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Rubio Income Share Agreement

Because investors are encouraged to allow students to pay a smaller share of their income when enrolling in quality, low-cost education programs, ISAs allow for a more efficient allocation of financial resources among universities. [3] And at the federal level, Senators Marco Rubio (R-FL) and Todd Young (R-IN) introduced the investment in Student Success Act, p. 268, in 2017 with the aim of creating a legal structure for income participation agreements. The bill has yet to be advanced in the Senate. [Investors] could « buy » a portion of a person`s income prospects: to give them the means to finance their training, provided they agree to pay the lender a certain portion of their future income. In this way, a lender would recover more than its initial investment of relatively successful people, which would compensate for the failure to recover its initial investment from the unsuccessful. In 2013, Oregon lawmakers passed a bill that would study pay it forward as a college funding system. The model would allow students to study at university without study and then pay a portion of their income after graduation to finance the cost of their studies. However, unlike the Income Participation Agreement model, Pay It Forward would be publicly funded and would provide fixed percentage repayments for all institutions. [7] [With an ordinary student loan], my nominal monthly payment is set, but my income could change or disappear completely (making security a monthly repeat of bad news). In the case of an income-involved contract, it is the opposite: I do not know what my monthly nominal payment will be over the lifetime, nor the total amount I will pay, but I know I can always afford it. [11] For ISA beneficiaries whose income was above the above minimum, the percentage of income-based income would be limited to 7.5% to 20% of income depending on the duration of the contract.

The longest contract would be 30 years, but could be extended by the number of months the recipient did not have to pay a percentage of his income because he fell below 200% of the poverty line. In general, the Rubio/Petri provisions seem useful: they are simple and logical safeguards that prevent potential bad actors from exploiting students. The fact that repayments are limited to 15% of an individual`s income also prevents borrowers from overburdening their resources. Income participation agreements would, as it is written, offer far more protection than other types of unsecured consumer credits (such as credit cards or private-sector loans), since monthly payments for these types of credits can legally exceed 15% of your total income. The bills would impose certain standards that ISAs would have to meet: they would be subject to a minimum income exemption of $10,000, a maximum repayment period of 30 years and a total limit of 15% of the income of the person who is promised (one student could have two ISAs, for example one at 10 per cent and the other at 5 per cent). Invoices also require that certain information provided to consumers be clearly communicated to the RECIPIENT of the ISA.