Unlocking Opportunity at Texas Christian University: Are Income Share Agreements the Master Key?

Abstract

As the nation’s growing student debt obligations surmount $1.6 trillion, some post-secondary education institutions are investigating innovative solutions for college financing to replace traditional loans. Income Share Agreements (ISAs) represent a popular strategy for some trade and state universities; through legal contracts, these institutions assume the burden of remaining education costs after grants and scholarships in return for a predetermined percentage of the student’s future income over a specified time period. This thesis will investigate the viability of ISAs specifically at private, nonprofit, four-year institutions, using Texas Christian University (TCU) as a case study. Using a multivariate distribution of correlated stochastic variables, Monte Carlo simulation generated thousands of possible net present value (NPV) scenarios for ISA contracts with the Neeley School of Business, the site of a potential pilot program. Most business major ISA contracts demonstrated a probability greater than 98% to return a positive NPV. These findings solidify recommendations to implement such a pilot program within the Neeley School of Business with the hopes of expanding these financial aid tools to all major programs in future years. An income share program at TCU could not only unlock opportunity but also maintain the university’s financial stability in a time of economic downturn.