Student Loan Disclosure Modernization Act

I 116TH CONGRESS 1ST SESSION H. R. 1161 To amend the Higher Education Act of 1965 to direct the Secretary of Education to develop a plain language disclosure form for borrowers of Federal student loans, and for other purposes. IN THE HOUSE OF REPRESENTATIVES FEBRUARY 13, 2019 Mr. CLEAVER (for himself and Mr. BANKS) introduced the following bill; which was referred to the Committee on Education and Labor A BILL To amend the Higher Education Act of 1965 to direct the Secretary of Education to develop a plain language dis- closure form for borrowers of Federal student loans, and for other purposes. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Student Loan Disclo- 4 sure Modernization Act’’. 5 SEC. 2. ADDITIONAL DISCLOSURES. 6 Section 433(a) of the Higher Education Act of 1965 7 is amended— 8 VerDate Sep 11 2014 04:03 Feb 23, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H1161.IH H1161 kjohnson on DSK79L0C42 with BILLS 2 •HR 1161 IH (1) in paragraph (4), by striking ‘‘the origina- 1 tion fee and’’ and inserting ‘‘finance charges, the 2 origination fee, and’’; 3 (2) by redesignating paragraphs (6) through 4 (19) as paragraphs (7) through (20), respectively; 5 and 6 (3) by inserting after paragraph (5), the fol- 7 lowing: 8 ‘‘(6) the annual percentage rate applicable to 9 the loan, taking into account— 10 ‘‘(A) the amount of the loan; 11 ‘‘(B) the stated interest rate of the loan; 12 ‘‘(C) the standard term for a loan of the 13 same type; 14 ‘‘(D) any fees or additional costs associ- 15 ated with the loan; and 16 ‘‘(E) any capitalization of interest on the 17 loan;’’. 18 SEC. 3. PLAIN LANGUAGE DISCLOSURE FORM. 19 Section 455(p) of the Higher Education Act of 1965 20 (20 U.S.C. 1087e(p)) is amended— 21 (1) by striking ‘‘Each institution’’ and inserting 22 the following: 23 ‘‘(1) IN GENERAL.—Each institution’’; and 24 (2) by adding at the end the following: 25 VerDate Sep 11 2014 04:03 Feb 23, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H1161.IH H1161 kjohnson on DSK79L0C42 with BILLS 3 •HR 1161 IH ‘‘(2) PLAIN LANGUAGE DISCLOSURE FORM.— 1 ‘‘(A) DEVELOPMENT AND ISSUANCE OF 2 FORM.—Not later than 18 months after the 3 date of the enactment of this paragraph, the 4 Secretary shall, based on consumer testing, de- 5 velop and issue a model form to be known as 6 the ‘Plain Language Disclosure Form’ that 7 shall be used by institutions and contractors de- 8 scribed in paragraph (1) to comply with the dis- 9 closure requirements of such paragraph. 10 ‘‘(B) FORMAT.—The Secretary shall en- 11 sure that the Plain Language Disclosure 12 Form— 13 ‘‘(i) enables borrowers to easily iden- 14 tify the information required to be dis- 15 closed under section 433(a) with respect to 16 a loan, with emphasis on the loan terms 17 determined by the Secretary to be critical 18 to understanding the total costs of the loan 19 and the estimated monthly repayment; 20 ‘‘(ii) has a clear format and design, 21 including easily readable font; and 22 ‘‘(iii) is as succinct as practicable. 23 VerDate Sep 11 2014 04:03 Feb 23, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H1161.IH H1161 kjohnson on DSK79L0C42 with BILLS 4 •HR 1161 IH ‘‘(C) CONSULTATION.—In developing Plain 1 Language Disclosure Form, the Secretary shall, 2 as appropriate, consult with— 3 ‘‘(i) the Federal Reserve Board; 4 ‘‘(ii) institutions and contractors de- 5 scribed in paragraph (1); 6 ‘‘(iii) borrowers of loans under this 7 part; and 8 ‘‘(iv) other organizations involved in 9 the provision of financial assistance to stu- 10 dents, as identified by the Secretary. 11 ‘‘(3) ELECTRONIC SYSTEM FOR COMPLIANCE.— 12 In carrying out paragraph (2), Secretary shall de- 13 velop and implement an electronic system that may 14 be used by institutions and contractors described in 15 paragraph (1) to generate a Plain Language Disclo- 16 sure Form for each borrower by— 17 ‘‘(A) enabling institutions and contractors 18 to enter personalized loan request information 19 electronically; 20 ‘‘(B) integrating appropriate data found in 21 the National Student Loan Data System; and 22 ‘‘(C) generating and integrating personal- 23 ized borrower information. 24 VerDate Sep 11 2014 04:03 Feb 23, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H1161.IH H1161 kjohnson on DSK79L0C42 with BILLS 5 •HR 1161 IH ‘‘(4) LIMIT ON LIABILITY.—Nothing in this 1 paragraph shall be construed to create a private 2 right of action against an institution or contractor 3 described in paragraph (1) with respect to the form 4 or electronic system developed under this paragraph. 5 ‘‘(5) BORROWER SIGNATURE REQUIRED.—Be- 6 ginning after the issuance of the Plain Language 7 Disclosure Form by the Secretary under paragraph 8 (2), a loan may not be issued to a borrower under 9 this part unless the borrower acknowledges, in writ- 10 ing (which may include an electronic signature), that 11 the borrower has read the Plain Language Disclo- 12 sure Form for the loan concerned. 13 ‘‘(6) CONSUMER TESTING DEFINED.—In this 14 subsection, the term ‘consumer testing’ means the 15 solicitation of feedback from individuals, including 16 borrowers and prospective borrowers of loans under 17 this part (as determined by the Secretary), about 18 the usefulness of different methods of disclosing ma- 19 terial terms of loans on the Plain Language Disclo- 20 sure Form to maximize borrowers’ understanding of 21 the terms and conditions of such loans.’’. 22 SEC. 4. REPORT TO CONGRESS. 23 Not later than 2 years after the date of the enact- 24 ment of this Act, the Secretary of Education shall submit 25 VerDate Sep 11 2014 04:03 Feb 23, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H1161.IH H1161 kjohnson on DSK79L0C42 with BILLS 6 •HR 1161 IH to Congress a report that includes a description of the 1 methods and procedures used to develop the Plain Lan- 2 guage Disclosure Form required under section 455(p)(2) 3 of the Higher Education Act of 1965 (as added by section 4 3 of this Act). 5 Æ VerDate Sep 11 2014 04:03 Feb 23, 2019 Jkt 089200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6301 E:\BILLS\H1161.IH H1161 kjohnson on DSK79L0C42 with BILLS