Young Op-ed: An Innovative Solution to Nation’s Student Debt Crisis
KOKOMO, Ind. – In an op-ed in today’s Kokomo Tribune, U.S. Senator Todd Young (R-Ind.) outlines the need for his ISA Student Protection Act, which aims to provide a new financing option for higher education as an alternative to the unworkable free-college proposals from Democrats. Income Share Agreements (ISAs) are already up and running in schoolsacross the country, including Kenzie Academy in Indiana.
“On the debate stage, we have heard Democrats running for president offer the wrong answer to America’s student debt crisis: discharge all student debt and offer free, taxpayer-funded college to all. In a political season when we find opposing sides disagreeing on so many things, we can all agree that education after high school is too expensive,” Senator Young writes. “We need to look for a solution and find a responsible middle ground that lies somewhere in between doing nothing and paying tens of billions of dollars a year for students to attend college. That’s why an increasing number of students across the nation are drawn to innovative, privately funded, debt-free arrangements known as Income Share Agreements (ISAs).”
Read Senator Young’s full op-ed here and below.
Kokomo Tribune: Todd Young: An innovative solution to nation’s student debt crisis
By: U.S. Senator Todd Young
Thursday, December 5, 2019
On the debate stage, we have heard Democrats running for president offer the wrong answer to America’s student debt crisis: discharge all student debt and offer free, taxpayer-funded college to all.
In a political season when we find opposing sides disagreeing on so many things, we can all agree that education after high school is too expensive. Student debt, and traditional student loan arrangements, have become a burden on Americans striving to build better lives for themselves and their families.
We need to look for a solution and find a responsible middle ground that lies somewhere in between doing nothing and paying tens of billions of dollars a year for students to attend college.
That’s why an increasing number of students across the nation are drawn to innovative, privately funded, debt-free arrangements known as Income Share Agreements (ISAs).
With ISAs, private funders – maybe a university, maybe a non-profit, maybe a corporation – will pay for a student’s trade school, coding program, or college degree; after graduation, students will repay funders with a modest percentage of their future earnings for a set number of years.
Traditional student loans place all the risk on the student. If you can’t find a job related to your major, private loans aren’t forgiving. If you happen to find a job that pays too little, you will be stuck with unmanageable student loan payments.
Plans on the left propose taking the risk of non-payment off of the student only to transfer it to taxpayers, many of whom are of modest means. Students who dropped out of school or found themselves underemployed would have nothing to worry about, but taxpayers living paycheck to paycheck would feel the squeeze.
Under today’s taxpayer-funded “college for free” proposals, it’s easy to imagine a scenario where far more people would take advantage of free college, and far more people would leave without a diploma, because there’s no risk in doing so. After all, the entire cost of non-completion would be paid by taxpayers.
To avoid this predicament, ISAs give students flexibility to design a private payment agreement that works for them.
In fact, ISAs are already being used in many places across the country, including in Indiana.
For example, ISAs are also being used by students to pursue meaningful career training at technical and professional schools. In Indianapolis, Kenzie Academy offers ISAs for their online and in-person technology education program. I had an opportunity to visit Kenzie Academy and met Tamika, a 10-year Navy veteran and mother of four. She wanted a new career in technology but knew she could not afford tuition payments or loans with high interest rates. The ISA program allows her to continue caring for her family without relocating outside of Indiana.
Purdue University has also gotten into the game. Its “Back a Boiler” program is an attractive alternative to private loans or the government’s PLUS loans that have high interest rates.
I have spoken with students who told me that ISAs are attractive to them because instead of basing financial aid on family income, which is outside of the student’s control, they are solely based on each individual’s projected future earnings.
Some commentators have rightly worried that this kind of system could be abused.
This is why the bipartisan ISA Student Protection Act is good policy. The legislation creates a regulatory framework for Income Share Agreements in a student-focused way.
Earners making less than 200% of the Federal Poverty Line are exempted from making any repayments whatsoever. The new regulatory framework will also require that funders let students know if private loans or PLUS loans would offer them a better deal, meaning they must compare how ISA payments stack up against loans so that every student can decide which mix of funding works best for them.
Once the regulatory framework is in place, ISAs will be used to fund all sorts of postsecondary education, from college to career and technical schools, all without burdening taxpayers.
Bottom line: ISAs are a sensible, privately funded solution to the out-of-control student debt crisis. Once signed into law, this legislation will safeguard students so that funders will pay to upskill and reskill American workers and provide needed regulatory clarity. No matter where someone comes from, or what challenges they face, all deserve an opportunity to achieve their higher education goals, have a meaningful career, and live their version of the American Dream.