Outcomes-Based Financing (OBF) for Students Act
Sponsored By: Senator Young, Todd [R-IN]
Introduced
Summary
This bill would set federal rules for outcomes-based education financing, with a central goal of _capping how much of future income a recipient can be required to pay_. It would define outcomes-based products, limit payments and pricing, require strong disclosures, and change tax and bankruptcy treatment for these arrangements.
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- Students and families: Limits an individual's OBF payment to no more than 20% of their income at any time and requires an income threshold no less than 250% of the federal poverty guideline before payments are due. It also bars payments when income is below the threshold.
- Providers and pricing: Restricts effective APRs for recipients at or below 350% of the poverty line to 8% plus the high yield on the 10-year Treasury. It caps payment counts at 240 monthly payments and duration at 360 months unless a consumer asks to extend.
- Regulators, schools, and reporting: Directs the Consumer Financial Protection Bureau to issue model disclosures and rules within 270 days, adds a new Fair Credit Reporting Act rule on how OBFs appear on credit reports, and amends the Higher Education Act and tax code for OBF treatment.
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Bill Overview
Analyzed Economic Effects
6 provisions identified: 3 benefits, 0 costs, 3 mixed.
Stronger payment limits for students
If enacted, this bill would cap OBF payments so you never pay more than 20% of your income at any time. It would set a minimum income threshold of at least 250% of the federal poverty line and require providers to add up future OBF burdens up to a statutory maximum ($70,000 for FY2025, then CPI-U indexed). The bill would ban assignments of your wages and make any such assignment unenforceable, while allowing voluntary, revocable payroll deductions. It would also bar most acceleration of OBF agreements and make discharged OBF amounts easier to treat in bankruptcy.
Tax relief for OBF students and helpers
If enacted, the bill would say forgiven or altered OBF obligations are not taxable income for taxpayers for tax years after enactment. It would let some excess payments under outcomes-based agreements count as student loan interest for the student loan interest deduction when the money paid qualified higher education costs. The bill would also let employer payments that cover your OBF obligation be treated as tax-free educational assistance for tax years after enactment.
Tax timing change for OBF providers
If enacted, the bill would let OBF providers exclude from gross income amounts received that do not exceed the remaining financed principal. The rule would apply for taxable years beginning after enactment. This change would let providers defer reporting some receipts as taxable income and could affect how OBF products are priced.
New disclosure and reporting rules
If enacted, the bill would require the Consumer Financial Protection Bureau to publish model disclosures and write rules for OBF products within 270 days. Ads, applications, approvals, and closings would need clear facts, comparison tables using a $10,000 baseline, income scenarios, and a warning that payments could reach 20% of income. The bill would set rules for how OBF data appears on credit reports and let providers use continuing consent to get tax-return info for verification. It would also allow data-driven underwriting but require those systems to meet Bureau standards.
Federal rules that override state limits
If enacted, the bill would set federal rules for OBF products and preempt many state laws that conflict with those rules. The federal rules include a 20% income cap, a 250% of poverty minimum income threshold, a 240-payment limit, and a 360-month maximum duration. States could avoid preemption only by passing laws that cite this federal section and match those limits.
Limits on proprietary college OBF accounting
If enacted, the bill would limit how proprietary (for-profit) colleges count OBF payments under the Higher Education Act. For OBF products they make, only payments received in the school's fiscal year would count, and only up to the amount financed under the product. This change affects school reporting and compliance rather than direct student payment amounts.
Sponsors & CoSponsors
Sponsor
Young, Todd [R-IN]
IN • R
Cosponsors
Sen. Warner, Mark R. [D-VA]
VA • D
Sponsored 6/24/2026
Sen. Coons, Christopher A. [D-DE]
DE • D
Sponsored 6/24/2026
Roll Call Votes
No roll call votes available for this bill.
View on Congress.gov