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Future of Income Share Agreements (ISAs) in a Low Interest Rate World
August 3, 2019
Alternative education finance to expand access to
university and vocational courses
This article was first published 02 August, 2019 on LinkedIn.
ISAs market and business models are poised to evolve and adjust over the coming months considering the recent introduction of the ISA Student Protection Act and the Federal Reserve rate cut. ISAs can thrive in a low interest world by sharpening their value proposition to students, schools, and investors.
Two weeks ago, a bipartisan coalition of US Senators introduced the
ISA Student Protection Act (the Act), designed to provide a legal and regulatory framework for Income Share Agreements (ISAs) - Acuerdo de Ingreso Compartido (AIC) in Spanish - an alternative higher education financing tool where students receive funding in exchange for a percentage of the student’s income post-graduation for a fixed period of time.
On Wednesday, the Federal Reserve announced a quarter-point rate cut against a background of trade uncertainty, low inflation, and weakened global growth. How would Income Share Agreements continue gaining popularity in a low interest rate environment? How does this impact, if at all, the value proposition of ISAs versus comparable private and Federal Direct PLUS loans (if eligible) targeting how students’ most common use of ISAs to date – in colleges, students filling a gap after maxing out federal loans, and in coding bootcamps, students doing full-tuition ISAs? How could colleges and coding bootcamps innovate, diversify, and secure scalable ISA funding with the added risk of weak economic and employment growth?
ISA Student Protection Act
It is a welcomed proposal. Existing ISAs have no federal oversight and guardrails. The Act should help protect consumers and inspire confidence among investors. It brings ISAs under federal consumer protection laws and gives the Consumer Financial Protection Bureau oversight authority.
Below some areas from the Act for ISA operators, investors, schools, and enthusiasts to consider.
First, ISAs are not taxable. The Act excludes from all student’s gross income in tax calculations (a) the original amount financed and (b) the potential difference arising when total payments are less than the original amount financed.
Second, maximum percentage of income share set at 20%. There are a few existing ISA providers asking for 17% but I am not aware of any asking for more than 20%.
Third, maximum duration is 30 years. Calling long-term capital providers such as institutional and impact investors, foundations, philanthropists, and endowments to keep ISAs on your radar.
Fourth, income floor below which students are not required to pay is set at equal or greater than 200% of the federal poverty line. This is the equivalent of $24,980 in 2019 or more at the option of the funder. Currently, some ISA providers more than double this amount.
Fifth, unlike student loans, ISAs would be dischargeable under bankruptcy law. This is another reason why ISAs enable students’ freedom and range more than student loans.
Sixth, ISAs would not be controlled or precluded by state law with respect to (a) usury, and (b) ISA licensing or registration, unless such state enacts law specifically intended for ISAs.
Seventh, nothing would prevent ISAs from being securitized and repackaged into marketable financial instruments. ISAs could well join student loans into becoming a new stand-alone asset class.
Eighth, consumer credit reports may include information on student’s ISAs. Equifax, Experian, and Transunion beware.
How ISAs can thrive in a low interest world
With the Federal Reserve move to cut interest rates for the first time since 2008, ISAs’ challenge now appears to establish itself and grow to size and scale in a low interest rate world. What impact, if any, would this have on the ISA emerging ecosystem?
Here are some themes for ISA operators, investors, schools, and enthusiasts to ponder.
First, ISA providers should consider revisiting their competitive fit against comparable private and Federal Direct PLUS loans (if eligible) which may lower rates and APRs. Note that, with the rate cut, if you have student loans with a variable rate tied to a benchmark (only offered by private student lenders), you could now pay less interest. If you have federal loans, all of which have fixed interest rates (see Federal Student Aid), you could consider refinancing. It is likely that only a very small percentage of the outstanding $1.6 trillion student debt will be eligible for it, and as Nerd Wallet
says, it is a decision not be taking lightly.
Second, schools, students, and investors need to remain laser-focused on alignment of interests and risk. ISAs are poised to do this. They signal value to students as institutions shift focus to outcomes, have Skin In The Game, and differentiate themselves from their peers. They serve as an insurance policy for students who do not know whether their education may or may not pay back. Whether ISAs are being used to cover a gap in student’s cost of attendance after maxing out federal loans, or selectively being deployed to help with temporary hardship, drive enrollment (ISAs do not require collateral or co-signer), or address needs of first-generation, low-income, or minority students, a stronger emphasis on ISAs value-add and benefits is recommended. For coding bootcamps, ISAs are a bit more straightforward as they are now the funding methods of choice after cash up front.
Third, schools could consider launching ISAs with a variable specified percentage of the future income of an individual. As far as I am aware, all ISAs so far have a fixed specified income share for the duration of the contract. As it is in the schools’ and investors’ best interest for students to get and stay in good jobs, perhaps there could be milestones along the life of the agreement that trigger a revision of the income-share percentage. For instance, perhaps gamification elements could be introduced in year XY of the ISA. These can be supported by employers and aimed at creating opportunities for students to advance their careers, with employers benefiting from engaging better with and improving the financial health of their team members.
Fourth, ISA ecosystem should consider introducing a scalable product for impact investors to complement institutional money, lower cost of capital, and legitimize ISAs in the face of the public with a strong “investors care” market signal. Mission-aligned institutional, professional, and retail investors, including UHNWIs, family offices, foundations, schools, pension funds, endowments, philanthropists, and wealth managers, could take this opportunity to promote and accelerate a shift in the culture of education finance, and drive long-term, ethical behavior aligned to United Nations Sustainable Development Goals.
Fifth, leverage anchored education institutions to unleash ISA funding. Increase capital flows via tailored, strategic capital raising bringing key investors and organizations to invest alongside flagship schools. Perhaps there is even a performance boost to be explored on target returns due to tax benefits derived from students residing in or attending schools located in a qualified New Markets Tax Credit
or Opportunity Zones.
Sixth, ISAs should also consider fundraising outside the US. Non-US-based investors are keen on USD-denominates assets. Despite the trade disputes and “mid-cycle adjustment”, we still live in an increasingly globalized world. Some central banks already have interest rates of less than one percent or negative. Wealthy consumers are having to pay banks for having their cash accumulate dust (see UBS plans negative interest rate for rich clients).
Accelerating Momentum
This low interest rate environment is as likely to continue as it is to reverse. Regardless of the direction, I believe ISA operators, investors, schools, and enthusiasts should continue in stealth mode, engaging with students, improving the product, building a track record, diversifying and scaling funding, etc. The ISA market and business models are poised to evolve and adjust over the coming months. Aside from monetary policy, the keys signals to watch for are the impact of low interest rates in economic activity, student’s willingness to advance or upskill their education, employer’s ability to fill and deliver good jobs, and investor’s attitudes towards a new alternative investment that delivers financial and social return.
A commercial fusion energy source has never been closer to appearing on the electrical grid. Amazing, major breakthroughs in fusion science and technology are accelerating the potential for fusion energy to transform the global energy market and catalyze an equitable transition to a clean economy. Alongside overcoming significant remaining technical challenges, learning about the massive scale of investment, innovation, and excitement for fusion energy was inspiring. Here are a few of my takeaways from participating in Fusion Energy Week – U.S. Fusion Energy last week: How Fusion Works Fusion is not fission. Fusion binds. Fission divides. Fusion could provide abundant, safe, reliable, zero-carbon energy – 4x greater than fission. Fission faces many challenges, amongst them its destructive potential, global security proliferation risks and oversight, radiation, and nuclear waste. Yes, they share some science and technical (S&T) fundamentals and the word “nuclear”, yet the difference between fusion and fission is not just a linguistic nuance. It is not like thinking of soccer in the US and football non-US. It appears to me it is more like understanding the key differences and distinctions across cue sports: billiards, pool, and snooker. Fusion replicates a natural process that powers the sun and stars. For almost a century, scientists have been trying to replicate this on our planet earth. To do so, scientists bring together two atoms of Hydrogen (H), the lightest element of the periodic table, to create a heavier atom, essentially isotopes of H, deuterium and tritium. Various devices and methods including magnets and lasers are being developed for fusion. The leading concept is the Tokamak , which uses electromagnetic forces to confine very hot (+100MM degrees Celsius), charged, magnetic plasma in a vessel in the shape of a donut. This plasma produces heat which is then run through a turbine and a generator to convert the thermal energy into electricity. Should you want to dive deeper in the science behind fusion, suggest checking out the resources available at the US Fusion Energy website, the Office of Nuclear Energy at the Department of Energy, and Dr. Anne White's, Professor of Nuclear Science and Engineering at The Massachusetts Institute of Technology, explanation of fusion in 5 levels of difficulty published in Wired (magazine). Hats off to anyone who gets their kids to sing along this song – “not an illusion, if we get it just right”. Accelerating Systems Change Systems change in the financing and deploying of clean energy that address climate change and environmental, equitable justice, require a wide range of actors collaborating across their value chains and potentially beyond their interest. More often than not in non-traditional ways. I am excited and interested to see how the Inflation Reduction Act (IRA) federal and state, tax credits and electrification rebates, as well as the Greenhouse Gas Reduction Fund (GGRF) $27 billion, are executed to accelerate energy independence, resiliency, and contribute to a fossil fuel-free world. The fight against climate change demands it is done ensuring fairness and equity, building a diverse and inclusive workforce, and fostering environmental stewardship. However, the fact is that the marginal value one heat pump, one solar roof installation, one induction stove, one electric vehicle or powered two-wheeler, one Energy Savings Agreement, one battery recycling solution, is small relative to its contribution to helping transform the energy transition. It is also very hard to measure. We need to speed up the pace of change. We also need scale. Fusion promises it. Mobilize & Leverage Private Capital from Public Funding The fusion energy market is already seeing a significant amount of investment into private fusion energy companies. According to Global Corporate Venturing and Pitchbook there are now over 40 venture-backed companies developing fusion technology. According to reports from the Fusion Industry Association , over the last decade, more than $4.7 billion of private capital has entered the space. Already the three-year and five-year moving averages of private funding exceed the available public funding sources. Fig. 1 - Private and Public Funding vs. Year. Hsu, S. U.S. Fusion Energy Development via Public-Private Partnerships. J Fusion Energ 42, 12 (2023). https://doi.org/10.1007/s10894-023-00357-9
Life, like fixing your own bike, should encourage our tinkering. Tinker, and after trial and error, we may discover new things = new skills. Then, the ultimate test. Not written or proctored. Doing it. Living it. A maximum effort on climbs cat 2/3/4 and on the downhill at the U.S. Gran Fondo National Series ! Some of the best names in cycling support the U.S. Gran Fondo National Series , the largest and most competitive series of gran fondo cycling events in the United States, including amongst the series supporters and partners, Suarez (Title Sponsor), Wahoo Fitness (Results Partner), UNDRBDR (Official Anti-Chafe Product), Industry Nine (Road Wheels Partner), Shimano (Neutral Support Partner), USA Cycling (US Governing Body) , CTS (Coaching and Training Partner), Ride With GPS (Route Planning & Navigation Partner) and Hammer Nutrition (Sports Nutrition Partner). Make sure to mark your 2023 calendars! It is an amazing riding and racing, experience and organization! “DIY Overhaul A La Carte” Pre Gran Fondo Maryland 2022 Remove/Clean/Install EXISTING Cassette Remove/Clean/Install EXISTING Crankset Remove/Clean/Install EXISTING Pedals Remove/Clean/Install EXISTING Bottom Bracket Remove/Clean/Install EXISTING Headset & Fork Thoroughly Wash/Clean Bike Frame True Wheels (Lateral) Remove/Install NEW Front & Rear Derailleurs/Mechs Remove/Install NEW Chain Remove/Install NEW Handlebars Tape Remove/Install/Adjust/Index NEW Break and Derailleur Cables & Housing Remove/Install NEW Tires Photo Above - First Place Photo, Gran Fondo National Series, https://firstplacephoto.shotsee.com/gallery/granfondomaryland2022
Prowess Global Group S.A.S. informa a la opinión pública que hemos puesto fin a nuestra alianza con Torrot Electric Europa, S.A. Todas las compañías evolucionan y se transforman con el paso del tiempo, y nosotros no somos la excepción. Creemos que el liderazgo en el mundo de las motocicletas eléctricas off-road para niños y niñas comienza con la próxima generación, y por ello estamos contribuyendo a la iniciación y capacitación de más niños y niñas en el motociclismo. Bogotá, D.C. y Colombia, hoy cuentan con la flota más grande de motos eléctricas de Latinoamérica para la formación y entrenamiento integral de niñas y niños en el Motocross y Trial! Cuatro excelentes pistas y escuelas de formación de jóvenes pilotos en el motociclismo, ahora disponen de motocicletas eléctricas para sus clases, cursos y entrenamientos. ¡Contáctalos y visítalos! Agradecemos muy especialmente a nuestros clientes, aliados, concesionarios y equipos comerciales, pistas e instructores, y autoridades distritales, departamentales, y nacionales del motociclismo en Colombia, por haber confiado en nosotros. Con hechos, no palabras, estamos apoyando semilleros y construyendo el futuro de nuestro país , ofreciéndole a los más pequeños, las más amigables, divertidas y seguras experiencias en el mundo de las motos. ¡Mucha suerte y éxitos rodando nuevas aventuras! -------------------------------------------------------------------------------------------------------------- Prowess Global Group S.A.S. today announced that it has terminated its exclusive importer and distributor agreement with Torrot Electric Europa, S.A., to distribute Torrot KIDS electric motorcycles in Colombia. All companies evolve and transform over time, and we are no exception. We believe that leadership in the world of electric motorcycles for kids begins with the next generation, and that is why we are contributing to the initiation and training of more children into the world of motorcycling. Bogotá, D.C. and Colombia, have the largest fleet of electric motorcycles in Latin America designed for the introduction and development of young Motocross and Trial riders! Four excellent racetracks and motorcycling training schools now have world-class electric motorcycles available for their classes, courses, and training sessions. Make sure to contact and visit them! We are very thankful to our customers, partners, dealers and sales teams, racetracks and instructors, and Colombia´s national, regional, and local motorcycling authorities, for trusting us. Through actions, not words, we are building and supporting the future of our country , offering kids the best, safest and most fun initiation into the two-wheel electric vehicles space! Best of luck and many successful new riding adventures!
El pasado Domingo 24 de Abril de 2022, en el marco de prácticas clasificatorias de la I Válida del Campeonato Andino de Motocross, se realizó una Evaluación Oficial y Prueba Cronometrada de la motocicleta eléctrica Torrot Motocross Two con el gran Campeón Latinoamericano y Nacional 2021 categoría 50cc, Martín Ospina Cuello, joven piloto en formación en la Pista La Laguna . Nuestras felicitaciones a los organizadores, la Liga de Motociclismo de Bogotá, la Liga de Motociclismo de Cundinamarca y la Pista la Laguna. Gran organización y asistencia!
El pasado Sábado 26 de Marzo de 2022, en el marco de prácticas libres de la II Válida del Campeonato Nacional de Motocross Colombia 2022, se realizó una Evaluación Oficial y Prueba Cronometrada de la motocicleta eléctrica Torrot Motocross Two con el gran Campeón Latinoamericano y Nacional 2021 categoría 50cc, Martín Ospina Cuello, joven piloto en formación en la Pista La Laguna . Extendemos un especial y sincero agradecimiento a la Liga de Motociclismo de Bogotá, la Federacion Colombiana de Motociclismo , y la Comisión Nacional de Motocross, por su excelente tarea y gentil invitación para ser parte de esta gran fiesta del Motocross Colombiano. A nivel mundial y en Colombia, cada vez más jóvenes pilotos están considerando motocicletas eléctricas como una alternativa de vehículo para desarrollar su destreza y técnicas de conducción. Ha sido demostrado que las motos eléctricas son una excelente alternativa y complemento para contribuir y acelerar la iniciación y capacitación de más niños y niñas en el motociclismo deportivo, Motocross, Enduro, Trial y Supermotard, de una manera segura, divertida y pedagógica.
El pasado Sábado 5 de Febrero de 2022, 15 niñas y niños que nunca antes se habían montado en una moto, vivieron la mejor, más divertida y segura, y eléctrica iniciación en el mundo de las motos en Colombia! La gran experiencia " Mi Primera Vez en una Moto ”, permitió que niñ@s conocieran los fundamentos técnicos de dos modalidades del motociclismo: Motocross y Trial. La combinación y práctica de estas modalidades es la base sólida de los grandes pilotos. Con el equipo de protección puesto, que incluía casco, uniforme, guantes y botas, los niñ@s recibieron una excelente instrucción y clase personalizada. Conocieron sobre el funcionamiento y correcto uso de la motocicleta y vivieron sus primeras sensaciones en el mundo de las motos con Torrot KIDS, la #1 moto eléctrica a nivel mundial. Los jóvenes pilotos rodaron durante 40 minutos tanto en el óvalo de Motocross Enduro como en la pista de Trial. Mientras tanto, los padres y madres aprendieron sobre la teconología de punta Europea detrás de estos vehículos eléctricos, la cual está marcando la pauta para el sector de movilidad eléctrica. Tal es caso de especificaciones técnicas de las motocicletas, como la Aplicación Móvil APP de Control Parental, el Sistema de Gestión de Batería de Litio 48V Extraíble, y la Personalización de la potencia, velocidad, acelerador y freno regenerativo de la moto según las destrezas del niño o niña. Síguenos y conoce más en nuestras redes sociales, Instagram , Twitter y YouTube .
Empezamos el 2022 a lo grande con una invitación a vivir la gran experiencia “Mi Primera Vez en una Moto”. La cita es el próximo Sábado 5 de Febrero en la Pista OffRoad ubicada en el KM 25, Autopista Norte, La Vereda Yerbabuena, Chía, Cundinamarca (ver ubicación aquí ) Torrot KIDS es la moto líder a nivel mundial para los más pequeños. Su proyecto de ingeniería, diseño, alta calidad de componentes, tecnología de punta Europea y versatilidad de manejo, permite que niños rueden y desarrollen su pasión por las motos. Para uso recreativo, estilo de vida, o competencia del más alto nivel. En la Pista Offroad tendremos un excelente espacio, instrucción y clase personalizada, para que tus hijos o hijas puedan vivir su primera experiencia y sentir sus primeras sensaciones en el mundo de las motos de una manera divertida en un espacio seguro y profesional. En “Mi Primera Vez en una Moto” los niñ@s podrán experimentar dos modalidades del motociclismo: Motocross y Trial. Mientras los niños ruedan en el óvalo de Motocross Enduro o sobrepasan obstáculos en la pista de Trial, los padres y madres podrán conocer y apreciar el App de Control Parental, el Sistema de Gestión de Batería de Litio 48V Extraíble, y la Personalización de la potencia, velocidad, acelerador y freno regenerativo de la moto según las destrezas de sus hijo o hija. Reserva to cupo ahora para compartir de un tiempo de aprendizaje, nuevos amigos y mucha diversión al lado de las motocicletas eléctricas Torrot KIDS, la #1 moto eléctrica infantil. ¡Te esperamos! Descripción : Experiencia : “Mi Primera Vez en una Moto” Fecha : Sábado 5 de Febrero 2022 Lugar : Pista Offroad (ver ubicación aquí ) Hora : 10:00 AM – 2:00 PM Reservaciones : Cupos cada 40 mins. Cambio de moto (Motocross Two y Trial Two) a la mitad del turno. Precio por Niñ@ : $50.000 COP. Incluye instructor y clase personalizada, uso exclusivo de motos eléctricas Torrot KIDS Motocross Two y Trial Two, equipo de protección y derecho de pista. Requisitos : Niñas y niños entre 6 y 11 años. Básico saber montar en bicicleta y tener sentido de equilibrio. Asistir con documento de identidad original. Diligenciar documento de exoneración de responsabilidad (en el día). Favor presentarse 25 minutos antes de la hora de la reserva.
El pasado 16 y 17 de Octubre de 2021, se realizó la 2nd VALIDA DISTRITAL DE MOTOCROSS en la ciudad de Bogotá, D.C., Colombia organizada por la Liga de Motociclismo de Bogotá y la Federación Colombiana de Motociclismo . Muchas gracias a los organizadores por invitarnos a vincularnos y patrocinar este evento. Agradecemos y valoramos la gran dedicación y trabajo del equipo organizador. Estamos comprometidos a apoyar y contribuir a la capacitación de los más pequeños y darles mayor visibilidad a los procesos de semilleros del país. Desde los más pequeños que aprenden por primera vez a conducir una moto, pasando por niños y niñas que se divierten con la moto de manera recreativa en las fincas, casas de campo, clubes campestres, trochas, etc., hasta los jóvenes pilotos que desarrollan y afinan sus destrezas y técnica de conducción para competencias a nivel distrital, nacional e internacional, Torrot KIDS es la moto líder a nivel mundial para niños y niñas de 3 a 12 años. Cada día, más y más niñas y niños están apreciando y gozando de la calidad y las ventajas de las motocicletas eléctricas Torrot KIDS. Desde sus componentes, la aplicación tecnológica móvil, hasta las sensaciones y la versatilidad que las motos ofrecen a los pilotos jóvenes en el desarrollo de sus destrezas y técnicas de conducción y manejo. ¡Muchas felicitaciones a los más de 40 participantes y los jóvenes pilotos campeones en las categorías Pitbike Infantil, 50cc Mini, 50cc, 65cc Novatos, 65cc y 85cc! Y grandes noticias nos esperan… muy pronto tendremos a Torrot KIDS Motocross ONE y Torrot KIDS Motocross TWO participando y compitiendo! Síguenos y no te pierdas estas noticias.
El pasado 9 y 10 de Octubre, se realizó la 5ta VALIDA NACIONAL DEL CAMPEONATO DE MOTOCROSS COLOMBIA en la ciudad de Manizales, Caldas, organizada por la Liga Caldense de Motociclismo y la Federación Colombiana de Motociclismo . Torrot Electric Europa y Prowess Global Group, representante exclusivo de Torrot KIDS para Colombia, agradecemos muy especialmente a los organizadores la oportunidad de poder vincularnos y patrocinar la realización de esta válida. Casi 50 niños y niñas orgullosamente representaron a la Liga Antioqueña de Motociclismo , Liga Valle de Motociclismo , Liga de Motociclismo de Bogotá , Liga de Motociclismo del Tolima , Liga de Motociclismo de César , Liga de Motociclismo de Cundinamarca , Liga de Motociclismo del Huila , Liga de Motociclismo de Nariño y Liga Santandereana de Motociclismo . Nuestros sinceros agradecimientos a todos los niños y niñas que disfrutaron de las pruebas de manejo. Desde los chicos y chicas que nunca se habían montado en una moto, hasta los experimentados jóvenes pilotos actualmente triunfando a nivel Nacional y Latinoamericano, todos se gozaron las motocicletas eléctricas Torrot KIDS con excelentes comentarios. Su versatilidad de manejo, mayor torque y potencia (además programable), menos peso (hasta 50% más ligeras), y tecnología de punta Europea, entre otros factores, hacen que Torrot KIDS sea la moto eléctrica líder a nivel mundial para los pilotos entre 3 y 12 años. Hoy, quisiéramos rendirles un pequeño homenaje a todos ellos. Muchas gracias por confiar en nosotros. Con ustedes, estamos convencidos de que el futuro del motocross Colombiano está en excelentes manos. ¡Muchos éxitos y siempre adelante! Síguenos y conoce más en Instagram @prowessglobalgroup y Twitter @Prowess_Global.
¿Cuáles son las ventajas de las motocicletas eléctricas sobre las motos de gasolina para niños y niñas?