Income Share Agreement ("ISA") is a less financially risky alternative to a traditional student loan. University gives money to student in exchange for a share of the student's future income for a certain period of time. In the student doesn't make enough money in that period of time, the balance gets forgiven. If the student earns good income, the student may end up paying more than the principal amount, which is why the student should ensure that the maximum payments are capped just like in the template below.
INCOME SHARE AGREEMENT
THIS IS NOT A LOAN
This
Income Share Agreement (the “Agreement”) is made effective as of __________________
(the “Effective Date”) by and between ________________ (“School”) and ________________________
(“Student”). The parties agree as follows:
1. Funding.
School will deduct the Funding Amount of $_____________ from the Student’s
tuition balance owed to School, as follows:
a)
first disbursement of $______ on ____________;
b)
second disbursement of $_____ on January __________.
Within 30 days from each disbursement, School will send Student an itemized
statement. School has sole discretion to decide to which fees, in what order
and in what proportions to allocate the Funding Amount between the Student’s
various outstanding balances due School. Student is
responsible for setting up automatic payments to Student’s bank account for any
amounts due.
2. Withdrawal. If Student withdraws from the program funded by the Funded Amount
prior to completing it, the whole Funding Amount disbursed, minus any
applicable refunds plus collection costs, will become due 30 days from the date
of withdrawal.
3.
Monthly Payments; Late Fee. As
consideration for the Funding Amount received, Student will owe School “Monthly
Payments,” defined as ___% of Student’s monthly gross income from all work,
including employment, freelancing and business. Student shall start making
Monthly Payments for each month in which the Student’s gross income from all
work sources exceeds $_____ per month. All overdue payments shall incur a late
fee of ___% per month.
4. Payment Cap
The maximum
total amount of Student’s payments under this Agreement is capped at twice the
Funding Amount plus late fees and collection costs, if any, minus refunds and
other sums School owes Student pursuant to this Agreement (“Payment Cap”). School
will not impose any prepayment penalty for early payment of the Payment Cap in
full at any time.
5.
Repayment Term
a) Payments Cease. Student’s Monthly Payment obligations will cease upon the occurrence
of one of the following, whichever is sooner:
i. The total amount of all payments made under this Agreement has reached
the Payment Cap, or
ii.
Student has made a total of 12 Monthly
Payments, without any underpayment, and provided all relevant Documentation, or
iii. Student has had less than 12 months of work that paid more than $_______
per month and accurately made all of the Monthly Payments for the qualifying
months, or
iv. Student dies
or becomes totally and permanently disabled.
b) Payments Survive. Student acknowledges that termination of Monthly Payment obligations
will not extinguish any other outstanding payment obligations Student might
have, such as late fees, underpaid amounts and unpaid program costs.
6.
Mandatory Documentation.
“Documentation” means paperwork that shows Student’s work income amounts that
could be subject to this Agreement, including, without limitation, copies of:
IRS forms including filed tax returns, W-2 and 1099; pay stubs; employment
letters with salary figure(s), contracts for freelance work, good faith
estimate of Student’s self-employment income for the current calendar year.
Student must provide School copies of Documentation no later than 30 days from
the date of each document. Student shall provide at least one document for each
source of income if the total income from all work sources exceeds $______ in
any given month. If income amount from any work source changes in any given
month, Student shall provide updated Documentation and recalculate Monthly
Payment.
7.
Mandatory Notifications. Student must notify School
in writing within 30 days of any change in Student’s circumstances that are
relevant to this Agreement (“Notifications”), including without limitation
changes to: monthly income amounts; work income sources, including new work
sources and lost sources; contact information, including residence address,
phone number or email.
8.
Default and Its Consequences.
a) Definition. “Default” shall mean Student’s:
i.
Failure to make Monthly Payments in full by
due dates for more than four (4) months in any twelve-months period, or
ii.
Failure to timely provide all relevant,
accurate Documentation and Notifications, or
iii. Submission of false or misleading information that impairs School’s
rights under this Agreement, or
iv. Underpayment of any Monthly Payment by more than ____%, or
b) Consequences. If Student fails to cure Default within ___
days after being notified, School can, in addition to any other available
remedies, declare the Payment Cap to be due and payable, less any Monthly
Payments already received, plus any outstanding fees and collection costs.
9. Student Representations.
Student represents and warrants that Student:
a) Only provided true and not
misleading information under this Agreement;
b) Has never been convicted of
a crime that involves dishonesty or breach of trust in any US or foreign
jurisdiction;
c) Is not contemplating
bankruptcy and in the past twelve months have not consulted with an attorney
regarding bankruptcy;
d) Will not use the Funding
Amount for purposes unrelated to Student’s participation in School program.
e) Has truthfully filed all
required federal tax returns and does not have any outstanding tax payment
obligations due.
10.
Consent. Student agrees to cooperate with School’s
reasonable requests to help verify any information relevant to this Agreement.
Student authorizes School to obtain Student’s credit report, contact consumer
reporting agencies and other databases. Upon Student’s request, School shall
answer whether or not it has obtained Student’s credit report and, if so, from
what source(s).
11.
Governing Law &
Arbitration.
This Agreement shall be governed by the laws of _____________, without regard
to its conflict of laws provisions that would result in application of any
other law. Any controversy or claim arising out of or relating to this
Agreement, or the breach thereof, shall be settled by arbitration administered
in ___________ by the American Arbitration Association in accordance with its
Commercial Arbitration Rules. Judgment on the award rendered by the arbitrator
may be entered in any court having jurisdiction thereof. Except as may be
required by law, neither a party nor an arbitrator may disclose the existence,
content, or results of any arbitration hereunder without the prior written
consent of both parties. PARTIES UNDERSTAND AND AGREE THAT THIS SECTION MEANS
THEY WAIVE THEIR RIGHT TO SUE IN COURT AND HAVE A JURY TRIAL.
12.
General. The parties are
independent contractors to each other and this Agreement does not establish any
partnership, employment, joint venture or similar relationship. If any part of
this Agreement is declared invalid or unenforceable, it should not affect the
validity of all the other parts. Student cannot assign Student’s rights and/or
obligations under this Agreement to others. School has the
right, at its sole discretion, to assign or subcontract its rights or
obligations hereunder. This
Agreement does not create any rights for third parties that did not sign it. A failure by any of the parties to assert rights arising from any breach
or default of this Agreement shall not be regarded as a waiver of rights. In case of discrepancies between
the English original of this Agreement and any foreign
language translation, the English version shall prevail.
IN WITNESS WHEREOF, the
parties have executed this Agreement as of the Effective Date
____________________
____________________
