Income Share Agreements (ISAs), a financing tool for students pursuing post-secondary education, would receive strong consumer protections to safeguard students under a bipartisan bill introduced by U.S. Sen. Todd Young (R-IN).
“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,” said Sen. Young on Tuesday.
The ISA Student Protection Act of 2023, S. 136, which Sen. Young sponsored on Jan. 30 with lead original cosponsor U.S. Sen. Mark Warner (D-VA), would provide a consumer protection framework necessary to support the growth of accessible, affordable, and accountable financing options for post-secondary education, according to the text of the bill.
Under an ISA, which are such financing options, a student agrees to pay a percentage of his or her income over a set time period in exchange for tuition payments from non-governmental sources. When the agreed timeframe ends, the student stops payments regardless of whether the initial amount was paid back to the ISA funder, according to information provided by Sen. Young’s staff.
“Hoosiers should not be forced to make a choice between a quality education and an affordable one. In the midst of record-high inflation, many students and families continue to face financial hardship and an increase in student loan debt,” Sen. Young said. “With the appropriate safeguards, ISAs can be an innovative, debt-free financing option for Hoosier students.”
If enacted, S. 136 would update existing consumer protection laws to ensure they are applied properly to ISAs and add new protections to ensure ISAs are affordable and share risk, says a bill summary provided by the senator’s staff.
Additionally, among several other provisions, S. 136 would prohibit ISA providers from entering into agreements with students that require payments higher than 20 percent of income; exempt individuals from making payments toward their ISA when their income falls below an affordability threshold; and set a maximum number of payments and limit payment obligation to the end of a fixed window, the information says.
The Consumer Financial Protection Bureau also would receive regulatory authority over ISAs under the measure, which is supported by numerous organizations, including Purdue University, Jobs for the Future, Better Future Forward, the San Diego Workforce Partnership, and many more.
Sen. Warner added that ISAs “are a promising way to finance post-secondary education and an attractive alternative to high-interest student loans. 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.”