Sec. 303. Additional requirements for educational ISAs
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The following additional provisions apply to any income share agreement that is an educational ISA: The ISA provider of an educational ISA that is to be used solely for postsecondary educational expenses shall provide the disclosures described in subsection (b)(1) with any application or solicitation for the educational ISA. For purposes of this section, the term solicitation means an offer of an income share agreement that does not require the potential ISA recipient to complete an application.
In the case of a telephone application or solicitation for an educational ISA, the ISA provider shall provide the disclosure by, at its option— disclosing orally the information described in subsection (b)(1); or mailing a copy of the disclosure described in subsection (b)(1) not later than 3 business days after the potential ISA recipient has applied for the educational ISA. For an income share agreement that the ISA recipient may use for multiple purposes including postsecondary educational expenses, the ISA provider need not provide the disclosures required under subsection (b)(1) in the application or solicitation.
The ISA provider shall provide the disclosures required by subsection (b)(2) before consummation on, or with any notice of approval provided to the applicant for, an educational ISA. If the ISA provider mails notice of approval, the disclosures shall be mailed with the notice. If the ISA provider communicates notice of approval by telephone, the ISA provider shall mail the disclosures not later than 3 business days after providing the notice of approval. If the ISA provider communicates notice of approval electronically, the ISA provider shall provide the disclosure, at its option, either in electronic form in accordance with the requirements of this title or by mailing the disclosure not later than 3 business days after communicating the notice of approval.
If the ISA provider communicates approval in person, the ISA provider shall provide the disclosures to the applicant for an income share agreement at that time. The disclosures required by subsection (b)(3) shall be provided after the ISA recipient accepts the income share agreement. If a disclosure under paragraph (1), (2), or
(3)is mailed to the potential ISA recipient or ISA recipient, as the case may be, the potential ISA recipient or ISA recipient shall be deemed to have received the disclosure 5 business days after the disclosure is mailed. Disclosures shall reflect the terms of the legal obligation between the parties. If any information necessary for an accurate disclosure is unknown to the ISA provider, the ISA provider shall make the disclosure based on the best information reasonably available at the time the disclosure is provided, and shall state clearly that the disclosure is an estimate. If a disclosure made under paragraph
(2)becomes inaccurate because of an event that occurs after the ISA provider delivers the required disclosures, the inaccuracy is not a violation of this Act, although new disclosures may be required in accordance with this title. If a disclosure under paragraph
(3)becomes inaccurate because of an event that occurs after the creditor delivers the required disclosures, the inaccuracy is not a violation of this Act. In addition to the other disclosure requirements of this title, an ISA provider of an educational ISA shall provide the disclosures required under this subsection as follows: On or with a solicitation or an application for an educational ISA, an ISA provider shall disclose the following: The ISA payment calculation method that applies to the educational ISA and actually offered by the ISA provider at the time of application or solicitation. If the ISA payment calculation method will depend, in part, on a later determination of the ISA recipient’s creditworthiness or other factors, a statement that the ISA payment calculation method for which the ISA recipient may qualify will depend on the ISA recipient’s creditworthiness and other factors, if applicable. In the case of an ISA payment calculation method that is based on a schedule of percentages— an explanation of how the schedule of percentages is calculated using percentages of income based on the ISA recipient’s income; and the timing for recalculation of the ISA recipient’s payments under the schedule of percentages. In the case of an ISA payment calculation method that is based on a schedule of fixed amounts that an ISA recipient is required to pay that is calculated based on the ISA recipient's income for a payment period— an explanation of how the schedule of fixed amounts is calculated using fixed amounts based on the ISA recipient’s income; and the timing for recalculation of the ISA recipient’s payments under the schedule of fixed amounts. An itemization of the fees or range of fees required to obtain the educational ISA. Any fees or other penalties based on the ISA recipient’s default or late payment. The ISA duration, or range of ISA durations, offered by the ISA provider. A description of any payment deferral options. Using the highest dollar amount or percentage applicable under the ISA payment calculation method described in subparagraph (A)(i) and using an amount financed of $10,000, or $5,000 if the ISA provider only offers income share agreements of this type for less than $5,000, the loan comparison based on these assumptions. Any age or school enrollment eligibility requirements relating to the ISA recipient. With respect to an educational ISA that might be used for postsecondary expenses at an institution of higher education that participates in a student financial assistance program under title IV of the Higher Education Act of 1965 ( 20 U.S.C. 1070 et seq. )— a statement the ISA recipient may qualify for Federal student financial assistance through a program under such title; and the interest rates for each program of financial assistance available under title IV of the Higher Education Act of 1965 ( 20 U.S.C. 1070 et seq. ) and information regarding whether the rates for the loans available under such title are fixed or variable. If applicable to the student’s circumstances, a statement that the ISA recipient may obtain additional information concerning Federal student financial assistance from the institution of higher education that the student attends, or at the website of the Department of Education, including an appropriate website address for the Department. A statement that an institution of higher education may have school-specific education loan benefits and terms not detailed on the disclosure form. A statement that if the application for the educational ISA is approved by the ISA provider, the terms of the educational ISA will be available and will not change for 30 days except as a result of adjustments to the ISA payment calculation method, ISA duration, or ISA maximum number of payments and other changes permitted by law. A statement that, before the educational ISA may be consummated, the ISA recipient must complete the self-certification form and that the form may be obtained from the institution of higher education that the student attends. The following statement: IMPORTANT NOTICE REQUIRED BY LAW: Students are cautioned to consider carefully entering into this Income Share Agreement if their total future payment commitment, including any other forms of education finance, may exceed 20 percent of their expected future income. Your total future obligation may exceed this percentage if you have received additional education financing, including other income share agreements, Department of Education Direct or FFEL Loans, or private education loans. . Upon approval of an educational ISA by an ISA provider, the ISA provider shall disclose the information required under section 302(d) and the following information: The ISA payment calculation method that applies to the educational ISA. In the case of an ISA payment calculation method that is based on a schedule of percentages— an explanation of how the schedule of percentages is calculated using percentages of income based on the ISA recipient’s income; and the timing for recalculation of the ISA recipient’s payments under the schedule of percentages. In the case of an ISA payment calculation method that is based on a schedule of fixed amounts that an ISA recipient is required to pay based on the ISA recipient's income for a payment period— an explanation of how the schedule of fixed amounts is calculated using fixed amounts based on the ISA recipient’s income; and the timing for recalculation of the ISA recipient’s payments under the schedule of fixed amounts. An itemization of the fees or range of fees required to obtain the educational ISA. Any fees or other penalties based on the ISA recipient’s defaults or late payments. The ISA duration, or range of ISA durations, offered by the ISA provider. A description of any payment deferral options. The following disclosure shall be made using the ISA payment calculation method, ISA duration, and ISA maximum number of payments for which the ISA recipient has been approved: The loan comparison based on these assumptions. A description of the payment deferral option chosen by the ISA recipient, if applicable, and any other payment deferral options that the ISA recipient may elect at a later time. Any payments required while the ISA recipient is enrolled at a covered educational institution, based on the deferral option chosen by the ISA recipient. In the case of an educational ISA that may be used for education expenses at an institution of higher education that participates in the student financial assistance programs under title IV of the Higher Education Act of 1965 ( 20 U.S.C. 1070 et seq. ), the following: A statement that the ISA recipient may qualify for Federal student financial assistance through a program under title IV of the Higher Education Act of 1965 ( 20 U.S.C. 1070 et seq. ). The interest rates for each program of financial assistance available under title IV of the Higher Education Act of 1965 ( 20 U.S.C. 1070 et seq. ) and information regarding whether the rates for the loans available under such title are fixed or variable. A statement that the ISA recipient may obtain additional information concerning Federal student financial assistance from the institution of higher education that the student attends, or at the website of the Department of Education, including an appropriate website address for the Department. A statement that the ISA recipient may accept the terms of the income share agreement until the last day of the acceptance period described in subsection (d)(1). The specific date on which the acceptance period expires, based on the date upon which the ISA recipient receives the disclosures required under this paragraph for the income share agreement. A specification of the method or methods by which the ISA recipient may communicate acceptance. A statement that, except for changes to the ISA payment calculation method and other changes permitted by law, the rates and terms of the income share agreement may not be changed by the ISA provider during the period described in clause (i). The following statement: IMPORTANT NOTICE REQUIRED BY LAW: Students are cautioned to consider carefully entering into this Income Share Agreement if their total future payment commitment, including any other forms of education finance, may exceed 20 percent of their expected future income. Your total future obligation may exceed this percentage if you have received additional education financing, including other income share agreements, Department of Education Direct or FFEL Loans, or private education loans. . After the ISA recipient has accepted the income share agreement in accordance with subsection (d)(1), the ISA provider shall disclose to the ISA recipient the information required by this section and the following information: The ISA payment calculation method applicable to the income share agreement. In the case of an ISA payment calculation method that is based on a schedule of percentages— an explanation of how the schedule of percentages is calculated using percentages of income based on the ISA recipient’s income; and the timing for recalculation of the ISA recipient’s payments under the schedule of percentages. In the case of an ISA payment calculation method that is based on a schedule of fixed amounts that an ISA recipient is required to pay based on the ISA recipient's income for a payment period— an explanation of how the schedule of fixed amounts is calculated using fixed amounts based on the ISA recipient’s income; and the timing for recalculation of the ISA recipient’s payments under the schedule of fixed amounts. An itemization of the fees or range of fees required to obtain the educational ISA. Any fees or other penalties based on the ISA recipient’s defaults or late payments. The ISA duration or range of ISA durations offered by the ISA provider. A description of any payment deferral options. The following disclosure shall be made using the ISA payment calculation method, ISA duration, and ISA maximum number of payments for which the ISA recipient has been approved: The loan comparison based on these assumptions. A description of the payment deferral option chosen by the ISA recipient, if applicable, and any other payment deferral options that the ISA recipient may elect at a later time. Any payments required while the ISA recipient is enrolled at a covered educational institution, based on the deferral option chosen by the ISA recipient. A statement that— the ISA recipient has the right to cancel the income share agreement, without penalty, at any time before the cancellation period under subsection
(e)expires; and the income share agreement proceeds will not be disbursed until after such cancellation period expires. The specific date on which the cancellation period expires and a statement that the ISA recipient may cancel by that date. A statement specifying— all methods by which the ISA recipient may cancel; and if the ISA provider permits cancellation by mail, that the ISA recipient's mailed request will be deemed timely if placed in the mail not later than the cancellation date specified in clause (ii). The disclosures required by this subparagraph shall be made more conspicuous than any other disclosure required under this section, except for the ISA payment calculation method, ISA duration, ISA maximum number of payments, amount financed, income threshold, and the ISA provider's identity, which shall be disclosed in accordance with the requirements of section 302(d). The following statement: IMPORTANT NOTICE REQUIRED BY LAW: Students are cautioned to consider carefully entering into this Income Share Agreement if their total future payment commitment, including any other forms of education finance, may exceed 20 percent of their expected future income. Your total future obligation may exceed this percentage if you have received additional education financing, including other income share agreements, Department of Education Direct or FFEL Loans, or private education loans. . Except as provided in subparagraph
(B)and paragraph (2), an ISA provider, other than the covered educational institution itself, shall not use the name, emblem, mascot, or logo of a covered educational institution, or other words, pictures, or symbols identified with a covered educational institution, in the marketing of educational ISAs in a way that implies that the covered education institution endorses the ISA provider's income share agreements. An ISA provider's marketing of an educational ISA does not imply that the covered education institution endorses the ISA provider's income share agreements if the marketing includes a clear and conspicuous disclosure, equally prominent and closely proximate to the reference to the covered educational institution, that the covered educational institution does not endorse the ISA provider's income share agreements and that the ISA provider is not affiliated with the covered educational institution. If an ISA provider and a covered educational institution have entered into an arrangement under which the covered educational institution agrees to endorse the ISA provider's educational ISAs, and such arrangement is not prohibited by other applicable law or regulation, paragraph (1)(A) shall not apply as long as the educational ISA marketing includes a clear and conspicuous disclosure, equally prominent and closely proximate to the reference to the covered educational institution, that the ISA provider's income share agreements are not offered or made by the covered educational institution, but are made by the ISA provider. The ISA recipient has the right to accept the terms of an educational ISA at any time not later than 30 calendar days following the date on which the ISA recipient receives the disclosures required under subsection (b)(2). Except for changes permitted under paragraph (3), the terms of the educational ISA that are required to be disclosed under paragraphs
(2)and
(3)of subsection
(b)may not be changed by the ISA provider prior to the earlier of— the date of disbursement of the income share agreement; or the expiration of the 30-day period described in paragraph (1), if the ISA recipient has not accepted the income share agreement before within the period. Notwithstanding paragraph (2), nothing in this section shall prevent an ISA provider of an educational ISA from— withdrawing an offer before consummation of the transaction if the making of the income share agreement would be prohibited by law or if the ISA provider has reason to believe that the ISA recipient has committed fraud in connection with the income share agreement application; changing the ISA payment calculation method and terms if the change will unequivocally benefit the ISA recipient; or reducing the amount funded based upon a certification or other information received from the covered educational institution, or from the ISA recipient, indicating that the student's cost of attendance has decreased or the ISA recipient's other financial aid has increased, except that, in such case, the ISA provider may make corresponding changes to the terms of the ISA payment calculation method, ISA duration, and other terms only to the extent that the ISA recipient would have received the terms if the ISA recipient had applied for the reduced amount financed. If the ISA provider changes the ISA payment calculation method or terms of the income share agreement under this paragraph, the ISA provider shall not be required to— provide the disclosures required under subsection (b)(2) for the new income share agreement terms; or provide an additional 30-day period to the ISA recipient to accept the new terms of the income share agreement. Notwithstanding paragraphs
(2)and (3), nothing in this section prevents an ISA provider, at its option, from changing the ISA payment calculation method or terms of the income share agreement to accommodate a specific request by the ISA recipient, such as a request for a different repayment option. If the ISA provider changes the rate or terms of the income share agreement under subparagraph (A), the ISA provider— shall provide the disclosures required under subsection (b)(2) and shall provide the ISA recipient the 30-day period to accept the income share agreement, as required under paragraph (1); and shall not make further changes to the income share agreement and terms of the loan, except as specified in paragraph (3)(B). Except as permitted under paragraph (3)(B), unless the ISA recipient accepts the income share agreement offered by the ISA provider in response to the ISA recipient's request in accordance with subparagraph (A), the ISA provider may not withdraw or change the ISA payment calculation method or any terms of the income share agreements for which the ISA recipient was approved prior to the ISA recipient's request for a change in income share agreement terms under this paragraph. The ISA recipient may cancel an educational ISA, without penalty, until midnight of the third business day following the date on which the ISA recipient receives the disclosures required by subsection (b)(3). No funds may be disbursed for an educational ISA until the 3-business-day period has expired, absent exceptional circumstances necessitating disbursement based on a request from the covered educational institution. In such a case, the covered educational institution shall promptly, upon cancellation by the student, refund the amounts to the ISA provider. For an educational ISA intended to be used for the postsecondary educational expenses of a student while the student is attending an institution of higher education, the ISA provider shall obtain, from the ISA recipient or the institution of higher education, the educational ISA certification form developed by the Secretary under section 155 of the Higher Education Act of 1965 ( 20 U.S.C. 1019d ), signed by the ISA recipient, in written or electronic form, before consummating the educational ISA. An ISA provider that has a preferred ISA financing arrangement with a covered educational institution shall, each year in accordance with paragraph (2), provide to the covered educational institution the information required under subsection (b)(1) for each type of educational ISA that the ISA provider plans to offer to ISA recipients for students attending the covered educational institution, for the period beginning July 1 of the year in which the information is provided and ending June 30 of the following year. For each year of a preferred ISA provider financing arrangement, the ISA provider shall provide the information required under paragraph
(1)by the later of— the first day of April; or the date that is 30 days after entering into, or learning the ISA provider is a party to, a preferred ISA provider arrangement.
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