Sen. Young introduces bill on income share agreement protections, modeled after Purdue

New bipartisan legislation protecting how students pay for college is being modeled after Purdue University's Back a Boiler program.

Posted: Aug 27, 2019 7:06 AM

WASHINGTON (WLFI) — New bipartisan legislation protecting how students pay for college is being modeled after Purdue University's "Back a Boiler" program. 

"Back a Boiler" has gained national attention since 2016. Now, it's caught the eye of lawmakers.

U.S. Senator for Indiana Todd Young is one of four legislators that have introduced the Income Share Agreement Student Protection Act. Young expects this bill will expand what's being done in West Lafayette to the entire country.

"A variant of what we've seen implemented by President Daniels and the good folks at Purdue can now go nationwide," Young said.

An income share agreement is an alternative way to pay for college. Rather than taking out a loan with interest, students pay back the money as a percentage of their post-graduation income. It has no principal balance or interest. Its payments adjust with the student's income over the life of the contract. Payments do not begin until six months after the student has graduated and is employed earning a minimum annual salary of $20,000.

However, Sen. Young said it needs protection.

"Frankly it's going to put within reach a higher education to those who wouldn't otherwise have one," said Young.

This legislation would put legal protections on ISA's that Senn. Young says would protect student from "bad actors."

"This ISA model will now be dischargeable in bankruptcy and it will be truly a privately-financed debt free college education that is paid for."

It's modeled largely after protections Purdue has built in, according to university president Mitch Daniels.

"Putting things like that in place I think will interest more schools, and interest is spreading pretty fast anyway," said Daniels. "And it will reassure people there are some good boundaries around this they can rely on."

Versions of this bill have been previously introduced in the House and Senate. According to Young, this is the first Senate version to have bipartisan support.

"That alone makes it unique these days," Daniels said.

As of June, Daniels said 850 students currently have contracts with Back a Boiler. Only four other universities nationwide have an income share agreement program.

Daniels said it's growing. He even said another Big Ten school has reached out to him to learn how to implement an ISA.

Young is working on the legislation with Sens. Mark Warner (D-Va.), Marco Rubio (R-Fla.), and Chris Coons (D-Del.). 

According to a news release, the ISA Student Protection Act would codify the following safeguards and consumer protections for ISA recipients:

-Individuals making less than 200 percent of the Federal Poverty Level ($24,980 in 2019) are exempt from making payments towards their ISA.
-ISA providers cannot make agreements with students that require payments higher than 20 percent of income for shorter-term contracts, with the cap decreasing to 7.5 percent for the longest contracts allowed (30 years).
-ISAs are dischargeable in bankruptcy.
-Funders must disclose to students how their monthly payments would compare under the ISA to payments on a private or federal loan for the same amount of money and number of payments.
-Applies federal consumer protection laws (i.e. Fair Credit Reporting Act, Fair Debt Collection Practices Act, Military Lending Act, Servicemembers Civil Relief Act, Equal Credit Opportunity Act) to ISAs.
-Gives the Consumer Financial Protection Bureau oversight authority over ISAs.
Clarifies the tax treatment of ISA contributions for both funders and recipients.

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