California regulators have struck an agreement to regulate income share agreements as student loans, in what could set a standard across the country.
The deal between the California Department of Financial Protection and Innovation and New York-based Meratas, would subject the company to state protections and is believed to be the first such agreement to subject ISAs to state licensing and regulation, the department said in a release. The state will now treat ISAs as student loans under the California Student Loan Servicing Act.
Under the agreements, which have become increasingly popular due to rising student debt, companies pay for students' tuition in exchange for a portion of future income after graduation. Critics say they're just a disguised form of debt, and some observers have called for stronger consumer protections.