Insider Post, income share agreements Post, ISA Post, regulation Post

State of Illinois Passes Income Share Agreement (ISA) Act

Dave Edwards October 30, 2019

In a step forward for state regulation of Income Share Agreements (ISA), Illinois recently signed into law the Student Investment Account Act (Act).

Pursuant to the Act, the Illinois State Treasurer can allocate up approximately $1.5 billion to  “enter into income share agreements with participants [and] facilitate such arrangements between participants and eligible income share agreement providers.”

Although the Act is limited to Illinois only, it is helpful to establishing greater state-level consensus on the treatment of ISAs.  To that end, we summarize certain of the Act's terms as follows:

  • “Income share agreement” means “an agreement between a participant and an eligible institution of higher education or an income share agreement provider approved by the State Treasurer in which the participant agrees to pay a percentage of the participant’s future earnings for a fixed period in exchange for funds to pay for their post-secondary education.”
  • “Income share provider” means “an organization that allows income share agreement participants to fund their education by means of an income share agreement.”
  • “Institution of higher education” means “a post-secondary educational institution located in Illinois and approved by the State Treasurer.”
  • “Participant” means “a resident student who enters into an income share agreement for the purpose of funding the participant’s attendance at an institution of higher learning.”

The Act authorizes the State Treasurer “to establish specific criteria governing the eligibility of entities to participate in its programs, the making of income share agreement or education loans, provisions for default, the establishment of default reserve funds, the purchase of default insurance, the provision of prudent debt service reserves, and the furnishing by participating entities of such additional guarantees of the income share agreements or education loans as the State Treasurer shall determine.”

To recover an ISA owned (or serviced) by the State Treasurer, the law allows the Treasurer to make deductions from “salary, wages, commissions, and bonuses” of an employee in Illinois and, to the extent allowed by federal or the law of a state in which the employee resides, an employee outside of Illinois, by serving a notice of administrative wage garnishment on the employer. However, levy is not permitted until the Treasurer “has caused a demand to be made on the employee…such that the employee is provided an opportunity to contest the existence or amount of the income share agreement or education loan obligation.”


Topics: Insider, income share agreements, ISA, regulation


Interested in ISAs?

Download our overview on Income Share Agreements, and see if an ISA is right for you.

Download Now
Want something amazing?

Subscribe to Meratas News

Stay informed on new Merit Financing programs as they are launched, and our mission to promote greater student empowerment by eradicating debt.

Get it in your inbox ;)