On Tuesday, Sens. Todd Young (R-IN), Marco Rubio, (R-FL), Mark Warner (D-VA), and Chris Coons (D-DE) introduced the ISA Student Protection Act of 2019, legislation that would establish guidelines and add consumer protections to income-share agreements (ISAs), which are gaining attention as alternatives to traditional student loans, but are currently unregulated.
ISAs replace traditional loan concepts like principal balances, interest rates, and repayment periods with a contract that requires recipients to pay a certain percentage of their income for a fixed period of time. ISAs are offered by institutions, financial institutions, and not-for-profit organizations. There is currently no statutory or regulatory guidance on ISAs, which has contributed to concerns about borrower protections from consumer groups and hesitancy among institutions to offer them.
The bill establishes that ISAs are not considered credit, and that ISA providers are not considered creditors, as those terms are defined in the Truth In Lending Act (TILA). Therefore, disclosure and timing requirements under TILA do not apply.