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# Legislative Bulletin..........................................May 9, 2007

**Contents:**

> **H.R. 890 ---** Student Loan Sunshine Act

H.R. 890 --- Student Loan Sunshine Act *(Miller, D-CA)*

**[Order of Business]{.underline}**: The bill is scheduled for
consideration on Wednesday, May 9, 2007, under a motion to suspend the
rules and pass the bill.

**[Note:]{.underline}** The legislation being considered today is a
compilation of H.R. 890 (Miller, D-CA), and H.R. 1994 (McKeon, R-CA).
Neither bill has been considered by the Education and Labor Committee.

**[Summary]{.underline}**: H.R. 890 would make a number of changes to
current law regarding entities providing loans to college students
through federal loan programs, as well as in the private market. The
specific provisions of the bill are summarized below.

-   Requires lenders to inform students and parents of all federal
    borrowing options under Title IV of the Higher Education Act,
    including the "terms and conditions of available loans that are more
    favorable to the borrower."

-   Prohibits lenders from using the name, emblem, mascot or logo of the
    institution in marketing private student loans in any way that
    implies that the institution endorses the private loans offered by
    the lender.

-   Requires the Secretary of Education to report to Congress on the
    adequacy of information provided to students and parents about
    educational loans.

-   Requires the Secretary to develop a disclosure form for lenders that
    would include information on loan interest rates, fees, repayment
    terms, annual percentage rate, and other listed information.

-   Requires institutions of higher education (IHEs) to disclose on
    their website a statement that indicates that students are not
    limited to use lenders recommended by the institution, that the
    institution is required to process any loan selected by a student
    from eligible lenders, the maximum amount of federal grant and loan
    aid available to students and the institution's cost of attendance.

-   Requires IHEs to inform students and parents of their eligibility
    for federal assistance (pell grants and federal loans) and to inform
    of the terms and conditions of private educational loans that are
    less favorable than the terms and conditions of federal loans.

-   Requires IHEs to establish a code of conduct that would prohibit a
    conflict of interest or the appearance of a conflict of interested
    with the responsibilities of employees or agents with respect to
    student loans or other financial aid.

-   Prohibits a lender, guarantor, or a servicer of educational loans
    from offering gifts to employees of an IHE. Gift is defined as "any
    gratuity, favor, discount, entertainment, hospitality, loan or other
    item having a monetary value of more than a deminimus amount
    \[including\] a gift of services, transportation, lodging, or
    meals." The term gift does not include informational material
    related to student loans or food, refreshments, and training that is
    an "integral part of a training session that is designed to improve
    the lender's service."

-   Prohibits employees in an IHE's financial aid office from accepting
    gifts, fees, or payments (including stock) from a lender.

-   Prohibits IHEs from allowing lenders to staff the student financial
    aid office or call center.

-   Institutes penalties for IHEs and lenders that violate the
    provisions of this Act. If a lender does not participate in a
    federal loan program under Title IV of the Higher Education Act
    (this includes the Federal Family Education Loan program and the
    Direct Loan program), the entity would be subject to a \$25,000
    fine. However, if the lender is a participant of the federal loan
    program, the Secretary could "limit, terminate, or suspend the
    lender's participation in the program."

-   Requires private lenders to inform potential borrowers of the
    following:

    -   that the borrower may qualify for federal assistance in lieu of
        or in addition to a private loan;

    -   that in many cases, a federal student loan may provide the
        consumer with more beneficial terms and conditions, including a
        lower annual percentage rate and fewer and lower fees, than
        private educational loans"; and

    -   that the consumer may obtain additional information concerning
        federal assistance from IHES or at the Department of Education's
        website.

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-   Requires the borrower to sign a notice stating that the lender
    provided the above information.

-   Requires lenders to notify an IHE if they are providing a student
    with a loan of more than \$1,000.

-   Requires the Department of Education to display a link to the
    federal student financial aid website in a prominent place on the
    Department's website.

**[Committee Action]{.underline}**: H.R. 890 was introduced on February
7, 2007, and referred to the House Committee on Education and Labor,
which took no official action.

**[Cost to Taxpayers]{.underline}**: There is no CBO score available for
this legislation.

**[Does the Bill Expand the Size and Scope of the Federal
Government?]{.underline}**: No.

**[Does the Bill Contain Any New State-Government, Local-Government, or
Private-Sector Mandates?]{.underline}**: A CBO estimate for this
legislation is no available. However, the bill includes several
private-sector mandates on private lenders providing loans to college
students.

**[Constitutional Authority]{.underline}**: A committee report citing
constitutional authority is unavailable. House Rule XIII, Section
3(d)(1), requires that all committee reports contain "a statement citing
the *specific* powers granted to Congress in the Constitution to enact
the law proposed by the bill or joint resolution" *(emphasis added).*

**[RSC Staff Contact:]{.underline}** Joelle Cannon;
<joelle.cannon@mail.house.gov>, 202.226.0718.

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