WASHINGTON – Yesterday, U.S. Senators Todd Young (R-Ind.), Mark Warner (D-Va.), Marco Rubio (R-Fla.), and Chris Coons (D-Del.) introduced the ISA Student Protection Act to improve an innovative financing tool for students pursuing postsecondary education.
Income Share Agreements (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.
This bipartisan bill would help safeguard ISAs with consumer protections to improve their effectiveness – protecting students and ensuring their success in the workforce.
“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,” said Senator Young. “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,” 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 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.”
“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,” said Senator Rubio. “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.”
“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 Bill of Rights Act will allow the innovation of ISAs to proceed safely and with more government oversight, to the benefit of American students and families,” said Senator Coons.
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.
President Mitch Daniels, Purdue University said, “Purdue will offer ISAs for a fourth academic year at Purdue this fall. Since its inception, our ‘Back a Boiler’ program has drawn a flood of inquiries from universities hoping to implement similar ISA programs. This bipartisan legislation should receive prompt consideration to provide the framework necessary to expand this student-friendly option to more students nationwide who wish to be protected against the risks of excessive student loans.”
Chok Ooi, CEO and Co-founder of Kenzie Academy, an Indianapolis-based career college focused on providing technology training to anyone looking to accelerate their career said, “ISAs are a tool that can make post-secondary skills training more accessible and affordable for the millions of adult learners aspiring to acquire today's most in-demand jobs. Given ISAs are a powerful – and necessary – access tool, we want to make sure there are standards and best practices in place so they are used appropriately to protect the consumer and hold bad actors accountable.”
Dr. Irma Becerra, President of Marymount University in Arlington, Virginia said, “As a small university with finite resources in a major metropolitan area, we are constantly looking for solutions in support of our students who face unique challenges in completing their postsecondary education. Marymount has identified income-share agreements as a promising solution to some of these challenges. Income-share agreements will help us fill financial gaps in serving all of our students, regardless of their socioeconomic background. I applaud the sponsors of the ISA Student Protection Act for their efforts to support programs like ours and ensure income-share agreements continue expanding in a student-focused way.”
Kevin James, Founder and CEO of Better Future Forward said, “ISAs have tremendous promise as a tool to help address gaps in educational equity. However, like any financial tool, ISAs also create opportunities for bad actors. We, therefore, commend Sens. Warner, Young, Rubio and Coons for their critically important work to protect students and foster innovation in the student financing space. We believe this bill will advance a healthy public conversation about ISAs and the best approach to crafting a legal framework that protects students and supports access to this innovative new option."
Former Governor Jack Markell said, “Income Share Agreements have given students who have not otherwise had access to financial aid - such as Dreamers and adult learners - the ability to finance their postsecondary education. I commend the bi-partisan sponsors of The ISA Student Protection Act for legislation that authorizes critical consumer protections which will provide greater certainty to students and this growing market.”
To see a full list of endorsement quotes, please click here.
The ISA Student Protection Act would codify the following safeguards and consumer protections for ISA recipients:
- Individuals making less than 200 percent of the Federal Poverty Level ($24,980 in 2019) 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).
- ISAs are dischargeable in bankruptcy.
- 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.
Last Congress, Senators Young and Rubio introduced a version of this bill entitled the Investing in Student Success Act, and other versions were previously introduced in the House and Senate. This is the first Senate version of the bill to have bipartisan support.
For the full bill text, click here.
“ISAs have tremendous promise as a tool to help address gaps in educational equity. However, like any financial tool, ISAs also create opportunities for bad actors. We, therefore, commend Sens. Warner, Young, Rubio and Coons for their critically important work to protect students and foster innovation in the student financing space. We believe this bill will advance a healthy public conversation about ISAs and the best approach to crafting a legal framework that protects students and supports access to this innovative new option,” said Kevin James, Founder and CEO of Better Future Forward.