[Congressional Record Volume 153, Number 20 (Thursday, February 1, 2007)]
[Senate]
[Pages S1533-S1537]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. KENNEDY (for himself, Mr. Durbin, Mrs. Clinton, Mr. 
        Harkin, Mr. Rockefeller, Mr. Kerry, and Mr. Schumer):
  S. 486. A bill to establish requirements for lenders and institutions 
of higher education in order to protect students and other borrowers 
receiving educational loans; to the Committee on Health, Education, 
Labor, and Pensions.
  Mr. KENNEDY. Mr. President, it's a privilege to join my colleague, 
Senator Durbin, in introducing the Student Loan Sunshine Act, to 
provide greater support for students and families across America who 
are struggling with great difficulty to pay for college.
  Over the past 20 years, the cost of attending college has doubled. 
Today, the average cost of attendance at a 4-year public college is 
almost $13,000. As a result, students and families are going deeper and 
deeper into debt to finance the cost of higher education. In 1993, 
fewer than a third of students at four-year colleges graduated with 
debt to pay on their student loans. Today that number has doubled. Two-
thirds of students now graduate with student loan debt.
  The average debt load has soared as well. In the past decade, it has 
increased by 57 percent at public colleges and 38 percent at private 
colleges. Today, the typical graduate leaves college saddled with 
$17,000 in student loans.
  Nowhere has this growth been more pronounced than in private student 
loans. Until recently, most students who borrowed for college took out 
loans under the Direct Loan program and the Federal Family Education 
Loan program--the two main student loan programs subsidized by the 
Federal Government.
  With the cost of college rising rapidly and grant aid stagnating, 
however, more and more students are turning to the private loan sector 
and are taking out so-called ``alternative loans''--private loans that 
lenders offer through colleges and universities. Students are also 
borrowing increasingly from direct-to-consumer education lenders, which 
include giant lenders such as Sallie Mae that also participate in the 
FFEL program, as well as other companies that just offer private-market 
loans, such as Loan to Learn.
  A decade ago, private loans accounted for only 3 percent of all funds 
used to finance students' post-secondary education. Since then, the 
volume of private loans has grown by an astronomical 1200 percent. 
Today, private loans now total $17 billion, and represent 20 percent of 
all borrowing for higher education.
  Many lenders making these private loans claim they're providing an 
important service. They say that at a time when college prices are 
rising rapidly, they provide needed funds to help students pay for 
college.
  What they won't tell you is the exorbitant cost that countless 
students are paying for these loans. Unlike loans offered through the 
federal programs, private loans frequently carry much higher interest 
rates, especially for students without credit histories and families 
without strong credit ratings. In some cases, the interest rates on 
private loans may be as high as 19 percent a year, compared to 6.8 
percent for loans offered through the FFEL and Direct Loan programs.
  The lenders also don't tell you about the aggressive tactics they use 
to persuade colleges to offer private loans to their students--and to 
persuade students to borrow directly as well.
  The private company Student Loan Xpress has offered 100 percent loan 
approval at colleges if the college agrees to ``brand'' the private 
loan with the college's name and emblem--making the loan appear to be 
offered by the college, not the private lender.
  Other private loan companies encourage borrowers not to fill out the 
Free Application for Federal Student Aid, which allows borrowers to 
obtain loans at lower interest rates. They don't prominently disclose 
the fact that their interest rates are typically much higher.
  Some lenders make gifts to college and university employees. Loan to 
Learn invited college officials and their spouses to an all-expenses 
paid ``education conference'' in the West Indies. Many lenders who 
participate in the FFEL program offer similar ``educational 
conferences'' at fancy hotels, and offer free entertainment and tickets 
to sporting events to college officials. The Attorney General in New 
York State has opened an investigation into such practices and is 
looking into the practices of six lenders, including Sallie Mae, 
Nelnet, and Educap, the corporate name of Loan to Learn.
  We need to take immediate steps to stop actions that prevent students 
from obtaining the best loan agreement possible. That is what the 
Student Loan Sunshine Act does.
  First and foremost, it is a consumer protection measure. It will 
protect student and parent borrowers by ending the inappropriate lender 
practices I've just mentioned.
  It prohibits lenders from offering to a college employee any gift 
worth more than $10, including free or discounted trips, meals, 
invitations to entertainment events or other form of hospitality.
  It prohibits lenders from offering services to financial aid offices 
that create a conflict of interest, such as lending staff during peak 
loan processing times. It also prohibits lenders from ``branding'' 
their loans with a college name, emblem, or logo.
  The Sunshine Act also arms students and parents with the information 
they need to make wise decisions when they borrow funds for higher 
education.

[[Page S1534]]

  The Act requires lenders to report any special arrangements they have 
with colleges to make such loans, and it ensures that this information 
is conveyed to borrowers.
  It requires the Secretary of Education, together with members of the 
higher education community and students, to develop a clear, easy-to-
use model format for reporting the terms and conditions of student 
loans, similar to the APR disclosure required for other types of loans.
  If a college creates a ``preferred lender'' list, the Act requires 
the college to disclose clearly and fully why it has identified a 
lender as a preferred lender. Schools must also include at least three 
nonaffiliated lenders on the list, so that students have a real choice. 
Finally, the Sunshine Act also addresses the fast-growing direct-to-
consumer educational loan market. It offers new protections for 
students who take out direct-to-consumer loans, so they don't borrow 
more than is necessary to pay for their college education.
  The Act requires all lenders of direct-to-consumer private 
educational loans to state clearly and prominently that borrowers may 
qualify for low-interest loans through the Federal Government's loan 
programs. It also requires lenders to clearly disclose the terms and 
conditions of the loans they're offering, including any hidden fees, as 
well as any complaints against the lender that have been filed by 
consumer agencies such as the Better Business Bureau or the state 
attorney general's office.
  Before a direct-to-consumer lender can offer an education loan of 
more than $1000, the Act requires the lender to notify the borrower's 
college of the amount of the proposed loan, so that the school can 
advise the borrower whether the loan exceeds what's necessary to cover 
the student's cost of attendance after other aid sources are factored 
in.
  Students deserve the best loan advice possible from financial aid 
officers and the best deal from lenders. They have the right to exhaust 
their federal loan eligibility before turning to more expensive private 
lenders for aid.
  Going to college is a lifetime investment, but paying for college is 
a heavy burden for too many families. As the private student loan 
market continues to grow, it's our responsibility to protect students 
from exploitation in that market.
  I thank the bill's cosponsors, and I urge my colleagues to support 
this bill as well. It's time we put students first, and the Student 
Loan Sunshine Act takes important steps to do just that.
  I ask unanimous consent that the text of this bill be printed in the 
Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                 S. 486

       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 Sunshine Act''.

     SEC. 2. INSTITUTION AND LENDER REPORTING AND DISCLOSURE 
                   REQUIREMENTS.

       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--LENDER AND INSTITUTION REQUIREMENTS RELATING TO EDUCATIONAL 
                                 LOANS

     ``SEC. 151. DEFINITIONS.

       ``In this part:
       ``(1) Covered institution.--The term `covered 
     institution'--
       ``(A) means any educational institution that offers a 
     postsecondary educational degree, certificate, or program of 
     study (including any institution of higher education, as such 
     term is defined in section 102) and receives any Federal 
     funding or assistance; and
       ``(B) includes an agent of the educational institution 
     (including an alumni association, booster club, or other 
     organization directly or indirectly associated with such 
     institution) or employee of such institution.
       ``(2) Educational loan.--The term `educational loan' 
     (except when used as part of the term `private educational 
     loan') means--
       ``(A) any loan made, insured, or guaranteed under title IV; 
     or
       ``(B) a private educational loan (as defined in paragraph 
     (5)).
       ``(3) Educational loan arrangement.--
       ``The term `educational loan arrangement' means an 
     arrangement or agreement between a lender and a covered 
     institution--
       ``(A) under which arrangement or agreement a lender 
     provides or otherwise issues educational loans to the 
     students attending the covered institution or the parents of 
     such students; and
       ``(B) which arrangement or agreement--
       ``(i) relates to the covered institution recommending, 
     promoting, endorsing, or using the loan product of the 
     lender; and
       ``(ii) involves the payment of any fee or provision of 
     other material benefit by the lender to the institution or to 
     groups of students who attend the institution.
       ``(4) 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).
       ``(5) Private educational loan.--The term `private 
     educational loan' means a private loan provided by a lender 
     that--
       ``(A) is not made, insured, or guaranteed under title IV; 
     and
       ``(B) 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.
       ``(6) 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.

     ``SEC. 152. REQUIREMENTS FOR LENDERS AND INSTITUTIONS 
                   PARTICIPATING IN EDUCATIONAL LOAN ARRANGEMENTS.

       ``(a) Reporting for Lenders.--In addition to any other 
     disclosure required under Federal law, each lender that 
     participates in 1 or more educational loan arrangements shall 
     prepare and submit to the Secretary (at a time to be 
     determined by the Secretary) an annual report that includes, 
     with respect to each educational loan arrangement, the 
     following:
       ``(1) The date on which the arrangement was entered into 
     and the period for which the arrangement applies.
       ``(2) A summary of the terms of the arrangement related to 
     the marketing, recommending, endorsing, or use of, the loans.
       ``(3) The full details of any aspect of the arrangement 
     relating to the covered institution issuing loans and the 
     lender (or a financial partner of the lender) servicing or 
     purchasing such loans.
       ``(4) A summary of any direct or indirect benefit provided 
     or paid to any party in connection with the arrangement.
       ``(b) Provision of Loan Information.--A lender may not 
     provide a private educational loan to a student attending a 
     covered institution with which the lender has an educational 
     loan arrangement, or the parent of such student, until the 
     covered institution has informed the student or parent of 
     their remaining options for borrowing under title IV, 
     including information on any terms and conditions of 
     available loans under such title that are more favorable to 
     the borrower.
       ``(c) Use of Institution Name.--
       ``(1) In general.--A covered institution that has entered 
     into an educational loan arrangement with a lender regarding 
     private educational loans shall not allow the lender to use 
     the name, emblem, mascot, or logo of the institution, or 
     other words, pictures, or symbols readily identified with the 
     institution, in the marketing of private educational loans to 
     the students attending the institution in any way that 
     implies that the institution endorses the private educational 
     loans offered by the lender.
       ``(2) Applicability.--Paragraph (1) shall apply to any 
     educational loan arrangement, or extension of such 
     arrangement, entered into or renewed after the date of 
     enactment of the Student Loan Sunshine Act.

     ``SEC. 153. INTEREST RATE REPORT FOR INSTITUTIONS AND LENDERS 
                   PARTICIPATING IN EDUCATIONAL LOAN ARRANGEMENTS.

       ``(a) Secretary Duties.--
       ``(1) Report and model format.--Not later than 180 days 
     after the date of enactment of the Student Loan Sunshine Act, 
     the Secretary shall--
       ``(A) prepare a report on the adequacy of the information 
     provided to students and the parents of such students about 
     educational loans (including loans made, insured, or 
     guaranteed under title IV and private educational loans), 
     after consulting with students, representatives of covered 
     institutions (including financial aid administrators, 
     registrars, and business officers), lenders (including 
     lenders of private educational loans), loan servicers, and 
     guaranty agencies;
       ``(B) include in the report a model format, based on the 
     report's findings, to be used by lenders and covered 
     institutions in carrying out subsections (b) and (c)--
       ``(i) that provides information on the applicable interest 
     rates and other terms and conditions of the educational loans 
     provided by a lender to students attending the institution, 
     or the parents of such students, disaggregated by each type 
     of educational loans provided to such students or parents by 
     the lender, including--

       ``(I) the interest rate and terms and conditions of the 
     loans offered by the lender for the upcoming academic year;
       ``(II) with respect to such loans, any benefits that are 
     contingent on the repayment behavior of the borrower;
       ``(III) the annual percentage rate for such loans, based on 
     the actual disbursed amount of the loan;

[[Page S1535]]

       ``(IV) the average amount borrowed from the lender by 
     students enrolled in the institution who obtain loans of such 
     type from the lender for the preceding academic year; and
       ``(V) the average interest rate on such loans provided to 
     such students for the preceding academic year; and

       ``(ii) which format shall be easily usable by lenders, 
     institutions, guaranty agencies, and loan servicers; and
       ``(C)(i) submit the report and model format to the 
     Committee on Health, Education, Labor, and Pensions of the 
     Senate and the Committee on Education and Labor of the House 
     of Representatives; and
       ``(ii) make the report and model format available to 
     covered institutions, lenders, and the public.
       ``(2) Format update.--Not later than 1 year after the 
     submission of the report and model format described in 
     paragraph (1), the Secretary shall--
       ``(A) assess the adequacy of the model format included in 
     the report;
       ``(B) after consulting with students, representatives of 
     covered institutions (including financial aid administrators, 
     registrars, and business officers), lenders (including 
     lenders of private educational loans), loan servicers, and 
     guaranty agencies--
       ``(i) prepare a list of any improvements to the model 
     format that have been identified as beneficial to borrowers; 
     and
       ``(ii) update the model format after taking such 
     improvements into consideration; and
       ``(C)(i) submit the list of improvements and updated model 
     format to the Committee on Health, Education, Labor, and 
     Pensions of the Senate and the Committee on Education and 
     Labor of the House of Representatives; and
       ``(ii) make the list of improvements and updated model 
     format available to covered institutions, lenders, and the 
     public.
       ``(3) Use of form.--The Secretary shall take such steps as 
     necessary to make the model format, and any updated model 
     format, available to covered institutions and to encourage--
       ``(A) lenders subject to subsection (b) to use the model 
     format or updated model format (if available) in providing 
     the information required under subsection (b); and
       ``(B) covered institutions to use such format in preparing 
     the information report under subsection (c).
       ``(b) Lender Duties.--Each lender that has an educational 
     loan arrangement with a covered institution shall annually, 
     by a date determined by the Secretary, provide to the covered 
     institution and to the Secretary the information included on 
     the model format or an updated model format (if available) 
     for each type of educational loan provided by the lender to 
     students attending the covered institution, or the parents of 
     such students, for the preceding academic year.
       ``(c) Covered Institution Duties.--Each covered institution 
     shall--
       ``(1) prepare and submit to the Secretary an annual report, 
     by a date determined by the Secretary, that includes, for 
     each lender that has an educational loan arrangement with the 
     covered institution and that has submitted to the institution 
     the information required under subsection (b)--
       ``(A) the information included on the model format or 
     updated model format (if available) for each type of 
     educational loan provided by the lender to students attending 
     the covered institution, or the parents of such students; and
       ``(B) a detailed explanation of why the covered institution 
     believes the terms and conditions of each type of educational 
     loan provided pursuant to the agreement are beneficial for 
     students attending the covered institution, or the parents of 
     such students; and
       ``(2) ensure that the report required under paragraph (1) 
     is made available to the public and provided to students 
     attending or planning to attend the covered institution, and 
     the parents of such students, in time for the student or 
     parent to take such information into account before applying 
     for or selecting an educational loan.

     ``SEC. 154. PRIVATE EDUCATIONAL LOAN DISCLOSURE REQUIREMENTS 
                   FOR COVERED INSTITUTIONS.

       ``A covered institution that provides information to any 
     student, or the parent of such student, regarding a private 
     educational loan from a lender shall, prior to or concurrent 
     with such information--
       ``(1) inform the student or parent of--
       ``(A) the student or parent's eligibility for assistance 
     and loans under title IV; and
       ``(B) the terms and conditions of such private educational 
     loan that are less favorable than the terms and conditions of 
     educational loans for which the student or parent is 
     eligible, including interest rates, repayment options, and 
     loan forgiveness; and
       ``(2) ensure that information regarding such private 
     educational loans is presented in such a manner as to be 
     distinct from information regarding loans that are made, 
     insured, or guaranteed under title IV.

     ``SEC. 155. GIFT BAN FOR EMPLOYEES OF INSTITUTIONS.

       ``(a) Gift Ban.--A lender or guarantor of educational loans 
     shall not offer any gift to an employee or agent of a covered 
     institution.
       ``(b) Reports of Gift Ban Violations.--
       ``(1) Employee report.--Each employee or agent of a covered 
     institution shall report to the Inspector General of the 
     Department of Education any instance of a lender or guarantor 
     of educational loans (including an agent of the lender or 
     guarantor) that attempts to give a gift to the employee or 
     agent in violation of subsection (a).
       ``(2) Inspector general report.--The Inspector General of 
     the Department of Education shall investigate any reported 
     violation of this subsection and shall annually submit a 
     report to the Committee on Health, Education, Labor, and 
     Pensions of the Senate and the Committee on Education and 
     Labor of the House of Representatives identifying all 
     reported violations of the gift ban under subsection (a), 
     including the lenders involved in each such violation, for 
     the preceding year.
       ``(c) Definition of Gift.--
       ``(1) In general.--In this section, the term `gift' means 
     any gratuity, favor, discount, entertainment, hospitality, 
     loan, or other item having a monetary value of more than $10. 
     The term includes a gift of services, transportation, 
     lodging, or meals, whether provided in kind, by purchase of a 
     ticket, payment in advance, or reimbursement after the 
     expense has been incurred.
       ``(2) Exceptions.--The term `gift' shall not include any of 
     the following:
       ``(A) Standard informational material related to a loan, 
     such as a brochure.
       ``(B) Food, refreshments, training, or informational 
     material furnished to an 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 covered institution, if 
     such training or participation contributes to the 
     professional development of the employee or agent of the 
     institution.
       ``(C) Favorable terms, conditions, and borrower benefits on 
     an educational loan provided to a student employed by the 
     covered institution.
       ``(3) Rule for gifts to family members.--For purposes of 
     this section, a gift to a family member of an employee or an 
     agent of a covered institution, or a gift to any other 
     individual based on that individual's relationship with the 
     employee or agent, shall be considered a gift to the employee 
     or agent if--
       ``(A) the gift is given with the knowledge and acquiescence 
     of the employee or agent; and
       ``(B) the employee or agent has reason to believe the gift 
     was given because of the official position of the employee or 
     agent.

     ``SEC. 156. COMPLIANCE AND ENFORCEMENT.

       ``(a) Condition of Any Federal Assistance.--Notwithstanding 
     any other provision of law, a covered institution or lender 
     shall comply with this part as a condition of receiving 
     Federal funds or assistance provided after the date of 
     enactment of the Student Loan Sunshine Act.
       ``(b) Penalties.--Notwithstanding any other provision of 
     law, if the Secretary determines, after providing notice and 
     an opportunity for a hearing for a covered institution or 
     lender, that the covered institution or lender has violated 
     subsection (a)--
       ``(1) in the case of a covered institution, or a lender 
     that does not participate in a loan program under title IV, 
     the Secretary may impose a civil penalty in an amount of not 
     more than $25,000; and
       ``(2) in the case of a lender that does participate in a 
     program under title IV, the Secretary may limit, terminate or 
     suspend the lender's participation in such program.
       ``(c) Considerations.--In taking any action against a 
     covered institution or lender under subsection (b), the 
     Secretary shall take into consideration the nature and 
     severity of the violation of subsection (a).

     ``SEC. 157. GAO STUDY AND REPORTS.

       ``(a) Study.--The Comptroller General of the United States 
     shall conduct a study on--
       ``(1) the gifts or financial or other material benefits 
     that are provided by lenders to covered institutions to 
     secure, or as part of an effort to secure, the covered 
     institutions' educational loan business;
       ``(2) the extent to which lenders issuing private 
     educational loans may be inappropriately using inducements to 
     secure, or as part of an effort to secure, educational loan 
     arrangements with covered institutions; and
       ``(3) whether educational loans made to students attending 
     a covered institution in connection with an educational loan 
     arrangement, and private educational loans made directly to 
     students, provide competitive interest rates, terms, and 
     conditions to students who obtain such loans.
       ``(b) Reports.--The Comptroller General of the United 
     States shall--
       ``(1) not later than 1 year after the date of enactment of 
     the Student Loan Sunshine Act, submit to Congress a 
     preliminary report regarding the findings of the study 
     described in subsection (a); and
       ``(2) not later than 2 years after such date of enactment, 
     submit to Congress a final report regarding such findings.''.

     SEC. 3. PROGRAM PARTICIPATION AGREEMENTS.

       Section 487(a) of the Higher Education Act of 1965 (20 
     U.S.C. 1094(a)) is amended by adding at the end the 
     following:
       ``(24)(A) In the case of an institution (including an 
     employee or agent of an institution) that maintains a 
     preferred lender list, in print or any other medium, through 
     which the institution recommends 1 or more specific lenders 
     for loans made under part B to the students attending the 
     institution (or the parents of such students), the 
     institution will--
       ``(i) clearly and fully disclose on the preferred lender 
     list--

[[Page S1536]]

       ``(I) why the institution has included each lender as a 
     preferred lender, especially with respect to terms and 
     conditions favorable to the borrower; and
       ``(II) that the students attending the institution (or the 
     parents of such students) do not have to borrow from a lender 
     on the preferred lender list;
       ``(ii) ensure, through the use of the list provided by the 
     Secretary under subparagraph (C), that--
       ``(I) there are not less than 3 lenders named on the 
     preferred lending list that are not affiliates of each other; 
     and
       ``(II) the preferred lender list--

       ``(aa) specifically indicates, for each lender on the list, 
     whether the lender is or is not an affiliate of each other 
     lender on the list; and
       ``(bb) if the lender is an affiliate of another lender on 
     the list, describes the specifics of such affiliation; and

       ``(iii) establish a process to ensure that lenders are 
     placed upon the preferred lender list on the basis of the 
     benefits provided to borrowers, including --
       ``(I) highly competitive interest rates, terms, or 
     conditions for loans made under part B;
       ``(II) high-quality servicing for such loans; or
       ``(III) additional benefits beyond the standard terms and 
     conditions for such loans.
       ``(B) For the purposes of subparagraph (A)(ii)--
       ``(i) the term `affiliate' means a person that controls, is 
     controlled by, or is under common control with another 
     person; and
       ``(ii) a person has control over another person if--
       ``(I) the person directly or indirectly, or acting through 
     1 or more others, owns, controls, or has the power to vote 5 
     percent or more of any class of voting securities of such 
     other person;
       ``(II) the person controls, in any manner, the election of 
     a majority of the directors or trustees of such other person; 
     or
       ``(III) the Secretary determines (after notice and 
     opportunity for a hearing) that the person directly or 
     indirectly exercises a controlling interest over the 
     management or policies of such other person.
       ``(C) The Secretary shall maintain and update a list of 
     lender affiliates of all eligible lenders, and shall provide 
     such list to the eligible institutions for use in carrying 
     out subparagraph (A).''.

     SEC. 4. NOTICE OF AVAILABILITY OF FUNDS FROM FEDERAL SOURCES.

       Section 128 of the Truth in Lending Act (15 U.S.C. 1638) is 
     amended by adding at the end the following:
       ``(e) Disclosures Relating to Private Educational Loans.--
       ``(1) In general.--In the case of an extension of credit 
     that is a private educational loan, other than a residential 
     mortgage transaction, the creditor shall provide in every 
     application for such extensions of credit and together with 
     any solicitation, marketing, or advertisement of such 
     extensions of credit, written, electronic, or otherwise, the 
     disclosures described in paragraph (2).
       ``(2) Disclosures.--Disclosures required by this subsection 
     shall include a clear and prominent statement--
       ``(A) that the borrower may qualify for Federal financial 
     assistance through a program under title IV of the Higher 
     Education Act of 1965, in lieu of or in addition to a loan 
     from a non-Federal source;
       ``(B) of the interest rates available with respect to such 
     Federal financial assistance;
       ``(C) describing how the applicable interest rate is 
     determined, including whether it is based on the credit score 
     of the borrower;
       ``(D) showing sample loan costs, disaggregated by type;
       ``(E) of the types of repayment plans that are available;
       ``(F) of whether, and under what conditions, early 
     repayment may be made without penalty;
       ``(G) of when and how often the loan would be 
     recapitalized;
       ``(H) describing all fees, deferments, or forbearance;
       ``(I) describing all available repayment benefits, and the 
     percentage of all borrowers who qualify for such benefits;
       ``(J) describing collection practices in the case of 
     default;
       ``(K) describing late payment penalties and associated 
     fees;
       ``(L) of any complaints (and their resolution) filed with 
     any State or private consumer protection agency (including 
     the Better Business Bureau); and
       ``(M) such other information as the Board may require.
       ``(3) Provision of information.--Before a creditor may 
     issue any funds with respect to an extension of credit 
     described in paragraph (1) for an amount equal to more than 
     $1,000--
       ``(A) the creditor shall notify the relevant postsecondary 
     educational institution, in writing, of the proposed 
     extension of credit and the amount thereof; and
       ``(B) if such relevant institution is a covered 
     institution, the institution shall, in an expedient manner, 
     notify the prospective borrower, in accordance with 
     procedures established by rule of the Board, whether and to 
     what extent the proposed extension of credit exceeds the cost 
     of attendance (as defined in section 472 of the Higher 
     Education Act of 1965) for the student at that institution, 
     after consideration of the Federal and State grant and loan 
     aid and institutional aid that the student has or is eligible 
     to receive.
       ``(4) Regulatory authority.--The Board--
       ``(A) shall issue such rules and regulations as may be 
     necessary to implement this subsection; and
       ``(B) may, by rule, establish appropriate exceptions to the 
     disclosures required by this subsection.
       ``(5) Definitions.--As used in this subsection, the terms 
     `private educational loan' and `covered institution' have the 
     same meanings as in section 151 of the Higher Education Act 
     of 1965.''.

  Mr. DURBIN. Mr. President, I rise today to urge my colleagues to 
support the Kennedy-Durbin ``Student Loan Sunshine Act.''
  There is no question that having a college education is essential in 
today's job market. Over the course of a lifetime, a college graduate 
will earn over $1 million more than those with only a high school 
diploma.
  In addition to the individual benefits of a college education, 
investing in and producing more college-educated Americans is vital to 
our nation's growth. Economists estimate that the increase in the 
education level of the United States labor force between 1915 and 1999 
directly resulted in at least 23 percent of the overall growth in U.S. 
productivity.
  However, paying for college is becoming increasingly difficult for 
students and their families. Tuition at four-year public institutions 
rose by 42 percent in the last five years, and more and more students 
are leaving college saddled with ever increasing debt burdens. 
According to the U.S. Department of Education, the average student debt 
has increased by more than 50 percent over the last decade. In 2004, 
college students graduated with an average of $17,400 in federal 
student loan debt, almost 45 percent more than students who graduated 
in 1993. When private loans are factored in, the average debt increases 
to more than $19,000.
  As students and their families struggle to find ways to pay for 
higher education, more and more are forced to turn to private student 
loans in order to close the gap. Because these loans are not guaranteed 
or subsidized by the government, they often carry much higher interest 
rates.
  According to The College Board, private student loans are now a $17.3 
billion industry. Between the 2000-2001 and 2005-2006 school years, 
private student loans grew at an average annual rate of 27 percent, 
after adjusting for inflation.
  As more students begin to rely on private student loans to help pay 
for college, some lenders and colleges are engaging in practices that 
do not appear to be in the best interests of the students. An article 
published in The New York Times revealed examples of incentives offered 
to colleges by student loan companies in order to be placed on a 
college's ``preferred lender'' list.
  An example cited in the article included an all-expense paid trip to 
the Caribbean for university officials and their spouses to attend an 
education ``summit'' held at a luxury five-star beachfront resort. 
Between symposiums, forums and roundtable discussions on the importance 
of addressing the cost of higher education, guests could enjoy 
complimentary water and beach sports such as snorkeling, sailing, 
kayaking, sailboarding and volleyball as well as access to an 18-hole 
championship golf course, a 10-court tennis complex, two beachfront 
pools and a luxury spa. News of the trip garnered such a negative 
response from the public that the sponsor of the trip, Loan to Learn, 
ultimately cancelled the trip. Aside from all-expense paid trips, other 
examples of incentives include iPods that were given away at a 
financial aid administrators meeting and bonuses that are based on how 
much students borrow.
  Colleges and universities should not be enticed to select ``preferred 
lenders'' or take other actions related to the student loan program on 
the basis of factors that are irrelevant, or at best ancillary, to the 
primary interests of the students.
  The Student Loan Sunshine Act protects students and parents from 
potential exploitation by private student loan lenders and lenders that 
offer gifts to schools as a way to acquire the school's loan business. 
It ensures that students and their families have all the facts and can 
feel confident that they're receiving the best deal on their college 
loan.
  First, this bill puts a stop to inappropriate lender practices. 
Lenders are

[[Page S1537]]

prohibited from offering any gift over $10 to employees of a 
university, including free trips, meals, and tickets to entertainment 
events. Lenders are no longer allowed to offer services to a financial 
aid office that create a conflict of interest such as lending staff 
during peak loan processing times, printing literature for the 
financial aid office and e-mailing students on behalf of the financial 
aid office.
  Second, the Act provides students and their families access to 
information about preferred lender lists, special arrangements between 
lenders and colleges and terms and conditions of loans. A school's 
preferred lender list must include at least three lenders that are 
independent from each other, clearly disclose why a lender was 
identified as a preferred lender, and clearly state that students and 
parents may take out a student loan with a lender that is not on their 
school's preferred lender list. This requirement is needed because in 
some instances, a school's preferred lender list may include what 
appear to be five different lenders; however, four of the five lenders 
may turn out to be subsidiaries of a single company. Lenders are 
required to report to the Secretary of Education any special 
arrangement they have with colleges to make loans to the students at a 
school including the terms of the arrangement and any benefit provided 
to the school in connection with the loan arrangement. In addition, the 
Act requires the Secretary of Education, along with the higher 
education community and students, to develop an easy-to-understand form 
for reporting the terms and conditions of student loans--similar to an 
APR disclosure.
  Finally, the Act encourages students to maximize their borrowing 
options through the government's loan programs before obtaining private 
loans with higher interest rates and discourages over-borrowing through 
direct-to-consumer education loans. Some companies fail to clearly 
disclose that their private educational loans typically carry a higher 
interest rate and even encourage students not to complete the Free 
Application for Federal Student Aid form, which allows students to 
borrow low-interest educational loans. The Act requires all direct-to-
consumer lenders to clearly disclose to students certain information 
such as: the fact that the student may be eligible for low-interest 
student loans through the federal government, how the interest rate is 
determined, any and all fees, and whether any complaints have been 
filed against the lender. Additionally, the Act puts in place 
provisions that will ensure that before a student obtains an 
educational loan through a direct-to-consumer lender, the student is 
informed of their loan options through the federal government and 
whether the loan will cause the student to exceed what is necessary to 
cover the student's cost of attendance.
  These requirements are simply meant to ensure that as students are 
about to sign on the dotted line and accept what will likely be one of 
the largest debts they will incur in their lives, they have the 
information they need to make an informed decision and some assurance 
that their school has only their best interests in mind--not visions of 
the Caribbean or the latest iPod. We must not look away and allow them 
to be taken advantage of at one of the most critical points in their 
lives. I urge my colleagues to support this important legislation.

                          ____________________