[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1994 Introduced in House (IH)]







110th CONGRESS
  1st Session
                                H. R. 1994

To provide more transparency in the financial aid process and to ensure 
 that students are receiving the best information about financial aid 
                             opportunities.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             April 23, 2007

   Mr. McKeon (for himself and Mr. Keller of Florida) introduced the 
 following bill; which was referred to the Committee on Education and 
 Labor, and in addition to the Committee on Financial Services, for a 
 period to be subsequently determined by the Speaker, in each case for 
consideration of such provisions as fall within the jurisdiction of the 
                          committee concerned

_______________________________________________________________________

                                 A BILL


 
To provide more transparency in the financial aid process and to ensure 
 that students are receiving the best information about financial aid 
                             opportunities.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Financial Aid Accountability and 
Transparency Act of 2007''.

SEC. 2. ACCOUNTABILITY AND TRANSPARENCY.

    Title I of the Higher Education Act of 1965 (20 U.S.C. 1001 et 
seq.) is amended by adding at the end the following:

     ``PART E--INSTITUTIONAL REQUIREMENTS RELATED TO STUDENT LOANS

``SEC. 151. DEFINITIONS.

    ``In this part:
            ``(1) Agent.--The term `agent', when used with respect to 
        an institution of higher education, means an organization such 
        as an alumni association or booster club.
            ``(2) Lender.--
                    ``(A) In general.--The term `lender'--
                            ``(i) means a creditor, except that such 
                        term shall not include an issuer of credit 
                        under a residential mortgage transaction; and
                            ``(ii) includes an agent of a lender.
                    ``(B) Incorporation of tila definitions.--The terms 
                `creditor' and `residential mortgage transaction' have 
                the meanings given such terms in section 103 of the 
                Truth in Lending Act (15 U.S.C. 1602).
            ``(3) Loan.--
                    ``(A) Student loan.--The term `student loan' 
                means--
                            ``(i) any Federal student loan; or
                            ``(ii) a private educational loan.
                    ``(B) Federal student loan.--The term `Federal 
                student loan' means any loan made, insured, or 
                guaranteed under title IV of this Act.
                    ``(C) Federal direct loan.--The term `Federal 
                Direct loan' means any loan made under part D of title 
                IV of this Act.
                    ``(D) Private educational loan.--The term `private 
                educational loan' means a private loan provided by a 
                lender that--
                            ``(i) is not made, insured, or guaranteed 
                        under title IV; and
                            ``(ii) is issued by a lender for 
                        postsecondary educational expenses to a 
                        student, or the parent of the student, 
                        regardless of whether the loan is provided 
                        through the educational institution that the 
                        student attends or directly to the student or 
                        parent from the lender.
            ``(4) Postsecondary educational expenses.--The term 
        `postsecondary educational expenses' means any of the expenses 
        that are included as part of a student's cost of attendance, as 
        defined under section 472.
            ``(5) Recommend.--An institution shall be considered to 
        recommend any lender if the institution communicates to any 
        student or parent of any student any recommendation, referral, 
        promotion, or endorsement of any lender or the loan products of 
        any lender.

``SEC. 152. RECOMMENDED LENDERS.

    ``No institution of higher education or agent of an institution of 
higher education may recommend any lender unless--
            ``(1) the institution has adopted a formal written policy 
        concerning the procedures and criteria by which the institution 
        will select lenders for inclusion in or exclusion from those 
        recommendations;
            ``(2) the policy, procedures, and criteria adopted by the 
        institution are disclosed in accordance with section 153(a); 
        and
            ``(3) if the institution recommends--
                    ``(A) any lender for making a Federal student loan, 
                other than a Federal Direct loan, the institution 
                recommends a minimum of 3 eligible lenders (as that 
                term is defined in section 435) that are not affiliated 
                lenders (as determined in accordance with regulations 
                of the Secretary) for making such loans; and
                    ``(B) any lender for making a private educational 
                loan, the institution recommends a minimum of 3 lenders 
                that are not affiliated lenders (as so determined) for 
                making such loans.

``SEC. 153. DISCLOSURES.

    ``(a) Lender Recommendations.--An institution of higher education 
shall disclose, on its website and in the informational materials 
listed in subsection (d), the policy, procedures, and criteria that the 
institution has adopted in accordance with section 152(1), and the 
process by which the institution adopted such policy, procedures, and 
criteria.
    ``(b) Model Disclosure Form for Loan Options.--
            ``(1) Requirement.--The Secretary shall develop and 
        prescribe an easy-to-read model disclosure form that will 
        provide students with the relevant information about the terms 
        and conditions for both Federal loans and private educational 
        loans for use by both institutions of higher education and 
        lenders.
            ``(2) Consultation.--In developing the model disclosure 
        forms required by this subsection, the Secretary shall consult 
        with--
                    ``(A) students;
                    ``(B) representatives from institutions of higher 
                education, including financial aid administrators, 
                registrars, business officers, and student affairs 
                officials;
                    ``(C) lenders;
                    ``(D) loan servicers; and
                    ``(E) guaranty agencies.
            ``(3) Information on federal student loans.--The model 
        disclosure forms under this subsection with respect to Federal 
        student loans shall include at a minimum the following 
        information with respect to loans provided through each lender 
        recommended by the institution and, in the case of a Federal 
        Direct loan, with respect to loans provided through the 
        institution:
                    ``(A) the interest rate of the loan;
                    ``(B) any fees associated with the loan;
                    ``(C) the repayment terms available on the loan;
                    ``(D) the opportunity for deferment or forbearance 
                with the loan, including whether the loan payments can 
                be deferred if the student is in school; and
                    ``(E) contact information for the lender.
            ``(4) Information on private educational loans.--The model 
        disclosure forms under this subsection with respect to private 
        educational loans shall include at a minimum the following 
        information with respect to loans made by each lender 
        recommended by the institution:
                    ``(A) the method of determining the interest rate 
                of the loan;
                    ``(B) types of repayment plans that are available;
                    ``(C) whether, and under what conditions, early 
                repayment may be available without penalty;
                    ``(D) other borrower benefits such as in-school 
                deferments;
                    ``(E) late payment penalties; and
                    ``(F) such other information as the Secretary may 
                require.
            ``(5) Deadline.--The model disclosure forms required by 
        this subsection shall be developed and prescribed within one 
        year after the date of enactment of the Financial Aid 
        Accountability and Transparency Act of 2007.
    ``(c) Disclosures by Institutions of Higher Education.--An 
institution of higher education that participates in the Federal 
student loan programs under part B of title IV of this Act, or any 
institution that recommends any lender of private educational loans for 
its students, shall disclose, on its website and in the informational 
materials described in subsection (e)--
            ``(1) a statement that--
                    ``(A) indicates that students are not limited to or 
                required to use the lenders the institutions 
                recommends; and
                    ``(B) the institution is required to process the 
                documents required to obtain a loan from any eligible 
                lender the student selects;
            ``(2) at a minimum, all of the information provided by the 
        model disclosure form prescribed under subsection (b) with 
        respect to any lender recommended by the institution for 
        Federal student loans and, as applicable, private educational 
        loans;
            ``(3) disclose the maximum amount of Federal grant and loan 
        aid available to students in an easy-to-understand format; and
            ``(4) the institution's cost of attendance (as determined 
        under section 472).
    ``(d) Disclosures for Federal Direct Loans.--An institution of 
higher education that participates in the Federal Direct loan program 
shall disclose, on its website and in the informational materials 
described in subsection (e), the information required under paragraphs 
(2), (3), and (4) of subsection (c), and the policies, procedures, and 
criteria the institution used to make the determination to participate 
in such Federal Direct loan program.
    ``(e) Informational Materials.--The informational materials 
described in this subsection are any publications, mailings, or 
electronic messages or media distributed to prospective or current 
students that describe, discuss, or relate to the financial aid 
opportunities available to students at an institution of higher 
education.

``SEC. 154. CODE OF CONDUCT.

    ``(a) Code of Conduct Required.--Each institution of higher 
education that participates in the Federal student loan program or has 
students that obtain private educational loans shall--
            ``(1) develop a code of conduct in accordance with 
        subsection (b) with which its employees, trustees, and 
        directors are required to comply with respect to student loans;
            ``(2) publish the code of conduct prominently on its 
        website; and
            ``(3) administer and enforce such code in accordance with 
        the requirements of this section.
    ``(b) Contents of Code.--
            ``(1) In general.--The code required by this section shall 
        contain a limitation on the acceptance of gifts, payments, or 
        other financial benefits (including the opportunity to purchase 
        stock) provided to officers and employees of the institution 
        (and, when appropriate, family members of such officers and 
        employees) by any lender or guaranty agency that present or may 
        present a conflict of interest or the appearance of a conflict 
        of interest with the responsibilities of such officer or 
        employee with respect to student loans or other financial aid.
            ``(2) Fees from lenders for service prohibited.--The code 
        required by this section shall prohibit any officer or employee 
        who is employed in the financial aid office of the institution, 
        or who otherwise has responsibilities with respect to student 
        loans or other financial aid, from accepting from any lender or 
        affiliate of any lender any fee, payment, or other financial 
        benefit (including the opportunity to purchase stock) as 
        compensation for consulting services, serving on an advisory 
        council, or otherwise advising such lender or affiliate.
            ``(3) Permitted exclusions from gift limitations.--An 
        institution may exclude from treatment as a gift, payment, or 
        other financial benefit under the code of conduct required by 
        this section--
                    ``(A) standard informational material related to a 
                loan, such as a brochure;
                    ``(B) reimbursement for necessary transportation, 
                lodging, and related expenses (including food and 
                refreshments) for travel to a meeting in connection 
                with serving on an advisory council, if such 
                reimbursement is for travel for a period not exceeding 
                2 days and 1 night for each such meeting;
                    ``(C) training or informational material furnished 
                to an officer, employee, or agent of an institution as 
                an integral part of a training session or through 
                participation in an advisory council that is designed 
                to improve the lender's service to the institution, if 
                such training or participation contributes to the 
                professional development of the employee or agent of 
                the institution; and
                    ``(D) favorable terms, conditions, and borrower 
                benefits on an educational loan provided to a student, 
                or a parent of a student, employed by the covered 
                institution.
    ``(c) Training and Compliance.--An institution of higher education 
shall administer and enforce a code of conduct required by this section 
by, at a minimum, requiring all of its officers and employees with 
responsibilities with respect to student loans or other financial aid 
to obtain training annually in compliance with the code.
    ``(d) Ban on Education Loan Arrangements.--An institution of higher 
education shall be prohibited from entering into an education loan 
arrangement. For purposes of this section, an education loan 
arrangement is an arrangement between an institution of higher 
education (or an agent of the institution) and a lender under which--
            ``(1) a lender provides or issues student loans to students 
        attending the institution or to parents of such students;
            ``(2) the institution recommends the lender or the loan 
        products of the lender; and
            ``(3) the lender pays a fee or provides other material 
        benefits to the institution or officers, employees, or agents 
        of the institution.
    ``(e) Ban on Staffing Assistance.--
            ``(1) Prohibition.--An institution of higher education 
        shall be prohibited from requesting or accepting from any 
        lender any assistance with call center staffing or financial 
        aid office staffing.
            ``(2) Certain assistance permitted.--Nothing in paragraph 
        (1) shall be construed to prohibit an institution from 
        requesting or accepting assistance from a lender related to--
                    ``(A) professional development training for 
                financial aid administrators; or
                    ``(B) providing educational counseling materials, 
                financial literacy materials, or debt management 
                materials to borrowers, provided that such materials 
                disclose to borrowers the identification of any lender 
                that assisted in preparing or providing such materials.

``SEC. 155. RULE OF CONSTRUCTION.

    ``Nothing in this part shall be construed to prohibit an 
institution of higher education from negotiating with lenders for 
reduced interest rates or fees on student loans for students or 
parents.''.

SEC. 3. DISCLOSURES REQUIRED FOR PRIVATE EDUCATIONAL LOANS.

    (a) In General.--Section 128 of the Truth in Lending Act (15 U.S.C. 
1638) is amended by adding at the end the following new subsection:
    ``(e) Disclosures Required for Private Educational Loans.--
            ``(1) In general.--In addition to any other disclosures 
        required under this chapter with respect to a consumer credit 
        transaction, a creditor shall provide any consumer with the 
        following information, and obtain the acknowledgment of the 
        consumer under paragraph (3), before executing any contract or 
        agreement between the creditor and the consumer relating to any 
        extension of credit consisting of or involving a private 
        educational loan:
                    ``(A) The consumer may qualify for Federal 
                financial assistance for education through a program 
                under title IV of the Higher Education Act of 1965 (20 
                U.S.C. 1070 et seq.).
                    ``(B) In many cases, a Federal student loan may 
                provide the consumer with more beneficial terms and 
                conditions , including a lower annual percentage rate 
                and fewer and lower fees, than private educational 
                loans.
                    ``(C) The consumer may obtain additional 
                information concerning such Federal financial 
                assistance at the website of the Department of 
                Education.
            ``(2) Clear and conspicuous disclosure.--The disclosure 
        required under paragraph (1) shall be placed in a conspicuous 
        and prominent location on or with any written application, 
        solicitation, or other document or paper relating to any 
        extension of credit consisting of or involving a private 
        educational loan for which such disclosure is required.
            ``(3) Written acknowledgment of receipt.--In each case in 
        which a disclosure is provided pursuant to paragraph (1), a 
        creditor shall obtain a written acknowledgment from the 
        consumer that the consumer has read and understood the 
        disclosure.
            ``(4) Definitions.--For purposes of this subsection, the 
        terms `Federal student loan' and `private educational loan' 
        have the same meanings as in section 151 of the Higher 
        Education Act of 1965.
            ``(5) Regulations.--In prescribing regulations to implement 
        this subsection, the Board shall consult with the Secretary of 
        Education.''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
apply with respect to any credit consisting of or involving a private 
educational loan that is extended pursuant to a contract or agreement 
entered into after July 1, 2007.
                                 <all>