A quick explainer of income-share agreements
Instead of traditional student loans TradeUp uses a new kind of financial instrument called an income share agreement or an ISA. Unlike loans ISAs have no interest, set repayment windows, and built-in student protection.
In an ISA, there are three terms that matter - length, income share, and repayment cap.
Length: ISAs have set lengths, unlike loans. If your ISA has a length of 24 months that means that after 24 monthly payments the ISA is over - ISAs don't follow you around like private loans.
Income Share: An income share of 5.0% means that for those 24 months, you make payments equal to 5.0% of your pre-tax income.
Repayment Cap: A repayment cap of 1.4x means that no matter how high your salary is, you will never pay more than 1.4x the amount you initially borrowed. Once you pay back that amount the ISA is over, even if it's been less than 24 months!