Consumer Advocates Cheer End of Income Share Agreement Legislation

Illinois bill would have allowed interest rates up to 20% for student loans

Legislation backed by the Income Share Agreement (ISA) industry met its legislative demise this week to applause from consumer and student borrower advocates.

HB1519 would have allowed ISAs to charge interest rates on student loans of up to 20%. An ISA is a type of student loan where a borrower agrees to repay the loan based on a percentage of their income over a fixed period of time.

ISAs are prevalent among for-profit schools that have a history of charging high dollars for an inadequate education. Like for-profit schools, ISAs target marginalized populations who may struggle to access higher education due to economic barriers.

Advocates representing the interests of student loan borrowers warned that the bill's passage would have costly implications.

"If HB 1519 passes, Illinois would be the only state in the country to cater so profoundly to the ISA industry as to create a new regulatory regime for these student loans," said Winston Berkman-Breen, policy counsel and deputy director for advocacy at the Student Borrower Protection Center. "ISAs are forms of credit that should operate within the state's existing financial oversight and consumer protection frameworks. Companies offering these agreements also have a track record of consumer abuses and discriminatory lending, which should give policymakers pause before creating a friendlier environment for them in Illinois."

One ISA borrower who expects to ultimately pay $30,000 in loan repayments for an education advertised to cost $15,000 said she's glad HB1519 is dead for now and hopes its ending spells the beginning of increased protections for student borrowers.

“I wouldn’t wish my experience on anyone, and I hope sharing my story educates lawmakers and the public about how ISAs do more harm than good to consumers by creating financial struggles for young adults right out of school,” Devine Sims said. “Given my experience, I believe a bill to regulate the ISA industry should be based on protecting students, not legalizing the industry’s predatory practices.”

Photo byPang YuhaoonUnsplash