I don't think the problem is that it is a loan. The real problem is that you can manipulate people to sign up for the ISA and then give a low cost bad quality service. If you scale this up high enough, there are going to be people whose income is going to increase above the threshold just through chance alone. If you provide some low quality MOOC that costs you very little per person then you basically get to take a share of someone's income without providing any value.

If the institution was accredited and there were inspections and punishments to keep quality above a certain threshold the model might work but right now it basically invites companies to operate like scammers.