Student Loan Disclosure Modernization Act

II 116TH CONGRESS 1ST SESSION S. 2015 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 SENATE OF THE UNITED STATES JUNE 27, 2019 Mr. SCOTT of South Carolina (for himself and Mr. MANCHIN) introduced the following bill; which was read twice and referred to the Committee on Health, Education, Labor, and Pensions 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 (20 U.S.C. 1083(a)) is amended— 8 VerDate Sep 11 2014 01:20 Jul 03, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S2015.IS S2015 kjohnson on DSK79L0C42 with BILLS 2 •S 2015 IS (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 01:20 Jul 03, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S2015.IS S2015 kjohnson on DSK79L0C42 with BILLS 3 •S 2015 IS ‘‘(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 and loan repayment options (includ- 17 ing income-based and income contingent 18 repayment), with emphasis on the loan 19 terms determined by the Secretary to be 20 critical to understanding the total costs of 21 the loan and the estimated monthly repay- 22 ment; 23 ‘‘(ii) has a clear format and design, 24 including easily readable font; and 25 VerDate Sep 11 2014 01:20 Jul 03, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S2015.IS S2015 kjohnson on DSK79L0C42 with BILLS 4 •S 2015 IS ‘‘(iii) is as succinct as practicable. 1 ‘‘(C) CONSULTATION.—In developing the 2 Plain Language Disclosure Form, the Secretary 3 shall, as appropriate, consult with— 4 ‘‘(i) the Federal Reserve Board; 5 ‘‘(ii) institutions and contractors de- 6 scribed in paragraph (1); 7 ‘‘(iii) borrowers of loans under this 8 part; and 9 ‘‘(iv) other organizations involved in 10 the provision of financial assistance to stu- 11 dents, as identified by the Secretary. 12 ‘‘(3) ELECTRONIC SYSTEM FOR COMPLIANCE.— 13 In carrying out paragraph (2), Secretary shall de- 14 velop and implement an electronic system that may 15 be used by institutions and contractors described in 16 paragraph (1) to generate a Plain Language Disclo- 17 sure Form for each borrower by— 18 ‘‘(A) enabling institutions and contractors 19 to enter personalized loan request information 20 electronically; 21 ‘‘(B) integrating appropriate data found in 22 the National Student Loan Data System; and 23 ‘‘(C) generating and integrating personal- 24 ized borrower information. 25 VerDate Sep 11 2014 01:20 Jul 03, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S2015.IS S2015 kjohnson on DSK79L0C42 with BILLS 5 •S 2015 IS ‘‘(4) LIMIT ON LIABILITY.—Nothing in this 1 subsection 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 01:20 Jul 03, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S2015.IS S2015 kjohnson on DSK79L0C42 with BILLS 6 •S 2015 IS 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 01:20 Jul 03, 2019 Jkt 089200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6301 E:\BILLS\S2015.IS S2015 kjohnson on DSK79L0C42 with BILLS