Short title

This Act may be cited as the

Transparency in Student Loan Consultation Act of 2018

Findings

Congress finds as follows: (1)Loopholes in Federal law allow institutions of higher education and third party consultants that contract with such institutions to provide borrowers with inaccurate or incomplete information, including with respect to borrower repayment options. (2)The Higher Education Act of 1965 (20 U.S.C. 1001 et seq.) does not contain borrower-centered provisions that would allow the Secretary of Education to establish minimum standards governing communications that institutions of higher education and third party consultants may have with borrowers who are no longer enrolled at such an institution. (3)The Higher Education Act of 1965 requires that institutions of higher education provide certain information to borrowers about the borrower’s student loans when the borrower enters and exits the student loan program, but such Act does not require or permit the Department of Education to oversee communications between the institutions or third party consultants and the borrowers after the borrowers are no longer enrolled at an institution. (4)In a report released April, 26, 2018, the Government Accountability Office (hereinafter referred to as GAO) found that some institutions of higher education hired third party consultants that encouraged student loan borrowers with past-due payments to put loans in forbearance, an option that allows borrowers to temporarily postpone payments. (5)Loan forbearance can help borrowers avoid default in the short-term, but ultimately increases loan costs over time. (6)The GAO found that 5 of the 9 third party consultants hired by institutions of higher education, that served about 800 out of 1,300 institutions, encouraged forbearance over potentially more beneficial options. (7)The GAO also found that 4 of the 5 third party consultants provided inaccurate or incomplete information to borrowers about their repayment options. Inaccurate information about the consequences of default could cause a borrower to feel undue pressure to choose forbearance, even when the borrower is eligible for more favorable repayment and postponement options. (8)Borrowers who only receive a forbearance application may inaccurately assume that forbearance is the only or preferred option to avoid default. (9)Moreover, borrowers may miss the opportunity to learn about other, potentially more favorable repayment and postponement options from the Department of Education’s loan servicers, who are responsible for counseling borrowers and approving forbearance requests. (10)Student loan borrowers deserve accurate and complete information about loan repayment options to make informed decisions about loan repayment that are in their best interest, not the interest of institutions of higher education or third party consultants.

Loan repayment transparency

Section 487(a) of the Higher Education Act of 1965 (20 U.S.C. 1094) is amended by adding at the end the following:

(30)The institution will ensure that any information related to student loan repayment that is provided to a borrower who is in repayment status or who will enter repayment status within 6 months, whether provided directly by the institution or by a third party servicer who has a contract with the institution— (A)is accurate and complete; (B)if such information is related to the provision, explanation, selection, or revision of any loan repayment or consolidation option, includes a list and explanation of each of the loan repayment options and Federal loan consolidation options available to the borrower, including an explanation of any special options that may be available due to the particular circumstances of the borrower; and (C)with respect to a borrower who has failed to make an installment payment when due, or who is otherwise requesting default prevention, aversion, or debt management counseling, includes an explanation of the borrower’s repayment status and repayment schedule, and a description of each option for which the borrower is eligible to make, schedule, postpone, or reduce loan payments, including loan forgiveness, cancellation, deferment, and forbearance opportunities.