II 

114TH CONGRESS 

1ST SESSION S. 2186 

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 

OCTOBER 20, 2015 

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 2015’’. 


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1 TITLE I—AUTHORIZATION OF 

2 INCOME SHARE AGREEMENTS 

3 SEC. 101. PURPOSE; LAWFULNESS OF INSTRUMENTS; PRE4 EMPTION OF STATE LAW. 

5 (a) PURPOSE.—It is the purpose of this title to au6 thorize individuals to enter into income share agreements 

7 for the purposes of obtaining funds for postsecondary edu8 cation in exchange for agreeing to pay to the holder of 

9 the contract a specified percentage of the individual’s fu10 ture income. 

11 (b) LAWFULNESS OF CONTRACTS; PREEMPTION.— 

12 Any income share agreement that complies with the re13 quirements of section 102 shall be a valid, binding, and 

14 enforceable contract notwithstanding any State law lim15 iting or otherwise regulating assignments of future wages 

16 or other income. 

17 SEC. 102. TERMS AND CONDITIONS OF INCOME SHARE 

18 AGREEMENT CONTRACTS. 

19 (a) DEFINITION OF INCOME SHARE AGREEMENT.— 

20 For purposes of this title, the term ‘‘income share agree21 ment’’ means an agreement between an individual and any 

22 other person under which the individual commits to pay 

23 a specified percentage of the individual’s future income, 

24 for a specified period of time, in exchange for payments 


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1 to or on behalf of such individual for postsecondary edu2 cation, workforce development, or other purposes. 

3 (b) TERMS AND CONDITIONS OF AGREEMENTS.—An 

4 income share agreement complies with the requirements 

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

6 following conditions: 

7 (1) SPECIFIED PERCENTAGE OF INCOME.—The 

8 income-share agreement shall specify the percentage 

9 of future income that the individual subject to the 

10 agreement will be obligated to pay, except that the 

11 agreement shall provide for that any year covered by 

12 such agreement during which the individual has an 

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

14 to reflect changes in the Consumer Price Index for 

15 All Urban Consumers published by the Bureau of 

16 Labor Statistics of the Department of Labor for the 

17 most recent 12-month period for which such data 

18 are available) the individual shall not be required to 

19 pay for such year any portion of the individual’s in20 come. 

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

22 agreement shall specify the definition of income to 

23 be used for purposes of calculating an individual’s 

24 obligation under the contract. 


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1 (3) ANNUAL LIMITATION ON OBLIGATION.—The 

2 percentage of income required under the income 

3 share agreement to be paid by the individual subject 

4 to the agreement may not exceed a percentage such 

5 that, when multiplied by $15,000, the product ex6 ceeds the aggregate amount of periodic payments of 

7 principal and interest that would be required to be 

8 paid during a 12-month period under a comparable 

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

10 percent. 

11 (4) AGGREGATE LIMITATION ON OBLIGATION.— 

12 No eligible individual may enter into any income 

13 share agreement if the total percentage of such indi14 vidual’s future income that the individual agrees to 

15 pay under that contract, and any other income share 

16 agreements of such individual, exceeds 15 percent of 

17 such future income. 

18 (5) TIME-BASED LIMITATION ON OBLIGA19 TION.— 

20 (A) LIMITATION.—The income-share 

21 agreement may not provide for the individual 

22 subject to the agreement to assume a commit23 ment to pay future income having a commit24 ment factor, that when added to the commit25 ment factors for any other income-share agreeVerDate Sep 11 2014 21:02 Oct 20, 2015 Jkt 059200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S2186.IS S2186

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1 ments to which such individual is subject, 

2 equals a sum that exceeds the maximum com3 mitment factor. 

4 (B) COMMITMENT FACTOR.—As used in 

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

6 means, with respect to an income-share agree7 ment, the product of— 

8 (i) the percentage (expressed as a dec9 imal) of such future income required to be 

10 paid during such period; and 

11 (ii) the remaining number of years 

12 under the agreement that future income is 

13 required to be paid at such percentage. 

14 (C) MAXIMUM COMMITMENT FACTOR.—As 

15 used in this paragraph, the term ‘‘maximum 

16 commitment factor’’ means, with respect to an 

17 income-share agreement, 2.25 (which figure is 

18 the product of 7.5 percent and the number of 

19 years in the longest allowable contract under 

20 paragraph (6)(A)). 

21 (6) EXTENSION OF PERIOD.—The income-share 

22 agreement may provide that such period may be ex23 tended by a number of years that is equal to the 

24 number of years during which the agreement is in 


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1 force for which the individual’s annual income is 

2 below the dollar amount specified in paragraph (1). 

3 (7) EARLY TERMINATION.—The income-share 

4 agreement shall specify the terms and conditions by 

5 which the individual subject to the agreement may 

6 extinguish the individual’s obligations under the 

7 agreement before the end of the payment period 

8 specified in the agreement and any application ex9 tension provided for in the agreement pursuant to 

10 paragraph (6)(B). 

11 (c) REQUIRED DISCLOSURES.—An income share 

12 agreement does not comply with the requirements of this 

13 section unless the individual who is committing to pay fu14 ture income is provided, before entry into such agreement, 

15 a disclosure document that clearly and simply discloses— 

16 (1) that— 

17 (A) the agreement is not a debt instru18 ment, and that the amount the individual will 

19 be required to pay under the agreement— 

20 (i) may be more or less than the 

21 amount provided to the individual; and 

22 (ii) will vary in proportion to the indi23 vidual’s future income; 

24 (B) that the obligations of the individual 

25 under the agreement are not dischargeable 


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1 under bankruptcy law, except in a case that 

2 would impose an undue hardship on the debtor 

3 and the debtor’s dependents; 

4 (C) whether the obligations of the indi5 vidual under the agreement may be extin6 guished by accelerating payments, and, if so, 

7 under what terms; 

8 (D) the duration of the individual’s obliga9 tions under the agreement (absent such accel10 erating payments), including any circumstances 

11 under which the contract would be extended; 

12 (E) the percentage of income the individual 

13 is committing to pay under the agreement and 

14 the minimum amount of annual income that, 

15 pursuant to subsection (b)(1), triggers the indi16 vidual’s obligation under the agreement to make 

17 payments for such year; and 

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

19 purposes of calculating the individual’s obliga20 tion; and 

21 (2) a comparison of— 

22 (A) the amounts an individual would be re23 quired to pay under the income-share agree24 ment at a range of annual income levels, which 

25 income levels shall correspond to the levels the 


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1 individual might reasonably be expected to 

2 make given the intended use of the funds pro3 vided under the agreement, as determined in 

4 accordance with guidance issued by the Sec5 retary of the Treasury; to 

6 (B) the amounts required to be paid under 

7 a comparable loan that bears interest at a fixed 

8 annual rate of 10 percent. 

9 (d) NON-INTERFERENCE.—An income-share agree10 ment represents an obligation by the individual pay the 

11 specific percentage of future income, but shall not be con12 strued to give the contract holder any rights over an indi13 vidual’s actions. 

14 SEC. 103. DEFINITIONS. 

15 As used in this title: 

16 (1) STATE.—The term ‘‘State’’ includes, in ad17 dition to the several States of the Union, the Com18 monwealth of Puerto Rico, the District of Columbia, 

19 Guam, American Samoa, the Virgin Islands, the 

20 government of the Northern Mariana Islands, and 

21 the Trust Territory of the Pacific Islands. 

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

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

24 having the effect of a law of any State or any polit25 ical subdivision of a State, or any agency or instruVerDate Sep 11 2014 21:02 Oct 20, 2015 Jkt 059200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S2186.IS S2186

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1 mentality of a State or political subdivision of a 

2 State, except that a law of the United States appli3 cable only to the District of Columbia shall be treat4 ed as a State law (rather than a law of the United 

5 States). 

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

7 USURY. 

8 Income share agreements shall not be subject to 

9 State usury laws. 

10 SEC. 105. RULEMAKING; MODEL DISCLOSURE FORMS. 

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

12 consultation with such other agency heads as the Sec13 retary considers appropriate, may issue such regulations 

14 as may be necessary to carry out this title. 

15 (b) MODEL DISCLOSURE FORMS.— 

16 (1) IN GENERAL.—Not later than the end of 

17 the 180-day period beginning upon the date of the 

18 enactment of this Act, the Secretary of the Treas19 ury, after consultation with such other agency heads 

20 as the Secretary considers appropriate, shall promul21 gate a model disclosure form for the disclosures re22 quired under section 102(c). 

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 21:02 Oct 20, 2015 Jkt 059200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S2186.IS S2186

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1 quired under section 102(c) to be disclosed shall be 

2 deemed to have satisfied the requirements of section 

3 102(c). 

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 102 to or on behalf of the individual who 

12 commits to pay a specified percentage of such individual’s 

13 future income 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 


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1 such agreement, as a repayment of investment in the 

2 contract which reduces the holder’s basis in such 

3 agreement, and 

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

5 includible in gross income. 

6 (c) INCOME SHARE AGREEMENT.—For purposes of 

7 this title, the term ‘‘income share agreement’’ has the 

8 meaning given such term under title I. 

9 TITLE III—QUALIFIED 

10 EDUCATION LOAN 

11 SEC. 301. QUALIFIED EDUCATION LOAN. 

12 (a) IN GENERAL.—Paragraph (1) of section 221(d) 

13 of the Internal Revenue Code of 1986 is amended by add14 ing at the end the following: ‘‘Such term includes any in15 come share agreement (as defined in section 102 of the 

16 Investing in Student Success Act of 2015), except that 

17 payments made by the taxpayer during the taxable year 

18 to meet an income share agreement obligation shall not 

19 be taken into account under subsection (a)’’. 

20 (b) INFORMATION REPORTING NOT REQUIRED.— 

21 Subsection (e) of section 6050S of such Code is amended 

22 by inserting ‘‘(without regard to the last sentence there23 of)’’ after ‘‘section 221(d)(1)’’. 


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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 (as such term 

10 is defined in title I) shall be included as income or assets 

11 in the computation of expected family contribution for any 

12 program funded in whole or in part under the Higher 

13 Education Act of 1965. 

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 after ‘‘indus22 trial banking,’’ the following: ‘‘income share agree23 ments (as defined under section 102 of the Investing 

24 in Student Success Act of 2015),’’; and 


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

2 income share agreements’’ after ‘‘services’’ each 

3 place such term appears. 

Æ 


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