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Senate of Pennsylvania
Session of 2021 - 2022 Regular Session

MEMORANDUM

Posted: January 22, 2021 01:36 PM
From: Senator Ryan P. Aument
To: All Senate members
Subject: Addressing the Student Loan Debt Crisis through Income Share Agreements
 
In the near future, I intend to reintroduce a package of bills that would ease the strain of the student loan debt crisis on current students and graduates, while emphasizing the importance of personal responsibility and protecting taxpayers.
 
Since 1969, college tuition has increased by over 3,000 percent, far outpacing the increase in the consumer price index. Yet, studies show that today’s real average wage (that is, the wage after accounting for inflation) has about the same purchasing power it did 40 years ago. This has resulted in younger generations taking on 300 percent more student loan debt than their parent’s generation; leaving long-term effects on the national economy and causing ripple effects in our communities. While many argue that students should forgo post-secondary education altogether due to the astronomical cost, the reality of our current job market is that over 65 percent of job openings through 2020 required a college degree.
 
Between ongoing fallout from the recession and now the impact of a pandemic, along with a high cost of living that is outpacing wage increases, student-loan debt has made it difficult for younger generations to save money, forcing them to postpone key life decisions such as getting married, having kids, buying a house, and saving for retirement.
 
In fact, even prior to the pandemic some experts had pointed to the ominous similarities between the student-loan debt crisis and the mortgage crisis that caused the economic crash of 2008.
 
The rate at which student-loan borrowers default on their debt is nearly the same as the rate at which people defaulted on their mortgages in the years leading up to the crash.  Perhaps even more alarming is the fact that the total US consumer debt was higher in the first quarter of 2019  than it was in 2008.
 
All of this is to say that the student-loan debt crisis is not a problem unique only to young adults or college graduates, just as the mortgage crisis was not a problem unique only to homeowners.  Rather, just as in 2008, these trends could culminate in a financial crisis that will affect our entire nation.
 
We must begin to acknowledge and confront the student loan debt crisis, and it is my intent to do just that through the establishment of a Student Loan Income Share Agreement (ISA) Program.  ​As we continue to look for additional ways to make college more affordable, please join me in co-sponsoring these proposals to accomplish this goal.  

For more information about Income Share Agreements, the student loan debt crisis, and the proposals above, please visit my dedicated Student Loan Debt webpage at https://www.senatoraument.com/student-loan-debt/. 
 



Document #1

Introduced as SB143

Description:
The first bill would provide a refinancing opportunity to Pennsylvanians who have graduated with significant student loan debt by creating the Student Loan Retirement Agreement Program, which would allow borrowers to meet their obligations and repay onerous student loans through the use of Income Share Agreements (ISAs). 
 
In an ISA, the participant would commit to pay a specific share or percentage of their income for a period of time to pay off their loan.  This type of repayment plan would be especially helpful for graduates whose student loans have high interest rates, allowing a more manageable repayment plan. 
 
Specifically, the program would enable eligible participants – students who live in Pennsylvania, are employed, and have significant public and private college debt – to refinance onerous student loans based on their ability to pay given their respective career paths and current employment through the use of state-sponsored Income Share Agreements (ISA).   
 
The Student Loan Retirement Agreement Program, would authorize and direct the Pennsylvania Treasurer to create a revolving line of credit, using funds currently under the management of the Treasury, which would provide the liquidity necessary to implement the program and which would be repaid with program proceeds.  The initial line of credit for this program will be capped and the program would not be funded by the issuance of General Obligation Debt or by tax revenue.  Rather, it would leverage existing assets and be self-sustaining through the reinvestment of revenue generated by the program. 
 
In other words, taxpayers will not be on the hook to repay a debt that is not theirs. 
 
The program would be administered by the Pennsylvania Higher Education Assistance Agency (PHEAA) in consultation with the Student Loan Income Share Agreement Advisory Committee, which will be composed of legislators and members of the Executive Branch.   
 
 

Document #2

Introduced as SB144

Description:
This proposal would focus on how Income Share Agreements (ISAs) may be utilized by current and future students by authorizing and directing a study of the desirability and feasibility of using ISAs to finance a portion of the cost to attend college in Pennsylvania and for Pennsylvanian’s to attend college in other states. 
 
In partnership with Pennsylvania and participating colleges and universities, my proposal would direct the Pennsylvania Higher Education Assistance Agency (PHEAA), in consultation with an oversight committee, to study one or more financial vehicles to support the use of ISAs for current students attending a post-secondary institution as a way to pay for their education. 
 
In particular, the study will assess, among other things, whether a state sponsored program is feasible from a financial and policy perspective by: 
  1. Helping meet the presently unmet financial and funding needs of Pennsylvania colleges and universities; 
  1. Attracting out of state students to Pennsylvania’s colleges and universities, therefore helping to reverse declining enrollment; 
  1. Reducing overall student indebtedness; and 
  1. Aligning the interests of institutions of higher education with the interests of their students. 
 
All without the incurrence of indebtedness backed by the general credit and taxing power of the Commonwealth! 
 
If the evaluation concludes that the program is feasible, the program would be implemented without further legislative action.