U.S. Sen. Marco Rubio, R-Fla., has teamed with two Indiana Republicans--former Gov. Mitch Daniels and U.S. Sen. Todd Young--to unveil a proposal to reform higher education financing.
Rubio and Young brought out the “Investing in Student Success Act" to “create a legal structure for a new debt-free higher education financing option called income share agreements (ISA)” which helps take taxpayers off the hook for defaulted loans. Rubio and Young, then a member of the U.S. House, worked on the legislation last year.
“It’s getting harder and harder for American families to afford the rising costs of college, and students are often forced to run up thousands of dollars of debt,” Rubio said as he introduced the bill on Thursday. “This innovative legislation would empower students to leverage their future income today and access the financial resources of businesses, individuals and nonprofit organizations in order to achieve their higher education goals.”
"Income share agreements are an innovative debt-free financing option for students,” said Young. “Students and their families should not be forced to make a choice between a quality education and financial hardship. I'm excited to work with my colleague Senator Rubio and have the support of Purdue President Mitch Daniels in this effort."
Daniels, now the president of Purdue University, has spearheaded the “Back a Boiler” program which offers ISAs to some students.
“An income-share agreement is a contract between a student and an investor in which a student pays a small percentage of their income for a number of years after graduation,” Rubio’s office noted. “Students who enter into an ISA do not incur debt and only make payments if they are employed and receiving an income above a certain threshold. ISAs are designed to offer alternatives to students outside of traditional student loan options. The ISA does not accrue interest and offers a number of consumer protections including caps on payments based on income and length of the contract.
Daniels, who led the Office of Management and Budget (OMB) in President George W. Bush’s first term insisted students across the nation could benefit from ISAs.
“After our successful launch of ‘Back a Boiler’, we have been hearing from schools around the country interested in pursuing their own program. We thank Senators Young and Rubio for their work to clarify the framework for Income Share Agreements,” said Daniels. “With congressional action, widespread use of ISAs can be a reality for students nationwide.”
Rubio's and Young's bill was sent to the Senate Finance Committee earlier this week.
