Know Before You Owe Federal Student Loan Act of 2015

Summary: Know Before You Owe Federal Student Loan Act of 2015 This bill amends title IV (Student Assistance) of the Higher Education Act of 1965 to expand lender disclosure requirements.  A lender must provide a statement to a Federal Family Education Loan or Direct Loan borrower during a period when loan payments are not required. Such statement must include the current loan balance, original principal loan amount, interest rate, total interest paid, aggregate payments, lender or servicer contact information, and accumulated interest amount. It must also explain the option to pay accrued interest before it capitalizes and suggest a payment amount based on interest charged.  Additionally, the legislation modifies loan counseling requirements for an institution of higher education (IHE) that participates in federal student aid programs.  Currently, an IHE must provide one-time entrance counseling to a student who is a first-time federal student loan borrower. This bill requires an IHE to provide pre-loan counseling to a student borrower of a federal student loan at or prior to the first disbursement of each new loan.  It revises and expands required elements of pre-loan counseling to include a borrower's estimated debt-to-income ratio at graduation, a statement to borrow the minimum necessary amount, a warning that high debt-to-income ratio makes repayment more difficult, options to reduce borrowing, and an explanation of the importance of on-time graduation.  Prior to certifying a Federal Direct Loan disbursement to a student, an IHE must ensure that such student manually enters the exact dollar amount of the loan.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Know Before You Owe Federal Student 
Loan Act of 2015''.

SEC. 2. REQUIRED PERIODIC DISCLOSURES DURING PERIODS WHEN LOAN PAYMENTS 
              ARE NOT REQUIRED.

    Section 433 of the Higher Education Act of 1965 (20 U.S.C. 1083) is 
amended by adding at the end the following:
    ``(f) Required Periodic Disclosures During Periods When Loan 
Payments Are Not Required.--During any period of time when a borrower 
of one or more loans, made, insured, or guaranteed under this part or 
part D is not required to make a payment to an eligible lender on the 
borrower's loan from that eligible lender, such eligible lender shall 
provide such borrower with a statement that corresponds to each payment 
installment time period in which a payment would be due if payments 
were required to be made, and that includes, in simple and 
understandable terms--
            ``(1) the original principal amount of each of the 
        borrower's loans, and the original principal amount of those 
        loans in the aggregate;
            ``(2) the borrower's current balance, as of the time of the 
        statement, as applicable;
            ``(3) the interest rate on each loan;
            ``(4) the total amount the borrower has paid in interest on 
        each loan;
            ``(5) the aggregate amount the borrower has paid for each 
        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;
            ``(6) the lender's or loan servicer's address and toll-free 
        phone number for payment and billing error purposes;
            ``(7) an explanation--
                    ``(A) that the borrower has the option to pay the 
                interest that accrues on each loan while the borrower 
                is a student at an institution of higher education or 
                during a period of deferment or forbearance, if 
                applicable; and
                    ``(B) if the borrower does not pay such interest 
                while attending an institution or during a period of 
                deferment or forbearance, any accumulated interest on 
                the loan will be capitalized when the loan goes into 
                repayment, resulting in more interest being paid over 
                the life of the loan;
            ``(8) the amount of interest that has accumulated since the 
        last statement based on the typical installment time period and 
        the aggregate interest accrued to date; and
            ``(9) a suggested payment amount equal to the interest 
        charged since the last installment time period.''.

SEC. 3. PRE-LOAN COUNSELING AND CERTIFICATION OF LOAN AMOUNT.

    Section 485(l) of the Higher Education Act of 1965 (20 U.S.C. 
1092(l)) is amended--
            (1) in the subsection heading, by striking ``Entrance 
        Counseling'' and inserting ``Pre-Loan Counseling'';
            (2) in paragraph (1)--
                    (A) in subparagraph (A)--
                            (i) in the matter preceding clause (i), by 
                        striking ``a disbursement to a first-time 
                        borrower of a loan'' and inserting ``the first 
                        disbursement of each new loan (or the first 
                        disbursement in each award year if more than 
                        one new loan is obtained in the same award 
                        year)''; and
                    (B) in clause (ii)(I), by striking ``an entrance 
                counseling'' and inserting ``a counseling'';
            (3) in paragraph (2)--
                    (A) by striking clause (i) of subparagraph (G) and 
                inserting the following:
                            ``(i) an estimate of the borrower's 
                        projected loan debt-to-income ratio upon 
                        graduation, calculated using--
                                    ``(I) the best available data on 
                                starting wages for the borrower's 
                                program of study; and
                                    ``(II) the estimated total student 
                                loan debt, including Federal debt and, 
                                to the best of the institution's 
                                knowledge, private loan debt already 
                                incurred, and the estimated future debt 
                                required to complete the program of 
                                study; and''; and
                    (B) by adding at the end the following:
                    ``(L) A statement that the borrower should borrow 
                the minimum amount necessary to cover expenses and that 
                the borrower does not have to accept the full amount of 
                loans for which the borrower is eligible.
                    ``(M) A warning that the higher the borrower's 
                debt-to-income ratio is, the more difficulty the 
                borrower is likely to experience in repaying the loan.
                    ``(N) Options for reducing borrowing through 
                scholarships, reduced expenses, work-study, or other 
                work opportunities.
                    ``(O) An explanation of the importance of 
                graduating on time to avoid additional borrowing, what 
                course load is necessary to graduate on time, and 
                information on how adding an additional year of study 
                impacts total indebtedness.''; and
            (4) by adding at the end the following:
            ``(3) In addition to the other requirements of this 
        subsection, each eligible institution shall, prior to 
        certifying a Federal direct loan under part D for disbursement 
        to a student (other than a Federal Direct Consolidation Loan or 
        a Federal Direct PLUS loan made on behalf of a student), ensure 
        that the student manually enter, either in writing or through 
        electronic means, the exact dollar amount of Federal direct 
        loan funding under part D that such student desires to 
        borrow.''.

SEC. 4. CONFORMING AMENDMENTS.

    (a) Program Participation Agreements.--Section 487(e)(2)(B)(ii)(IV) 
of the Higher Education Act of 1965 (20 U.S.C. 1094(e)(2)(B)(ii)(IV)) 
is amended--
            (1) by striking ``Entrance and exit counseling'' and 
        inserting ``Pre-loan and exit counseling''; and
            (2) by striking ``entrance and exit counseling'' and 
        inserting ``pre-loan and exit counseling''.
    (b) Regulatory Relief and Improvement.--Section 487A of the Higher 
Education Act of 1965 (20 U.S.C. 1094a) is amended by striking 
``entrance and exit interviews'' and inserting ``pre-loan and exit 
interviews'' each place the term appears.