[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[S. 4481 Introduced in Senate (IS)]

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118th CONGRESS
  2d Session
                                S. 4481

  To strengthen requirements for contracts between the Department of 
 Education and Federal student loan servicers, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                              June 5, 2024

Mr. Wyden (for himself, Ms. Klobuchar, Mr. Van Hollen, and Mr. Padilla) 
introduced the following bill; which was read twice and referred to the 
          Committee on Health, Education, Labor, and Pensions

_______________________________________________________________________

                                 A BILL


 
  To strengthen requirements for contracts between the Department of 
 Education and Federal student loan servicers, and for other purposes.

    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 ``Student Loan Servicers 
Accountability Act of 2024''.

SEC. 2. CONTRACT REQUIREMENTS FOR FEDERAL STUDENT LOAN SERVICERS.

    (a) In General.--Part G of title IV of the Higher Education Act of 
1965 (20 U.S.C. 1088 et seq.) is amended by adding at the end the 
following:

``SEC. 494A. CONTRACT REQUIREMENTS FOR FEDERAL STUDENT LOAN SERVICERS.

    ``(a) Enhanced Vetting.--Before entering into a contract or other 
agreement with a Federal student loan servicer for the servicing of 
Federal student loans, the Secretary shall evaluate the following 
factors:
            ``(1) In the case of a servicer that has previously 
        serviced Federal student loans, the past performance of the 
        servicer compared to all Federal student loan servicers, 
        including--
                    ``(A) the levels of consumer satisfaction reported 
                with respect to such servicer; and
                    ``(B) the quality of customer service practices and 
                the demonstrated ability of the servicer to prevent 
                errors and disruptions in services in the event a 
                Federal student loan is transferred to or from the 
                servicer, as measured by--
                            ``(i) the service level methodology 
                        performance metrics and servicer allocation 
                        metrics issued by the Office of Federal Student 
                        Aid of the Department (or any successor 
                        metrics); and
                            ``(ii) any other quantitative or 
                        qualitative factors the Secretary determines 
                        appropriate for analysis.
            ``(2) In the case of a servicer that has not previously 
        serviced Federal student loans, the past performance of the 
        servicer compared to other similarly situated servicers, 
        including--
                    ``(A) the levels of consumer satisfaction reported 
                with respect to such servicer; and
                    ``(B) the quality of customer service practices and 
                the demonstrated ability of the servicer to prevent 
                errors and disruptions in services in the event a 
                student loan is transferred to or from the servicer, as 
                measured by any quantitative or qualitative factors the 
                Secretary determines appropriate for analysis.
            ``(3) Any penalties or other punitive measures previously 
        imposed on the servicer by the Department as a result of the 
        servicer's misconduct, failure to adequately support borrowers, 
        or inability to meet the terms and conditions of a servicing 
        agreement with the Department.
            ``(4) Any legal action previously taken against the 
        servicer, including any legal action taken by a State.
            ``(5) The ability of the servicer to capture necessary data 
        regarding borrowers and the eligible Federal student loans held 
        by borrowers in the event such loans are transferred to the 
        servicer, including the ability of the servicer to gather all 
        information related to the repayment history of a borrower and 
        relevant consumer demographic data prior to servicing such 
        loans.
            ``(6) The ability of the servicer to provide targeted 
        services, including personalized counseling and other high-
        quality services, for borrowers most at risk of default and 
        delinquency, including borrowers who have previously defaulted.
            ``(7) The demonstrated ability of the servicer--
                    ``(A) to support borrowers from traditionally 
                underrepresented communities by providing information 
                through the forms described in subsection (f) and 
                through automatic website translation, and services in 
                multiple languages (including Spanish, Mandarin, 
                Haitian Creole, Arabic, and other languages); and
                    ``(B) to provide appropriate access and support for 
                borrowers with disabilities.
    ``(b) Required Contract Terms.--As part of any contract or other 
agreement between the Department and a Federal student loan servicer, 
the servicer shall agree to the following terms:
            ``(1) The servicer shall place a borrower's loans into an 
        administrative forbearance, during which interest shall not 
        accrue, during any period in which the servicer has identified 
        a servicer error but has not yet corrected the error.
            ``(2) For a borrower who has submitted a certification of 
        the borrower's employment status or income for purposes of the 
        public service loan forgiveness program under section 455(m) or 
        an income-driven repayment plan, respectively, the servicer 
        shall provide credit toward loan forgiveness under that program 
        or plan for--
                    ``(A) any period during which the borrower--
                            ``(i) was in administrative forbearance due 
                        to a servicer error as described in paragraph 
                        (1); and
                            ``(ii) would have otherwise qualified for 
                        credit toward forgiveness if not for such 
                        forbearance; or
                    ``(B) any other period during which the borrower 
                would have qualified for credit toward forgiveness if 
                not for a servicer error.
            ``(3) The servicer shall provide appropriate remedies to a 
        borrower in the event a servicer error results in financial 
        harm to the borrower (as determined by the Secretary), 
        including--
                    ``(A) refunding overpayments on a loan made due to 
                a servicer error;
                    ``(B) reimbursing a borrower for fees and other 
                expenses, such as insufficient funds fees, incurred by 
                the borrower as a result of a servicer error; and
                    ``(C) such other remedies as the Secretary 
                determines appropriate.
            ``(4) The servicer shall ensure that credit reporting 
        agencies remove delinquencies or other negative information 
        from the credit reports of a borrower if the negative credit 
        information was a result of an error by the servicer.
            ``(5) The servicer shall maintain all records concerning 
        the account of a borrower--
                    ``(A) for the period during which the servicer 
                services any loan of the borrower; and
                    ``(B) for a period of not less than 3 years after--
                            ``(i) the loans of a borrower have been 
                        paid in full, discharged, or assigned to 
                        collection;
                            ``(ii) the account has been transferred to 
                        another servicer; or
                            ``(iii) the servicer otherwise ceases the 
                        servicing of such loans.
            ``(6) The servicer shall abide by any decision of the 
        Secretary to revoke the contract in accordance with subsection 
        (e).
    ``(c) Applicability.--
            ``(1) Contracts covered.--Subsections (a) and (b) shall 
        apply with respect to contracts and other agreements entered 
        into on or after the date that is 90 days after the date of 
        enactment of the Student Loan Servicers Accountability Act of 
        2024.
            ``(2) Special rule.--The requirements of paragraphs (1) 
        through (5) of subsection (b) shall apply to the actions of the 
        Department in directly administering the public service loan 
        forgiveness program under section 455(m), income-driven 
        repayment plans, and other forgiveness and repayment programs 
        authorized under this Act in the same manner as such 
        requirements apply to Federal student loan servicers.
    ``(d) Review of Legacy Contracts.--Not later than 180 days after 
the date of enactment of the Student Loan Servicers Accountability Act 
of 2024, the Secretary shall conduct a review of all legacy student 
loan servicing contracts to determine whether such contracts, and the 
Federal student loan servicers providing services under such contracts, 
align with the requirements set forth in subsections (a) and (b). The 
Secretary shall use the results of such review to inform any decision 
of the Secretary to continue or renew such a contract.
    ``(e) Revocation.--
            ``(1) In general.--Subject to paragraph (2), the Secretary 
        may revoke a contract or other agreement between the Department 
        and a covered servicer or vendor if the Secretary determines 
        that the covered servicer or vendor knowingly withheld 
        information or made misrepresentations to the Department in 
        connection with the vetting process described in subsection (a) 
        or any element of a contract entered into under subsection (b).
            ``(2) Notice.--In the event the Secretary determines that a 
        covered servicer or vendor described in paragraph (1) withheld 
        information or made misrepresentations as described in such 
        paragraph, the Secretary shall provide the covered servicer or 
        vendor (as the case may be) with reasonable notice of such 
        determination and an opportunity for a hearing before making 
        taking final action to revoke the contract or other agreement 
        concerned.
    ``(f) Information in Multiple Languages.--The Secretary and the 
Director of the Office of Management and Budget shall ensure that forms 
and other information relating the rights of borrowers under this 
section are made available in multiple languages (including Spanish, 
Mandarin, Haitian Creole, Arabic, and other languages) and are 
accessible to borrowers with disabilities.
    ``(g) Report to Congress.--Not later than 1 year after the date of 
enactment of the Student Loan Servicers Accountability Act of 2024, and 
on an annual basis thereafter, the Secretary shall submit to Congress a 
report that evaluates the status of compliance with this section, 
including the compliance of--
            ``(1) the Department; and
            ``(2) covered servicers and vendors.
    ``(h) Definitions.--In this section:
            ``(1) Covered servicer or vendor.--The term `covered 
        servicer or vendor' includes--
                    ``(A) a Federal student loan servicer;
                    ``(B) a vendor in the Unified Servicing and Data 
                Solution system;
                    ``(C) a business process operation vendor; and
                    ``(D) a vendor or servicer as designated by the 
                Secretary.
            ``(2) Federal student loan.--The term `Federal student 
        loan' means a loan made under part B, D, or E that is held by 
        the Department.
            ``(3) Federal student loan servicer.--The term `Federal 
        student loan servicer' means any individual, State, or private, 
        for-profit or nonprofit organization, which enters into, or 
        seeks to enter into, a contract with the Secretary to 
        administer, through either manual or automated processing, any 
        aspect of a Federal student loan program, including monitoring, 
        processing, servicing, or collecting loans.
            ``(4) Legacy student loan servicing contract.--The term 
        `legacy student loan servicing contract' means a contract 
        between the Department and a Federal student loan servicer 
        that--
                    ``(A) was entered into before the date that is 90 
                days after the date of enactment of the Student Loan 
                Servicers Accountability Act of 2024; and
                    ``(B) was in effect as of such date.''.
    (b) Conforming Amendment to PSLF.--Section 455(m) of the Higher 
Education Act of 1965 (20 U.S.C. 1087e(m)) is amended by adding at the 
end the following:
            ``(5) Treatment of certain periods of forbearance.--Each 
        month during which an eligible Federal Direct Loan is in an 
        administrative forbearance described in section 494A(b)(1) 
        shall be treated as a qualifying payment counted for purposes 
        of paragraph (1)(A), regardless of whether the borrower made a 
        payment on such loan during such period.''.

SEC. 3. COMPTROLLER GENERAL STUDY AND REPORT.

    (a) Study.--The Comptroller General of the United States shall 
conduct a study--
            (1) to determine how and to what extent the transfer of 
        Federal student loans to Federal student loan servicers leads 
        to disruptions in repayment or servicer errors that affect the 
        credit ratings of borrowers of such loans, which shall include 
        evaluation of--
                    (A) negative effects resulting from a servicer's 
                failure to maintain accurate, up-to-date information on 
                the status of a borrower's account;
                    (B) the root causes of such failures, such as 
                errors caused by a lack of compatibility between the 
                information technology systems of different Federal 
                student loans servicers; and
                    (C) how such failures impact borrowers, such as by 
                presenting borrowers with inaccurate account balances, 
                inaccurate or incomplete payment histories, and 
                miscalculated monthly payment amounts;
            (2) to develop, in consultation with the Director of the 
        Bureau of Consumer Financial Protection, recommendations to 
        assist the Department of Education in mitigating any negative 
        effects of such transfers on the credit ratings of borrowers;
            (3) to determine how and to what extent servicing errors, 
        servicer noncompliance with State or Federal requirements, or 
        servicer failure to provide timely and accurate information to 
        borrowers negatively impacts the credit scores of borrowers or 
        otherwise results in harm to borrowers;
            (4) to assess the effectiveness of the processes used by 
        servicers to receive and respond to consumer complaints, 
        including--
                    (A) servicer requirements regarding how complaints 
                can be filed; and
                    (B) servicer processes for tracking, investigating, 
                resolving, and addressing the root causes of consumer 
                complaints, including complaints submitted through the 
                websites and feedback systems of the Department of 
                Education; and
            (5) to determine how the Unified Servicing and Data 
        Solution will effectively address errors and other issues 
        arising from the transfer of Federal student loans to and from 
        different servicers.
    (b) Comptroller General Report.--Not later than two years after the 
date of the enactment of this Act, the Comptroller General shall submit 
to the appropriate congressional committees a report on the results of 
the study conducted under subsection (a).
    (c) Definitions.--In this section:
            (1) Appropriate congressional committees.--The term 
        ``appropriate congressional committees'' means--
                    (A) the Committee on Health, Education, Labor, and 
                Pensions of the Senate; and
                    (B) the Committee on Education and the Workforce of 
                the House of Representatives.
            (2) Federal student loan; federal student loan servicer.--
        The terms ``Federal student loan'' and ``Federal student loan 
        servicer'' have the meanings given those terms in section 494A 
        of the Higher Education Act of 1965 (as added by section 2 of 
        this Act).
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