Income Share Agreement (Free Template)

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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.

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

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