Starting this academic year, graduate students will face new federal borrowing limits, driving some to private lenders and leaving others without a way to finance their education. But a group of bipartisan lawmakers and policy experts believes they have a solution to this funding gap: outcomes-based financing.
Now, they’re looking to pass a bill that would make it possible.
Introduced last month by a group of bipartisan, bicameral lawmakers, the Outcomes-Based Financing for Students Act is designed to create a framework that helps a lender tie students’ loan access to their earnings after graduation rather than to their credit history. It includes safeguards such as capping payments at no more than 20 percent of a student’s income, providing additional protections for lower-income students who earn less than 350 percent of the federal poverty level and requiring clear, standardized disclosures about what borrowers are getting themselves into before they sign on the dotted line, among other things.
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