(Excerpt from Inside Higher Ed News)

• The Education Department clarified this week that income-share agreements in higher education are private loans.
• As loan providers, the companies that provide these agreements are regulated in different ways than before the clarification, and colleges have specific requirements in terms of how they promote the arrangements.
• Income-share agreements (or ISAs) offer students up-front financial support and, in exchange, require them to pay back a portion of their future income for a set number of years. They are offered in some cases through colleges and in other cases by companies. Some providers of ISAs have argued that they are not loans.
• Rich Williams, chief of staff of the Education Department’s Office of Postsecondary Education, wrote a blog post on the change in policy Wednesday.
• “It’s no surprise that students often look to their college as a trusted source of information as they determine how to pay for tuition, housing, books, and other living expenses,” he wrote. “Capitalizing on this trust, some banks and lenders have long viewed colleges as a gateway to new consumers, courting schools to become their preferred provider of education loans and other financial products.
• “Taking out private student loans can be financially risky for students, but the department’s rules for preferred lender arrangements can help reduce that risk by ensuring that students get unbiased, trustworthy information they need to make borrowing decisions. These rules ensure colleges provide transparency on the terms and conditions of any college-endorsed private student loan and publicly document why they endorse a particular private student loan. Additionally, colleges must commit to a code of conduct that prohibits revenue sharing agreements with a lender and eliminates other conflicts of interest. These are important practices for colleges to consider when endorsing any financial product.”