Student Borrower Bill of Rights Act of 2007 - Urges the Department of Education to enforce vigorously rules requiring lenders to complete lender verification certificates in a timely manner for borrowers seeking to consolidate loans.
Amends the Higher Education Act of 1965 to require specified loan participants under the Federal Family Education Loan (FFEL) and Federal Perkins Loan programs to disclose to each national credit bureau organization any on-time payments made for such loans and their status as student loans.
Requires FFEL consolidation loan borrowers or lenders to pay the Department 1% of the balance owed on the sum of such loans to obtain a subsequent FFEL consolidation loan. Allows borrowers to refinance Federal Direct Consolidation Loans.
Creates a student borrower bill of rights.
Requires the Secretary to limit a federal student loan borrower's monthly payments on the basis of the borrower's income.
Revises the requirement that the Secretary discharge the liability of a permanently and totally disabled borrower by repaying the amount owed on the loan. Requires such a discharge even if a borrower, although not permanently and totally disabled, is unable to engage in any substantial gainful activity because of a medically determinable impairment which can be expected to result in death or last at least 60 continuous months.
Amends federal bankruptcy law to allow discharge of certain educational benefit overpayments, repayments, and student loan debt.
Directs the Secretary to study the interest rates and fees charged to private student loan borrowers. Limits the collection fee on defaulted federal student loans and the total interest and fees that can be imposed on such loan borrowers.
Requires institutions of higher education (IHEs) that enroll students receiving assistance, and tout the employment prospects of their graduates, to make information publicly available concerning graduates' employment, earnings, and loan defaults.
Establishes an appeals and settlement process for federal student loan borrowers who suffer economic losses from violation of their rights.
Makes IHEs liable to a federal student loan borrower for the total amount of a student loan if they provide specified prohibited incentives to admissions officers to secure student enrollments or financial aid.
Prohibits participating IHEs from causing unnecessary loan processing delays for borrowers who use lenders they do not recommend or suggest.
[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[S. 511 Introduced in Senate (IS)]
110th CONGRESS
1st Session
S. 511
To provide student borrowers with basic rights, including the right to
timely information about their loans and the right to make fair and
reasonable loan payments, and for other purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
February 7, 2007
Mrs. Clinton (for herself, Ms. Mikulski, Mr. Kerry, and Mr. Lieberman)
introduced the following bill; which was read twice and referred to the
Committee on Health, Education, Labor, and Pensions
_______________________________________________________________________
A BILL
To provide student borrowers with basic rights, including the right to
timely information about their loans and the right to make fair and
reasonable loan payments, and for other purposes.
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 Borrower Bill of Rights Act
of 2007''.
SEC. 2. FINDINGS.
Congress finds the following:
(1) Postsecondary education is increasingly a requirement
for a high-paying job in the modern economy; college graduates
earn, on average, $1,000,000 more over their working lives than
people who stop their education after secondary school.
(2) As the cost of college increases and as need-based
grant aid stagnates, more and more students go into debt to
pursue higher education and better economic opportunities.
(3) The amount students borrowed from Federal student loan
programs increased by 76 percent from academic year 1994-1995
to academic year 2004-2005, totaling $54,000,000,000 in
academic year 2004-2005.
(4) The fastest growing source of financial aid is private
credit, increasing by 734 percent from academic year 1994-1995
to academic year 2004-2005, totaling $14,000,000,000 in
academic year 2004-2005.
(5) In academic year 2003-2004, 62 percent of students who
graduated with a baccalaureate degree from a public college or
university graduated with debt, and their debt averaged
$15,500, and 73 percent of students who graduated with a
baccalaureate degree from a private college or university
graduated with debt, and their debt averaged $19,400.
(6) Some student borrowers need additional timely, clear,
and complete information about the terms and conditions of
their loans, beyond the counseling and information currently
provided.
(7) High-interest rates and high fees have caused the
balance owed by some borrowers to balloon in short periods of
time.
(8) Income-contingent repayment plans are unavailable to
many borrowers who, as a result, are required to make
unaffordable high monthly payments.
(9) The prospect of high levels of debt, burdensome monthly
payments, and confusion about rights and repayment options
deters people from taking out loans and pursuing higher
education.
(10) There is a need to guarantee student borrowers that
they will have access to timely information about student loans
and that their loan repayments will be affordable.
SEC. 3. DEFINITION OF LENDER.
In this Act, the term ``lender'' means any public or private entity
that--
(1) lends funds to an individual to enable such individual
to attend an institution of higher education; or
(2) insures, guarantees, or collects on a loan made to an
individual to enable such individual to attend an institution
of higher education.
SEC. 4. A RIGHT TO SHOP IN A FREE MARKETPLACE.
(a) Sense of the Senate.--It is the sense of the Senate that the
Department of Education should vigorously enforce rules requiring
lenders to complete lender verification certificates in a timely manner
for borrowers seeking to consolidate loans.
(b) Accurate and Comprehensive Reporting to Credit Bureaus.--The
Higher Education Act of 1965 (20 U.S.C. 1001 et seq.) is amended--
(1) in section 430A(a)--
(A) by striking ``agreements with credit bureau
organizations'' and inserting ``an agreement with each
national credit bureau organization (as described in
section 603(p) of the Fair Credit Reporting Act)'';
(B) in paragraph (2), by striking ``and'' after the
semicolon;
(C) by redesignating paragraph (3) as paragraph
(4);
(D) in paragraph (4), as redesignated by
subparagraph (C), by striking the period at the end and
inserting ``; and'';
(E) by inserting after paragraph (2) the following:
``(3) of any on time payments made for such loan;''; and
(F) by inserting at the end the following:
``(5) that such loan is a student loan.''; and
(2) in section 463(c)--
(A) in paragraph (1), by striking ``cooperative
agreements with credit bureau organizations'' and
inserting ``a cooperative agreement with each national
credit bureau organization (as described in section
603(p) of the Fair Credit Reporting Act)''; and
(B) in paragraph (2)--
(i) in subparagraph (B), by striking
``and'' after the semicolon;
(ii) in subparagraph (C), by striking the
period at the end and inserting ``; and''; and
(iii) by adding at the end the following:
``(D) any on time payments made for such loan; and
``(E) such loan as a student loan.''.
(c) A Right To Reconsolidate Loans.--
(1) Part b.--Section 428C(a)(3)(B) of the Higher Education
Act of 1965 (20 U.S.C. 1078-3(a)(3)(B)) is amended to read as
follows:
``(B)(i) Except as provided in clause (ii), an individual
who has received a consolidation loan under this section, or
the consolidation lender, shall pay a fee of 1 percent of the
balance owed on the sum of such loans to be consolidated to the
Department to obtain a subsequent consolidation loan under this
section.
``(ii) An individual who has received a consolidation loan
under this section may obtain a subsequent consolidation loan
under this section for no fee if such individual was eligible
to obtain a subsequent consolidation loan pursuant to this
subparagraph on the day before the date of enactment of the
Student Borrower Bill of Rights Act of 2007.''.
(2) Part d.--Section 455(g) of the Higher Education Act of
1965 (20 U.S.C. 1087e(g)) is amended--
(A) by striking ``A borrower'' and inserting the
following:
``(1) In general.--A borrower''; and
(B) by adding at the end the following:
``(2) Refinancing authority.--Notwithstanding any other
provision of this part, a borrower may refinance a Federal
Direct Consolidation Loan.''.
SEC. 5. A RIGHT TO TIMELY INFORMATION ABOUT LOANS.
(a) In General.--Title IV of the Higher Education Act of 1965 (20
U.S.C. 1070 et seq.) is amended by adding at the end the following:
``PART I--STUDENT BORROWER BILL OF RIGHTS
``SEC. 499. DEFINITIONS.
``In this part:
``(1) Federal student loan.--The term `Federal student
loan' means a loan made, insured, or guaranteed under this
title (except loans made to parents under section 428B or under
the Federal Direct PLUS Loan program).
``(2) Lender.--The term `lender' means any public or
private entity that--
``(A) lends funds to an individual to enable such
individual to attend an institution of higher
education; or
``(B) insures, guarantees, or collects on a loan
made to an individual to enable such individual to
attend an institution of higher education.
``SEC. 499A. A RIGHT TO TIMELY INFORMATION ABOUT LOANS.
``(a) Regular Bill Providing Pertinent Information About a Loan.--A
lender of a Federal student loan shall provide the borrower of such
loan a bill each month or, in the case of a loan payable less
frequently than monthly, a bill that corresponds to each payment
installment time period, including a clear and conspicuous notice of--
``(1) the borrower's principal borrowed;
``(2) the borrower's current balance;
``(3) the interest level on such loan;
``(4) the amount the borrower has paid in interest;
``(5) the amount of additional interest payments the
borrower is expected to pay over the life of the loan;
``(6) the total amount the borrower has paid for the loan,
including the amount the borrower has paid in interest, the
amount the borrower has paid in fees, and the amount the
borrower has paid against the balance;
``(7) a description of each fee the borrower has been
charged for the current payment period;
``(8) the applicable monthly payment amount set by the
Secretary under section 499B for such borrower and the amount
such borrower would owe each month according to the borrower's
repayment plan absent the provisions of section 499B, or, in
the case of a loan payable less frequently than monthly, the
amount that corresponds to the payment installment time period
taking into consideration the applicable monthly payment amount
set by the Secretary under section 499B for such borrower and
the amount such borrower would owe that corresponds to the
payment installment time period according to the borrower's
repayment plan absent the provisions of section 499B;
``(9) the date by which the borrower needs to make the
payment described in paragraph (8) to avoid additional fees;
``(10) the amount of such payment that will be put towards
interest, the balance, and any fees;
``(11) the lender's address and toll-free phone number for
payment purposes;
``(12) the lender's address and toll-free number for
billing error purposes; and
``(13) any change in the terms and conditions of the loan.
``(b) Information Provided Five Months After Ceasing To Be at Least
a Half-Time Student.--A lender of a Federal student loan shall provide
to the borrower of such loan, on the date that is 5 months after the
borrower has ceased to be at least a half-time student at the
institution of higher education for which the loan was made, who
requests it, and make readily available on the Internet, a clear and
conspicuous notice of not less than the following information:
``(1) The conditions under which a borrower could be
charged any fee, and the amount of such fee.
``(2) The conditions under which a loan would default and
the consequences of default.
``(3) The borrower's rights and options, including
repayment options, deferments, forbearances, and discharge
rights to which the borrower may be entitled.
``(4) Legitimate resources, including nonprofit
organizations, advocates, and counselors (including the Office
of the Ombudsman at the Department), where borrowers can
receive advice and assistance, if such resources exist.
``(5) Information about how a borrower can appeal to the
Department a decision made by a lender about their loan.
``(c) Information Provided During Delinquency.--
``(1) Sense of the senate.--It is the sense of the Senate
that the Secretary should vigorously enforce rules requiring
that a lender of a Federal student loan provide a borrower in
delinquency information about such borrower's rights and
options, means of avoiding default, and the consequences of
default, at such a time and in such manner as is most useful
for such borrower.
``(2) Additional information.--In addition to any other
information required under law, a lender of a Federal student
loan shall provide a borrower in delinquency with a clear and
conspicuous notice of the date on which the loan will default
if no payment is made, the minimum payment that must be made to
avoid default, discharge rights to which the borrower may be
entitled, legitimate resources, including nonprofit
organizations, advocates, and counselors (including the Office
of the Ombudsman at the Department), where borrowers can
receive advice and assistance, if such resources exist, and
information about how a borrower can appeal to the Department a
decision made by a lender about their loan.
``(d) Information Provided During Default.--A lender of a Federal
student loan shall provide a borrower in default, on not less than 2
separate occasions, with a clear and conspicuous notice of not less
than the following information:
``(1) The options available to the borrower to get out of
default.
``(2) The cost and conditions of each option.
``(3) Information about how a borrower can appeal to the
Department a decision made by a lender about their loan.
``(e) Sense of the Senate.--It is the sense of the Senate that the
Department should--
``(1) write and distribute a training manual for
organizations, advocates, and counselors who help people who
are having problems repaying Federal student loans,
describing--
``(A) the rights of such borrowers; and
``(B) the Department's policies for dealing with
particular programs; and
``(2) provide to such organizations, advocates, and
counselors technical assistance where needed.''.
(b) Information Provided During the Transfer of a Loan to a New
Servicer.--Section 428(b)(2)(F) of the Higher Education Act of 1965 (20
U.S.C. 1078(b)(2)(F)) is amended--
(1) in clause (i)--
(A) in subclause (III), by striking ``and'' after
the semicolon;
(B) in subclause (IV), by striking ``and'' after
the semicolon; and
(C) by adding at the end the following:
``(V) the effective date of the
transfer;
``(VI) the date the current
servicer will stop accepting payments;
``(VII) the date at which the new
servicer will begin accepting payments;
and
``(VIII) that the transfer does not
affect any term or condition of their
loan documents other than those terms
directly related to the servicing of
the loan;'';
(2) in clause (ii)(II), by striking the comma at the end
and inserting ``; and''; and
(3) by adding at the end the following:
``(iii) the transferee will be required,
during the 60-day period beginning on the
effective date of the transfer, to not treat a
payment as late if the borrower mistakenly
sends such payment to the transferor instead of
to the transferee and the payment is otherwise
on time,''.
(c) Information Provided During Consolidation.--Section 428C(b)(1)
of the Higher Education Act of 1965 (20 U.S.C. 1078-3(b)(1)) is
amended--
(1) in subparagraph (E), by striking ``and'' after the
semicolon;
(2) by redesignating subparagraph (F) as subparagraph (G);
and
(3) by inserting after subparagraph (E) the following:
``(F) that the lender of the consolidation loan
shall, upon application for such loan, provide the
borrower with a clear and conspicuous notice of not
less than the following information:
``(i) the effects of consolidation on total
interest to be paid, fees to be paid, and
length of repayment, relative to the borrower's
currently scheduled total interest to be paid,
fees to be paid, and length of repayment at the
borrower's current interest rate;
``(ii) the effects of consolidation on a
borrower's underlying loan benefits, including
loan forgiveness, cancellation, deferment, and
reduced interest rates on those underlying
loans;
``(iii) the ability of the borrower to
prepay the loan, pay on a shorter schedule, and
to change repayment plans;
``(iv) that borrower benefit programs may
vary among different loan holders, and a
description of how the borrower benefits may
vary among different loan holders;
``(v) the tax benefits for which borrowers
may be eligible;
``(vi) the consequences of default; and
``(vii) that by making the application the
applicant is not obligated to agree to take the
consolidation loan; and''.
(d) Information Provided During Consolidation or Reconsolidation of
a Federal Student Loan With a Private Loan.--A lender shall, upon
application for a consolidation or reconsolidation loan of one or more
loans made, insured, or guaranteed under part B, part D, or part E of
title IV of the Higher Education Act of 1965 (20 U.S.C. 1071, 1087a,
1087aa) with one or more private loans, provide the borrower with a
clear and conspicuous notice of not less than the following
information:
(1) That the consolidation or reconsolidation loan would be
a private loan, not a Federal loan.
(2) A description of the benefits and protections for the
loan made, insured, or guaranteed under part B, part D, or part
E that the borrower would lose by consolidating such loan with
a private loan.
(3) That the lender may be eligible to consolidate two or
more loans made, insured, or guaranteed under part B, part D,
or part E within the Federal loan program.
SEC. 6. A RIGHT TO MAKE AFFORDABLE LOAN PAYMENTS.
(a) Affordable Loan Payments.--Part I of title IV of the Higher
Education Act of 1965, as added by section 5, is amended by adding at
the end the following:
``SEC. 499B. A RIGHT TO MAKE AFFORDABLE LOAN PAYMENTS.
``(a) Limit on Monthly Payment Amounts to an Affordable Level.--
``(1) In general.--
``(A) Limitation.--
``(i) In general.--With respect to Federal
student loans that are made, insured, or
guaranteed after the date of enactment of this
section, the Secretary shall limit the total
monthly payment amount for all of such loans of
a student borrower to not more than the amount
determined pursuant to subparagraph (B), except
as provided in subsection (b)(3).
``(ii) Commencement.--The limit on the
monthly payment amount described in clause (i)
shall begin the day after 1 year after the date
the student ceases to carry at least one-half
the normal full-time academic workload (as
determined by the institution).
``(B) Formula amount.--
``(i) In general.--The amount referred to
in subparagraph (A) shall be the same amount
for each month of a year. Such amount shall be
an amount that is the quotient of the sum of 10
percent of the borrower's annual adjusted gross
income between 100 percent and 200 percent of
the poverty line for the previous year and 20
percent of the borrower's annual adjusted gross
income above 200 percent of the poverty line
for the previous year divided by 12.
``(ii) Poverty line.--In this subparagraph,
the term `poverty line' means the poverty line
described in section 673 of the Community
Services Block Grant Act (42 U.S.C. 9902),
applicable to a family of the size involved.
``(2) Provision of information to the secretary.--
``(A) In general.--The limit on the monthly payment
amount set by the Secretary under paragraph (1) shall
apply only if a borrower provides the Secretary, in
such form and at such time--
``(i) such information as the Secretary
shall require to determine the monthly payment
amount that is applicable for such borrower;
and
``(ii) certification that the borrower is
employed full time or is actively seeking full-
time employment.
``(B) Update to information.--The Secretary shall
require a borrower to--
``(i) provide the information required
under subparagraph (A)(i) annually for the term
of the loan of such borrower; or
``(ii) during each year for the term of the
loan of such borrower, authorize the Secretary
to obtain the information required under
subparagraph (A)(i) from the Internal Revenue
Service for such year.
``(3) Continuous update.--Upon receiving information under
paragraph (2)(B), the Secretary shall revise the limit on the
monthly payment amount for such borrower under paragraph (1),
as necessary.
``(4) Applicability to all repayment plans.--Regardless of
which repayment plan a borrower of a loan selects under this
title, the limit on the monthly payment amount set by the
Secretary under paragraph (1) shall apply to the monthly
repayment amount applicable for such repayment plan.
``(5) No fees or charges.--Notwithstanding any other term
or condition of Federal student loans of a borrower that are
made, insured, or guaranteed after the date of enactment of
this section, if the borrower pays the maximum monthly payment
amount that is applicable for the borrower for such loans, as
determined under this section, on time according to the terms
and conditions of such loans, such borrower may not be charged
any late fee, underpayment fee, or finance charge for such
loans for such month.
``(6) Subsidized loans.--In the case of a Federal student
loan made, insured, or guaranteed after the date of enactment
of this section for which an interest subsidy is paid under
section 428(a), if the amount owed each month in interest
payments for such loan exceeds the applicable amount for such
borrower as determined under this section, and, at the
discretion of the Secretary, if the borrower pays such
applicable amount, the Federal Government shall pay the
difference between such amount owed in interest payments and
such amount that has been determined is applicable.
``(b) Study.--
``(1) In general.--The Secretary shall conduct a study to
determine what additional protections beyond those described in
subsection (a) are necessary, if any, to ensure that monthly
payment amounts for student borrowers of different incomes and
with different costs of living are affordable.
``(2) Content of study.--The study under paragraph (1)
shall--
``(A) consider the payments required of student
borrowers in other countries, including the United
Kingdom, Australia, and New Zealand, and compare such
payments to the payments required of student borrowers
in the United States; and
``(B) be completed and submitted to the appropriate
committees of Congress not later than 12 months after
the date of enactment of this section.
``(3) Additional limits on monthly repayments.--If the
Secretary determines in the study under paragraph (1) that
additional protections are necessary to ensure that monthly
payment amounts of student borrowers of Federal student loans
made, insured, or guaranteed after the date of enactment of
this section are affordable, the Secretary may establish rules
based on such study that limits the monthly payment amount for
a student borrower to a level that is affordable for such
borrower.
``(c) Notification of Right To Make Payments of More Than
Minimum.--Notwithstanding any other provision of this section, a
borrower whose applicable monthly payment amount set by the Secretary
under this section is less than the amount such borrower would owe each
month according to the borrower's repayment plan absent the provisions
of this section--
``(1) shall be notified of the amount the borrower would
owe each month according to the borrower's repayment plan
absent the provisions of this section; and
``(2) may pay the amount described in paragraph (1) or
another amount that is greater than the applicable monthly
payment amount set by the Secretary under this section.''.
(b) Income Contingent Repayment.--Section 455(e) of the Higher
Education Act of 1965 (20 U.S.C. 1087e(e)) is amended by adding at the
end the following:
``(7) Tax burden.--The balance due on a loan made under
this part at the end of the maximum repayment period is
exempted from the definition of income for the purpose of
taxes.''.
(c) Discharge Rights in Cases of Severe Need.--
(1) Discharge and cancellation rights in cases of
disability.--
(A) Amendments.--
(i) FFEL and direct loans.--Section 437(a)
of the Higher Education Act of 1965 (20 U.S.C.
1087(a)) is amended by striking ``or becomes
permanently and totally disabled (as determined
in accordance with regulations of the
Secretary)'' and inserting ``or is unable to
engage in any substantial gainful activity by
reason of any medically determinable physical
or mental impairment that can be expected to
result in death or has lasted, or can be
expected to last, for a continuous period of
not less than 60 months''.
(ii) Perkins.--Section 464(c)(1)(F) of the
Higher Education Act of 1965 (20 U.S.C.
1087dd(c)(1)(F)) is amended by striking ``or if
he'' and all that follows through the semicolon
and inserting ``or if the borrower is unable to
engage in any substantial gainful activity by
reason of any medically determinable physical
or mental impairment that can be expected to
result in death or has lasted, or can be
expected to last, for a continuous period of
not less than 60 months;''.
(B) Sense of the senate.--It is the Sense of the
Senate that the Department of Education should continue
to administer the discharge and cancellation right
provisions of the Higher Education Act of 1965 amended
in subparagraph (A) in such a way as to prevent fraud
and abuse.
(2) Discharge rights in cases of bankruptcy.--
(A) Sense of the senate.--It is the Sense of the
Senate that the Bankruptcy Abuse Prevention and
Consumer Protection Act of 2005 (Public Law 109-8)
affords sufficient protections to prevent fraud and
abuse in the carefully regulated discharge of student
loans in bankruptcy.
(B) Amendment.--Section 523(a)(8) of title 11,
United States Code, is amended to read as follows:
``(8) unless--
``(A) excepting such debt from discharge under this
paragraph would impose an undue hardship on the debtor
and the debtor's dependents, for a debt that does not
meet the requirements of subparagraph (B) and that is--
``(i) an educational benefit overpayment or
loan made, insured, or guaranteed by a
governmental unit, or made under any program
funded in whole or in part by a governmental
unit or nonprofit institution;
``(ii) an obligation to repay funds
received as an educational benefit,
scholarship, or stipend; or
``(iii) an educational loan that is a
qualified education loan, as defined in section
221(d)(1) of the Internal Revenue Code of 1986,
incurred by a debtor who is an individual; or
``(B) such debt is for an overpayment, loan,
obligation, or qualified education loan described in
clause (i), (ii) or (iii) of subparagraph (A) that--
``(i) was made, entered into, or incurred
after the date of enactment of the Student
Borrower Bill of Rights Act of 2007; and
``(ii) first became due more than 7 years
(exclusive of any applicable suspension of the
repayment period) before the date of the filing
of the petition;''.
SEC. 7. A RIGHT FOR INTEREST RATES AND FEES TO BE REASONABLE.
(a) In General.--Part I of title IV of the Higher Education Act of
1965, as added by section 5 and amended by section 6, is further
amended by adding at the end the following:
``SEC. 499C. A RIGHT FOR INTEREST RATES AND FEES TO BE REASONABLE.
``(a) In General.--The Secretary shall conduct a study of the
interest rates and fees that are charged of borrowers of private
student loans, including--
``(1) the conditions under which the interest rate charged
of such a borrower is raised or lowered, including the
conditions under which the interest rate is raised on
delinquent payments, and the amount and frequency of such
interest rate changes;
``(2) the conditions under which fees are charged of such a
borrower and frequency of such fees, including fees that are
charged as a condition of taking a deferment or forbearance,
and the amount and frequency of such fees;
``(3) identifying such practices as described in paragraphs
(1) and (2) that are exploitative or unreasonable; and
``(4) determining what remedies exist for such practices
identified in paragraph (3).
``(b) Maximum Collection Fees.--
``(1) In general.--Notwithstanding any other provision of
this title, the fee charged to a borrower for collecting on a
defaulted Federal student loan shall not exceed the lesser of
the expenses incurred in collecting on such loan or the amount
calculated for such loan based on the following:
``(A) In the case of a defaulted loan that is paid
off through consolidation by the borrower under this
title, the amount that is 7.5 percent of the balance of
such loan.
``(B) In the case of a defaulted loan rehabilitated
under part D or pursuant to section 428F(a)(1)(A), the
amount that is 13.5 percent of the balance of such
loan.
``(C) In the case of a defaulted loan collected
under part D or part B and not described in
subparagraph (A) or (B), the amount that is 18 percent
of the balance of such loan.
``(2) Itemized list of expenses.--An entity that charges a
borrower for collecting on a defaulted Federal student loan
shall provide such borrower an itemized list of any expenses
incurred in collecting on such loan.
``(c) Cap on Total Charges.--
``(1) In general.--The Department shall set a cap on the
maximum total amount that can be charged of a borrower on a
Federal student loan, including all interest and fees, as a
percentage of the original loan balance, over a period of 10
years, 15 years, and 20 years.
``(2) Level of cap.--The cap set under paragraph (1) shall
be set--
``(A) at the minimum level beyond which additional
amount charged on a loan is unreasonable or
exploitative; and
``(B) for each time period, at a level that is
higher than the amount the borrower, who makes
regularly scheduled payments in accordance with a
standard repayment plan, currently pays over such time
period.''.
(b) Conforming Amendments.--
(1) Loans paid off through consolidation.--Section
428(c)(6)(B) of the Higher Education Act of 1965 (20 U.S.C.
1078(c)(6)(B)) is amended--
(A) by striking clause (i) and inserting the
following:
``(i) on or after October 1, 2007, not charge the
borrower collection costs in excess of the amount
provided in section 499C(b)(1)(A); and''; and
(B) in clause (ii), by striking ``clause (i)(I)''
and inserting ``clause (i)''.
(2) Rehabilitated loans.--Section 428F(a)(1)(C) of the
Higher Education Act of 1965 (20 U.S.C. 1078-6(a)(1)(C)) is
amended by striking ``not to exceed'' and all that follows
through the period and inserting ``not to exceed the amount
provided in section 499C(b)(1)(B).''.
SEC. 8. A RIGHT TO NOT BE EXPLOITED.
Part I of title IV of the Higher Education Act of 1965, as added by
section 5 and amended by sections 6 and 7, is further amended by adding
at the end the following:
``SEC. 499D. A RIGHT TO NOT BE EXPLOITED.
``(a) Publication of Job Placement Information.--
``(1) In general.--Each institution of higher education (as
defined in section 102) that enrolls a student receiving
assistance under this Act and that is determined by the
Secretary, in accordance with paragraph (2), to be a disclosure
institution, shall make publicly available and include in
institution materials (including applications for admission to
the institution) a clear and conspicuous notice of group level
job placement information for each of the past 5 years of
graduates (or, if the institution has not been in operation for
5 years, for as long as the institution has been in operation),
including not less than the following information:
``(A) The percentage of students entering the
institution who graduated within 150 percent of their
expected graduation date.
``(B) The percentage of graduates employed within 6
months of graduating.
``(C) The percentage of graduates employed in the
field that the graduates studied at the institution.
``(D) The median annual earnings of those graduates
who are employed.
``(E) The percentage of former students of the
institution who took out a loan to attend the
institution who defaulted on such loan at least once
after leaving the institution.
``(2) Disclosure institution.--In determining whether an
institution is a disclosure institution, the Secretary
primarily shall consider whether the institution makes claims
relating to the employment prospects of the graduates of the
institution. In addition, the Secretary shall consider each of
the following criteria as a supplementary factor in determining
whether an institution is a disclosure institution with respect
to a particular year:
``(A) More than 75 percent of the institution's
revenue for such year is loan volume.
``(B) Fewer than 50 percent of the students
enrolled in the institution the previous year, who did
not graduate from such institution in such previous
year, are still enrolled in the institution.
``(C) More than 10 percent of the students who have
taken out loans to attend the institution have
defaulted on such loans at least once after leaving the
institution.
``(3) Records.--Each institution of higher education (as
defined in section 102) that enrolls a student receiving
assistance under this Act and that is determined by the
Secretary, in accordance with paragraph (2), to be a disclosure
institution, shall keep, for a period of 5 years, the records
that substantiate the information the institution is required
to publicize under paragraph (1).
``(b) Sense of the Senate.--It is the sense of the Senate that the
Secretary should enforce the rights of borrowers of private student
loans and Federal student loans to raise claims and defenses related to
the actions of for-profit institutions of higher education against
lenders from which the borrowers borrowed money to attend such
institutions, including the Federal Trade Commission Rule.
``(c) Appeal to the Secretary.--
``(1) In general.--
``(A) In general.--Any borrower of a Federal
student loan who has suffered an economic loss as a
result of a violation of the borrower's rights under
this title shall have the right to appeal such action
to the Secretary.
``(B) Rights of borrower.--For the purpose of this
subsection, the rights of a borrower described in
subparagraph (A) are those rights involved in the
solicitation for, disbursement of, repayment of
(including rights to terminate or suspend repayment),
or collection of a Federal student loan, including--
``(i) such rights described in this part
and under the Student Borrower Bill of Rights
Act of 2007 and the amendments made by such
Act; and
``(ii) borrower rights under the following
sections of this Act: 427, 428, 428C, 428F,
428J, 428K, 430A, 433, 437, 438, 463, 463A,
464, 465, 484, 484B, 485 (except subsections
(f) and (g) of section 485), and 488A.
``(2) Notification.--Not less than 30 days before making an
appeal under this subsection, the borrower shall jointly notify
the Secretary and the party whose action the borrower wishes to
appeal (referred to in this subsection as the `respondent')
that the borrower intends to make an appeal, the action that
the borrower intends to appeal, and the economic loss that the
borrower suffered as a result of the violation.
``(3) Settlement.--
``(A) In general.--After the notification under
paragraph (2), the borrower and the respondent shall
make a good faith effort to settle the dispute. If no
settlement is reached or if the respondent fails to
respond to the borrower's notice within 30 days of the
borrower providing such notice, the borrower may appeal
the applicable action to the Secretary, which shall
adjudicate the borrower's claim in a fair, impartial,
and timely manner. In so doing, the Secretary may, if
it should choose, develop a policy by which borrowers
who make appeals work with the office of the Ombudsman
or another relevant office within the Department to
facilitate dispute resolution before providing a formal
hearing. Whether or not the Secretary develops such a
policy, the Secretary shall provide a formal hearing of
the borrower's appeal within 60 days of the start of
the appeal, unless the Secretary determines that there
is no basis for such a hearing or if the borrower
making the appeal provides written consent to waive the
borrower's right to a hearing or to delay or withdraw
the appeal.
``(B) Judicial review.--Any borrower who is
adversely affected by the final agency action shall be
entitled to judicial review of such action pursuant to
section 706 of title 5, United States Code.
``(4) Information.--The Secretary shall make publicly
available on the Internet and elsewhere information about how
borrowers can make appeals under this subsection and in what
circumstances they can do so.
``(5) Same rights.--Borrowers shall have the same right to
appeal, including the same rights and remedies, whether their
loans are held under part B, part D, or part E, and whether the
respondent is the Department or another lender that
participates in programs described in part B, part D, or part
E.
``(6) Inapplicability of apa.--The Secretary shall not be
required to comply with the provisions of subchapter II of
chapter 5, and chapter 7, of title 5, United States Code
(commonly referred to as the Administrative Procedure Act), in
implementing this subsection, except as provided in paragraph
(3)(B).
``(d) Admissions Officers as Salespersons.--Notwithstanding any
other provision of this Act, an institution of higher education that
does not comply with section 487(a) by violating paragraph (20) of such
section shall be liable to a borrower of a Federal student loan taken
out to attend such institution for the entire amount of such loan.
``(e) Right To Pay Off Principal Faster Than Scheduled.--A lender
of a Federal student loan shall provide a borrower who pays more than
the amount required for any regularly scheduled payment an easy and
unbiased means of choosing whether such overpayment payment should
count as a--
``(1) prepayment for a subsequently scheduled payment; or
``(2) payment against the principal owed on such loan.''.
SEC. 9. PREFERRED LENDER REQUIREMENTS.
Section 487(a) of the Higher Education Act of 1965 (20 U.S.C. 1088)
is amended by adding at the end the following:
``(24) The institution will not cause any unnecessary loan
processing delay for a borrower who uses a lender that is not
recommended or suggested by the institution.''.
<all>
Introduced in Senate
Sponsor introductory remarks on measure. (CR S1711)
Read twice and referred to the Committee on Health, Education, Labor, and Pensions.
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