Sen. Marco Rubio (R-Fla.) has come to realize higher education reform will an important issue for the 2016 presidential race and is now offering his own alternative to student loans.
On Wednesday, Rubio plans to release new legislation allowing students to utilize "income share agreements" to pay for school, Reuters reported. It resembles the "pay it forward" plan and calls for a private investor to fund a student's education in exchange for a percentage of their post-graduation salary over a set period of time.
Rubio wants to expand the use of these income share agreements to provide the legal framework for companies that want to fund students' education.
"The same way that private investors invest in a business idea, they could invest in a person who basically says: 'This is who I am. This is what my career goals are. This is what I've done so far. This is what I intend to major and graduate in. And in return, when I graduate, I will pay a percentage of my salary over a defined period of time in return for that investment,'" Rubio told Reuters.
The legislation would give legal protection to both the investor and the student. The income share agreements would not aim to replace student loans, but rather to supplement them. Student loan debt is spiraling out of control and more post-graduates are drowning in massive amounts of debt than ever. Many have to put off buying a home, getting married and other life decisions.
"Pay if forward" is a plan currently in the state legislatures of at least a dozen states. Under the plan, students take out an interest-free loan and agree to pay back a certain percentage of their paycheck for a fixed amount of time. Michigan is the latest state to consider the proposal, but others include Oregon, New Jersey and more.
"Many players have resisted getting into the marketplace because they're not sure of the legal certainty behind it," Rubio told Reuters. "The fact that it's now a recognized investment vehicle would allow more players to get into the space and could encourage more to come forward."
