IllinoisSB1537104th General Assembly (2025–2026)SenateWALLET

STUDENT LOAN SERVICING RIGHTS

Sponsored By: Elgie R. Sims, Jr. (Democratic)

Signed by Governor

Summary

Amends the Student Loan Servicing Rights Act. Creates within the Act an Article concerning educational income share agreements. Contains provisions concerning: monthly payment affordability; maximum annual percentage rates; limits on the duration of income share agreements; risk sharing; limits on covered income; fees; restrictions on security interests; discharge of obligations; prohibitions on cosigners; limits on acceleration; assignment of wages; limitations on garnishment; use of multiple agreements; required disclosures; early completion of the agreement; assumption of increases in future income; receipts; and adjustment of dollar amounts. Provides that the Attorney General may enforce a violation of the Educational Income Share Agreements Article of the Student Loan Servicing Rights Act as an unlawful practice under the Consumer Fraud and Deceptive Business Practices Act. Makes other changes. Amends the Consumer Installment Loan Act and the Interest Act to make conforming changes. Provides that the provisions of the amendatory Act are severable. Effective immediately.

assignmentsexecutivefinancial institutions and licensing

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Bill Overview

Analyzed Economic Effects

13 provisions identified: 10 benefits, 1 costs, 2 mixed.

Death or disability ends education agreements

Your education income-share obligations end if the applicable government agency finds you totally and permanently disabled. They also end when you die. Your estate does not remain responsible for those obligations.

Education financing customers gain collection protections

Education income-share providers cannot take collateral or require or accept cosigners. They cannot demand future payments early, but can collect overdue amounts and use projected income when required records are missing. Any optional early-termination method must remain under your control. Providers cannot take wage assignments; prohibited assignments are unenforceable and revocable, though voluntary, revocable payroll deductions remain allowed. Licensed providers also cannot garnish unpaid earnings before a court enters judgment in an agreement-payment lawsuit.

State oversight expands for education financing

Covered education income-share providers fall within Illinois student loan servicing rules. Agreements and providers must also follow applicable private education loan, predatory lending, and Department rules. These cross-references alone do not change the agreement's credit status or when it creates debt. The Secretary can set licensing, examination, supervision, investigation, confidentiality, and enforcement rules for providers that do not service student loans. Those rules cannot import listed provisions that conflict with the income-share rules. The Attorney General can enforce violations through Illinois consumer fraud law.

Family income and benefits stay protected

Education income-share agreements must explain which income counts toward payments. Providers cannot count income belonging to your spouse, civil-union partner, child, or dependent. They also cannot count Social Security, IRA distributions, pensions, annuities, or income excluded from federal taxable income. Protected government aid includes unemployment, disaster relief, Medicare, Medicaid, SNAP, and earned income and child tax credits. Passive income without active participation in a business is also excluded.

Lower earners get zero-payment income protection

Your education income-share payment is $0 when your income is at or below the agreement's threshold. That threshold must be at least $47,000. Beginning January 1, 2026, the minimum rises every other January 1 when the specified annual inflation increase is positive. You can request a higher threshold to preserve income after payments equal to 275% of the one-person poverty guideline, locality-adjusted. Providers must explain this option on every monthly bill and may verify residence, including requiring 90 days of residence.

Payment limits protect education financing customers

An educational income share agreement funds education or training in return for payments tied to income. Each required payment cannot exceed 8% of your income for that payment period. Providers cannot sign agreements when projected payments, including other known education loans and income-share agreements, exceed 15% of income. Providers must check debts through outside sources and test future burdens at different incomes using the lowest available education-loan payments. For federally eligible programs, they must assume the greater of existing federal debt or maximum Stafford eligibility for your dependency status. Providers cannot intentionally split one agreement into several to evade legal limits.

Rate caps protect education financing customers

Education income-share agreements face an effective annual percentage rate cap: the higher of 9% or the specified Treasury yield plus 6 percentage points. Providers must refund any payment amount above this cap within 20 calendar days. A separate pricing limit applies when income stays at or below 450% of the one-person poverty guideline during the term. That limit is the higher of 8.5% or the specified Treasury yield plus 4.5 percentage points; the lower conflicting cap applies. Treasury yields come from the final 10-year note auction before the applicable origination or offering year. The lower-income test fixes poverty guidelines at origination and assumes the term starts after the program's expected length.

Students gain payment pauses and exit options

Education income-share agreements cannot require more than 180 monthly payments or run beyond 240 counted months. They must offer at least 3 months of voluntary payment pauses for every 30 required income-based payments. Requested and granted pause months do not count toward the 240-month limit. You can end the agreement when payments excluding fees reach its payment cap, through scheduled payments or a lump sum. Agreements must explain early completion and cannot impose prepayment penalties that violate federal law; this rule replaces other Illinois prepayment-penalty rules.

Students get clearer financing and refinancing notices

At signing, education income-share providers must give clear, separately grouped disclosures you can keep. They must explain funding, payment calculations, income thresholds, fees, verification, payment schedules, maximum payments and duration, provider contact, and bankruptcy treatment. Tables must show sample payments and effective annual rates at specified incomes. Electronic delivery requires applicable consent; federal model forms satisfy the requirements when established. Before offering refinancing, providers must give a clear, one-page warning about lost loan benefits and protections in at least 12-point type.

Students get payment and payoff records

Education income-share providers must send a written receipt for every payment without waiting for a request. You can request a free payment history, due within 21 calendar days. Providers must advertise payoff-statement requests on their websites and supply the statement within 10 days after a request. They must send a paid-in-full notice within 30 days after payoff.

Licensed education providers receive loan-law exemption

Licensed education income-share providers are exempt from the Consumer Installment Loan Act for operations covered by the new income-share rules. The exemption does not extend to their unrelated operations. It removes that law's requirements from covered operations without directly changing your payment amount.

Education financing fees allowed but capped

Education income-share providers may charge up to $25 when required income documents remain missing 30 days after the written-notice due date. A late fee is capped at the lesser of $15 or 5%, once per payment more than 15 days overdue. Returned checks or drafts can cost up to $25 plus actual expenses; income-verification form costs can pass through dollar-for-dollar. Written payment deferrals can cost up to 5% of the missed payment, but required voluntary pauses cannot carry that charge. Government fees and taxes are allowed, as are Secretary-approved fees that meet consumer-benefit and reasonableness review. The Interest Act recognizes charges authorized by the servicing law. Separately, designated statutory dollar amounts change July 1 in even-numbered years when the specified index change reaches 10%, rounded to whole percentages. Changes use 10% steps of enactment amounts, disregard excess portions, and require Department rules announcing them.

Missing income records trigger limited estimates

If required income records are missing, education income-share providers can estimate income using a method disclosed in the agreement. Allowed sources include reliable outside data, credit reports, tax-agency records, and reasonable estimates based on comparable program attendees. A prior-income estimate can rise by no more than 10%, no more than once in 12 months. Billing statements must disclose assigned income and explain your rights. Submit records within one year after notice, and providers must correct past estimates within 15 days; later corrections are optional. Providers must keep estimation methods and sources for three years after the agreement ends.

Sponsors & Cosponsors

Sponsor

Elgie R. Sims, Jr.
Democratic • Senate

Cosponsors

Bill Cunningham
Democratic • Senate
Katie Stuart
Democratic • House
Kevin Schmidt
Republican • House
Kimberly A. Lightford
Democratic • Senate
Mattie Hunter
Democratic • Senate
Maurice A. West, II
Democratic • House

Roll Call Votes

All Roll Calls

Yes: 204 • No: 0

House vote • 5/22/2025

Third Reading - Short Debate - Passed

Yes: 114 • No: 0

House vote • 4/29/2025

Do Pass / Short Debate Financial Institutions and Licensing Committee;

Yes: 12 • No: 0

Senate vote • 4/9/2025

Third Reading - Passed;

Yes: 55 • No: 0

Senate vote • 4/3/2025

Senate Floor Amendment No. 2 Recommend Do Adopt Executive;