Lawmakers argue bipartisan bill would spur growth of income-share agreements by clarifying consumer protections. Skeptics say the agreements offer students a different kind of debt.
Senate lawmakers announced legislation Tuesday that they argue will spur the growth of income-share agreements, privately run alternatives to student loans that commit workers to paying back a portion of their future income.
ISAs have received extensive press coverage, thanks to their promotion as an alternative to unmanageable student debt. They’ve yet to catch on widely, though — in part, supporters argue, because of a lack of clarity surrounding federal law.
Senator Todd Young, an Indiana Republican, and Senator Marco Rubio, a Florida Republican, were joined by Virginia Democrat Mark Warner and Delaware Democrat Chris Coons in rolling out the bill. Young and Rubio had previously introduced legislation. The new Democratic support reflects the growing interest in alternatives to traditional student loans. Coons said the legislation would allow ISA proponents to “proceed safely and with more government oversight.”
But some consumer advocates say regulations on financial products already apply to income-share agreements. And Democrats including Massachusetts senator Elizabeth Warren have warned that the financial instruments carry common pitfalls of private student loans with the “added danger of deceptive rhetoric and marketing.”