Current Employment Trends and Their Implications for Business, Society, and Individuals
February 12, 2025
Compensation system involves the total rewards that are given to the employees for the labour and services they provide to the organization. Compensation includes direct monetary benefits as well as indirect monetary benefits. Wages and salaries form the direct financial benefits that an employee receives from his or her company. Besides, wages and salaries, bonuses […]
TQM is a management approach that concentrates on teamwork, integrity, continuous improvement and continuous assessment jobs and their worth. On the other hand, job analysis deals in investigating each job separately and collecting the job-related information. Usually, the process is conducted in an organization once in a while especially when HR department has to source […]
Do you see various shapes in a crumpled ball of paper? Do you see various colours in a drop of oil mixed with water? If your answer is yes, then certainly you value creativity. Creativity is nothing but the process of creating something unique and new. Creativity indeed plays a crucial role in organizations at […]
What is Predictive Analytics and How Does it Help Decision Makers Predictive Analytics or the technological tool that combines AI or Artificial Intelligence, Big Data, and Analytics software is taking the world by storm. Not a day goes by without reading a report about how Predictive Analytics helps in predicting outcomes with uncanny accuracy. Right […]
Career Options in Our Parents and Grandparents Generations In our grandparents and parents generations, it was the norm to choose careers that offer job security, preferably life-long employment, and those that provided pension and other benefits. Indeed, such was the lure of these aspects that many among those generations chose to work for the government […]
American students have been burdened with student debt. Much has been read and written about the mountains of debt that American students face. These decisions are made by students, who are young adults and do not really have the financial knowledge required to make such an important decision. Several of these students ended up being trapped in student loans for decades. A lot of these loans are backed by the government which means just about anyone can get them. Also, these loans cannot be discharged under bankruptcy. This means that the student does not have any way to get rid of them in the future.
The concept of income sharing agreements is the new financial innovation which is gaining popularity amidst the ensuing student loan crisis. In this article, we will have a closer look at the pros and cons of income sharing agreements.
Income sharing agreements are an alternate way for American students to finance their college education. Instead of taking a student loan to finance their college education, they could opt for equity funding. Income sharing agreements are, therefore, a way for college students to transfer their risks to the lenders.
The cash flow remains the same. If the student needs $10,000 to fund their college education, they can obtain the same from investors. However, they do not have to pay fixed payments to repay that loan. In fact, it isn’t a loan at all. The investors are buying a percentage of the future earnings that the student will generate by undertaking the course. Typically students are allowed to keep the first $20,000 that they make for personal expenses. If they make more than $20,000, they are expected to pay 7% of their income to the lenders. The terms of this agreement may vary, but most agreements are drawn for a period of 10 years.
If the student earns a good amount of money, so do the investors. Otherwise, they make a loss too! However, there is a cap for the max amount that students will pay back to investors. Hence, high flying students who grow very fast in their career will not end up paying through their nose when they become part of an income sharing agreement.
However, it must be understood that this agreement is not regulated by the government. Hence, once the acceptability of these agreements increase and more students opt for this arrangement, investors might start entering fine print into these agreements. Analysts have warned that, if left unregulated, income sharing agreements have the potential to become the indentured slavery of today.
In conclusion, income sharing agreements are better than student loans in many aspects. However, the market is at a relatively nascent stage. Only a handful of universities have started adopting this model of financing as of now. Once the use of income sharing agreements becomes more widespread, it would become possible to ascertain their advantages and disadvantages more accurately.
Your email address will not be published. Required fields are marked *