A bipartisan group of U.S. Senators have introduced the “ISA Student Protection Act of 2019” that would create a legal framework for income share agreements (ISA) offered to students.
The bill would define an ISA as an agreement between an individual and ISA funder under which the funder “credits towards the tuition or other obligations of, or pays amounts to, or on behalf of, such individual for costs associated with a postsecondary training program, or any other program designed to increase the individual’s human capital, employability, or earning potential…and such individual pays to such ISA funder (or the ISA funder’s successor in interest) income-share payments for a defined term; and is not a loan.” The bill would create a category of “Qualified ISA” that would cover ISAs that meets certain requirements set forth in the bill. Those requirements include:
The bill provides that a Qualified ISA shall not be considered “credit” and an ISA funder shall not be considered a “creditor” as those terms are defined in TILA. The bill would make a Qualified ISA enforceable notwithstanding any state law limiting the assignment of future wages or other income and would provide that a Qualified ISA is not subject to state law with respect to (1) “usury, credit, loans, or credit or installment sales” unless the state law expressly states that it is intended to apply to Qualified ISAs, or (2) ability to repay requirements or ISA licensing or registration unless the state law was issued after the date of the bill’s enactment and expressly states that it is intended to apply to Qualified ISAs.
Other notable provisions of the bill include:
In June, a group of 20 education organizations and individuals sent a letter to the leaders of the House Financial Services Committee and Senate Finance Committee urging Congress to pass legislation that would provide a legal framework for colleges and universities and other education providers to offer ISAs to students. Also in June, Democratic lawmakers sent a letter to the Department of Education seeking information about possible ED plans to use ISAs in federal higher education programs and expressing concern that ISAs create the potential for discriminatory practices.