1924.2.
For the purposes of this title, the following terms have the following meanings:(a) “Comparable loan” means a loan that meets all of the following:
(1) Has an original principal amount such that, after any origination fees on the loan are paid, the amount of loan financing received by the individual is equal to the total amount of funding provided under the income share agreement to the individual receiving funds under the income share agreement.
(2) Has the same term to maturity as the duration of the income share agreement.
(3) Is fully amortized over that term to
maturity with monthly payments of principal and interest.
(b) “Income share agreement” means an agreement between an individual in this state and an ISA funder under which the individual commits to pay a specified percentage of the individual’s future income, for a specified period of time, in exchange for payments to or on behalf of such individual for costs associated with a postsecondary training program or any other program designed to increase the individual’s human capital, employability, or earning potential, including, but not limited to, programs eligible to participate under Title IV of the federal Higher Education Act of 1965 (20 U.S.C. Sec. 1001, et. seq.; Public Law 89-329), and any personal expenses, including, but not limited to, books, supplies, transportation, and living costs, incurred by the individual while enrolled in such a program or for the refinancing of debt used for these purposes.
(c) “ISA funder” means the person who pays amounts to, or on behalf of, an individual under an income share agreement in exchange for the right to receive a specified percentage of the individual’s future income or a successor in interest of an ISA funder.
(d) “Receiver” means the individual receiving funds under an income share agreement who agrees to pay a specified percentage of his or her income to an ISA funder under that income share agreement.
1924.6.
An income share agreement complies with the requirements of this title if all of the following are met:(a) (1) (A) The income share agreement shall specify the percentage of future income that the receiver shall be obligated to pay.
(B) The income share agreement shall provide that when a receiver has an income that is equal to or below the amount that is 150 percent of the poverty line for a single person, as defined in Section 673 of the Community Services Block Grant Act (42 U.S.C. 9902; Public Law 97-35), the percentage of income obligation for the individual is zero. The preceding sentence shall not be construed to preclude the charging of fees or
nominal payments during this period.
(2) The agreement shall specify any nominal monthly payment that is required during periods when the receiver has no percentage of income obligation, except that such nominal monthly payment shall not exceed twenty-five dollars ($25.00) per month adjusted each year to reflect changes in the Consumer Price Index for All Urban Consumers published by the federal Bureau of Labor Statistics of the United States Department of Labor for the most recent 12-month period for which the data are available.
(b) (1) An income share agreement shall specify the definition of income to be used for purposes of calculating a receiver’s obligation under the income share agreement.
(2) The definition of income shall not include the income of any children of the receiver.
(c) The maximum percentage of income a receiver under an income share agreement would be required to pay shall not exceed 20 percent, and the product of such percentage and the number of years of the agreement shall not exceed 2.25, which figure is the product of 7.5 percent and the number of years in the longest allowable income share agreement under this title.
(d) The payments required under an income share agreement for a receiver with income during the payment term equal to 175 percent of the poverty line for a single person, as defined in Section 673 of the Community Services Block Grant Act (42 U.S.C. 9902; Public Law 97-35), shall not exceed the payments on a comparable loan that bears interest at a rate equal to the annual percentage rate of interest limitation under Section 987(b) of Title 10 of the United States Code (10 U.S.C. 987(b)).
(e) The income share agreement shall specify the maximum period of time during which the receiver shall be obligated to pay a percentage of his or her income, excluding periods when a nominal payment, as described in paragraph (2) of subdivision (a), is required. The maximum period shall not exceed 360 months, except as provided in subdivision (f).
(f) The income share agreement may provide for the extension of the period by a number of months during which the receiver’s percentage of income obligation, excluding nominal payments and fees, was zero either because of further enrollment in education or training or the receiver’s income was below the level at which payments are required under the income share agreement.
(g) The income share agreement shall specify the terms and conditions by which the receiver may
terminate the receiver’s obligations under the income share agreement before the end of the payment period specified in the income share agreement and any extension provided for in the income share agreement pursuant to subdivision (f).
(h) The ISA funder shall provide the receiver, before entry into an income share agreement with the ISA funder, a document that clearly and simply discloses all of the following:
(1) That the agreement is not a debt instrument.
(2) That the amount the receiver will be required to pay under the income share agreement may be more or less than the amount provided to the receiver by the ISA funder and will vary in proportion to the receiver’s future income.
(3) That the obligations of the receiver under the agreement may not
be dischargeable under federal bankruptcy law.
(4) Whether the obligations of the receiver under the income share agreement may be extinguished through prepayment, and, if so, under what terms.
(5) The duration of the receiver’s obligations under the income share agreement, absent any prepayments, including any circumstances under which the income share agreement would be extended or discharged.
(6) The percentage of income the receiver is committing to pay under the income share agreement, including whether the percentage of income is fixed or variable, and the minimum amount of annual income that, pursuant to subdivision (a), triggers the receiver’s obligation under the income share agreement to make payments for that year.
(7) The definition of
income to be used for purposes of calculating the receiver’s obligation under the income share agreement.
(8) A comparison of (A) the amounts a receiver would be required to pay under the income share agreement at a range of annual income levels, which income levels shall correspond to the levels the receiver might reasonably be expected to make given the intended use of the funds provided under the income share agreement, and (B) the amounts required to be paid under a comparable loan.
(9) Income documentation, including federal tax information, that the receiver may be required to provide under the income share agreement.
(10) The intent to conduct annual reconciliation relating to obligations owed by the receiver under the income share agreement.
(11) Any nominal payments required under the income share agreement.