Last week, Robert Smith announced his new nonprofit, Student Freedom Initiative (SFI), which will offer low-interest rate loans to juniors and seniors attending historically black colleges and universities (HBCU) and majoring in science, technology, engineering, and math (STEM). Although Mr. Smith does not explicitly describe his initiative as an income share agreement (ISA), that is exactly what it is.
Here’s how an ISA works. Students receive funding for college, with an agreement that the investors will receive a percentage of the student’s income for a set number of years after graduation. The more money a student earns, the greater the return. Proponents of ISAs call them an investment in students, not debt. But ISAs don’t necessarily save students any money, and it’s near impossible to figure out exactly how much a student will pay over the course of an ISA.
In the blog below, I outline why ISAs are predatory and will not increase access for marginalized populations. Let’s not be fooled by Mr. Smith’s use of the word “freedom” to name his new initiative.
As we enter the 4th of July holiday weekend, please remember that many of the men who signed the Declaration of Independence were slave owners. We must ask ourselves, “What does freedom in the United States of America mean?” “Does my idea of freedom require the suppression of another’s freedom?” It’s time to take a closer look. .
