II 

115TH CONGRESS 

1ST SESSION S. 268 

To provide the legal framework necessary for the growth of innovative private 

financing options for students to fund postsecondary education, and 

for other purposes. 

IN THE SENATE OF THE UNITED STATES 

FEBRUARY 1, 2017 

Mr. YOUNG (for himself and Mr. RUBIO) introduced the following bill; 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 education, and for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Investing in Student 

5 Success Act of 2017’’. 

6 SEC. 2. DEFINITION. 

7 In this Act, the term ‘‘income share agreement’’ 

8 means an agreement between an individual and any other 

9 person under which the individual commits to pay a speciVerDate Sep 11 2014 19:08 Feb 06, 2017 Jkt 069200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S268.IS S268

sradovich on DSK3GMQ082PROD with BILLS
2 

•S 268 IS

1 fied percentage of the future income of the individual, for 

2 a specified period of time, in exchange for payments to 

3 or on behalf of the individual for postsecondary education, 

4 workforce development, or other purposes. 

5 TITLE I—AUTHORIZATION OF 

6 INCOME SHARE AGREEMENTS 

7 SEC. 101. DEFINITIONS. 

8 In this title: 

9 (1) STATE.—The term ‘‘State’’ includes, in ad10 dition to the several States of the Union, the Com11 monwealth of Puerto Rico, the District of Columbia, 

12 Guam, American Samoa, the Virgin Islands, the 

13 government of the Northern Mariana Islands, and 

14 the Trust Territory of the Pacific Islands. 

15 (2) STATE LAW.—The term ‘‘State law’’ means 

16 any law, decision, rule, regulation, or other action 

17 having the effect of a law of any State or any polit18 ical subdivision of a State, or any agency or instru19 mentality of a State or political subdivision of a 

20 State, except that a law of the United States appli21 cable only to the District of Columbia shall be treat22 ed as a State law (rather than a law of the United 

23 States). 


sradovich on DSK3GMQ082PROD with BILLS
3 

•S 268 IS

1 SEC. 102. PURPOSE; LAWFULNESS OF INSTRUMENTS; PRE2 EMPTION OF STATE LAW. 

3 (a) PURPOSE.—The purpose of this title is to author4 ize individuals to enter into income share agreements for 

5 the purposes of obtaining funds for postsecondary edu6 cation in exchange for agreeing to pay to the holder of 

7 the contract a specified percentage of the future income 

8 of the individual. 

9 (b) LAWFULNESS OF CONTRACTS; PREEMPTION.— 

10 Any income share agreement that complies with the re11 quirements of section 103 shall be a valid, binding, and 

12 enforceable contract notwithstanding any State law lim13 iting or otherwise regulating assignments of future wages 

14 or other income. 

15 SEC. 103. TERMS AND CONDITIONS OF INCOME SHARE 

16 AGREEMENT CONTRACTS. 

17 (a) TERMS AND CONDITIONS OF AGREEMENTS.—An 

18 income share agreement complies with the requirements 

19 of this section if the contract complies with each of the 

20 following conditions: 

21 (1) SPECIFIED PERCENTAGE OF INCOME.—The 

22 income share agreement shall specify the percentage 

23 of future income that the individual subject to the 

24 agreement will be obligated to pay, except that the 

25 agreement shall provide for that any year covered by 

26 the agreement during which the individual has an 


sradovich on DSK3GMQ082PROD with BILLS
4 

•S 268 IS

1 income that is less than $15,000 (adjusted each year 

2 to reflect changes in the Consumer Price Index for 

3 All Urban Consumers published by the Bureau of 

4 Labor Statistics of the Department of Labor for the 

5 most recent 12-month period for which the data are 

6 available) the individual shall not be required to pay 

7 for that year any portion of the income of the indi8 vidual. 

9 (2) DEFINITION OF INCOME.—An income share 

10 agreement shall specify the definition of income to 

11 be used for purposes of calculating the obligation of 

12 the individual under the contract. 

13 (3) ANNUAL LIMITATION ON OBLIGATION.—The 

14 percentage of income required under the income 

15 share agreement to be paid by the individual subject 

16 to the agreement may not exceed a percentage such 

17 that, when multiplied by $15,000, the product ex18 ceeds the aggregate amount of periodic payments of 

19 principal and interest that would be required to be 

20 paid during a 12-month period under a comparable 

21 loan that bears interest at a fixed annual rate of 20 

22 percent. 

23 (4) AGGREGATE LIMITATION ON OBLIGATION.— 

24 No eligible individual may enter into any income 

25 share agreement if the total percentage of the future 


sradovich on DSK3GMQ082PROD with BILLS
5 

•S 268 IS

1 income of the individual that the individual agrees to 

2 pay under that contract, and any other income share 

3 agreements of the individual, exceeds 15 percent of 

4 the future income. 

5 (5) TIME-BASED LIMITATION ON OBLIGA6 TION.— 

7 (A) LIMITATION.—The income share 

8 agreement may not provide for the individual 

9 subject to the agreement to assume a commit10 ment to pay future income having a commit11 ment factor, that when added to the commit12 ment factors for any other income share agree13 ments to which the individual is subject, equals 

14 a sum that exceeds the maximum commitment 

15 factor. 

16 (B) COMMITMENT FACTOR.—As used in 

17 this paragraph, the term ‘‘commitment factor’’ 

18 means, with respect to an income share agree19 ment, the product of— 

20 (i) the percentage (expressed as a dec21 imal) of the future income required to be 

22 paid during the period covered by the in23 come share agreement; and 


sradovich on DSK3GMQ082PROD with BILLS
6 

•S 268 IS

1 (ii) the remaining number of years 

2 under the agreement that future income is 

3 required to be paid at such percentage. 

4 (C) MAXIMUM COMMITMENT FACTOR.—As 

5 used in this paragraph, the term ‘‘maximum 

6 commitment factor’’ means, with respect to an 

7 income share agreement, 2.25 (which figure is 

8 the product of 7.5 percent and the number of 

9 years in the longest allowable contract under 

10 paragraph (6)). 

11 (6) EXTENSION OF PERIOD.—The income share 

12 agreement may provide that the period covered by 

13 the income share agreement may be extended by a 

14 number of years that is equal to the number of years 

15 during which the agreement is in force for which the 

16 annual income of the individual is below the dollar 

17 amount specified in paragraph (1). 

18 (7) EARLY TERMINATION.—The income share 

19 agreement shall specify the terms and conditions by 

20 which the individual subject to the agreement may 

21 extinguish the obligations of the individual under the 

22 agreement before the end of the payment period 

23 specified in the agreement and any application ex24 tension provided for in the agreement pursuant to 

25 paragraph (6). 


sradovich on DSK3GMQ082PROD with BILLS
7 

•S 268 IS

1 (b) REQUIRED DISCLOSURES.—An income share 

2 agreement does not comply with the requirements of this 

3 section unless the individual who is committing to pay fu4 ture income is provided, before entry into the agreement, 

5 a disclosure document that clearly and simply discloses— 

6 (1) that— 

7 (A) the agreement is not a debt instru8 ment, and that the amount the individual will 

9 be required to pay under the agreement— 

10 (i) may be more or less than the 

11 amount provided to the individual; and 

12 (ii) will vary in proportion to the fu13 ture income of the individual; 

14 (B) that the obligations of the individual 

15 under the agreement are not dischargeable 

16 under bankruptcy law, except in a case that 

17 would impose an undue hardship on the debtor 

18 and the dependents of the debtor; 

19 (C) whether the obligations of the indi20 vidual under the agreement may be extin21 guished by accelerating payments, and, if so, 

22 under what terms; 

23 (D) the duration of the obligations of the 

24 individual under the agreement (absent such ac25 celerating payments), including any circumVerDate Sep 11 2014 19:08 Feb 06, 2017 Jkt 069200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S268.IS S268

sradovich on DSK3GMQ082PROD with BILLS
8 

•S 268 IS

1 stances under which the contract would be ex2 tended; 

3 (E) the percentage of income the individual 

4 is committing to pay under the agreement and 

5 the minimum amount of annual income that, 

6 pursuant to subsection (a)(1), triggers the obli7 gation of the individual under the agreement to 

8 make payments for such year; and 

9 (F) the definition of income to be used for 

10 purposes of calculating the obligation of the in11 dividual; and 

12 (2) a comparison of— 

13 (A) the amounts an individual would be re14 quired to pay under the income share agree15 ment at a range of annual income levels, which 

16 income levels shall correspond to the levels the 

17 individual might reasonably be expected to 

18 make given the intended use of the funds pro19 vided under the agreement, as determined in 

20 accordance with guidance issued by the Sec21 retary of the Treasury; and 

22 (B) the amounts required to be paid under 

23 a comparable loan that bears interest at a fixed 

24 annual rate of 10 percent. 


sradovich on DSK3GMQ082PROD with BILLS
9 

•S 268 IS

1 (c) NON-INTERFERENCE.—An income share agree2 ment— 

3 (1) represents an obligation by the individual to 

4 pay the specific percentage of future income; and 

5 (2) shall not be construed to give the contract 

6 holder any rights over the actions of an individual. 

7 SEC. 104. PREEMPTION OF STATE LAW WITH RESPECT TO 

8 USURY. 

9 Income share agreements shall not be subject to 

10 State usury laws. 

11 SEC. 105. RULEMAKING; MODEL DISCLOSURE FORMS. 

12 (a) IN GENERAL.—The Secretary of the Treasury, in 

13 consultation with such other agency heads as the Sec14 retary considers appropriate, may issue such regulations 

15 as may be necessary to carry out this title. 

16 (b) MODEL DISCLOSURE FORMS.— 

17 (1) IN GENERAL.—Not later than 180 days 

18 after the date of enactment of this Act, the Sec19 retary of the Treasury, after consultation with such 

20 other agency heads as the Secretary considers ap21 propriate, shall promulgate a model disclosure form 

22 for the disclosures required under section 103(b). 

23 (2) SAFE HARBOR.—Any person who uses the 

24 model disclosure form promulgated pursuant to 

25 paragraph (1) and includes accurate information reVerDate Sep 11 2014 19:08 Feb 06, 2017 Jkt 069200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S268.IS S268

sradovich on DSK3GMQ082PROD with BILLS
10 

•S 268 IS

1 quired to be disclosed under section 103(c) shall be 

2 deemed to have satisfied the requirements of section 

3 103(b). 

4 TITLE II—TAX TREATMENT OF 

5 INCOME SHARE AGREEMENTS 

6 SEC. 201. TAX TREATMENT OF INCOME SHARE AGREE7 MENTS. 

8 (a) EXCLUSION FROM GROSS INCOME OF INCOME

9 SHARE AGREEMENT PROCEEDS.—Payments made under 

10 an income share agreement that complies with the require11 ments of section 103 to or on behalf of the individual who 

12 commits to pay a specified percentage of the future income 

13 of the individual to another person under such agreement, 

14 and any difference in value of the payments to or on behalf 

15 of such individual and the total amount paid by such indi16 vidual, shall not be includible in the gross income of such 

17 individual for purposes of the Internal Revenue Code of 

18 1986. 

19 (b) TREATMENT OF PAYMENTS OF FUTURE IN20 COME.—Payments of future income received by another 

21 person under an income share agreement shall be treated 

22 for purposes of the Internal Revenue Code of 1986— 

23 (1) first, with respect to so much of such pay24 ments as does not exceed the amount of the pay25 ments to which subsection (a) applies with respect to 


sradovich on DSK3GMQ082PROD with BILLS
11 

•S 268 IS

1 the agreement, as a repayment of investment in the 

2 contract which reduces the basis of the holder in the 

3 agreement; and 

4 (2) second, as income on the contract which is 

5 includible in gross income. 

6 TITLE III—QUALIFIED 

7 EDUCATION LOAN 

8 SEC. 301. QUALIFIED EDUCATION LOAN. 

9 (a) IN GENERAL.—Section 221(d)(1) of the Internal 

10 Revenue Code of 1986 is amended by adding at the end 

11 the following: ‘‘Such term includes any income share 

12 agreement (as defined in section 2 of the Investing in Stu13 dent Success Act of 2017), except that payments made 

14 by the taxpayer during the taxable year to meet an income 

15 share agreement obligation shall not be taken into account 

16 under subsection (a)’’. 

17 (b) INFORMATION REPORTING NOT REQUIRED.— 

18 Section 6050S(e) of such Code is amended by inserting 

19 ‘‘(without regard to the last sentence thereof)’’ after ‘‘sec20 tion 221(d)(1)’’. 


sradovich on DSK3GMQ082PROD with BILLS
12 

•S 268 IS

1 TITLE IV—FEDERAL INDIVIDUAL 

2 ASSISTANCE TREATMENT OF 

3 INCOME SHARE AGREEMENTS 

4 SEC. 401. AMOUNTS RECEIVED NOT TREATED AS INCOME 

5 IN CALCULATION OF FINANCIAL NEED 

6 UNDER THE HIGHER EDUCATION ACT OF 

7 1965. 

8 No portion of any amounts received by an individual 

9 for entering into an income share agreement shall be in10 cluded as income or assets in the computation of expected 

11 family contribution for any program funded in whole or 

12 in part under the Higher Education Act of 1965 (20 

13 U.S.C. 1001 et seq.). 

14 TITLE V—INVESTMENT 

15 COMPANY TREATMENT 

16 SEC. 501. BUSINESSES MAKING INCOME SHARE AGREE17 MENTS EXCLUDED FROM INVESTMENT COM18 PANY TREATMENT. 

19 Section 3(c) of the Investment Company Act of 1940 

20 (15 U.S.C. 80a–3(c)) is amended— 

21 (1) in paragraph (4), by inserting ‘‘income 

22 share agreements (as defined in section 2 of the In23 vesting in Student Success Act of 2017),’’ after ‘‘in24 dustrial banking,’’; and 


sradovich on DSK3GMQ082PROD with BILLS
13 

•S 268 IS

1 (2) in paragraph (5), by inserting ‘‘, including 

2 income share agreements (as defined in section 2 of 

3 the Investing in Student Success Act of 2017)’’ after 

4 ‘‘services’’ each place that term appears. 

Æ 


sradovich on DSK3GMQ082PROD with BILLS