Young, Colleagues Introduce Bill to Support Transformative Financing Tools for Students

WASHINGTON - U.S. Senators Todd Young (R-Ind.), Mark Warner (D-Va.), and Chris Coons (D-Del.) introduced the bipartisan Outcomes-Based Financing (OBF) for Students Act. The legislation expands access to innovative financing options for students pursuing postsecondary education and workforce training while establishing strong consumer protections to safeguard participants.

Companion legislation was introduced in the U.S. House of Representatives by Representatives Erin Houchin (R-Ind.-9) and Ritchie Torres (D-N.Y.-15).

Outcomes-based financing (OBF) products - including outcomes-based loans and payment agreements - help students pay for postsecondary education, workforce training, and related expenses. Students make payments only after reaching a minimum income threshold, with payments tied to earnings and limited over time. This model can expand access to high-quality education and training opportunities while promoting accountability and shared risk between students and providers.

"Hoosiers should not be forced to choose between a quality education and an affordable one," said Senator Young. "With the appropriate safeguards, outcomes-based financing can give students an alternative to taking on more traditional student loan debt while gaining the skills they need for successful careers. Our bipartisan bill strengthens protections for students while helping colleges and career and technical schools prepare them for good-paying jobs without burdening taxpayers."

"Outcomes-Based Financing is a promising way to finance higher education and a more desirable alternative to high-interest student loans," said Senator Warner. "This bill offers an innovative form of financial support that prioritizes measurable results and expands opportunity for students."

"In our race to stay at the forefront of the global economy, we must ensure the next generation can afford to gain the skills they need for the jobs and economy of the future," said Senator Coons. "Finding a quality education that will lead to a successful career shouldn't force Americans to go into debt they won't be able to pay back. This bipartisan bill will help prevent Americans pursuing education from becoming trapped in spiraling debt, setting them on a path to success and strengthening our economy."

The legislation is supported by Jobs for the Future, Better Future Forward, Western Governors University, Social Finance, Progressive Policy Institute, Pursuit, The Forward Fund, and the Student Freedom Initiative.

To see a full list of endorsement statements, click here.

The OBF for Students Act modernizes consumer protection, tax, credit reporting, and higher education laws to establish a clear federal framework for outcomes-based financing products and ensure they remain affordable, transparent, and focused on student success. Specifically, the bill:

• Caps required payments at no more than 20 percent of a student's income and ensures no payments are owed when income falls below a minimum affordability threshold.
• Provides additional protections for lower-income students by limiting the cost of OBF products for individuals earning at or below 350 percent of the federal poverty level.
• Establishes clear limits on both the maximum number of payments and the overall duration of an OBF obligation.
• Requires clear, standardized disclosures on key terms, including payment calculations, income thresholds, fees, finance charges, payment limits, and agreement duration.
• Requires providers to illustrate how payment obligations may vary at different income levels.
• Provides strong bankruptcy protections by ensuring OBF products are not subject to the heightened certain student loans.
• Prevents providers from accelerating payment obligations under OBF products in cases of delinquency or default, except for limited cases involving outcomes-based loans.
• Ensures OBF obligations are terminated in the event of death or total and permanent disability.
• Clarifies the tax treatment of OBF products for students and providers, including protections for low-income students whose obligations are reduced, discharged, or terminated.
• Establishes clear federal rules governing OBF products under consumer protection, higher education, fair lending, and credit reporting laws.

For the full bill text, click here. For a section-by-section summary, click here.