Democratic Senator Elizabeth Warren, together with Democratic Representatives Ayanna Pressley and Katie Porter, have sent a letter to the Department of Education expressing concern about reports that the Department “is exploring an experiment with Income Share Agreements (ISAs) in federal higher education programs.” The letter states that the lawmakers are “seeking to learn more about the Department’s plans in order to evaluate whether these plans are in the best interest of students and within the Department’s authority under the law.”
ISAs are described in the letter as “contracts between students struggling to afford college and a funder — sometimes a college or other organization, but often private investors — that require students to commit to pay a portion of their income to the funder for a number of years after the students leave school in exchange for higher education financing.” According to the lawmakers, ISAs “carry many common pitfalls of traditional private student loans — with the added danger of deceptive rhetoric and marketing that obscure their true nature.” They assert that “like private student loans and many other types of debt, the terms of an ISA contract can be predatory and dangerous for students” and that ISAs “include some of the most exploitative terms in the private student loan industry, including mandatory arbitration agreements and class action bans.” The lawmakers say that they “are deeply concerned that ISAs create significant opportunities for discriminatory practices” for the reasons outlined in the letter.
The letter requests responses by June 25 to a series of questions that, according to the lawmakers, are intended to allow them “to understand whether the Department has taken appropriate steps to evaluate whether ISAs are in the best interest of students, and whether the Department has properly explored its legal authorities under the law.”
The same three lawmakers also sent letters to the presidents of several colleges and universities that, according to the letters, already have ISA programs. The letters request answers to questions about the institutions’ ISA programs and related documents.