[Congressional Record Volume 162, Number 140 (Thursday, September 15, 2016)]
[Senate]
[Pages S5845-S5847]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. DURBIN (for himself, Mr. Franken, and Mr. Reed):
  S. 3347. A bill to amend the Truth in Lending Act and the Higher 
Education Act of 1965 to require certain creditors to obtain 
certifications from institutions of higher education, and for other 
purposes; to the Committee on Banking, Housing, and Urban Affairs.
  Mr. DURBIN. Mr. President, this has been a big week in Chicago and 
the Midwest, in fact, across the country, as some 35,000 students who 
attended ITT Tech have finally come to realize that school is closing 
and many of them have to assess now what their lives will be from this 
point forward.
  In my hometown of Springfield, IL, there was a large sign in the 
local shopping mall ``ITT Tech,'' and I used to drive by and look at 
it, thinking: I know how this story is going to end, and it will not be 
good.
  It turns out some 750 students signed up at this for-profit college 
in the State of Illinois and, as I mentioned, many outside the State, 
and many of them were fleeced, literally.
  In this situation, they offered them an associate's degree at the ITT 
Tech campus at the White Oaks Mall in Springfield. There were several 
courses, one in communications, another one in computers.
  The tuition charged at ITT Tech for a 2-year associate's degree was 
$47,000. If those same students got in their cars and drove 15 minutes 
away, they would have been at Lincoln Land Community College. The same 
course is offered not for $47,000 for a 2-year career degree but less 
than $7,000.
  These students did not know better. They thought they were in good 
hands. They signed up for these loans, and now the school has 
disappeared. It disappeared after more than a dozen attorneys general 
around the United States started suing ITT Tech for its practices: 
recruiting students who were not ready for college, misleading them 
about the courses that were being offered, and overcharging them on 
their loans. It is currently being sued by the Consumer Financial 
Protection Bureau and the Securities and Exchange Commission. This is 
not the first major for-profit college to go down. Corinthian was an 
early casualty. I am sorry to say that I think others will follow.
  It bears repeating that when we take a look at this industry, the 
for-profit college industry, we are looking at the most heavily 
subsidized private for-profit companies in the United States of 
America. For many of these companies, over 90 percent of their revenue 
sources come from the Federal Treasury in the form of Pell grants and 
direct government loans. They take the money from the government 
through the students. The students end up with the debt to pay off and 
many times, if they can stick with the course, a worthless diploma or 
certificate.
  Why are we letting this happen? Why are we letting American families 
work hard to send their kids to college, only to be exploited by 
schools that are thinly veiled machines for taking money away from 
these poor students and saddling them with debt? Why aren't we speaking 
out? Well, sadly, the for-profit college and university industry in 
America has friends in high places. When the time comes, they hire some 
of the most effective lobbyists in Washington on both political sides 
to push for their agenda and to keep them in business. It is 
understandable. They take millions of dollars out of these operations. 
They end up with salaries for CEOs that are higher for their so-called 
university presidents than any university president in America. We let 
it happen. The Congress lets it happen. The government lets it happen.
  It is time for a new day and some new thinking. The 2016-2017 school 
year has begun. Millions of students across the country are walking 
onto college campuses, and they are excited about their opportunities. 
Many of these students know they are going to have to take out loans to 
finance their education and will end up owing the government thousands 
of dollars.
  We know that student debt is now larger than credit card debt. It is 
over $1 trillion. That means that students and their families across 
America are deeply indebted for higher education. If you are getting a 
good education out of it, something that really changes your life for 
the better and gives you new opportunities, the argument can be made. 
But, sadly, in many cases students don't receive the education they 
were promised. And at the end of the day whether these students owe 
money to the government or to private lenders, makes a big difference.
  A lot of students--19, 20 years old--really don't understand the 
magnitude of the debt they are incurring. We know that two-thirds of 
students who take out private education loans really don't understand 
the terms of those loans, the interest rates of those loans, and how 
they compare with government loans. They don't understand that in many 
cases, private student loans are significantly more expensive and 
riskier.
  Federal student loans have fixed, affordable interest rates. They 
have a variety of consumer protections built into them: forbearance in 
times of economic difficulty; manageable repayment options, such as 
income-based repayment plans which calculate your monthly student loan 
payment based on your income.
  On the other hand, private student loans don't have these protections 
and offer interest rates that are some of the highest in the land, up 
to 18 percent. These private loans also don't include repayment options 
that Federal loans do. I have heard from many private education loan 
borrowers that their lender is unwilling to work with them when it 
comes to alternative repayment plans. They are harassed by collection 
agencies night and day when they owe these private student loans. In 
many cases, private lenders are more focused on their own bottom line 
than the students' welfare.
  This past summer, the Consumer Financial Protection Bureau took 
action against Wells Fargo Bank--one of the

[[Page S5846]]

largest private student lenders--for illegal student loan servicing 
practices. Wells Fargo charged borrowers illegal fees, failed to 
provide borrowers with accurate loan information, and failed to correct 
inaccurate credit reports. Upon being caught, Wells Fargo was fined 
$3.6 million and is required to refund borrowers who were illegally 
charged.
  While I commend the Consumer Financial Protection Bureau for their 
work to hold private student lenders accountable, there are steps we in 
Congress should take to make sure students have a fighting chance.
  Today, Senators Franken, Reed, and I will introduce the Know Before 
You Owe Private Education Loan Act of 2016. This legislation requires 
school certification before a student can take out a private loan. 
There are certain steps the school has to take before certifying a 
loan. The prospective borrower's school has to confirm the student's 
enrollment status, cost of attendance, and estimated Federal financial 
aid assistance before certifying. The school must also notify students 
of the amount of unused Federal student aid for which they are still 
eligible. Think about that. Some of these schools are luring students 
into more expensive, terrible private loans when the students are still 
eligible for lower interest rates and better terms through the Federal 
Government. I have heard too many stories of for-profit colleges 
steering students into these private institutional loans. This bill 
will help stop that.
  The bill will also ensure that students are given information about 
the differences in terms and repayment options. For students who still 
decide to get a private student loan, the bill requires private lenders 
to send the student borrowers quarterly updates on their balance, 
accrued interest, and capitalized interest.
  The bill also requires private lenders to annually report the number 
of students taking out private loans, the amount of the loans, and the 
interest rates--all of these to be reported to the Consumer Financial 
Protection Bureau. Currently, there is little information publicly 
available about private student loans. Increasing the amount of 
available information will help policymakers and enforcement agencies 
more effectively protect students and their families.
  Here are a few of the organizations supporting our bill: the 
Institute for College Access and Success, National Association for 
College Admission Counseling, National Consumer Law Center, Consumer 
Action, National Association of Student Financial Aid Administrators, 
National Association of Consumer Advocates, Consumers Union, the 
American Association of University Women, the American Federation of 
Teachers.
  Loan certification for private education loans could keep many 
students from taking on unnecessary debt or unknowingly giving up the 
benefits and protections of Federal student loans. It is an important 
part of making college more affordable. I thank Senators Franken and 
Jack Reed for standing with me in this effort.
  I sincerely hope that this Congress, which is now coming to a close 
before the election, will take up this question of student loans when 
we return after the election. I know we only have a few weeks, but if 
you ask working families across America what concerns them greatly, it 
is the amount of debt kids are incurring to go to college. In some 
families, mom and dad have never been to college, and sending their son 
or daughter off to a university is a dream come true. It can turn into 
a nightmare if they end up at for-profit colleges and universities.
  I put on the Record the last time I spoke--and I will put it on 
again--the basic numbers to know about the for-profit college and 
university industry. Ten percent of all college students attend these 
schools, schools such as the University of Phoenix, DeVry, Kaplan, and 
Rasmussen. You know the names. Ten percent of the students end up in 
these schools, but when it comes to student loan defaults, 40 percent 
of the student loan defaults are students from for-profit colleges and 
universities. Students are dramatically overcharged for tuition. They 
are put into courses that are worthless, and they end up with maybe a 
certificate or a diploma that cannot even land them a job.
  Another statistic that I think is shameful--and it really should be a 
reminder to Members of the Senate of our responsibility--the Department 
of Education analyzed programs at for-profit colleges and found that 72 
percent of for-profit college graduates, on average, make less money 
than high school dropouts--72 percent. After all that time, all that 
debt, all those promises, they make less money than if they dropped out 
of high school. How can we continue to subsidize this industry after 
what we know about their performance? We need to hold them to higher 
standards.
  In the meantime, let's find a way to protect students and working 
families who are trying to realize the American dream, make this a 
better nation, and provide a better life for themselves and their 
families.
  Mr. President, I ask unanimous consent that the text of the 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. 3347

       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 ``Know Before You Owe Private 
     Education Loan Act of 2016''.

     SEC. 2. AMENDMENTS TO THE TRUTH IN LENDING ACT.

       (a) In General.--Section 128(e) of the Truth in Lending Act 
     (15 U.S.C. 1638(e)) is amended--
       (1) by striking paragraph (3) and inserting the following:
       ``(3) Institutional certification required.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     before a creditor may issue any funds with respect to an 
     extension of credit described in this subsection, the 
     creditor shall obtain from the relevant institution of higher 
     education where such loan is to be used for a student, such 
     institution's certification of--
       ``(i) the enrollment status of the student;
       ``(ii) the student's cost of attendance at the institution 
     as determined by the institution under part F of title IV of 
     the Higher Education Act of 1965; and
       ``(iii) the difference between--

       ``(I) such cost of attendance; and
       ``(II) the student's estimated financial assistance, 
     including such assistance received under title IV of the 
     Higher Education Act of 1965 and other financial assistance 
     known to the institution, as applicable.

       ``(B) Exception.--Notwithstanding subparagraph (A), a 
     creditor may issue funds with respect to an extension of 
     credit described in this subsection without obtaining from 
     the relevant institution of higher education such 
     institution's certification if such institution fails to 
     provide within 15 business days of the creditor's request for 
     such certification--
       ``(i) the requested certification; or
       ``(ii) notification that the institution has received the 
     request for certification and will need additional time to 
     comply with the certification request.
       ``(C) Loans disbursed without certification.--If a creditor 
     issues funds without obtaining a certification, as described 
     in subparagraph (B), such creditor shall report the issuance 
     of such funds in a manner determined by the Director of the 
     Bureau of Consumer Financial Protection.'';
       (2) by redesignating paragraphs (9), (10), and (11) as 
     paragraphs (10), (11), and (12), respectively; and
       (3) by inserting after paragraph (8) the following:
       ``(9) Provision of information.--
       ``(A) Provision of information to students.--
       ``(i) Loan statement.--A creditor that issues any funds 
     with respect to an extension of credit described in this 
     subsection shall send loan statements, where such loan is to 
     be used for a student, to borrowers of such funds not less 
     than once every 3 months during the time that such student is 
     enrolled at an institution of higher education.
       ``(ii) Contents of loan statement.--Each statement 
     described in clause (i) shall--

       ``(I) report the borrower's total remaining debt to the 
     creditor, including accrued but unpaid interest and 
     capitalized interest;
       ``(II) report any debt increases since the last statement; 
     and
       ``(III) list the current interest rate for each loan.

       ``(B) Notification of loans disbursed without 
     certification.--On or before the date a creditor issues any 
     funds with respect to an extension of credit described in 
     this subsection, the creditor shall notify the relevant 
     institution of higher education, in writing, of the amount of 
     the extension of credit and the student on whose behalf 
     credit is extended. The form of such written notification 
     shall be subject to the regulations of the Bureau.
       ``(C) Annual report.--A creditor that issues funds with 
     respect to an extension of credit described in this 
     subsection shall prepare and submit an annual report to the 
     Bureau containing the required information about private 
     student loans to be determined

[[Page S5847]]

     by the Bureau, in consultation with the Secretary of 
     Education.''.
       (b) Definition of Private Education Loan.--Section 
     140(a)(7)(A) of the Truth in Lending Act (15 U.S.C. 
     1650(a)(7)(A)) is amended--
       (1) by redesignating clause (ii) as clause (iii);
       (2) in clause (i), by striking ``and'' after the semicolon; 
     and
       (3) by adding after clause (i) the following:
       ``(ii) is not made, insured, or guaranteed under title VII 
     or title VIII of the Public Health Service Act (42 U.S.C. 292 
     et seq. and 296 et seq.); and''.
       (c) Regulations.--Not later than 365 days after the date of 
     enactment of this Act, the Bureau of Consumer Financial 
     Protection shall issue regulations in final form to implement 
     paragraphs (3) and (9) of section 128(e) of the Truth in 
     Lending Act (15 U.S.C. 1638(e)), as amended by subsection 
     (a). Such regulations shall become effective not later than 6 
     months after their date of issuance.

     SEC. 3. AMENDMENT TO THE HIGHER EDUCATION ACT OF 1965.

       (a) Amendment to the Higher Education Act of 1965.--Section 
     487(a) of the Higher Education Act of 1965 (20 U.S.C. 
     1094(a)) is amended by striking paragraph (28) and inserting 
     the following:
       ``(28)(A) The institution shall--
       ``(i) upon the request of a private educational lender, 
     acting in connection with an application initiated by a 
     borrower for a private education loan in accordance with 
     section 128(e)(3) of the Truth in Lending Act, provide 
     certification to such private educational lender--

       ``(I) that the student who initiated the application for 
     the private education loan, or on whose behalf the 
     application was initiated, is enrolled or is scheduled to 
     enroll at the institution;
       ``(II) of such student's cost of attendance at the 
     institution as determined under part F of this title; and
       ``(III) of the difference between--

       ``(aa) the cost of attendance at the institution; and
       ``(bb) the student's estimated financial assistance 
     received under this title and other assistance known to the 
     institution, as applicable; and
       ``(ii) provide the certification described in clause (i), 
     or notify the creditor that the institution has received the 
     request for certification and will need additional time to 
     comply with the certification request--

       ``(I) within 15 business days of receipt of such 
     certification request; and
       ``(II) only after the institution has completed the 
     activities described in subparagraph (B).

       ``(B) The institution shall, upon receipt of a 
     certification request described in subparagraph (A)(i), and 
     prior to providing such certification--
       ``(i) determine whether the student who initiated the 
     application for the private education loan, or on whose 
     behalf the application was initiated, has applied for and 
     exhausted the Federal financial assistance available to such 
     student under this title and inform the student accordingly; 
     and
       ``(ii) provide the borrower whose loan application has 
     prompted the certification request by a private education 
     lender, as described in subparagraph (A)(i), with the 
     following information and disclosures:

       ``(I) The amount of additional Federal student assistance 
     for which the borrower is eligible and the potential 
     advantages of Federal loans under this title, including 
     disclosure of the fixed interest rates, deferments, flexible 
     repayment options, loan forgiveness programs, and additional 
     protections, and the higher student loan limits for dependent 
     students whose parents are not eligible for a Federal Direct 
     PLUS Loan.
       ``(II) The borrower's ability to select a private 
     educational lender of the borrower's choice.
       ``(III) The impact of a proposed private education loan on 
     the borrower's potential eligibility for other financial 
     assistance, including Federal financial assistance under this 
     title.
       ``(IV) The borrower's right to accept or reject a private 
     education loan within the 30-day period following a private 
     educational lender's approval of a borrower's application and 
     about a borrower's 3-day right to cancel period.

       ``(C) For purposes of this paragraph, the terms `private 
     educational lender' and `private education loan' have the 
     meanings given such terms in section 140 of the Truth in 
     Lending Act (15 U.S.C. 1650).''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall take effect on the effective date of the regulations 
     described in section 2(c).

     SEC. 4. REPORT.

       Not later than 24 months after the issuance of regulations 
     under section 2(c), the Director of the Bureau of Consumer 
     Financial Protection and the Secretary of Education shall 
     jointly submit to Congress a report on the compliance of 
     institutions of higher education and private educational 
     lenders with section 128(e)(3) of the Truth in Lending Act 
     (15 U.S.C. 1638(e)), as amended by section 2, and section 
     487(a)(28) of the Higher Education Act of 1965 (20 U.S.C. 
     1094(a)), as amended by section 3. Such report shall include 
     information about the degree to which specific institutions 
     utilize certifications in effectively encouraging the 
     exhaustion of Federal student loan eligibility and lowering 
     student private education loan debt.
                                 ______