Student Loan Alternative: Stride Income Share Agreement
Stride is a financial aid service that offers graduate students a different way to pay for graduate school. Stride offers an alternative to traditional student loans – Income Share Agreements. Income Share Agreements are exactly like that they sound like. You agree to pay a percentage of your income for a specific number of years. There are pros and cons to Income Share Agreements, so do your homework before determining if they are right for you.
Here’s what you need to know.
How Does Stride Funding Work?
Stride offers Income Share Agreements (ISAs), where they give graduate students up-front money to cover tuition. In exchange, graduate students agree to pay Stride a percentage of their salary for a certain number of years.
Here’s an example of what an ISA might look like:
Say a student needs $25,000 to pay for tuition. They sign a contract where Stride agrees to give them the $25,000, and the student agrees to pay back 3% of their income for 5-7 years, regardless of how little or how much they earn.
How Do Income Share Agreements Differ from Student Loans?
Traditional student loans come with fixed payment terms where a student has to continually make payments no matter what. Even if they’re earning a little or don’t have a job, payments must still be made, unless they qualify for a deferment or forbearance.
This can present a problem for many people where they may have difficulty repaying their student loan on top of other expenses. And in some cases, this can lead to borrowers defaulting on their student loans.
Stride is structured differently from student loans because there are no fixed payments. Instead, graduates pay an income share during the payback period to fulfill their ISA obligation. Under this financial structure, the amount they earn each month directly determines how much their monthly payments are.
With Stride, no monthly payment is required if a graduate earns less than the equivalent of $40,000 a year during that month. In this situation, Stride defers the payment so a graduate can spend their money on more pressing expenses like housing, utilities and food.
But if you have a high paying job, your monthly payment could be more than it would be with a traditional student loan.
Here are a few other things to know:
- Stride offers graduate students up to $25,000 per year, while federal student loans offer up to $20,500 for graduate students with unsubsidized Federal Direct Stafford Loans. (Graduate students can borrow more through a Federal Direct Grad PLUS Loan.)
- Stride doesn’t require a co-signer.
- The payback period is typically 5 years.
There are two hard requirements that must be met in order to qualify.
You must be a U.S. citizen or permanent resident, and you must be a graduate student. Otherwise, you’re ineligible.
Beyond that, there are a couple of other things that factor in, with one being credit.
Although Stride doesn’t base approval on a particular credit score, they do look for major credit issues. Therefore, anyone with a history of major credit problems will likely be declined. If, however, you have solid credit, your odds of being eligible increase.
Also, Stride’s primary focus is on helping graduate students who are pursuing a science, technology, engineering and mathematics (STEM) education, as well as those in business and healthcare. If one of these is your area of study, you’re more likely to qualify than someone who’s in a different field.