Q&A with Ben Chernow of Bisota
Founder & CEO
Bisota is a finance company helping to solve the student loan crisis through income share agreements (ISA). ISAs offer investors the opportunity to invest in the future of promising young students and share in their later successes.
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What Is An ISA?
An ISA is a financial product that allows students to pay for school without incurring debt. This is done by having students pay back a portion of their income after they graduate and start working rather than make fixed payments through a traditional student loan. This effectively transfers risk from students to investors, and investors are compensated for the extra risk.
Why Is Now the Right Time to Invest With an ISA Company?
This is the perfect time to get involved with an ISA company. ISAs are gaining traction and the stage is set for widespread ISA adoption. ISAs are widely offered at coding bootcamps and are gaining acceptance at flagship universities such as Purdue University. There is also legislative interest in ISA. Numerous states have sanctioned official ISA studies, and Congress recently re-introduced a bill regarding ISA regulation. The SEC also recently approved the sale of ISA-related securities to the general public, and there has been a handful of court proceedings concerning ISAs, all of which have resulted in favorable rulings.
What Makes Bisota Different?
Bisota identified a unique solution to the problems underlying historical ISA failures. ISAs have been plagued by two problems: information asymmetry and adverse selection. Both of these problems stem from the same underlying issue - people with higher incomes are better-off with a traditional student loan while people with lower incomes are better-off with an ISA. Students have historically been good at allocating themselves accordingly, and thus ISA applicants have largely been students pursuing lower-income careers. Moreover, these students were incentivized to tell investors that they were pursuing high-paying careers in order to obtain more favorable terms on their ISA contracts. Thus, the result has been ISAs priced for students pursuing lucrative careers, but given to students pursuing low-paying careers, with investors left holding the bag.
Bisota solves both of these problems by focusing on students in vocational training programs rather than traditional universities. Vocational training programs provide streamlined career paths, which eliminate the adverse selection problem. These programs also solve the information asymmetry problem by signaling a student's intended career path - a student enrolled in a vocational training program for electricians is likely going to be an electrician, and an ISA can be priced accordingly.
Bisota also limits funding to students enrolled in programs that satisfy our internal criteria, including minimum graduation rates and job-placement rates. Bisota further limits funding to students pursuing specific vocations, which are selected using data from the Bureau of Labor Statistics concerning income and growth projections.
Ben Chernow of Bisota
Ben Chernow is a corporate litigator with an entrepreneurial spirit. While receiving his J.D. and M.B.A. from Vanderbilt University, he saw firsthand the broken student loan system and the crippling effect traditional student loans can have on young people just starting their careers. Not one to be confined by the status quo, Ben founded Bisota—offering an alternative to traditional student loans by allowing students to finance their education through Income Share Agreements.