A new legal structure enabling a debt-free higher education financing option would be established under legislation introduced by U.S. Sen. Todd Young (R-IN).
The Investing in Student Success Act, S. 268, would establish a higher education financing tool called income share agreements (ISA) that enable students to enter into contracts directly with investors. Students would pay a small percentage of their income for a number of years after graduation.
Under the measure, students would only be required to make payments when employed and earning an income above a certain threshold.
“Income share agreements are an innovative debt-free financing option for students,” Young said. “Students and their families should not be forced to make a choice between a quality education and financial hardship.”
An ISA would not accrue interest, and consumer protections like caps on payments based on income and contract length would be put into place under the bill.
Young introduced the bill with U.S. Sen. Marco Rubio (R-FL).
“It’s getting harder and harder for American families to afford the rising costs of college, and students are often forced to run up thousands of dollars of debt,” Rubio said. “This innovative legislation would 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.”
The legislation won the support of Purdue University President Mitch Daniels.
“After our successful launch of ‘Back a Boiler,’ we have been hearing from schools around the country interested in pursuing their own program,” Daniels said. Purdue’s Back-A-Boiler program is an ISA model that provides some students with a private-market alternative for financing their educations.
“With Congressional action, widespread use of ISAs can be a reality for students nationwide,” Daniels said.