-U.S. Senators Marco Rubio (R-FL), Todd Young (R-IN), Mark Warner (D-VA), and Chris Coons (D-DE) introduced the ISA Student Protection Act
(S. 2114) to improve an innovative financing tool for students who are pursuing postsecondary education or training.Income Share Agreements (ISAs) are an innovative and affordable way for students to finance their education based on their future income without going into debt. Under an ISA, a student agrees to pay a percentage of their income over a given time period in exchange for payments for tuition and expenses 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. This bipartisan bill would provide the necessary framework for ISAs and create consumer protections to improve their effectiveness - protecting students and ensuring their success in the workforce.'It's getting harder and harder for American families to afford the rising costs of college, and graduates are often forced to run up tens of thousands of dollars in student loan debt,' Rubio said.
'I am proud to re-introduce this innovative legislation to empower students to leverage their future income today and access the financial resources of businesses, individuals, and nonprofit organizations in order to achieve their higher education goals.''Far too often I hear of students and their families being forced to endure financial hardship in exchange for a quality education. Government-provided student loan debt continues to skyrocket while the average household income decreases,' Young said.
'That's why I have introduced a bill to offer students from all backgrounds with a private - or philanthropically - funded, debt-free financing option catered to their own income needs through the use of Income Share Agreements (ISAs). If we strengthen the framework of ISAs, we can help colleges and career and technical schools prepare Americans for rewarding careers, all without any additional cost to taxpayers.''Income-Share Agreements are a promising way to finance postsecondary education and an attractive alternative to private student loans and PLUS loans. ISAs are also proving to be uniquely responsive to the needs of students who are ineligible for existing federal student aid programs-including DACA recipients, some justice-involved individuals, and those attending short-term training programs,' Warner said.
'There are students across the country who are already benefiting from ISAs and deserve the safeguards and certainty the ISA Student Protection Act would provide, including protections during periods of low earnings, dischargeability in bankruptcy, and oversight authority by the Consumer Financial Protection Bureau. I'm pleased to be introducing this legislation with a bipartisan group of my colleagues and look forward to working to ensure ISAs continue expanding in a student-focused way.''Despite $1.6 trillion in U.S. student loan debt, millions of well-paying jobs continue to go unfilled. In an economy in need of more investment in postsecondary education and training opportunities, Income Share Agreements are a promising tool. Most importantly, ISAs protect students from the risk of onerous debt and elevate programs that guide students to well-paying jobs. The ISA Student Protection Act will allow the innovation of ISAs to proceed safely and with more government oversight, to the benefit of American students and families,' Coons said.
This legislation has been endorsed by The Aspen Institute's Future of Work Initiative, Colorado Mountain College (CMC), JFF, Marymount University, the Progressive Policy Institute, the San Diego Workforce Partnership, Purdue University, and the University of Utah.The ISA Student Protection Act
would codify the following safeguards and consumer protections for ISA recipients:
Low-income individuals are exempt from making payments towards their ISA.
ISA providers cannot make agreements with students that require payments higher than 20 percent of income for shorter-term contracts, with the cap decreasing to 7.5 percent for the longest contracts allowed (30 years).
ISA funders must disclose to students how their monthly payments would compare under the ISA to payments on a private or federal loan for the same amount of money and number of payments.
Applies federal consumer protection laws (i.e. 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 oversight authority over ISAs.
Clarifies the tax treatment of ISA contributions for both funders and recipients.