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ISA Student Protection Act of 2023
12/15/2023, 4:05 PM
Summary of Bill S 136
ISAs are a type of financial agreement where students receive funding for their education in exchange for a percentage of their future income for a set period of time. The ISA Student Protection Act of 2023 aims to regulate these agreements to ensure that students are not taken advantage of by unscrupulous lenders.
Some key provisions of the bill include requiring lenders to provide clear and transparent information about the terms of the ISA, including the percentage of income that will be paid back and the length of the repayment period. The bill also prohibits lenders from charging excessive fees or interest rates on ISAs. Additionally, the ISA Student Protection Act of 2023 establishes a regulatory framework to oversee ISAs and ensure that students are protected from predatory lending practices. This includes creating a complaint process for students who believe they have been treated unfairly by a lender. Overall, the goal of this legislation is to provide students with greater protections when entering into Income Share Agreements to finance their education. By regulating these agreements and holding lenders accountable, the ISA Student Protection Act of 2023 aims to ensure that students are able to pursue their education without falling victim to unfair financial practices.
Congressional Summary of S 136
ISA Student Protection Act of 2023
This bill sets forth consumer protections and other requirements for educational income share agreements (ISAs). In an educational ISA, a provider credits or advances funding for a recipient's postsecondary education or other training; in turn, the recipient agrees to pay the provider a percentage of the recipient's future earnings over a set period of time. (The Department of Education currently considers educational ISAs as private education loans for the purposes of preferred lender arrangement disclosures.)
Under the bill, the recipient is only obligated to pay back the provider if the recipient earns over a certain amount. The recipient's obligation to pay ends at the specified time even if the recipient does not pay back the full amount of the funding. Further, payments are limited to 20% of the recipient's income. Recipients earning under a certain threshold are exempt from payments.
If a recipient files for bankruptcy, ISAs are not subject to the same undue hardship standard typical of student loan discharges, therefore making these agreements easier to discharge. The bill also applies current consumer loan protections to these agreements. A provider must make certain disclosures to the recipient before entering into an ISA, including how payments are calculated, the length of the agreement, and how these agreements compare to student loan options.
The bill establishes the tax treatment of ISAs, including by exempting from taxable income the amounts received under an ISA.
