Outcomes-Based Financing (OBF) for Students Act
Sponsored By: Representative Houchin, Erin [R-IN-9]
Introduced
Summary
Creates an outcomes-based financing framework for education and workforce training. It would pair strong consumer protections and new disclosure rules with tax changes that affect students, workers, employers, and providers.
Personalized for You
How does this bill affect your finances?
Personalize government policy and PRIA will tell you what this bill means for your household, plus every other piece of legislation we track. PRIA reads each provision against your financial profile to show you exactly what matters to your wallet.
Bill Overview
Analyzed Economic Effects
5 provisions identified: 4 benefits, 0 costs, 1 mixed.
Student OBF tax rules and deductions
If enacted, amounts forgiven or otherwise discharged from an outcomes-based loan or payment agreement would not count as taxable income for taxable years after enactment. If the OBF agreement finances qualified higher education expenses, amounts you pay under the agreement would be treated like student loan interest for the student loan interest deduction. The deductible amount each year would equal amounts you paid that year minus the unpaid principal-like portion as defined by the bill.
Tax exclusion for OBF providers
If enacted, OBF providers could exclude from gross income amounts they receive from a recipient in a taxable year up to the unpaid portion of the original amount financed. The exclusion equals the smaller of amounts received that year or the amount financed minus what the provider already received in prior years. The rule applies for taxable years beginning after enactment.
Tax-free employer OBF education help
If enacted, an employer's financing of an employee's education through an outcomes-based product would be eligible for the tax-free employer educational assistance exclusion. The change would apply for taxable years beginning after enactment and uses the bill's definition of an outcomes-based product.
New rules for student OBF deals
If enacted, this bill would set detailed rules and protections for outcomes-based financing (OBF) used for education. It would define OBF products and limit payments: periodic payments must be $0 when your income is below the product's income threshold (which must be at least 250% of poverty), payments may never exceed 20% of income, the maximum number of monthly payments is 240, and OBF duration may not exceed 360 months. For people with income at or below 350% of poverty, providers could not offer APRs above 8% plus the prior year's final 10-year Treasury high yield. The bill would also require verification of income, allow certain methods if you fail to give documents (including a one-time up-to-10% assumed increase per year), ban acceleration of payment-agreement streams and allow loan acceleration only after 180 continuous days of nonpayment, end future obligations on death or on a total-and-permanent disability finding, limit what contract holders can require of you, allow credit-reporting of OBF terms but bar speculative future-amount entries, require clearer advertising disclosures, and set a federal rule that preempts many State limits while carving out narrow State exceptions.
School OBF reporting and forms
If enacted, proprietary colleges would count only OBF payments they actually receive in a fiscal year and only up to the amount financed when reporting under the Higher Education Act. The bill would also update Higher Education Act model disclosure forms so they reference the Truth in Lending Act OBF rules. These changes aim to align school reporting and student disclosures with the new OBF rules.
Sponsors & CoSponsors
Sponsor
Houchin, Erin [R-IN-9]
IN • R
Cosponsors
Rep. Torres, Ritchie [D-NY-15]
NY • D
Sponsored 6/25/2026
Roll Call Votes
No roll call votes available for this bill.
View on Congress.gov