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PRINTER'S NO. 1548
THE GENERAL ASSEMBLY OF PENNSYLVANIA
SENATE BILL
No.
1043
Session of
2020
INTRODUCED BY AUMENT, BROWNE, YUDICHAK, BARTOLOTTA, BREWSTER,
PITTMAN AND BOSCOLA, FEBRUARY 19, 2020
REFERRED TO EDUCATION, FEBRUARY 19, 2020
AN ACT
Amending Title 24 (Education) of the Pennsylvania Consolidated
Statutes, providing for the Higher Education Income Share
Financing Pilot Program.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. Title 24 of the Pennsylvania Consolidated
Statutes is amended by adding a chapter to read:
CHAPTER 74
HIGHER EDUCATION INCOME SHARE
FINANCING PILOT PROGRAM
Sec.
7401. Scope of chapter.
7402. Definitions.
7403. Higher Education Income Share Financing Pilot Program.
7404. Program administration.
7405. Terms and conditions.
7406. Higher Education Income Share Financing Advisory
Committee.
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7407. Public awareness and education.
§ 7401. Scope of chapter.
This chapter relates to the Higher Education Income Share
Financing Pilot Program.
§ 7402. Definitions.
The following words and phrases when used in this chapter
shall have the meanings given to them in this section unless the
context clearly indicates otherwise:
"College or university." An institution of higher education
accredited by an agency recognized under section 496 of the
Higher Education Act of 1965 (Public Law 89-329, 20 U.S.C. §
1099b).
"Committee." The Higher Education Income Share Financing
Advisory Committee established under section 7406 (relating to
Higher Education Income Share Financing Advisory Committee).
"Cost of education." The cost of education contemplated by
Title I, Part C of the Higher Education Act of 1965 (Public Law
89-329, 20 U.S.C. § 1015 et seq.) paid to a college or
university.
"Eligible applicant." An individual who meets criteria and
conditions required by a participating college or university and
by the program administrator under section 7404(b) (relating to
program administration).
"Income." Adjusted gross income for Federal income tax
purposes.
"Income share agreement." An agreement between a participant
and a participating college or university or a provider which:
(1) meets the requirements of the program administrator;
(2) requires the participant to pay a specific share or
percentage of the participant's income under specified
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circumstances for a specified period of time; and
(3) specifies the terms and conditions of the agreement
required under section 7405 (relating to terms and
conditions).
"Participant." An eligible applicant who enters into an
income share agreement with a participating college or
university.
"Participating college or university." A college or
university that:
(1) agrees to participate in the program by originating
income share agreements with participants in accordance with
program guidelines and other requirements set by the program
administrator in consultation with the committee;
(2) agrees to accept cash and a portion of related
securities in exchange for participating in the program; and
(3) meets other eligibility requirements as may be
determined by the program administrator in consultation with
the committee.
"Program." The Higher Education Income Share Financing Pilot
Program established under section 7403 (relating to Higher
Education Income Share Financing Pilot Program).
"Program administrator." The Pennsylvania Higher Education
Assistance Agency.
"Program guidelines." The policies, procedures and
guidelines established by the program administrator, in
consultation with the committee, for the administration of the
program.
"Provider." The program administrator or an entity created
or designated by the program administrator in consultation with
the committee.
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"Related securities." A security which results from the
securitization of the income share agreement, the use of an
income share agreement as collateral for direct and indirect
borrowings or the use of an income share agreement in connection
with any structured finance program approved by the program
administrator.
"Terms and conditions." The terms and conditions specified
under section 7405.
§ 7403. Higher Education Income Share Financing Pilot Program.
(a) Establishment.--The Higher Education Income Share
Financing Pilot Program is established. Under the program, a
participating college or university shall determine if an
individual is eligible to participate in the program. If the
individual is determined an eligible applicant, the
participating college or university may enter into an income
share agreement with the eligible applicant in exchange for
providing or financing a portion of the cost of education of the
eligible applicant. A provider shall acquire the income share
agreement from a participating college or university, and sell
the income share agreement, or aggregate the income share
agreements the provider acquires and sell the income share
agreements or related securities to third-party purchasers and
may be extended by the program administrator in consultation
with the committee.
(b) Administration.--The program shall be administered by
the program administrator in consultation with the committee.
The program administrator may contract with third parties to
provide all or some of the program administrator's duties under
this chapter or create, utilize, fund or own an entity to serve
as a provider or to facilitate the operation of the program.
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(c) Guidelines.--The program administrator, in consultation
with the committee, shall develop guidelines as are necessary
for the administration of the program.
(d) Evaluation.--The program administrator, in consultation
with the committee, shall evaluate the program. The program
administrator, in consultation with the committee, may initiate
the evaluation at any time during the pilot program, but must
complete the evaluation not later than five years after the
effective date of this subsection. The evaluation shall focus on
the economic and financial feasibility of the program with
respect to eligible applicants, participating colleges and
universities and purchasers of income share agreements or
related securities. The evaluation may include conducting one or
more pilot transactions. If the committee, in consultation with
the program administrator, determines that the program is
feasible, the program shall be implemented without further
action. The committee shall transmit notice of its determination
to the Legislative Reference Bureau for publication in the
Pennsylvania Bulletin.
(e) Proceeds.--Compensation for the services of the program
administrator shall be payable from the proceeds of the sale of
income share agreements or related securities. If the committee
determines that the program is not feasible or the program is
not implemented, the program administrator shall be compensated
for the program administrator's service by the Commonwealth and
reimbursed for incurred expenses.
(f) Expiration.--The program shall expire as follows:
(1) If the evaluation under subsection (d) is not
completed within the time period required under subsection
(d), the committee shall transmit notice to the Legislative
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Reference Bureau for publication in the Pennsylvania
Bulletin. The program shall expire on the date of the notice
under this paragraph.
(2) If the committee determines that the program is not
feasible under subsection (d), the program shall expire on
the date of the publication of the notice under subsection
(d).
§ 7404. Program administration.
(a) Application.--
(1) The following individuals may apply to a
participating college or university for assistance in paying
the cost of education:
(i) a Pennsylvania resident attending a
participating college or university located in or outside
of this Commonwealth; or
(ii) a non-Pennsylvania resident attending a
participating college or university located in this
Commonwealth.
(2) The application shall be on the forms and in the
manner established by the program administrator.
(b) Review.--The participating college or university shall
review the application and any other information the program
administrator deems necessary to determine if the individual
meets criteria established by the participating college or
university and the program administrator in the program
guidelines.
(c) Determination.--If the participating college or
university determines that the individual is an eligible
applicant, the participating college or university may enter
into an income share agreement with the eligible applicant if
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the income share agreement meets the requirements of section
7405 (relating to terms and conditions) and the eligible
applicant agrees to the terms and conditions.
(d) Acquisition.--A provider may acquire income share
agreements from participating colleges or universities.
(e) Sale.--A provider may aggregate and sell the income
share agreements the provider acquires or create, aggregate and
sell related securities composed of or results from the income
share agreements the provider acquires to third parties with a
portion, to the extent applicable, reserved for the
participating colleges or universities. Proceeds from the sale
of the income share agreements or related securities shall be
used to satisfy obligations in accordance with the following
order:
(1) Pay transaction costs of the sale of the income
share agreements or related securities.
(2) Pay administrative expenses of the program
administrator.
(3) Pay administrative expenses of the provider.
(4) Pay or transfer money or related securities to the
participating colleges or universities which originated the
income share agreements.
(f) Servicing.--The program administrator shall service the
income share agreements entered into under the program on behalf
of the participating colleges or universities and purchasers of
related securities. Payments required under an income share
agreement shall be collected by the program administrator and
distributed in accordance with the terms of the sale income
share agreements or related securities.
§ 7405. Terms and conditions.
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An income share agreement shall include the following terms
and conditions consistent with the program guidelines:
(1) The percentage of the income fixed as the share of
income due from the participant under the income share
agreement, consistent with program guidelines.
(2) The frequency of payments to be made by the
participant under the income share agreement, consistent with
program guidelines.
(3) The total number of payments to be made by the
participant under the income share agreement and any cap on
the total number of payments, consistent with program
guidelines.
(4) The term that payments must be made by the
participant under the income share agreement, to not exceed a
number of years specified in the program guidelines.
(5) The terms and conditions under which the participant
may prepay, defer, extend or extinguish future payments under
the income share agreement, consistent with program
guidelines.
(6) The consumer protections established by the program
guidelines.
(7) Other terms and conditions established by program
guidelines.
§ 7406. Higher Education Income Share Financing Advisory
Committee.
(a) Establishment.--The Higher Education Income Share
Financing Advisory Committee is established .
(b) Powers and duties.--The committee shall oversee the
program and shall assist the program administrator in developing
program guidelines.
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(c) Composition.--Th e committee shall be composed of the
following individuals:
(1) The Governor or a designee.
(2) The Secretary of the Budget.
(3) The Secretary of Education.
(4) Three residents of this Commonwealth appointed by
the Governor.
(5) The State Treasurer.
(6) The following members of the General Assembly:
(i) One member of the Senate appointed by the
President pro tempore.
(ii) One member of the House of Representatives
appointed by the Speaker of the House of Representatives.
(iii) One member of the Senate appointed by the
Minority Leader of the Senate.
(iv) One member of the House of Representatives
appointed by the Minority Leader of the House of
Representatives.
(v) The chairperson and minority chairperson of the
Appropriations Committee of the Senate.
(vi) The chairperson and minority chairperson of the
Appropriations Committee of the House of Representatives.
(d) Terms.--A committee member appointed under subsection
(c)(4) shall serve at the pleasure of the Governor.
(e) Appointments.--Appointments to the committee shall be
made not later than 60 days after the effective date of this
subsection.
(f) Meetings.--The committee shall meet for the first time
not later than 120 days after the effective date of this
subsection. If the evaluation under section 7403(d) (relating to
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Higher Education Income Share Financing Pilot Program)
determines that the program is feasible and recommends
implementation, the committee shall meet at least biannually to
review and update program guidelines as necessary.
(g) Operation.--The Governor shall be the chairperson of the
committee. A majority of the members present shall constitute a
quorum. A majority vote shall be necessary for the committee to
take action.
(h) Compensation.--A committee member may not receive a
salary but shall be entitled to reimbursement of the member's
expenses.
§ 7407. Public awareness and education.
(a) Requirement.--The program shall include methods designed
to raise general public awareness of and to educate students,
graduates, participating colleges and universities and faculty
about income share agreements and the program. Education shall
include the structure, benefits and risks associated with income
share agreements.
(b) Implementation.--The program administrator shall
implement the education required under subsection (a) in the
manner it deems appropriate, which may include:
(1) An outreach campaign utilizing print media, social
media, brochures, advertisements, public service
announcements and other similar channels.
(2) Distribution of program-related educational
information:
(i) to participating colleges and universities; and
(ii) through participating college and university
admission offices.
(3) Distribution of income share agreements and program-
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related information to organizations which supply admission
and educational financing-related publications and services
to participating colleges and universities.
(4) Inclusion of educational and awareness materials in
newsletters and other media used by the program administrator
in connection with general higher education financing and
nonfinancing programs.
Section 2. This act shall take effect in 60 days.
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