H.R. 9469: Outcomes-Based Financing (OBF) for Students Act

The bill would set rules for a type of student financing called outcomes-based financing products, which are repayment arrangements tied to a borrower’s income or earnings after school. It would establish consumer protections, disclosure requirements, and limits on how these products can be marketed, structured, and collected.

Repayment limits and affordability rules

The bill would require that payments under these products be based on income and would cap payments at 20% of income. It would also impose affordability standards, including rules that pause or reduce payments for lower-income borrowers. The repayment period would be limited, and any remaining balance would be forgiven after the allowed term ends.

Borrower protections

The bill would prohibit wage assignments and would limit aggressive collection features such as acceleration, meaning lenders would not be able to automatically demand the full balance in many situations. It would also require debt forgiveness if the borrower dies or becomes totally disabled. In addition, the bill would change how these obligations are treated in bankruptcy and would limit the reporting of future expected amounts on credit reports.

Disclosure, consent, and advertising rules

The bill would require lenders to provide certain disclosures before a borrower enters into one of these agreements, and it would require borrower consent for the product terms. It would also create rules for advertising and marketing, aimed at making sure the terms and risks are clearly presented and not misleading.

State law and underwriting provisions

The bill would largely override state laws that conflict with its rules, creating a more uniform federal standard for these products. It would also allow certain forms of income-based underwriting, meaning lenders could use income information when deciding whether to offer a product and on what terms.

Relevant Companies

None found.