Know Before You Owe Private Education Loan Act of 2019

II 116TH CONGRESS 1ST SESSION S. 2184 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. IN THE SENATE OF THE UNITED STATES JULY 18, 2019 Mr. DURBIN (for himself, Mr. REED, Mr. BROWN, Mr. CARDIN, Ms. BALD- WIN, and Ms. SMITH) introduced the following bill; which was read twice and referred to the Committee on Banking, Housing, and Urban Affairs A BILL To amend the Truth in Lending Act and the Higher Edu- cation Act of 1965 to require certain creditors to obtain certifications from institutions of higher education, 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 ‘‘Know Before You Owe 4 Private Education Loan Act of 2019’’. 5 SEC. 2. AMENDMENTS TO THE TRUTH IN LENDING ACT. 6 (a) IN GENERAL.—Section 128(e) of the Truth in 7 Lending Act (15 U.S.C. 1638(e)) is amended— 8 VerDate Sep 11 2014 23:30 Jul 23, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S2184.IS S2184 kjohnson on DSK79L0C42 with BILLS 2 •S 2184 IS (1) by striking paragraph (3) and inserting the 1 following: 2 ‘‘(3) INSTITUTIONAL CERTIFICATION RE- 3 QUIRED.— 4 ‘‘(A) IN GENERAL.—Except as provided in 5 subparagraph (B), before a creditor may issue 6 any funds with respect to an extension of credit 7 described in this subsection, the creditor shall 8 obtain from the relevant institution of higher 9 education where such loan is to be used for a 10 student, such institution’s certification of— 11 ‘‘(i) the enrollment status of the stu- 12 dent; 13 ‘‘(ii) the student’s cost of attendance 14 at the institution as determined by the in- 15 stitution under part F of title IV of the 16 Higher Education Act of 1965; and 17 ‘‘(iii) the difference between— 18 ‘‘(I) such cost of attendance; and 19 ‘‘(II) the student’s estimated fi- 20 nancial assistance, including such as- 21 sistance received under title IV of the 22 Higher Education Act of 1965 (20 23 U.S.C. 1070 et seq.) and other finan- 24 VerDate Sep 11 2014 23:30 Jul 23, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S2184.IS S2184 kjohnson on DSK79L0C42 with BILLS 3 •S 2184 IS cial assistance known to the institu- 1 tion, as applicable. 2 ‘‘(B) EXCEPTION.—Notwithstanding sub- 3 paragraph (A), a creditor may issue funds with 4 respect to an extension of credit described in 5 this subsection without obtaining from the rel- 6 evant institution of higher education such insti- 7 tution’s certification if such institution fails to 8 provide within 15 business days of the credi- 9 tor’s request for such certification— 10 ‘‘(i) notification of the institution’s re- 11 fusal to certify the request; or 12 ‘‘(ii) notification that the institution 13 has received the request for certification 14 and will need additional time to comply 15 with the certification request. 16 ‘‘(C) LOANS DISBURSED WITHOUT CER- 17 TIFICATION.—If a creditor issues funds without 18 obtaining a certification, as described in sub- 19 paragraph (B), such creditor shall report the 20 issuance of such funds in a manner determined 21 by the Director of the Consumer Financial Pro- 22 tection Bureau.’’; 23 VerDate Sep 11 2014 23:30 Jul 23, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S2184.IS S2184 kjohnson on DSK79L0C42 with BILLS 4 •S 2184 IS (2) by redesignating paragraphs (9), (10), and 1 (11) as paragraphs (10), (11), and (12), respec- 2 tively; and 3 (3) by inserting after paragraph (8) the fol- 4 lowing: 5 ‘‘(9) PROVISION OF INFORMATION.— 6 ‘‘(A) PROVISION OF INFORMATION TO STU- 7 DENTS.— 8 ‘‘(i) LOAN STATEMENT.—A creditor 9 that issues any funds with respect to an 10 extension of credit described in this sub- 11 section shall send loan statements, where 12 such loan is to be used for a student, to 13 borrowers of such funds not less than once 14 every 3 months during the time that such 15 student is enrolled at an institution of 16 higher education. 17 ‘‘(ii) CONTENTS OF LOAN STATE- 18 MENT.—Each statement described in 19 clause (i) shall— 20 ‘‘(I) report the borrower’s total 21 remaining debt to the creditor, includ- 22 ing accrued but unpaid interest and 23 capitalized interest; 24 VerDate Sep 11 2014 23:30 Jul 23, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S2184.IS S2184 kjohnson on DSK79L0C42 with BILLS 5 •S 2184 IS ‘‘(II) report any debt increases 1 since the last statement; and 2 ‘‘(III) list the current interest 3 rate for each loan. 4 ‘‘(B) NOTIFICATION OF LOANS DISBURSED 5 WITHOUT CERTIFICATION.—On or before the 6 date a creditor issues any funds with respect to 7 an extension of credit described in this sub- 8 section, the creditor shall notify the relevant in- 9 stitution of higher education, in writing, of the 10 amount of the extension of credit and the stu- 11 dent on whose behalf credit is extended. The 12 form of such written notification shall be sub- 13 ject to the regulations of the Bureau. 14 ‘‘(C) ANNUAL REPORT.—A creditor that 15 issues funds with respect to an extension of 16 credit described in this subsection shall prepare 17 and submit an annual report to the Bureau 18 containing the required information about pri- 19 vate student loans to be determined by the Di- 20 rector of the Bureau, in consultation with the 21 Secretary of Education.’’. 22 (b) DEFINITION OF PRIVATE EDUCATION LOAN.— 23 Section 140(a)(8)(A) of the Truth in Lending Act (15 24 U.S.C. 1650(a)(8)(A)) is amended— 25 VerDate Sep 11 2014 23:30 Jul 23, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S2184.IS S2184 kjohnson on DSK79L0C42 with BILLS 6 •S 2184 IS (1) by redesignating clause (ii) as clause (iii); 1 (2) in clause (i), by striking ‘‘and’’ after the 2 semicolon; and 3 (3) by adding after clause (i) the following: 4 ‘‘(ii) is not made, insured, or guaran- 5 teed under title VII or title VIII of the 6 Public Health Service Act (42 U.S.C. 292 7 et seq. and 296 et seq.); and’’. 8 (c) REGULATIONS.—Not later than 365 days after 9 the date of enactment of this Act, the Director of the Con- 10 sumer Financial Protection Bureau shall issue regulations 11 in final form to implement paragraphs (3) and (9) of sec- 12 tion 128(e) of the Truth in Lending Act (15 U.S.C. 13 1638(e)), as amended by subsection (a). Such regulations 14 shall become effective not later than 6 months after their 15 date of issuance. 16 SEC. 3. AMENDMENT TO THE HIGHER EDUCATION ACT OF 17 1965. 18 (a) AMENDMENT TO THE HIGHER EDUCATION ACT 19 OF 1965.—Section 487(a) of the Higher Education Act 20 of 1965 (20 U.S.C. 1094(a)) is amended by striking para- 21 graph (28) and inserting the following: 22 ‘‘(28)(A) Upon the request of a private edu- 23 cational lender, acting in connection with an applica- 24 tion initiated by a borrower for a private education 25 VerDate Sep 11 2014 23:30 Jul 23, 2019 Jkt 089200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S2184.IS S2184 kjohnson on DSK79L0C42 with BILLS 7 •S 2184 IS loan in accordance with section 128(e)(3) of the 1 Truth in Lending Act, the institution shall within 15 2 days of receipt of the request— 3 ‘‘(i) provide certification to such private 4 educational lender— 5 ‘‘(I) that the student who initiated the 6 application for the private education loan, 7 or on whose behalf the application was ini- 8 tiated, is enrolled or is scheduled to enroll 9 at the institution; 10 ‘‘(II) of such student’s cost of attend- 11 ance at the institution as determined under 12 part F of this title; and 13 ‘‘(III) of the difference between— 14 ‘‘(aa) the cost of attendance at 15 the institution; and 16 ‘‘(bb) the student’s estimated fi- 17 nancial assistance received under this 18 title and other assistance known to 19 the institution, as applicable; 20 ‘‘(ii) notify the creditor that the institution 21 has received the request for certification and 22 will need additional time to comply with the 23 certification request; or 24 VerDate Sep 11 2014 23:30 Jul 23, 2019 Jkt 089200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S2184.IS S2184 kjohnson on DSK79L0C42 with BILLS 8 •S 2184 IS ‘‘(iii) provide notice to the private edu- 1 cational lender of the institution’s refusal to 2 certify the private education loan pursuant to 3 subparagraph (D). 4 ‘‘(B) With respect to a certification request de- 5 scribed in subparagraph (A), and prior to providing 6 such certification under subparagraph (A)(i) or pro- 7 viding notice of the refusal to provide certification 8 under subparagraph (A)(iii), the institution shall— 9 ‘‘(i) determine whether the student who 10 initiated the application for the private edu- 11 cation loan, or on whose behalf the application 12 was initiated, has applied for and exhausted the 13 Federal financial assistance available to such 14 student under this title and inform the student 15 accordingly; and 16 ‘‘(ii) provide the borrower whose loan ap- 17 plication has prompted the certification request 18 by a private educational lender, as described in 19 subparagraph (A)(i), with the following infor- 20 mation and disclosures: 21 ‘‘(I) The amount of additional Federal 22 student assistance for which the borrower 23 is eligible and the advantages of Federal 24 loans under this title, including disclosure 25 VerDate Sep 11 2014 23:30 Jul 23, 2019 Jkt 089200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S2184.IS S2184 kjohnson on DSK79L0C42 with BILLS 9 •S 2184 IS of the fixed interest rates, deferments, 1 flexible repayment options, loan forgiveness 2 programs, and additional protections, and 3 the higher student loan limits for depend- 4 ent students whose parents are not eligible 5 for a Federal Direct PLUS Loan. 6 ‘‘(II) The borrower’s ability to select a 7 private educational lender of the bor- 8 rower’s choice. 9 ‘‘(III) The impact of a proposed pri- 10 vate education loan on the borrower’s po- 11 tential eligibility for other financial assist- 12 ance, including Federal financial assistance 13 under this title. 14 ‘‘(IV) The borrower’s right to accept 15 or reject a private education loan within 16 the 30-day period following a private edu- 17 cational lender’s approval of a borrower’s 18 application and about a borrower’s 3-day 19 right to cancel period. 20 ‘‘(C) For purposes of this paragraph, the terms 21 ‘private educational lender’ and ‘private education 22 loan’ have the meanings given such terms in section 23 140 of the Truth in Lending Act (15 U.S.C. 24 1650).’’. 25 VerDate Sep 11 2014 23:30 Jul 23, 2019 Jkt 089200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S2184.IS S2184 kjohnson on DSK79L0C42 with BILLS 10 •S 2184 IS (b) EFFECTIVE DATE.—The amendment made by 1 subsection (a) shall take effect on the effective date of the 2 regulations described in section 2(c). 3 (c) PREFERRED LENDER ARRANGEMENT.—Section 4 151(8)(A)(ii) of the Higher Education Act of 1965 (20 5 U.S.C. 1019(8)(A)(ii)) is amended by inserting ‘‘certi- 6 fying,’’ after ‘‘promoting,’’. 7 SEC. 4. REPORT. 8 (a) IN GENERAL.—Not later than 24 months after 9 the issuance of regulations under section 2(c), the Direc- 10 tor of the Consumer Financial Protection Bureau and the 11 Secretary of Education shall jointly submit to Congress 12 a report on the compliance of— 13 (1) private educational lenders with section 14 128(e)(3) of the Truth in Lending Act (15 U.S.C. 15 1638(e)(3)), as amended by section 2; and 16 (2) institutions of higher education with section 17 487(a)(28) of the Higher Education Act of 1965 (20 18 U.S.C. 1094(a)(28)), as amended by section 3. 19 (b) CONTENTS.—The contents of the report described 20 in subsection (a) shall include information about the de- 21 gree to which specific institutions utilize certifications in 22 effectively— 23 VerDate Sep 11 2014 23:30 Jul 23, 2019 Jkt 089200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S2184.IS S2184 kjohnson on DSK79L0C42 with BILLS 11 •S 2184 IS (1) encouraging the exhaustion of Federal stu- 1 dent loan eligibility by borrowers prior to taking on 2 private education loan debt; and 3 (2) lowering private education loan debt by bor- 4 rowers. 5 Æ VerDate Sep 11 2014 23:30 Jul 23, 2019 Jkt 089200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6301 E:\BILLS\S2184.IS S2184 kjohnson on DSK79L0C42 with BILLS