II 110th CONGRESS 1st Session S. 1400 IN THE SENATE OF THE UNITED STATES May 15, 2007 Mr. Enzi (for himself, Mr. Alexander, Mr. Allard, Mr. Burr, Mr. Isakson, and Ms. Murkowski) introduced the following bill; which was read twice and referred to the Committee on Health, Education, Labor, and Pensions A BILL To amend the Higher Education Act of 1965 to improve the information and repayment options provided to student borrowers, and for other purposes.
1.
Short title
This Act may be cited as the Student Information Means a Positive Loan Experience Act of 2007.
2.
Purpose
The purpose of this Act is to improve— (1)the repayment plans available to borrowers of loans under title IV of the Higher Education Act of 1965 (20 U.S.C. 1070 et seq.); and (2)borrowers' understanding of— (A)the repayment plans available for such loans; (B)the conditions under which such loans may be cancelled or forgiven; and (C)the availability of deferments, forbearance, and consolidation for such loans, and the impact on the balance of such loans and total interest paid of using those options.
3.
Flexible repayment plans
(a)
Student loan requirements
Section 427(a)(2)(H) of the Higher Education Act of 1965 (20 U.S.C. 1077(a)(2)(H)) is amended by inserting , and, if applicable, the option of electing to delay repayment or principal for the first 2 years of the repayment period before the semicolon at the end. (b)
FFEL repayment plans
Section 428(b)(9) of the Higher Education Act of 1965 (20 U.S.C. 1078(b)(9)) is amended— (1)in subparagraph (A)— (A)in the first sentence of the matter preceding clause (i), by inserting , and the election described in subparagraph (C) after thereon; (B)in clause (ii), by inserting , which plan shall be established by the lender with the informed agreement of the borrower before the semicolon at the end; and (C)by striking clause (iv) and inserting the following: (iv)for new borrowers on or after October 7, 1998, who accumulate outstanding loans under this part totaling more than $20,000, an extended repayment plan, with a fixed annual or graduated repayment amount paid over an extended period, not to exceed 25 years, except that the borrower shall repay annually a minimum amount determined in accordance with paragraph (1)(L)(i). ; and (2)by adding at the end the following: (C)
Option for first 2 years
A lender shall offer each new borrower of loans on or after October 7, 1998, the opportunity to elect, for the first 2 years of repayment of such loans, to delay the repayment of principal, regardless of the repayment plan selected under this paragraph. . (c)
Direct Loan repayment plans
Section 455(d) of the Higher Education Act of 1965 (20 U.S.C. 1087e(d)) is amended— (1)in paragraph (1)— (A)in the matter preceding subparagraph (A)— (i)in the first sentence, by inserting , and the election described in paragraph (6) after the loan; and (ii)in the third sentence, by striking may choose and inserting shall choose from; and (B)in subparagraph (C), by striking 428(b)(9)(A)(v) and inserting 428(b)(9)(A)(iv); and (2)by adding at the end the following: (6)
Option for first 2 years
The Secretary shall offer each new borrower of loans on or after October 7, 1998, the opportunity to elect, for the first 2 years of repayment of such loans, to delay the repayment of principal, consistent with section 428(b)(9)(C). . (d)
Effective date
The amendments made by this section shall apply with respect to loans for which the first disbursement is made on or after October 7, 1998.
4.
Revised definition of economic hardship
Section 435(o)(1) of the Higher Education Act of 1965 (20 U.S.C. 1085(o)(1)) is amended— (1)in subparagraph (A)(ii), by striking 100 percent of the poverty line for a family of 2 and inserting 150 percent of the poverty line applicable to the borrower's family size; and (2)in subparagraph (B)(ii), by striking to a family of 2 and inserting to the borrower's family size.
5.
Useful and comprehensive student loan information for borrowers
(a)
Insurance program agreements
Section 428(b)(1) of the Higher Education Act of 1965 (20 U.S.C. 1078(b)(1)) is amended— (1)in subparagraph (X), by striking and after the semicolon; (2)in subparagraph (Y)(ii), by striking the period at the end and inserting ; and; and (3)by adding at the end the following: (Z)provides that the lender shall, at the time the lender grants a deferment to a borrower who received a loan under section 428H and is eligible for a deferment under section 427(a)(2)(C), provide information to the borrower to enable the borrower to understand the impact of capitalization of interest on the borrower’s loan principal and total amount of interest to be paid during the life of the loan. . (b)
Guaranty Agreements
Section 428(c)(3)(C) of the Higher Education Act of 1965 (20 U.S.C. 1078(c)(3)(C)) is amended— (1)in clause (i), by striking and after the semicolon; (2)in clause (ii), by striking and after the semicolon; (3)by inserting after clause (ii) the following: (iii)the lender shall, at the time of granting a borrower forbearance, provide information to the borrower to enable the borrower to understand the impact of capitalization of interest on the borrower’s loan principal and total amount of interest to be paid during the life of the loan; and (iv)the lender shall contact the borrower not less often than once every 180 days during the period of forbearance to inform the borrower of— (I)the amount of unpaid principal and the amount of interest that has accrued since the last statement of such amounts provided to the borrower by the lender; (II)the fact that interest will accrue on the loan for the period of forbearance; (III)the amount of interest that will be capitalized, and the date on which capitalization will occur; (IV)the ability of the borrower to pay the interest that has accrued before the interest is capitalized; and (V)the borrower’s option to discontinue the forbearance at any time; and . (c)
Lender agreements
Section 428C(b)(1) of the Higher Education Act of 1965 (20 U.S.C. 1078–3(b)(1)) is amended— (1)in subparagraph (E), by striking and after the semicolon; (2)by redesignating subparagraph (F) as subparagraph (G); and (3)by inserting after subparagraph (E) the following: (F)that the lender shall, upon application for a consolidation loan, provide the borrower with information about the possible impact of loan consolidation, including— (i)the total interest to be paid and fees to be paid on the consolidation loan, and the length of repayment for the loan; (ii)whether consolidation would result in a loss of loan benefits under this part or part D, including loan forgiveness, cancellation, and deferment; (iii)in the case of a borrower that plans to include a Federal Perkins Loan under part E in the consolidation loan, that once the borrower adds the borrower’s Federal Perkins Loan to a consolidation loan— (I)the borrower will lose all interest-free periods that would have been available for such loan under part E, such as the periods during which no interest accrues on the Federal Perkins Loan while the borrower is enrolled in school at least half-time, the grace period, and the periods during which the borrower’s student loan repayments are deferred under section 464(c)(2); and (II)the borrower will no longer be eligible for cancellation of part or all of a Federal Perkins loan under section 465(a); (iv)the ability of the borrower to prepay the consolidation loan, pay such loan on a shorter schedule, and to change repayment plans; (v)that borrower benefit programs for a consolidation loan may vary among different lenders; (vi)the consequences of default on the consolidation loan; and (vii)that by applying for a consolidation loan, the borrower is not obligated to agree to take the consolidation loan; and . (d)
Information dissemination
Subparagraph (M) of section 485(a)(1) of the Higher Education Act of 1965 (20 U.S.C. 1092(a)(1)(M)) is amended to read as follows: (M)the terms and conditions of the loans that students receive under parts B, D, and E; . (e)
Exit counseling
Subparagraph (A) of section 485(b)(1) of the Higher Education Act of 1965 (20 U.S.C. 1092(b)(1)(A)) is amended by striking the subparagraph designation and all that follows through 465. and inserting the following: (A) Each eligible institution shall, through financial aid offices or otherwise, provide counseling to borrowers of loans that are made, insured, or guaranteed under part B (other than loans made pursuant to section 428C or loans made to parents pursuant to section 428B), or made under part D (other than Federal Direct Consolidation Loans or Federal Direct PLUS Loans made to parents) or E, prior to the completion of the course of study for which the borrower enrolled at the institution or at the time of departure from such institution. The counseling required by this subsection shall include—(i)information on the repayment plans available, including a discussion of the different features of each plan and sample information showing the difference in interest paid and total payments under each plan; (ii)the average anticipated monthly repayments under the standard repayment plan and, at the borrower’s request, the other repayment plans for which the borrower is eligible; (iii)such debt and management strategies as the institution determines are designed to facilitate the repayment of such indebtedness; (iv)an explanation that the borrower has the ability to prepay each such loan, pay the loan on a shorter schedule, and change repayment plans; (v)the terms and conditions under which the student may obtain full or partial forgiveness or cancellation of principal or interest under sections 428J, 460, and 465 (to the extent that such sections are applicable to the student's loans); (vi)the terms and conditions under which the student may defer repayment of principal or interest or be granted forbearance under subsections (b)(1)(M) and (o) of section 428, 428H(e)(7), subsections (f) and (l) of section 455, and section 464(c)(2), and the potential impact of such deferment or forbearance; (vii)the consequences of default on such loans; (viii)information on the effects of using a consolidation loan to discharge the borrower’s loans under parts B, D, and E, including, at a minimum— (I)the effects of consolidation on total interest to be paid, fees to be paid, and length of repayment; (II)the effects of consolidation on a borrower’s underlying loan benefits, including all grace periods, loan forgiveness, cancellation, and deferment opportunities; (III)the ability of the borrower to prepay the loan or change repayment plans; and (IV)that borrower benefit programs may vary among different loan holders; and (ix)a notice to borrowers about the availability of the National Student Loan Data System and how the system can be used by a borrower to obtain information on the status of the borrower's loans. . (f)
Conforming Amendment
Section 455(g) of the Higher Education Act of 1965 (20 U.S.C. 1087e(g)) is amended by striking 428C(b)(1)(F) and inserting 428C(b)(1)(G).
6.
Report required
Section 141(c) of the Higher Education Act of 1965 (20 U.S.C. 1018(c)) is amended— (1)in the subsection heading, by striking plan and report and inserting plan, report, and briefing; and (2)by adding at the end the following: (4)
Briefing on enforcement of student loan provisions
The Chief Operating Officer shall provide an annual briefing to the members of the authorizing committees on the steps the PBO has taken and is taking to ensure that lenders are providing the information required under clauses (iii) and (iv) of section 428(c)(3)(C) and sections 428(b)(1)(Z) and 428C(b)(1)(F). .