Income share agreements are increasingly discussed as an alternative to student loans.This paper seeks to measure the level of interest among students for various incomeshare agreement offers, and to explore the possibility of adverse selection. Usingsurvey data, the paper's analysis focuses primarily on whether student forecasts oftheir own incomes, self-reported risk attitudes, and grades have any predictive effecton their likelihood of interest. If lower income forecasts or lower grades correlatewith higher interest in the offers, adverse selection may be present. However, be-cause income-share agreements could be thought of as providing to students insuranceagainst poorer-than-expected outcomes, risk aversion could play a role in dampeningadverse selection by attracting a broad cross-section of students. The analysis findsthat a student's forecast of his or her income correlates significantly with interest inthe offers. If one assumes that students have an information advantage concerningtheir future incomes, adverse selection is present. Academic performance, measuredby grades, lacked a meaningful relationship with likelihood of interest in the offer. Ifgrades are better predictors of future income than student guesses, the results sug-gest adverse selection may not be an obstacle to the sustainability of income shareagreements. The risk attitude measure had surprising predictive effects, with highlevels of risk aversion corresponding to lower likelihood of interest in the offer. Thisoutcome suggests that one obstacle income share agreements may need to overcomeis unfamiliarity, and that framing the offers as a form of insurance may attract moreparticipants.
