Bill would expand private financing for college

Rep Tom Petri (R-Wis.) and Sen. Marco Rubio (R-Fla.) unveiled legislation on Wednesday that would establish a new private financing option for students to fund postsecondary education.

The Investing in Student Success Act would establish a legal framework that allows private individuals and organizations to provide students with money for school in exchange for the student making income-linked payments for a set time after graduation.

“This concept is quite innovative in its approach to financing college,” Petri, a member of the House Committee on Education and the Workforce, said. “Far too many students struggle to obtain enough financing through traditional sources to pay for college and many others are saddled with unaffordable payments after graduation. These plans would help all students get the financing they need – including students from disadvantaged backgrounds – but without the anxiety that comes with traditional loans.”

Rubio said higher education has become a necessity in the 21st century, but the current student loan system is complex and confusing.

“Allowing private investment groups to invest directly in an individual student is an alternative to student loans that helps make higher education more affordable and more accessible,” Rubio said.

A report published by the American Enterprise Institute found that lack of clarity in regard to tax treatment, consumer disclosures and other aspects prevented wider growth of the private financing system.

“By clarifying the lawfulness of income share agreements, this bill incentivizes the free enterprise system and allows people to access the skills needed to take advantage of the opportunities created by the free market,” Rubio said. “Fostering more choice for students to fund their education guarantees opportunity and equips people with the tools needed to achieve the American dream.”