S. 4943 — Outcomes-Based Financing (OBF) for Students Act

This section excludes from an individual's gross income any amount arising from the discharge of an outcomes-based loan or the termination or alteration of a payment obligation under an outcomes-based payment agreement, as defined in section 140(h) of the Truth in Lending Act. The exclusion applies to taxable years beginning after the date of enactment.

This section allows taxpayers to treat payments under outcomes-based payment agreements for qualified higher education expenses as interest paid on a qualified education loan, making them eligible for the student loan interest deduction under section 221. The deductible amount equals payments made in the taxable year minus any prior excess of financing received over amounts previously repaid. The change applies to taxable years beginning after the date of enactment.

This section expands the exclusion from gross income for employer-provided educational assistance under section 127 of the Internal Revenue Code to include amounts paid toward an employee's obligations under an OBF product (as defined in section 140(h) of the Truth in Lending Act) used to finance the employee's education. The change applies to taxable years beginning after the date of enactment.

This section excludes from the gross income of an outcomes-based financing (OBF) provider amounts received from an OBF recipient during the taxable year, to the extent they do not exceed the financing provided under the OBF product. The exclusion applies to taxable years beginning after the date of enactment.

This section directs the Bureau to prescribe regulations for outcomes-based financing (OBF) products within 270 days of enactment and to publish a model integrated disclosure form for such products. It requires OBF providers to disclose the payment calculation method, income threshold, maximum number of payments, maximum duration, interest rate details (where applicable), and related terms more conspicuously than other information in applications, approvals, and solicitations. It also mandates a comparison table based on a $10,000 financed amount and exempts OBF products from certain existing private education loan disclosure rules.

This section prohibits advertisements for outcomes-based financing (OBF) products from stating a specific OBF payment calculation method, OBF duration, OBF maximum number of payments, or income threshold unless the OBF provider usually and customarily arranges OBF products on those terms. It also requires any advertisement stating those terms to disclose the OBF payment calculation method, OBF duration, OBF maximum number of payments, and income threshold.

This section expands the definition of a gift under the Truth in Lending Act to include outcomes-based financing (OBF) products and adds definitions for OBF products and related terms. These cover the amount financed, income threshold, OBF duration (excluding in-school deferment, grace periods, and certain suspended periods), OBF maximum number of payments, OBF payment calculation method, OBF provider, OBF recipient, and the scope of financing for postsecondary programs or qualified higher education expenses.

This section excludes funds provided as part of an OBF product (as defined in 15 U.S.C. 1650(h)) from the exception to discharge in bankruptcy for certain educational loans under 11 U.S.C. 523(a)(8).

This section requires the Secretary of the Treasury to modify regulations and guidance within 180 days of enactment to permit continuing consent, by hand or electronic signature, for disclosure of an individual’s tax return information to an OBF provider or its successor under an OBF product, but only for relevant periods and only to the extent necessary to carry out the product terms.

This section requires proprietary institutions of higher education to count only OBF payments received (as defined in 15 U.S.C. 1650(h)) toward the 90/10 revenue requirement, to the extent they do not exceed the amount financed. It directs the Secretary, within 180 days of enactment and after consulting students, institutions, and OBF providers, to establish minimum disclosures for OBF products that include terms, fees, maximum and average financed amounts, default consequences, and contact information. It also requires model disclosure forms to cover OBF products.

This section permits creditors to use empirically derived credit systems that consider historical graduation rates, debt-to-income ratios, or earnings data from comparable institutions, majors, or fields when approving applications or setting terms for outcomes-based financing products, if the systems are demonstrably and statistically sound.

This section authorizes consumer reporting agencies to include in consumer reports descriptions of contract terms for outcomes-based financing (OBF) products, as defined in 15 U.S.C. 1650(h), and amounts owed under them. It prohibits inclusion of any speculation about future amounts owed under outcomes-based payment agreements, including payment caps or early termination amounts. The Bureau of Consumer Financial Protection must issue regulations on the furnishing and reporting of OBF product information.