In the past few months, there has been an upswell in conversation around Income Share Agreements (ISAs) from the media and educational institutions alike. As ISAs gain ground, we believe it is a good time to reflect on why we founded Leif, what we are doing now, and what we hope to accomplish in the future. Although Leif was founded in 2016, the origins of its mission took root years before.
I grew up in a working-class family where the value of hard work and education—and the sacrifices it sometimes took to get it—were made a priority from an early age. I was fortunate to have parents who encouraged me to go after every educational opportunity that came my way, even if it was financially out of reach. I was lucky to earn a scholarship at an elite private high school and even luckier to land a spot at my dream university where I was able to develop as both an engineer and an athlete. A decade of hard work in capital markets allowed me to pay down a hefty dose of student debt and has ultimately afforded me the luxury of switching careers to pursue my passions.
At first I attributed many of these opportunities to luck, but as I look back I realized there was much more going on behind the scenes. My parents worked tirelessly, as a teacher and a soccer coach, to ensure that I had the favorable circumstances that have allowed me to get where I am today. The sum total of these experiences has gifted me the perspective to truly appreciate the sacrifices my parents made and the obstacles they overcame to afford me these opportunities.
Leif was originally created as a non-profit to remove these obstacles. While this country is indeed the land of opportunity, we should not delude ourselves into believing that opportunity is equally distributed. People come from different backgrounds, are afforded different opportunities, and are faced with different obstacles. Income Share Agreements remove these obstacles by eliminating the upfront cost of education and investing in the future success of a student. Leif has created the best-in-class ISA platform that offers quality education at an affordable cost – to anyone, independent of that person’s own story. Our mission is to remove the financial barriers to education so that all people have the opportunity to better their lives.
For some prospective students, those barriers are practical. They simply do not have the means nor the credit history to make an upfront investment in an education, especially when loans are required. For other students, the barriers are more psychological, stemming from risk aversion. Taking on student loans feels like too much of a risk — what if they don’t graduate? What if they graduate but don’t get a job? What if they get a job, but it does not pay enough to keep up with student loan payments? We created Leif to help the best schools remove these obstacles—both practical and psychological—by offering ISAs as an alternative.
It is clear that the traditional student loan model is unsustainable. Americans now owe almost $1.5 trillion in outstanding student loans with expected default rates as high as 50% in the coming years. Student debt can be very difficult to shake: 1.8 million people over age 62 owe a total of $62.5 billion, meaning they are nearing retirement age, yet are still struggling to pay down loans they may have taken out decades ago. In many ways traditional student loans can feel like a lifetime prison sentence.
We believe both schools and students alike will benefit when the two parties work together with aligned incentives. A traditional student loan forces students to accept all of the downside risk of not being able to afford their monthly payments, under very uncertain outcomes. With an ISA, students agree to pay only a small percentage of their income for a predetermined period of time, up to a clearly defined dollar amount, but only if they earn above a certain amount (the latter serving as a very valuable feature of wage insurance). Programs that burden students with an excessive amount of loans can lead to a lifetime prison sentence of debt. Programs that invest in the future success of their students and only collect payments when students are earning sufficient income are simply the future of education finance.
We have already seen the success of ISAs in expanding access to a more diverse range of students (EOY Blog Post: Leif's Social Impact in 2018). An immigrant from Haiti, a forklift driver turned engineer, an unemployed father of three — the list goes on. When students like these win, schools win as well. In addition to democratizing higher education, all of our partner schools have experienced a significant increase in enrollment. We think that is a pretty terrific scenario for all parties involved.
For generations, a college degree was the surest path to upward mobility. But over the past 25 years, the inflation-adjusted cost of tuition has increased by nearly 200% while entry-level wages have remained stagnant. To us, it is clear—the time has come for schools to align their incentives with those of their students while supporting transparency of outcomes. Leif offers the best-in-class platform to help schools seize this opportunity and increase access to quality education at an affordable cost to all.
Co-Founder & CEO