Bill introduced in Senate to help students finance college costs
A bill was introduced in the US Senate this week designed to help students pay for college costs.
The ISA Student Protection Act would support a student financing tool for postsecondary education called Income Share Agreements (ISAs). ISAs provide opportunities for students to design financial aid best suited to their needs based on their future income and job success.
Through an ISA, a student agrees to pay a percentage of their income over a given period in exchange for tuition payments from nongovernmental sources. When the agreed time frame ends, the student stops payments regardless of whether the initial amount was paid back to the ISA funder.
“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,” US Sen. Todd Young (R-IN) said.
Young is one of the bill’s sponsors, along with Sens. Mark Warner D-VA), Marco Rubio (R-FL), and Chris Coons (D-DE).
“Income-Share Agreements are a promising way to finance postsecondary education and an attractive alternative to high-interest student loans,” 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 of 2022 would provide.”
Specifically, the ISA Student Protection Act would prohibit ISA providers from entering into agreements with students that require payments higher than 20 percent of income. It would also exempt individuals from making payments toward their ISA when their income falls below an affordability threshold.
Among other provisions, it would set a maximum number of payments and limits payment obligation to the end of a fixed window; set a minimum number of voluntary payment relief pauses, during which payment obligations may be suspended; require detailed disclosures to students who are considering entering into an ISA; provide bankruptcy protection for ISA recipients by omitting the higher “undue hardship” standard for discharge required under private loans; prevent funders from accelerating an ISA in default; ensures that ISA obligations cease in the event of death or total and permanent disability; apply federal consumer protection laws to ISAs; give the Consumer Financial Protection Bureau regulatory authority over ISAs; and clarify the tax treatment of ISA contributions for both funders and recipients.
“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,” Coons said.