January 31, 2023

Young, Colleagues Reintroduce Bill to Support Innovative Financing Tool for Students

WASHINGTON, D.C. — U.S. Senators Todd Young (R-Ind.), Mark Warner D-Va.), Marco Rubio (R-Fla.), and Chris Coons (D-Del.) reintroduced their bipartisan bill, the ISA Student Protection Act, to support an innovative financing tool for students pursuing postsecondary education called Income Share Agreements (ISAs). The bill would also apply strong consumer protections to safeguard students.

ISAs provide opportunities for students to design financial aid best suited to their needs based on their future income and job success. Under an ISA, a student agrees to pay a percentage of their income over a given time period in exchange for tuition payments from nongovernmental sources. When the agreed timeframe ends, the student stops payments regardless of whether the initial amount was paid back to the ISA funder.

“Hoosiers should not be forced to make a choice between a quality education and an affordable one. In the midst of record-high inflation, many students and families continue to face financial hardship and an increase in student loan debt,” said Senator Young. “With the appropriate safeguards, ISAs can be an innovative, debt-free financing option for Hoosier students. Our bipartisan bill works to strengthen the framework for ISAs, enabling both colleges and career and technical schools to prepare students for success in the workforce without burdening taxpayers.”

“Income-Share Agreements are a promising way to finance postsecondary education and an attractive alternative to high-interest student loans,” said Senator Warner. “There are students across the country who are already benefitting from ISAs and deserve the safeguards and certainty the ISA Student Protection Act of 2022 would provide.”

“Everything is more expensive these days, especially the cost of a college degree. This common sense bill creates a debt-free financing option for students,” said Senator Rubio.

“Income Share Agreements are a useful alternative for some students who need financing for postsecondary education and training, especially when federal student aid is not available. The ISA Student Protection Act of 2023 would establish guardrails to protect these students as they begin their careers while creating legal certainty for providers who develop these innovative financial offerings,” said Senator Coons. “With trillions of dollars in U.S. student loan debt burdening the country’s workforce, I’m glad to move forward on bipartisan legislation to strengthen additional financing options for students who are preparing for success.”

This legislation is supported by Purdue University, Jobs for the Future, Better Future Forward, the San Diego Workforce Partnership, and more.

To see a full list of endorsement quotes, click here.

The ISA Student Protection Act would update existing consumer protection laws to ensure they are applied properly to ISAs and add new protections to ensure ISAs are affordable and share risk. Specifically, the bill:

  • Prohibits ISA providers from entering into agreements with students that require payments higher than 20 percent of income.
  • Exempts individuals from making payments towards their ISA when their income falls below an affordability threshold.
  • Sets a maximum number of payments and limits payment obligation to the end of a fixed window.
  • Sets a minimum number of voluntary payment relief pauses, during which payment obligations may be suspended.
  • Requires detailed disclosures to students who are considering entering into an ISA, including the amount financed, the payment calculation method, the number of payments expected, the length of the agreement, and how their payments under the ISA would compare to payments under a comparable loan.
  • Provides strong bankruptcy protection for ISA recipients by omitting the higher “undue hardship” standard for discharge required under private loans.
  • Prevents funders from accelerating an ISA in default.
  • Ensures that ISA obligations cease in the event of death or total and permanent disability.
  • Applies federal consumer protection laws (e.g., Fair Credit Reporting Act, Fair Debt Collection Practices Act, Military Lending Act, Servicemembers Civil Relief Act, Equal Credit Opportunity Act) to ISAs.
  • Gives the Consumer Financial Protection Bureau regulatory authority over ISAs.
  • Clarifies the tax treatment of ISA contributions for both funders and recipients.

For the full bill text, click here.