Edly review for investing in income sharing agreements ISAs

The rising cost of education has become a pressing concern for many students and their families. With traditional student loans burdening graduates with debt they struggle to repay, innovative solutions are emerging to shift this paradigm. One such solution is the Income Sharing Agreement (ISA), which offers a fresh approach to financing education. In this article, we will delve into how ISAs work, the benefits they provide, and how platforms like Edly are changing the landscape of education financing.

Understanding Income Sharing Agreements (ISAs)

An Income Sharing Agreement, or ISA, is a financial model that allows students to finance their education by agreeing to pay a fixed percentage of their future income for a specified period after graduation. This system contrasts sharply with traditional student loans, where the burden of debt falls entirely on the student. The ISA approach helps mitigate the risks associated with education financing, making it a compelling alternative for many.

Instead of accruing interest on a loan, which can lead to overwhelming debt, ISAs offer flexibility based on the graduate's income level. If a graduate does not secure a high-paying job or is unemployed, they are not required to make payments until they reach a specified income threshold. This model ensures that students only pay what they can afford, aligning their financial obligations with their actual earning potential.

The Founders of Edly and Their Vision

Edly was founded with a mission to revolutionize how students finance their education by leveraging the ISA model. The company is led by two dynamic individuals with extensive experience in finance and investment.

Christopher Ricciardi, CFA

Christopher Ricciardi serves as the CEO of Edly and has a rich background in finance. Currently, he is the Treasurer and Director of the American Fund for the London School of Economics. His previous roles include CEO of Cohen and Company and Global Head of Structured Credit Products at Merrill Lynch. With his expertise, Ricciardi aims to bring transparency and efficiency to education financing through Edly.

Charles Trafton

Charles Trafton, the President of Edly, has a strong investment background, having partnered with FlowPoint Capital and FlowPoint Education Management. He has also been recognized as an “All-American Research Analyst” by Institutional Investor for his analytical prowess. Trafton's focus at Edly is to ensure that the ISA model not only benefits students but also provides attractive returns for investors.

Challenging the Traditional Student Loan Model

As student loan debt in the United States has soared to approximately $1.8 trillion, many graduates find themselves trapped in a cycle of repayment that can last for decades. This alarming trend highlights the need for alternative financing models that alleviate some of the burdens associated with traditional loans.

• Total outstanding student loan debt has risen significantly, from $1.48 trillion in 2019 to $1.6 trillion in 2022.
• Only 0.28% of applications for loan forgiveness through the Public Student Loan Forgiveness program have been approved, according to the United States Government Accountability Office.
• Over three million seniors aged 60 and older continue to pay off their student loans.
• The cost of college has significantly outpaced wage growth, increasing eightfold since 1980.
• Americans owe approximately $521 billion more in student loans than in credit card debt.

The traditional student loan model presents several challenges that exacerbate the financial struggles of graduates:

1) Inflexibility of Traditional Loans

Traditional private student loans require fixed monthly payments regardless of income, creating significant financial strain.

2) Accumulation of Interest

Missing a payment can lead to compounding interest, making it increasingly difficult for students to repay their loans over time.

3) No Defined Maximum Repayment Amount

Students can end up paying much more than they initially borrowed due to unforeseen circumstances.

4) Credit Checks and Co-signers

Many students are denied loans because of their credit history, making education financing less accessible.

5) Long Repayment Terms

Traditional loans often come with decades-long repayment terms that further prolong financial hardship.

Edly's Innovative Solution

Edly's Income Share Agreements provide a refreshing alternative to the traditional loan model. Here's how they work:

Repayment Structure Tailored to Students

Edly's ISAs allow students to pay a fixed percentage of their income once they secure employment above a specified income threshold, typically between $30,000 and $40,000. Repayment terms are designed around the student's financial situation, ensuring affordability.

• Flexibility: Payments adjust based on income fluctuations, allowing for pauses in repayment during periods of unemployment or lower earnings.
• Cap on Total Repayment: Students know upfront the maximum amount they will repay, typically 1.5 to 2 times the initial ISA amount, preventing unexpected debt burdens.
• No Interest Accrual: Unlike traditional loans, Edly's model eliminates compounding interest, making repayment more manageable.

Potential for Cost Savings

Depending on their career outcomes, some students may end up paying less than the total payment cap, and in some cases, they may repay less than what they borrowed. This flexible repayment structure significantly reduces financial stress for graduates.

How Edly Works for Students

Edly simplifies the process for students seeking funding. Here's a step-by-step breakdown:

1. Apply for Eligibility

Students can quickly determine their eligibility for funding via a short application, which does not require a credit check.

2. Approval Process

Upon passing initial screening, students are assigned a personal account servicer to guide them through agreement terms.

3. Direct Tuition Payment

Once an ISA is finalized, Edly pays the educational institution directly, streamlining the financing process.

4. Focus on Education

While in school, students are not required to make payments, allowing them to concentrate solely on their studies.

5. Employment and Repayment

Payments commence only when the graduate secures a job earning above the minimum income threshold, and these payments vary based on income.

6. Adaptability to Job Changes

Should a graduate experience job loss or reduced income, Edly allows for adjustments to repayment, ensuring financial stability.

How Edly Works for Investors

Investors play a crucial role in funding students’ education, and Edly ensures that only the most qualified candidates are selected. Here's how the process works:

1. Rigorous School Screening

Edly conducts thorough screenings of schools and programs, investing only in those with strong track records for student success.

2. Investment Options

Investors can choose from two strategies:

• High Yield Strategy: Targeting a 14% return, Edly identifies and manages profitable investment opportunities.
• Principal Protected Strategy: Utilizing U.S. Treasury STRIPS, this option offers a lower-risk investment with an 8% target return.

3. Regular Communication

Investors receive monthly updates on performance, ensuring transparency and informed decision-making.

Edly's Fee Structure

Understanding the fees involved is essential for both investors and students. Here’s a breakdown:

High Yield Strategy Fees

• 1% annual management fee for the first two years.
• 4% of cash flows received from ISA portfolios.

Principal Protected Strategy Fees

• 0.5% management fee for the first year.
• 2% management fee of ISA cash flows.
• 1% of Treasury STRIPS cash flows.

Target and Actual Returns for Investors

Edly aims for a 14% return on investments for the High Yield Strategy, while the Principal Protected Strategy targets an 8% return. Investors receive monthly payments and a 1099 tax form for their returns.

Historically, Edly has reported an impressive return rate of 16.57% on their ISAs, demonstrating the potential for lucrative investments while supporting students' educational journeys.

Portfolio Composition

Edly’s investment portfolio primarily focuses on high-demand career fields:

• Technology and Engineering – 50%
• Nursing – 25%
• Business – 15%
• Industrial Vocational – 10%

Transforming Education Financing

Edly's innovative approach to education financing through ISAs presents a unique opportunity for both students and investors. By investing in ISAs, individuals can diversify their portfolios, receive regular cash flows, and contribute to increasing access to education.

Three key benefits of investing in ISAs include:

• Attractive potential returns ranging from 8% to 14%.
• Support for students in avoiding burdensome debt, enhancing college affordability.
• Greater access to education financing for underrepresented groups, as Edly does not require credit scores or co-signers.

To learn more about Edly and explore their offerings, visit Edly.co.

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