,,ii  #aadth ,,congress  #ast ,session  
,s4 #bahf  ,,in ,,the ,,senate ,,of     
,,the ,,united ,,states  ,october #bj1  
#bjae,mr4 ,rubio introduced the         
following bill2 which was read twice and
 referred to the ,committee on ,finance 
,a ,,bill  ,to provide the legal        
framework necessary for the growth of   
innovative private financing options for
 students to fund postsecondary         
education1 and for other purposes4  #a4 
,short title ,this ,act may be cited as 
the ,investing in ,student ,success ,act
 of #bjae4  ,i ,authorization of ,income
 ,share ,agreements  #aja4 ,purpose2    
lawfulness of instruments2 preemption of
 ,state law  7a7 ,purpose ,it is the    
purpose of this title to authorize      
individuals to enter into income share  
agreements for the purposes of obtaining
 funds for postsecondary education in   
exchange for agreeing to pay to the     
holder of the contract a specified      
percentage of the individual's future   
income4  7b7 ,lawfulness of contracts2  

preemption ,any income share agreement  
that complies with the requirements of  
section #ajb shall be a valid1 binding1 
and enforceable contract notwithstanding
 any ,state law limiting or otherwise   
regulating assignments of future wages  
or other income4  #ajb4 ,terms and      
conditions of income share agreement    
contracts  7a7 ,definition of income    
share agreement ,for purposes of this   
title1 the term income share agreement  
means an agreement between an individual
 and any other person under which the   
individual commits to pay a specified   
percentage of the individual's future   
income1 for a specified period of time1 
in exchange for payments to or on behalf
 of such individual for postsecondary   
education1 workforce development1 or    
other purposes4  7b7 ,terms and         
conditions of agreements ,an income     
share agreement complies with the       
requirements of this section if the     
contract complies with each of the      
following conditions3  7#a7 ,specified  

percentage of income ,the income-share  
agreement shall specify the percentage  
of future income that the individual    
subject to the agreement will be        
obligated to pay1 except that the       
agreement shall provide for that any    
year covered by such agreement during   
which the individual has an income that 
is less than #ae1jjj 7adjusted each year
 to reflect changes in the ,consumer    
,price ,index for ,all ,urban ,consumers
 published by the ,bureau of ,labor     
,statistics of the ,department of ,labor
 for the most recent #ab-month period   
for which such data are available7 the  
individual shall not be required to pay 
for such year any portion of the        
individual's income4  7#b7 ,definition  
of income ,an income share agreement    
shall specify the definition of income  
to be used for purposes of calculating  
an individual's obligation under the    
contract4  7#c7 ,annual limitation on   
obligation ,the percentage of income    
required under the income share         

agreement to be paid by the individual  
subject to the agreement may not exceed 
a percentage such that1 when multiplied 
by #ae1jjj1 the product exceeds the     
aggregate amount of periodic payments of
 principal and interest that would be   
required to be paid during a #ab-month  
period under a comparable loan that     
bears interest at a fixed annual rate of
 #bj percent4  7#d7 ,aggregate          
limitation on obligation ,no eligible   
individual may enter into any income    
share agreement if the total percentage 
of such individual's future income that 
the individual agrees to pay under that 
contract1 and any other income share    
agreements of such individual1 exceeds  
#ae percent of such future income4  7#e7
 ,time-based limitation on obligation   
7,a7 ,limitation ,the income-share      
agreement may not provide for the       
individual subject to the agreement to  
assume a commitment to pay future income
 having a commitment factor1 that when  
added to the commitment factors for any 

other income-share agreements to which  
such individual is subject1 equals a sum
 that exceeds the maximum commitment    
factor4  7,b7 ,commitment factor ,as    
used in this paragraph1 the term        
commitment factor means1 with respect to
 an income-share agreement1 the product 
of-- 7i7 the percentage 7expressed as a 
decimal7 of such future income required 
to be paid during such period2 and  7ii7
 the remaining number of years under the
 agreement that future income is        
required to be paid at such percentage4 
7,c7 ,maximum commitment factor ,as used
 in this paragraph1 the term maximum    
commitment factor means1 with respect to
 an income-share agreement1 #b4be 7which
 figure is the product of #g4e percent  
and the number of years in the longest  
allowable contract under paragraph      
7#f77;,a774  7#f7 ,extension of period  
,the income-share agreement may provide 
that such period may be extended by a   
number of years that is equal to the    
number of years during which the        

agreement is in force for which the     
individual's annual income is below the 
dollar amount specified in paragraph    
7#a74  7#g7 ,early termination ,the     
income-share agreement shall specify the
 terms and conditions by which the      
individual subject to the agreement may 
extinguish the individual's obligations 
under the agreement before the end of   
the payment period specified in the     
agreement and any application extension 
provided for in the agreement pursuant  
to paragraph 7#f77;,b74  7c7 ,required  
disclosures ,an income share agreement  
does not comply with the requirements of
 this section unless the individual who 
is committing to pay future income is   
provided1 before entry into such        
agreement1 a disclosure document that   
clearly and simply discloses--  7#a7    
that-- 7,a7 the agreement is not a debt 
instrument1 and that the amount the     
individual will be required to pay under
 the agreement--  7i7 may be more or    
less than the amount provided to the    

individual2 and  7ii7 will vary in      
proportion to the individual's future   
income2  7,b7 that the obligations of   
the individual under the agreement are  
not dischargeable under bankruptcy law1 
except in a case that would impose an   
undue hardship on the debtor and the    
debtor's dependents2  7,c7 whether the  
obligations of the individual under the 
agreement may be extinguished by        
accelerating payments1 and1 if so1 under
 what terms2  7,d7 the duration of the  
individual's obligations under the      
agreement 7absent such accelerating     
payments71 including any circumstances  
under which the contract would be       
extended2  7,e7 the percentage of income
 the individual is committing to pay    
under the agreement and the minimum     
amount of annual income that1 pursuant  
to subsection 7b77#a71 triggers the     
individual's obligation under the       
agreement to make payments for such     
year2 and  7,f7 the definition of income
 to be used for purposes of calculating 

the individual's obligation2 and  7#b7 a
 comparison of--  7,a7 the amounts an   
individual would be required to pay     
under the income-share agreement at a   
range of annual income levels1 which    
income levels shall correspond to the   
levels the individual might reasonably  
be expected to make given the intended  
use of the funds provided under the     
agreement1 as determined in accordance  
with guidance issued by the ,secretary  
of the ,treasury2 to  7,b7 the amounts  
required to be paid under a comparable  
loan that bears interest at a fixed     
annual rate of #aj percent4  7d7        
,non-,interference ,an income-share     
agreement represents an obligation by   
the individual pay the specific         
percentage of future income1 but shall  
not be construed to give the contract   
holder any rights over an individual's  
actions4  #ajc4 ,definitions ,as used in
 this title3 7#a7 ,state ,the term      
,state includes1 in addition to the     
several ,states of the ,union1 the      

,commonwealth of ,puerto ,rico1 the     
,district of ,columbia1 ,guam1 ,american
 ,samoa1 the ,virgin ,islands1 the      
government of the ,northern ,mariana    
,islands1 and the ,trust ,territory of  
the ,pacific ,islands4  7#b7 ,state law 
,the term ,state law means any law1     
decision1 rule1 regulation1 or other    
action having the effect of a law of any
 ,state or any political subdivision of 
a ,state1 or any agency or              
instrumentality of a ,state or political
 subdivision of a ,state1 except that a 
law of the ,united ,states applicable   
only to the ,district of ,columbia shall
 be treated as a ,state law 7rather than
 a law of the ,united ,states74  #ajd4  
,preemption of ,state ,law with respect 
to usury ,income share agreements shall 
not be subject to ,state usury laws4    
#aje4 ,rulemaking2 model disclosure     
forms  7a7 ,in general ,the ,secretary  
of the ,treasury1 in consultation with  
such other agency heads as the          
,secretary considers appropriate1 may   

issue such regulations as may be        
necessary to carry out this title4  7b7 
,model disclosure forms  7#a7 ,in       
general ,not later than the end of the  
#ahj-;day period beginning upon the date
 of the enactment of this ,act1 the     
,secretary of the ,treasury1 after      
consultation with such other agency     
heads as the ,secretary considers       
appropriate1 shall promulgate a model   
disclosure form for the disclosures     
required under section #ajb7;c74  7#b7  
,safe harbor ,any person who uses the   
model disclosure form promulgated       
pursuant to paragraph 7#a7 and includes 
accurate information required under     
section #ajb7;c7 to be disclosed shall  
be deemed to have satisfied the         
requirements of section #ajb7;c74  ,,ii 
,tax ,treatment of ,income ,share       
,agreements  #bja4 ,tax treatment of    
income share agreements  7a7 ,exclusion 
from gross income of income share       
agreement proceeds ,payments made under 
an income-share agreement that complies 

with the requirements of section #ajb to
 or on behalf of the individual who     
commits to pay a specified percentage of
 such individual's future income to     
another person under such agreement1 and
 any difference in value of the payments
 to or on behalf of such individual and 
the total amount paid by such           
individual1 shall not be includible in  
the gross income of such individual for 
purposes of the ,internal ,revenue ,code
 of #aihf4  7b7 ,treatment of payments  
of future income ,payments of future    
income received by another person under 
an income share agreement shall be      
treated for purposes of the ,internal   
,revenue ,code of #aihf--  7#a7 first1  
with respect to so much of such payments
 as does not exceed the amount of the   
payments to which subsection 7a7 applies
 with respect to such agreement1 as a   
repayment of investment in the contract 
which reduces the holder's basis in such
 agreement1 and  7#b7 second1 as income 
on the contract which is includible in  

gross income4  7c7 ,income share        
agreement ,for purposes of this title1  
the term income share agreement has the 
meaning given such term under title ,i4 
,,iii ,qualified education loan  #cja4  
,qualified education loan  7a7 ,in      
general ,paragraph 7#a7 of section      
#bba7;d7 of the ,internal ,revenue ,code
 of #aihf is amended by adding at the   
end the following3 ,such term includes  
any income share agreement 7as defined  
in section #ajb of the ,investing in    
,student ,success ,act of #bjae71 except
 that payments made by the taxpayer     
during the taxable year to meet an      
income share agreement obligation shall 
not be taken into account under         
subsection 7a74  7b7 ,information       
reporting not required ,subsection 7e7  
of section #fjej,s of such ,code is     
amended by inserting 7without regard to 
the last sentence thereof7 after section
 #bba7;d77#a74  ,,iv ,federal           
,individual ,assistance ,treatment of   
,income ,share ,agreements  #dja4       

,amounts received not treated as income 
in calculation of financial need under  
the ,higher ,education ,act of #aife ,no
 portion of any amounts received by an  
individual for entering into an income  
share agreement 7as such term is defined
 in title ,i7 shall be included as      
income or assets in the computation of  
expected family contribution for any    
program funded in whole or in part under
 the ,higher ,education ,act of #aife4  
,v ,investment ,company treatment  #eja4
 ,businesses making income share        
agreements excluded from investment     
company treatment ,section #c7;c7 of the
 ,investment ,company ,act of #aidj 7#ae
 ,u4,s4,c4 #hj;a-#c7;c77 is amended--   
7#a7 in paragraph 7#d71 by inserting    
after industrial banking1 the following3
 income share agreements 7as defined    
under section #ajb of the ,investing in 
,student ,success ,act of #bjae712 and  
7#b7 in paragraph 7#e71 by inserting 1  
including income share agreements after 
services each place such term appears4