[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[H.R. 890 Introduced in House (IH)]
110th CONGRESS
1st Session
H. R. 890
To establish requirements for lenders and institutions of higher
education in order to protect students and other borrowers receiving
educational loans.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
February 7, 2007
Mr. George Miller of California (for himself, Mr. Hinojosa, Mr. Bishop
of New York, Mr. Courtney, Mr. Yarmuth, Mr. Tierney, Mrs. Davis of
California, Mr. Grijalva, Mr. Davis of Illinois, Mr. Michaud, Mr.
McDermott, Ms. Matsui, and Mr. Van Hollen) 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 establish requirements for lenders and institutions of higher
education in order to protect students and other borrowers receiving
educational loans.
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;
``(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--
``(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.''.
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