In September, Leif was engaged by Clarkson University — a leader in higher education offering undergraduate and graduate degrees focusing on engineering and technology — for the design, origination, and servicing of its ISA program. In light of this exciting new partnership, which builds on Leif’s commitment to the education finance space over the past five years, we thought it was a good time to review the fundamentals of outcomes-based education financing, address some common misconceptions, and clarify the role Leif plays as a forward-thinking technology and innovation company.
Q: Is outcomes-based financing more equitable or less equitable than traditional student loans?
A: In our view, which is echoed by many in the education industry, the current system of paying for post-secondary education provides inequitable access to financial support, too often results in financial hardship for students and parents, and maintains no structural accountability for students who do not graduate or are not prepared for the careers of their choice. These shortcomings disproportionately affect low-income students and students of color. Additionally, private loans offer virtually no protection to students with low earnings after school.
In contrast, an outcomes-based approach supports equitable access to high-quality post-secondary and training options, strong affordability protections, and shared accountability for educational and career success. Moreover, a recent study by Jobs for the Future (JFF), found that “Under a properly designed school-based ISA, learners only pay schools for the education and training they received if they succeed in the job market.”
Q: What role can outcomes-based financing play for traditional higher education institutions? While Clarkson has favorably cited Leif’s “student-centric platform,” we note that at least one university has chosen to pause its ISA program due in part to a problem with its platform provider.
A: Outcomes-based financing is a powerful alternative to more traditional student loans at a range of educational institutions, and we are seeing traditional higher ed schools taking a closer look due to the continued rising cost of tuition.
But not all providers are created equal. Well-designed ISAs and other related financing solutions support equitable access to education options, insulate against the uncertainty of traditional loans, and provide for shared education and career accountability, helping ensure a higher degree of successful outcomes.
It is worth noting that in September, Stanford Law School announced a new program that will allow some students to fund their law degrees with an ISA.
We also believe that more education is needed, both on and off campus, to explain the details and benefits of outcomes-based financing.
Q: Some critics of outcomes-based financing have expressed concern about the financing structure of ISAs, especially considering the fact that one high-profile provider has gone out of business. What are your thoughts?
A: Without going into details about a former competitor, we would just emphasize that our platform is structured in a different and highly sustainable manner, both for our education partners and the students who benefit from these financing agreements.
Q: A number of technology bootcamps have been criticized for hyping their services to vulnerable student populations in order to generate revenue, and in reality, providing poor educational experiences. Do you vet schools or do due diligence before partnering with them?
A: We do everything we can to partner only with schools who are responsible educational institutions. On occasion, we have been made aware of information to the contrary, and in those instances, we immediately terminated relationships with those school partners.
Q: In its effort to protect consumers, the Department of Education (DOE) has said that ISAs should be considered a form of traditional student loans and subject to the same existing regulations. What is your response to this?
A: Current consumer finance education regulations are based on a rigid principal-and-interest-based loan model that does not account for the flexibility afforded by ISAs. As a result, they are not directly applicable to outcomes-based financing products and in our view need to be updated to accommodate innovative alternatives in order to truly protect consumers. Of note, regulators in certain instances have issued consent orders mandating that specific ISA products include required disclosures similar to traditional student loans.
Bottom line, recognizing that there are clear differences between the ISA product and traditional student loans, and that existing frameworks don’t always best serve the consumer, we make sure that our disclosures have built in consumer protections that account for those differences while aligning with the spirit of the existing regulations.
Q: What is Leif's position on increasing regulation and oversight of ISAs and other outcomes-based financing tools? Are you concerned about the legislation introduced into Congress earlier this year that seeks to create a consumer protection framework and further regulate this form of education financing?
A: We welcome appropriate regulation and oversight and strongly support that legislation, which is rooted in a clear understanding of outcomes-based financing. The ISA Student Protection Act of 2022 will help provide more consumer protection in the wider ISA market, as well as clarify the tax implications of these agreements. Furthermore, it will mandate clearer disclosures from providers, which Leif already has in place for contracts originated through our platform.
Q: How is Leif performing, and how is it positioned for the future?
A: Today we partner with more than 350+ technology boot camps and vocational schools, and we are now expanding into the traditional higher education segment, with recent agreements with Clarkson University, Roseman University, and Messiah University to simply name a few. At the core of our business is an end-to-end technology platform that enables the design, origination, and program management of innovative tuition solutions, all with the goal of increasing access to education at an affordable cost. And we have helped more than 30,000 students to date receive an education linked to their economic success in the workplace. It’s a mission we are proud to help lead.
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