Sens. Young, Rubio Introduce Income-Share Agreement Bill

By Allie Bidwell, Communications Staff

Two Republican senators on Thursday introduced a bill that would create a legal structure for income-share agreements as an alternative higher education financing model.

The bill – the Investing in Student Success Act – was introduced by Sen. Todd Young (R-IN) and Sen. Marco Rubio (R-FL). Rubio introduced the bill in the Senate last Congress, while Young introduced a companion bill in the House of Representatives. The legal framework “would provide investors with clarity regarding tax treatment, consumer disclosures, and other relevant aspects of these contracts.”

The idea of using income-share agreements as an alternative to student loans has gathered bipartisan support in the past, but has not moved forward. Under an income-share agreement, a student would receive private funds to finance his or her college education, and in return, would repay a certain percentage of his or her income for a fixed amount of time.

“Income share agreements are an innovative debt-free financing option for students,” Young said in a statement. “Students and their families should not be forced to make a choice between a quality education and financial hardship.”

While the idea is popular, thought leaders in higher education have pointed out complications that have prevented it from moving forward on a larger scale. Some have pointed out, for example, that there is no statutory or regulatory guidance for schools. Income-share agreements can also take many different forms, according to one report from the American Enterprise Institute, as either a private financing model or a philanthropic model. And despite the appeal, there are still regulatory obstacles to consider, as well as the upside and downside risks associated with entering into an income-share agreement.

But Young and Rubio’s bill would draw heavily from Purdue University’s “Back a Boiler” program, which offers income-share agreements to some students.

“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 in a statement. “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.”

 

Publication Date: 2/6/2017


William H | 2/6/2017 9:56:18 AM

While I want to encourage the creative energy behind this "innovation", a loan by any other name is still a loan.

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