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Income Share Agreements have the same rules as private education loans
March 03, 2022
When it comes to paying for an education, an Income Share Agreement (ISA) may seem different than a private education loan – at least to a student.
However, when it comes to federal regulations, an ISA falls under the same rules as private education loans, according a March 2 Electronic Announcement issued by the Department of Education.
In the announcement, the Department reminded schools that the Consumer Financial Protection Bureau (CFPB) recently concluded in a Consent Order against a student loan originator that ISAs are private education loans under the Truth in Lending Act (TILA) and its implementing Regulation Z. Additionally, the Department said the CFPB, in January 2022, updated its examination procedures for private student lending to explicitly reference ISAs.
“Since the Department’s authorizing statute and regulations expressly incorporate the TILA definitions, it follows that any product, including an ISA, that meets the TILA and Regulation Z definitions of a private education loan also meets the definition of that term under the HEA and the Department’s regulations,” the Department said in the announcement.
As such, in the announcement, the Department clarified that ISAs used to finance expenses for postsecondary education are private education loans under 34 C.F.R. 601.2(b). Also, in the announcement, the Department reminded institutions of higher education of their obligations when recommending, promoting, or endorsing private education loans under 34 C.F.R. Part 601.