The agency that regulates financial services in California announced Thursday that it had reached agreement with a provider of income share agreements to regulate the alternative form of college financing in the same way it regulates student loans.
The California Department of Financial Protection and Innovation characterized as "unprecedented" its agreement with Meratas, which works with educational institutions to provide up-front financial support to their students in exchange for a portion of their earnings after they enter the job market. Under the arrangement, the state agency will grant Meratas a conditional license to provide ISAs to students in California in exchange for regulating the financial agreements under the state's Student Loan Servicing Act. Meratas had voluntarily applied for the license.
Income share agreements remain uncommon among traditional colleges and universities but have gained significant ground among alternative education and training providers. Among the biggest knocks against them are the fact that many federal and state laws and regulations do not apply to them.
The California agency and Meratas both said they hoped their agreement would help create a clearer path to regulating the ISA industry.