Income Share Agreements Legislation

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The concept of income share agreements (ISAs) has been gaining momentum in recent years as an alternative way to fund higher education. Rather than taking out traditional student loans, students agree to pay a percentage of their income for a set period of time after graduation. This allows them to attend college without the burden of large amounts of debt right out of school.

However, as ISAs become more popular, there is a growing need for legislation to regulate them and protect both the students and the investors who fund the agreements.

Currently, there is no federal legislation that directly addresses ISAs. Instead, they fall under the jurisdiction of state laws. This has led to a patchwork of regulations across the country.

Some states, such as California and Oregon, have passed laws to provide consumer protections for students entering into ISAs. These laws include requiring clear disclosures of the terms and conditions of the agreements, limits on the percentage of income that can be collected, and prohibitions on certain predatory practices.

Other states, such as Arizona and Indiana, have passed laws specifically to encourage the use of ISAs as a way to finance higher education. These laws provide tax incentives for investors who fund ISAs and promote partnerships between higher education institutions and private ISA providers.

At the federal level, there have been some efforts to address ISAs. In 2019, a bipartisan group of senators introduced the ISA Student Protection Act, which would require ISAs to provide certain disclosures to students and limit the amount of income that can be collected. However, the bill has not yet been passed into law.

Despite the lack of federal legislation, ISAs are likely to continue to grow in popularity as a way to finance higher education. It will be important for states to continue to pass laws to protect students and investors and for the federal government to address the issue as well. As ISAs become more mainstream, it is crucial that they are regulated in a responsible and transparent manner to ensure that they are a viable option for students seeking to finance their education.