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ISA Marketplace Platform edly Secures Seed Funding

By Henry Kronk
September 03, 2019

The New York startup edly, which provides a marketplace for income share agreements (ISAs), announced on September 3 that it had secured seed funding to scale its operations. Funding was provided by Mistral Venture Partners.

ISAs have grown in popularity in recent years as a means to fund degrees in higher education. With an ISA, a student pays nothing up front. After successfully graduating from a program, they pay a share of their income for a set period of time.

The method of paying for college is seen by some as a way both to allow students to pursue an education without taking on a huge amount of debt and to tie value to education in a more realistic way. Detractors, however, worry that ISAs are unregulated and invite predatory student lending practices.

edly Connects with Mistral for Seed Funding Round

Most ISA universities today offer their product with backing from their own equity or internal fund. edly, however, offers vetted third parties the opportunity to invest in ISA offerings. By opening things up, the company believes it can offer even more affordable options.

“The payoff for graduating from high-quality colleges and skills academies has never been higher. However, the private student loan system has created barriers to education and skills training. Thanks to edly’s school partners and the team at Mistral Venture Partners who share our vision, we see increased ISA adoption which is poised to level the playing field for millions of Americans,” said CEO and Co-Founder Chris Ricciardi, in a statement.

Details of the funding round were not made public. Crunchbase currently sets edly’s total venture capital raised at $1 million, but lists two rounds: one worth $1 million in May of this year and another valuing $0 on September 3rd.

As part of the deal, three investors will join the edly board of directors. These are two members of Mistral—Managing Partner Code Cubitt and Principal Pablo Srugo—and Daniel Gilbert, an independent private investor.

“edly ISAs are by definition more affordable and strongly preferred by students as an alternative to private student loans,” Cubitt said, according to a news release. “edly ISAs link the cost of education to the value it creates, incentivizing schools toward more responsible, student-centric behavior. We’re proud to back Chris Ricciardi, Chuck Trafton and the entire edly team at this critical phase of market development.”

So far, edly has partnered with ISA issuers like V School, Bottega, and Holberton School. Others like Sabio, American Diesel Training Centers, and Advanced Welding School, are expected to join in the near term.

The Potential Promises and Pitfalls of ISAs

Some education stakeholders see ISAs as a viable means to curtail the huge amount of student debt that is collectively held by Americans. The total surpassed $1.5 trillion at the end of 2018.

While ISAs might not be right for every student, they have the potential to offer learners another avenue of paying for college outside of going with a federal or private loan or out of pocket.

Others still see ISAs as a means to tie the value of a degree to the price of tuition. In other words, while a physical education student and someone studying computer science will pay a similar amount in tuition, they will statistically earn different amounts over the rest of their professional lives.

The U.S. Department of Education has also signaled interest in these agreements.

But at the same time, ISAs are fairly new and unregulated. Some believe that opens up the potential for predatory companies to defraud students or trap them in a harmful situation.

In June, a group of lawmakers including Massachusetts Senator Elizabeth Warren sent a letter to Education Secretary Betsy DeVos asking for clarity with their position and urging caution.

“Like private student loans and many other types of debt, the terms of an ISA contract can be predatory and dangerous for students,” the lawmakers write. “Institutions market ISAs as low risk to borrowers because ISAs often do not require payment unless the borrower meets a specific income threshold. There is no evidence, however, that these income thresholds actually shield borrowers from having to make payments they cannot afford.”

Featured Image: Jane Carmona, Unsplash.