It’s a new idea, but one that has immense potential. Education, among India’s fastest-growing sectors, is particularly conducive to innovation, especially when it comes to financing quality education. And bridging a critical gap is the idea of income share agreements (ISA).What ISA does, therefore, is to ease the mode of financing marketable education courses, by lowering the risk for financial lenders. It also lowers the debt risk for students. And it incentivises institutes imparting valuable skills through specialised courses to look for students beyond the narrow band of those who can afford expensive training. Since institutes offering ISA typically also play a big role in finding the right job for students, the overall risk comes down.In the US, ISA is catching up as an education business model. In India, ISA is still in its nascent stage. A few startups offer ISAs for niche courses, and some education providers are considering it.ET spoke to 10 education experts, startup founders and law firms for this report. Many spoke off the record.“ISA allows institutes to admit meritorious students who otherwise may not be able to afford the course fee. This loan structure involves institutes, and it promises good placements… this adds another layer of security. The whole concept is in a nascent stage and we hear of some institutes attempting to do it. This is being done mostly for postgraduate courses, especially tech and specialised courses that the job market needs,” says Nagavalli G, partner at law firm Cyril Amarchand Mangaldas Startups offering the ISA model in India are AttainU, InterviewBit, Pesto Tech, AltCampus.AttainU, a startup that promises a scalable, high-quality college alternative for deserving students, offers software engineering courses that are conducted online and live. It offers ISA to 350 students now. Founded in November 2018, AttainU is currently running multiple batches and its first batch of 20 students will graduate in October.After completion of the course, AttainU promises a minimum annual salary (on cost-to-company, or CTC, basis) of Rs 5 lakh. If a student lands a job that pays less, he has no repayment obligation. On successful placement, students pay back the course fee through monthly payment of 15% of their salary. “ISA is a deferred fee-payment model, conditional to employment. We are working with three NBFC-fintech firms on the model,” said Divyam Goel, founder-CEO of AttainU.Once students find a job with a salary above the cut-off level, a contract is drawn up between the student, the NBFC and AttainU. The students pay zero interest to the NBFC for the course fee. According to an NBFC official — who did not wish to be identified — such an arrangement is a typical subvention-based personal loan.Pune-based reskilling startup InterviewBit, where students/professionals pay back the course fee only after landing a job, was initially offering online courses to students for free and was charging a hiring fee from companies once placements were done. The company had partnerships with 600-plus companies including Google , Amazon and Uber. However, margins were thin. So when InterviewBit wanted to move beyond the online model, it decided to take the ISA route with the help of banks/NBFCs.Abhimanyu Saxena, cofounder of InterviewBit.com, says focus on quality is all-important. For its first batch under ISA, which started off earlier this year, as many as 9,000 took the entrance test. Only 200 were selected. About 70% of the batch already has job offers.“Students sign a conditional loan, a legal contract, which says that if you don’t get a job within a year of starting the course, your loan gets cancelled. Otherwise, students pay back a certain percentage of their salary for a maximum of two years, or till they have repaid Rs 3 lakh, whichever is faster,” says Saxena. No interest is charged.Kumar Ashish, 22, completed his BTech from a Kolkata-based tier-3 private engineering college earlier this year. With little placement assistance from his college, he found that most off-campus jobs paid around Rs 7-8 lakh. The only offer that he had was in the same range.That was when Ashish took the ISA route, with InterviewBit. With a Rs 8-lakh education loan already weighing heavy, he could not afford the Rs 3 lakh required for the six-month programme. With the startup’s assistance, Ashish has recently landed a job at Pune-based MindTickle as a software developer engineer — at twice the base pay of his previous offer, plus Esops.In the US, Lambda School has successfully implemented the ISA concept, and is now considering an India entry. Recently, Lambda School said it was looking to set up operations in India, which, it feels, may become its second-biggest market.Ajay Raghavan, partner and head of employment law practice at law firm Trilegal , said the ISA model gives a creative twist to education financing options.“At the heart of the product is the ability to underwrite career success. Only when you have a clear idea of what kind of a career an individual will be able to access, and the skillset required to get him/her there, will this model work,” says Amitabh Jhingan, partner in the EY-Parthenon International Education Practice. Currently, in India — as in the US or UK — ISAs are being provided largely by standalone training providers rather than universities or formal education players, he says.There’s often a huge challenge around affordability when it comes to skilling, upskilling and employabilityfocused programmes in India. This model will help solve that, feels Jhingan. But screening will be key. “Also, there’s so much supply in India, the question is how do you acquire that brand, that slight exclusivity with employers,” he says.For loan repayment schedules, an algorithm is usually in place. Jhingan says some global ISA players manage a return of up to 30% if a student delivers above-average performance. Returns can drop to below 10% for average or below-average performance. Students typically pay 12-17% of their monthly salary to the ISA provider, and the repayment period is usually 2-3 years.What is needed, say stakeholders, is clear regulation in case ISA becomes a widely accepted model. Some people ET spoke to said RBI — the regulator of lenders — and UGC/HRD ministry — the regulators of education — may be relevant.