Bill Overview
Title: ISA Student Protection Act of 2022
Description: 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.
Sponsors: Sen. Young, Todd [R-IN]
Target Audience
Population: Individuals using educational ISAs for postsecondary education or training
Estimated Size: 1000000
- An educational ISA involves individuals who need funding for postsecondary education or training.
- Students and individuals undergoing postsecondary education or skill training are the primary users of ISAs.
- The global student population seeking higher education or training is significant, though not all use ISAs.
- The bill focuses on providing protections for these individuals in the context of ISAs.
- ISAs are typically more common in countries with established private lending systems for education.
- The bill is particularly relevant in the United States where the Department of Education's practices affect ISA classification.
Reasoning
- Educational ISAs target students or individuals pursuing postsecondary education or training but lacking traditional funding sources.
- Income-based repayment and protections against financial hardships make ISAs more accessible and attractive, partially under this bill.
- The policy protects individuals who may not fully repay their funding if their income doesn't exceed specified thresholds.
- The bill could especially benefit recent graduates or underskilled workers pursuing additional certification or degrees.
- In the context of the US, this policy primarily impacts a subset of students who prefer alternative funding options to traditional loans.
- Interviews vary from those likely to engage in ISAs, those indirectly influenced by industry changes, and those informed about diverse educational funding options.
Simulated Interviews
Graduate Student (Boston, MA)
Age: 23 | Gender: female
Wellbeing Before Policy: 5
Duration of Impact: 10.0 years
Commonness: 6/20
Statement of Opinion:
- I feel relieved that there's more transparency and protections now.
- Knowing my agreement isn't binding if I earn less is comforting.
- The comparison to student loans helped me understand the benefits better.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 6 | 5 |
| Year 3 | 7 | 5 |
| Year 5 | 7 | 5 |
| Year 10 | 8 | 5 |
| Year 20 | 7 | 4 |
Software Developer (Austin, TX)
Age: 30 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 3.0 years
Commonness: 8/20
Statement of Opinion:
- The policy wouldn't have impacted me directly since I've repaid.
- It's good to see protection, my experience was intense with repayment stress.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 6 | 6 |
| Year 3 | 7 | 6 |
| Year 5 | 7 | 6 |
| Year 10 | 7 | 6 |
| Year 20 | 7 | 6 |
Undergraduate Student (Chicago, IL)
Age: 19 | Gender: male
Wellbeing Before Policy: 4
Duration of Impact: 15.0 years
Commonness: 7/20
Statement of Opinion:
- This bill makes ISAs more appealing than loans to me.
- I am considering this since typical loans are intimidating.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 4 |
| Year 2 | 6 | 5 |
| Year 3 | 6 | 5 |
| Year 5 | 7 | 5 |
| Year 10 | 8 | 6 |
| Year 20 | 9 | 7 |
Data Analyst (Seattle, WA)
Age: 26 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 5.0 years
Commonness: 9/20
Statement of Opinion:
- I didn't need an ISA, but if I pursue a further degree, I'd look into them.
- The policy reduces risks which normally concern me.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 7 | 7 |
| Year 3 | 8 | 7 |
| Year 5 | 8 | 7 |
| Year 10 | 8 | 7 |
| Year 20 | 7 | 7 |
Entrepreneur (Los Angeles, CA)
Age: 40 | Gender: other
Wellbeing Before Policy: 8
Duration of Impact: 5.0 years
Commonness: 3/20
Statement of Opinion:
- If we train staff with an ISA agreement, the policy would safeguard us.
- Doesn't impact me personally, but for the startup's growth, it's beneficial.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 8 |
| Year 2 | 9 | 8 |
| Year 3 | 9 | 8 |
| Year 5 | 8 | 8 |
| Year 10 | 8 | 8 |
| Year 20 | 7 | 8 |
Entry-level Marketing Associate (New York, NY)
Age: 22 | Gender: female
Wellbeing Before Policy: 5
Duration of Impact: 12.0 years
Commonness: 6/20
Statement of Opinion:
- Policy would've reduced my anxiety when I first considered an ISA.
- Now, I'll consider ISAs for further studies or training.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 6 | 5 |
| Year 3 | 6 | 5 |
| Year 5 | 7 | 5 |
| Year 10 | 7 | 5 |
| Year 20 | 7 | 6 |
Civil Engineer (San Francisco, CA)
Age: 35 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 0.0 years
Commonness: 5/20
Statement of Opinion:
- It will help families like mine evaluate ISAs as an option.
- Glad to see safeguards given how complex financial aid can be.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 6 | 6 |
| Year 3 | 6 | 6 |
| Year 5 | 6 | 6 |
| Year 10 | 6 | 6 |
| Year 20 | 6 | 6 |
Freelance Graphic Designer (Miami, FL)
Age: 29 | Gender: female
Wellbeing Before Policy: 5
Duration of Impact: 10.0 years
Commonness: 4/20
Statement of Opinion:
- Policy brings peace of mind about my payment agreement.
- Freelancing income is unpredictable; nice to have payment relief options.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 7 | 5 |
| Year 3 | 7 | 5 |
| Year 5 | 8 | 6 |
| Year 10 | 8 | 6 |
| Year 20 | 8 | 6 |
Community College Administrator (Denver, CO)
Age: 45 | Gender: male
Wellbeing Before Policy: 7
Duration of Impact: 10.0 years
Commonness: 2/20
Statement of Opinion:
- This policy aids in advising students on reliable financial options.
- Shifts student loan focus to more manageable payback terms.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 7 |
| Year 2 | 8 | 7 |
| Year 3 | 8 | 7 |
| Year 5 | 9 | 7 |
| Year 10 | 9 | 7 |
| Year 20 | 9 | 7 |
Nurse (Portland, OR)
Age: 28 | Gender: female
Wellbeing Before Policy: 8
Duration of Impact: 5.0 years
Commonness: 4/20
Statement of Opinion:
- I'd explore ISAs under these terms for future education.
- Policies making ISAs attractive by reducing repayment risks are appreciated.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 8 |
| Year 2 | 8 | 8 |
| Year 3 | 9 | 8 |
| Year 5 | 9 | 8 |
| Year 10 | 9 | 8 |
| Year 20 | 9 | 8 |
Cost Estimates
Year 1: $25000000 (Low: $20000000, High: $30000000)
Year 2: $26000000 (Low: $21000000, High: $31000000)
Year 3: $27000000 (Low: $22000000, High: $32000000)
Year 5: $28000000 (Low: $23000000, High: $33000000)
Year 10: $30000000 (Low: $25000000, High: $35000000)
Year 100: $50000000 (Low: $40000000, High: $60000000)
Key Considerations
- Implementation costs of new consumer protection measures are uncertain but likely mandatory for compliance.
- Tax revenue impact depends on the scale of ISA adoption and the actual tax behavior of participants.
- Potential exists for cost overrun in initial years due to policy transition.