ISAs have four important terms: the principal, the income share, the period, and the payback cap:
- Principal: the amount of money the student receives upfront
- Income Share: a percentage of pre-tax income, due monthly beginning six months after graduation
- Payback Period: the maximum number of months for which a borrower owes income
- Payment Cap: the maximum amount the borrower can pay back, as expressed as a ratio of the principal
A borrower begins payments once employed, and continues making payments until their Payment Period expires or they hit the Payment Cap. Payments are equal to their income share times pre-tax income.
So if a student receives $10,000 for a 120-month, 3% income share, then gets a job with an annual salary of $50,000 after graduation, their monthly payments will be $125 (3% of their monthly income of $4167). At the expiration of the payback period they will have paid back $15,000 total.
Your terms may vary - the payment term may be less than 120 months, and the income share may vary, although it's typically between 2 and 5% of pre-tax income. Apply today to get a quote that's tailored to you!