Lewis Income Share Agreement Program

Q: What is an income share agreement (ISA)?

An ISA is a contract in which you receive a reduction that lowers your cost up-front, as well as your out-of-pocket costs, in exchange for paying an agreed upon percentage of your income over a defined number of months. There is no principal balance or interest rate, and the amount you pay in any given month automatically adjusts based on your earned income for that month, so that you always have an even payment burden. Depending on your earnings level, your required payments may be more or less than the amount of your initial credit, or you may not be required to pay anything at all.

At Clarkson, we refer to our ISA as the Lewis Income Share Agreement, or LISA, in honor of Earl ’66 and Barbara Lewis, who have provided the generous seed funding to make this program available to students. 

Q:  What are the key contract terms for LISA funding?

There are three (3) key contract terms in an ISA:

• Income Share — The percent of monthly income you pledge to pay after leaving school. 
• Number of Payments — The maximum number of monthly payments required before your obligation under the contract is over. 
• Income Threshold — The level of income below which you would not make payments. Payments also pause if you return to school. If either of these two situations occurs, payments are postponed until your income rises above the threshold again or you leave school.
• Payment Window — The longest period, in a calendar sense, during which you can be required to make payments, regardless of how many payments you have made or how much you have paid. This is usually listed as a number of months beginning from the end of the grace period and effectively sets a maximum time limit on your obligation.

Q:  What is the income share for Clarkson’s fall 2018 cohort?

Students who are accepted for the LISA program in the fall of 2018 will receive a tuition reduction of $10,000 for the academic year ($5,000 per semester). The income share percentage that you will pay after you leave Clarkson and after your grace period will depend on your fall 2018 class year, as follows:

First year    1.70%
Sophomore year   1.52%
Junior year       1.50%
Senior year       1.48%

So each year you stay enrolled at Clarkson, your diligence toward earning your degree is rewarded by paying a smaller and smaller percentage of your future income on that year’s $10,000 tuition reduction. The cumulative amount for all four years, or $40,000 in tuition reductions, would be 6.2% of your future income. We recruit students who can become future alumni — we believe you can do this, and we go the extra mile every day to support student success.

Q:  After I graduate, when do I start making payments? Is there a grace period?

After you graduate or otherwise separate from school, your account enters a six-month grace period to give you time to find a job and settle into your career. After your grace period ends, payments are due on the first of the following month. So, for example, if you graduate on May 15 and have a six-month grace period, the grace period will end on November 15, and the first payment will be due on December 1.

Q:  When does my payment obligation end?

Your payment obligation ends — and your account is closed in good standing — whenever the first of any of the following two (2) events occurs:

• You make the required number of payments.
• You reach the end of the payment window.

Q:  How do LISA payments work?

Monthly payments are calculated by applying your income share to your total monthly earned income, and that amount is sent to you in a monthly bill. Your earned income includes two things: (a) your wages, salary, tips and all other earned income that you report on line 7 of IRS tax form 1040 or line 1 of IRS tax form 1040-EZ; and (b) your business income that you report on line 12 of IRS tax form 1040. You can then pay online or with a check. Payments pause if you return to school, lose your job or have a monthly income of less than $1,667.

Q:  What happens if my grace period ends but I have a low-paying job, or maybe no job at all?

There are several job circumstances in which you can postpone making payments: 

• You are unemployed.
• You are employed and earning less than $1,667 per month, which is equivalent to $20,000 per year.
• You are temporarily disabled or take a medical leave.
• You voluntarily leave the workforce, for example to start a family or do charity work.

When you provide documentation of such circumstances, your account will be placed in a deferment status, and you will not be required to make monthly payments. Note that your income share percentage and the maximum number of payments required will not increase because of this pause, so you will face no penalty for this pause.

Q:  What happens if I return to school?

If you enroll half time or more in an educational program that results in a degree or certificate or in a vocational training program at a higher level than your current program, your payment obligation will pause until you complete or leave that new program. Then, you are given another six-month grace period before your payments start again once you re-enter the workforce and have an income above the minimum income threshold.

Q:  What happens if I don’t graduate on time or at all?

ISA contracts go into a payment status six months after graduation, separation or enrollment that is less than half time. Even if you don’t finish your degree or program, you are responsible for meeting the terms of your LISA contract.

Q: Will students be required to go into or steered toward certain types of employment?

No, there are no requirements stipulating the nature or type of employment or re-enrollment in school that you can choose after you leave the program.

Q:  What if I don’t know what career path I want to choose?

We want you to be successful, following your own passion with purpose. You do not have to know what career path you want to choose. The LISA is designed to adapt to your financial situation automatically so that you can make decisions about your career and personal goals without the stress of trying to figure out how to repay a loan balance with interest. You are contracting for a fixed percentage of your income, whatever that happens to be, so the amount you pay will change dynamically with your income and never become a payment that overburdens you.

Q:  What happens if I make the required number of payments, but their amounts add up to less than the tuition reduction I received up front?

You will have met your obligation under the contract, and your account will be closed in good standing. 

Q:  Am I required to fully pay the tuition reduction that was given to me under the LISA?

You are simply required to pay the agreed upon percentage of post-program income for the prescribed number of payments. After successfully making those payments, no additional payments are required, even if you have paid less than the original tuition discount.

Q:  Will the amount I am responsible for paying grow if it takes me a long time to find my first job or if I face occasional underpayment?

No. There is no balance or interest rate with ISAs, so there is nothing to grow. The amount you are required to pay (income share percentage multiplied by earned income) will only increase when your income increases. The income share percentage and required number of payments will not change over the course of the payment period, and you will never pay more than the sticker price of your tuition reduction.

Q:  What happens if my income changes during the year but I forget to update the program?

After the end of each year in which you make payments, you are required to inform us whenever your income changes, whether it’s an increase or a decrease. Every April, we will reconcile your monthly payments with your verifiable annual income, such as through a tax return, from the previous year. If you end up paying less than you were supposed to, your remaining payments for this year will be adjusted up for the remainder of the year to correct that discrepancy. If you end up paying more than you were supposed to, we will send you a check within 60 days of receiving your verifiable documentation.

Q:   Can I get the LISA for more than one year? If so, how would that look in payment?

Yes. For instance, if you take one for your first year of the program, you may also take one for your second year. Each LISA agreement is a contract on its own, and your payment will be the sum of the percentages listed in each agreement.

Q:   What happens if I leave Clarkson before or shortly after I start?

If you leave prior to incurring any Clarkson charges, the program fees will be cancelled, your contract will be cancelled and you will not owe any payments. If you leave after the 100% refund period, your contract amount will be adjusted based upon our stated refund policy.

Q:  What is the difference between ISAs and a traditional student loan?

Both ISAs and loans are a way of paying for an education or training program without up-front costs and without incurring debt. However, an ISA’s obligation automatically scales based on your ability to pay, and there is no principal or interest, whereas a loan is a way of paying for an education by borrowing money from another party in exchange for paying that full amount back, plus interest, over time, regardless of your earned income. ISAs have several advantages over traditional federal and private education loans:

• With ISAs, students only pay a percentage of their income and never pay more than the sticker price of tuition. With loans, students always repay more than what was borrowed because of origination fees and interest, and the payment window can be extended indefinitely.
• ISA payments self-adjust by income level and therefore, by design, are always affordable. With loans, payments remain the same even if income goes down or is lower than expected, exposing students to the risk of being unable to make their loan payments.

In times of significant economic difficulty (i.e., annual income lower than $20,000), no ISA payments are due, and the balance does not increase. The only thing that happens is that payments are delayed to the future when that time of difficulty is over. With loans, interest usually accrues, and your future payment burden increases for each month you face that difficulty. With some loans, you will still be required to make payments even when you have a low income.

Q:  What is the difference between ISAs and income-driven loan repayment plans that are available?

The key difference is that in income-driven repayment plans, there is always an outstanding balance. Thus, when required payments are less because of a drop in your income, the number of payments you have to make naturally increases to make up for that loss. This may delay life milestones that you may wish to pursue, such as a change in career or having a family. In addition, you must renew your eligibility for income-driven plans on an annual basis.

ISAs, on the other hand, never have a balance and have a fixed number of payments, so you are free to make those life decisions without increasing any kind of balance or the required number of payments. Also, you never have to renew your eligibility, and payments automatically adjust based upon verifiable income data.

Q:  Is a LISA meant to replace student loans?

The LISA offers students an option to pay for their degree without incurring debt, so it is explicitly meant to replace some student loans.

Q: What are the risks to students?

If you earn significantly more than your peers at Clarkson during the payment term, then the amount that you pay could be greater than the original amount you that you were awarded. Conversely, should you earn less than your Clarkson peers, you would pay less.   

Another risk that you face is if you do not fulfill your obligation to provide up-to-date income information or to make payments based on that income and your income share. If you fail on that obligation, then your account will become delinquent and may eventually go into default. It is prudent to look at the time value of money and the interest fees you would pay on other loan programs that do not apply to the Clarkson LISA.  

Q:  Why is Clarkson offering the LISA to students?

Our priority is to help students pay for their education and training in a way that best suits their particular needs. LISA funding provides a more income-flexible funding option for students that could reduce debt and financial risk. We are focused on student-centric communication and will offer the LISA with transparency and openness. 

Q:  Which students will be eligible to receive the LISA?

The program will be made available to all undergraduate students at Clarkson; however, it is limited by the amount of available funding. Eligibility requirements include the following:

• You must be a U.S. citizen, permanent resident or nonimmigrant with a U.S. work or student visa.
• You must be at least the age of majority based on your state or country of current residence.
• Your total obligations under all income-based agreements with us or another person must not require you to pay an aggregate income share exceeding twenty five (25) percent of your earned income in any given month.

Q:  How much funding is available for individual students?

Annual individual tuition discount amounts will be for as much as $10,000. These awards may be renewed each year as you progress through your academic program. You should talk with Kara Pitts, director of new student financial assistance, at 315-268-3707, or incomeshare@clarkson.edu, for more information.

Q:   What is the process to apply? How long does it take?

The online application is an easy-to-complete online form; we will ask you to confirm that you have applied to Clarkson and then share why you should be in the LISA program. Submission should take less than 30 minutes.  

The cohort of students selected to participate will work with our partner, Vemo, (www.vemo.com), to complete the paperwork for an agreement. Vemo is a pioneer in ISAs and has worked extensively with us to make ISAs available to students. Note that the contract still is between you and us, and Vemo is only helping us service our own LISA accounts.

Q:   What documents do I have to sign?

After you sign your enrollment agreement with us, you will sign the LISA, which includes a two-page summary of the agreement, called a “disclosure,” and additional contract terms and explanations. When classes begin, you will also receive a final disclosure, but it is only a reminder of the primary contract terms, and you do not have to sign it.

Q:  How will I know if the LISA is a good option for me?

The LISA gives you more flexible payment options post graduation than do traditional loans. Because payments are always a fixed percentage of income rather than a fixed dollar amount, you don’t have to worry about excessive payments in times of economic difficulties. In addition, once you have successfully made your required payments over the defined term of the contract, the contract ends even if the total sum of your payments is less than the tuition reduction you received up front.

However, LISAs are not eligible for consolidation with traditional student loans. In addition, monthly payments may vary from year to year based on changes in your income and thus are not completely fixed and predictable. You should consider both of these factors in making your decision.

Ultimately, ISAs are among many options that are available to fund your education, including paying all the program fees upfront. You and your trusted financial advisors should consider all of the available options and your individual situation before determining which one is best for you.

Q: How can I sign up for the LISA program or get more information?

Contact Kara Pitts, director of new student financial assistance, at 315-268-3707 or incomeshare@clarkson.edu. We recommend that you discuss the LISA with a financial aid advisor, your parents and your trusted financial advisor before deciding if the LISA program is a good funding solution for you. The application window for Clarkson is open now through February 1, 2018, for students entering in the fall of 2018.