(The Center Square) – A nonprofit policy organization is speaking out against legislation in Springfield that would make Illinois the first state to give the Income Share Agreement industry its own law.
ISAs are a type of private student loan where the loan is made in exchange for the student’s agreement to pay the lender a percentage of their future income for up to 20 years.
Horacio Mendez, president and CEO of Woodstock Institute, said the measure would codify the industry’s worst practices in dealing with student loans.
“The idea is a good one, but never underestimate our ability to turn a good idea into something predatory,” Mendez told The Center Square. “I think we can all agree that we are not in the habit of seeing student loans in the double digits.”
House Bill 1519 would permit ISAs to consume up to 20% of a student’s income and codify interest rates above 20% APR
“I was drowning in student loans that were at 4 percent. I know people who struggled at 10 percent, I can’t imagine how you are going to be able to make things work at 20%,” Mendez sad.
The bill, sponsored by state Sen. Elgie Simms, D-Chicago, is stalled in committee. Simms decided not to have the measure called for a vote in the Senate Executive Committee this week, so its future is unclear.
“Consumers, and consumer advocates, owe a debt of gratitude to Senator Sims,” said Brent Adams, Senior Vice president of Policy and Advocacy at Woodstock Institute. “We are confident that his leadership will ensure any legislation to govern this questionable industry will put consumer protection at the forefront.”
Last year, the federal government introduced legislation that would add new guardrails around ISAs. The bill was supported by companies that oversee ISA programs, but critics of ISA programs said they were skeptical the bill would prevent bad actors from preying on students.
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April 27, 2023 at 01:23PM