discretionary spending; and 20% should go into savings.

What is the 30 day rule?

The 30 day rule is a way of avoiding impulse purchases and helping you take control of your money. If you find yourself about to make a significant impulse purchase, agree to wait 30 days. Right down the item, its cost, and where you saw it in your calendar for 30 days in the future. If that date rolls around and you still feel you must have it, you can see about buying it, but there is a good chance the sense of “gotta have it” will have passed.

How much should you save a month?

Many financial experts advise saving 20% of your take-home pay, but of course the exact amount will vary depending on such factors as your income, your debt, your household (how many dependents, for instance), and your cost of living.

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SoFi members with direct deposit activity can earn 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.00% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 12/3/24. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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