Marco Rubio on Education: Renewed Push for Student Loans Alternative, Private Financing Option
U.S. Sen. Marco Rubio, R-Fla., is pushing federal efforts to expand access for students to pay for their higher education.
Rubio, also a Republican presidential candidate, reintroduced a 2014 Senate bill titled "Investing in Student Success Act." According to a statement from the Florida senator, the legislation would allow students to repay funds based on their income to any individual or organization that agreed to help pay for their education for a predetermined period of time following the scholar's graduation. In reintroducing the bill, he stated the private financing option would serve as a voluntary alternative to student loans.
"In the 21st century, higher education is no longer an option for Americans, it has become a necessity. A complex and confusing student loan system makes it increasingly difficult for millions of people trying to meet the challenges of our economy," Rubio said in a statement.
"Allowing private entities to invest directly in an individual student is an alternative to student loans that will help make higher education more accessible."
Based on the current bill's language, the eligible student borrower and lender should enter into an income share agreement if it exceeds 15 percent of the borrower's future income. The bill, if passed and signed into law, would also allow Puerto Ricans to take part of the private financing option.
To further support the purpose of his bill, Rubio referred to a report by the American Enterprise Institute (AEI), a right-wing think tank that has had an interest in education reforms. The AEI stated that income shared agreements, or ISAs, differs from a loan, in that "there is no principal balance to repay with an ISA: depending on the level of success after school, the student may ultimately pay more or less than the amount financed." The AEI, however, has called for policymakers to improve the legal frameworks for ISA contracts.
"By clarifying the lawfulness of income share agreements, this bill incentivizes the free enterprise system and allows people to access the skills needed to take advantage of the opportunities created by the free market. Providing students with more choices to fund their education will offer them more opportunities to achieve the American Dream," Rubio said.
Rubio has publicly made it known about his experience with loans. The senator said his parents did not have enough money to prepare for his higher education, but student loans and Pell grants, in addition to summer jobs and work study, helped pay for his undergraduate and law school degree.
Based on prepared remarks Rubio made in 2014, Rubio provided an example of how the ISA program would work, stating, "Let's say you are a student who needs $10,000 to pay for your last year of school. Instead of taking this money out in the form of a loan, you could apply for a 'Student Investment Plan' from an approved and certified private investment group. In short, these investors would pay your $10,000 tuition in return for a percentage of your income for a set period of time after graduation -- let's say, for example, 4 percent a year for 10 years."
Rubio noted the percentage would depend on the student's major, education institution and record, and the private individual or organization would then use the aforementioned information "to make a determination about the likelihood of you finding a good job and paying them back."
Rubio's 2014 bill did not advance in the Senate; based on Congress.gov, it was referred to the Senate Committee on Finance.
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