State of Illinois Passes Income Share Agreement (ISA) Act

Posted on October 30, 2019 by Anna

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:

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.”


Posted under: MeratasMemo, Uncategorized
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