Todd Young Income Share Agreements: A New Approach to Paying for College

As college tuition continues to rise, students and families are searching for new ways to pay for higher education. One innovative approach gaining popularity is income share agreements (ISAs). These agreements allow students to pay for college by committing to share a percentage of their future income with investors for a set period after graduation.

One of the champions of income share agreements is Senator Todd Young of Indiana. Young has been a vocal advocate for ISAs since his time in the House of Representatives, where he introduced the Investing in Student Success Act. This legislation aimed to make ISAs a more viable option for students by creating a legal framework and setting standards for transparency and consumer protection.

So, what exactly are income share agreements and how do they work? In general, ISAs allow students to receive funding for college in exchange for a percentage of their future income for a set period of time. The percentage and duration can vary depending on the terms of the agreement. Unlike traditional student loans, ISAs do not accrue interest and do not require a fixed monthly payment.

One of the main advantages of ISAs is that they align the interests of students and investors. Investors are incentivized to fund students who are likely to have high earning potential after graduation. Students, on the other hand, are not burdened with debt and are only obligated to pay a portion of their income if they are earning a certain threshold.

Another advantage of ISAs is that they can offer more flexibility than traditional student loans. Payments are tied to income, so if a graduate experiences a period of low earnings, their payments will be lower or even paused altogether. This can provide students with more financial security and reduce the risk of defaulting on loans.

Critics of ISAs raise concerns about potential exploitation of students, lack of regulation, and the potential for investors to disproportionately benefit. However, proponents such as Senator Young argue that ISAs can be an effective tool to increase access to higher education and reduce the burden of student debt.

In 2019, Senator Young introduced the ISA Student Protection Act, which aims to regulate ISAs and establish safeguards for students. The bill addresses concerns such as disclosure requirements, dispute resolution, and limitations on payments based on income. If passed, this legislation could help make ISAs a more widely accepted and regulated option for financing higher education.

Overall, income share agreements are an innovative and potentially beneficial approach to paying for college. While they are not without controversy, the support of advocates like Senator Todd Young suggests that ISAs may become an increasingly popular way for students to finance their education in the future.