Last week, an organization called Jobs for the Future (JFF) released the results of a statistical study they undertook to investigate whether or not Income Share Agreements (ISAs) reflect either a racial or gender bias in the distribution of their use. The report concluded that there is no bias in terms of race or gender.
For those of us working on creating more access to higher education and equal economic opportunities with ISAs, this conclusion does not come as a surprise!
Before commenting further, in the interest of transparency, let’s briefly review what the JFF did and how it conducted the study. First, the JFF used 7,639 ISAs that were active between 2018 and 2021. Some of the ISAs were new, others were in their repayment period. Now the caveat: Normally, in any financing endeavor, the financier is prohibited from collecting racial or gender data that can be tied directly to that application. That is, you can collect data during the process and save it in “bulk” to be reviewed later – but you cannot have it in a place where it could be seen by someone making the financing decision. The ISA data used did not have gender or race data, so that data was assigned to each ISA by using statistical methods. In fact, the JFF used several methods for assigning the same data, i.e., they used 3 different methods to assign race to have repeated confirmation of the assignments made.
In the end, as we’ve said, the study concluded that there was no statistically significant relationship between race and/or gender and the key contract terms they were offered!
Again, this is not surprising.
ISAs themselves are not living, breathing entities. They don’t think – therefore they do not form opinions and then biases or prejudices. Humans do that. Granted, this study could have found that bias does exist. But that is not a reason to cast doubt on ISAs as instruments – it only calls into question the equity of the financial system as a whole. The same bias that could exist in ISAs could also exist in mortgages and car loans. The instrument doesn’t decide, the lender does, whether through personal decisions made based on bias or through using algorithms that contain inherent bias.
The DefynanceISA product offers a fairer approach to financing higher education. By setting the monthly payment to a percentage of income, the Defynance ISA actually reduces bias by giving people – especially African Americans and Latinx and women, who are undoubtedly subject to bias in incomes – a more affordable way to repay the debt they incurred while attending college.
