To require financial literacy counseling for borrowers, and for other purposes.

Summary: Amends the Higher Education Act of 1965 to require institutions of higher education (IHEs) to provide at least four hours of financial literacy counseling to each student borrower: (1) under the Federal Family Education Loan (FFEL) program, at or prior to their receipt of such loan; and (2) under the FFEL, Direct Loan, or Perkins Loans programs, during their enrollment at the IHE or when their studies end.

Requires such counseling to include information on: (1) banking; (2) budgeting; (3) credit cards and ratings; (4) loans, grants, education tax credits, and scholarships; (5) renting and housing; and (6) investing.

Directs the Secretary of Health and Human Services to encourage IHEs to perform these duties using interactive programs that test each borrower's understanding of the financial literacy information they receive.

SECTION 1. FINANCIAL LITERACY COUNSELING.

    Section 485 of the Higher Education Act of 1965 (20 U.S.C. 1092) is 
amended by adding at the end the following new subsection:
    ``(n) Financial Literacy Counseling.--
            ``(1) In general.--Each eligible institution shall, through 
        financial aid offices, through an employee or group of 
        employees designated under subsection (c), or through a 
        contract or partnership with a nonprofit organization, provide 
        financial literacy counseling to borrowers in accordance with 
        the requirements of this subsection.
            ``(2) Entrance and exit counseling required.--
                    ``(A) In general.--Financial literacy counseling 
                required under this subsection shall--
                            ``(i) be provided to--
                                    ``(I) each first-time borrower of a 
                                loan made, insured, or guaranteed under 
                                part B (other than a loan made pursuant 
                                to section 428C or a loan made on 
                                behalf of a student pursuant to section 
                                428B) or made under part D (other than 
                                a Federal Direct Consolidation Loan or 
                                a Federal Direct PLUS loan made on 
                                behalf of a student), at or prior to 
                                the time of the first disbursement of 
                                such loan; and
                                    ``(II) each borrower of a loan 
                                made, insured, or guaranteed under part 
                                B (other than loans made pursuant to 
                                section 428C or loans under section 
                                428B made on behalf of a student) or 
                                made under part D (other than Federal 
                                Direct Consolidation Loans or Federal 
                                Direct PLUS Loans made on behalf of a 
                                student) or made under part E of this 
                                title, prior to the completion of the 
                                course of study for which the borrower 
                                enrolled at the institution or at the 
                                time of departure from such 
                                institution; and
                            ``(ii) include a total of not less than 4 
                        hours of counseling for such borrowers for each 
                        of the occasions described in clause (i).
                    ``(B) Early departure.--In the case of borrower who 
                leaves an institution without the prior knowledge of 
                the institution, the institution shall attempt to 
                provide the information required under this subsection 
                to the student in writing.
            ``(3) Information to be provided.--Financial literacy 
        counseling required under this subsection shall include 
        information on the following:
                    ``(A) Banking basics, including the types of 
                financial institutions, why and how banks may be useful 
                to individuals, and the fundamentals of using basic 
                checking and savings bank accounts (including how 
                checking and savings accounts work, fees that may be 
                charged, and how to open and maintain an account).
                    ``(B) Budgeting, including matching goals and 
                savings, identification of ways borrowers can save 
                money and understand savings options that can be used 
                to reach savings goals, the main components of a budget 
                (such as income, fixed income, fixed expenses, flexible 
                expenses and discretionary expenses), and how to 
                designate incomes and expenses.
                    ``(C) Credit cards, including how to use credit 
                appropriately, how to determine what forms of credit 
                best suit the needs of the borrower, the common 
                pitfalls of credit card debt, the differences in types 
                of credit cards (including pre-paid cards, debit cards, 
                secured credit cards linked to checking accounts, and 
                charge cards), responsible uses of credit cards, and 
                how to build a strong credit history.
                    ``(D) Loans, grants, education tax credits, and 
                scholarships, including--
                            ``(i) general information about and 
                        differences between installment loans, 
                        including car loans and student loans;
                            ``(ii) the difference between grants, 
                        scholarships, and loans, including the 
                        differences between need-based and merit-based 
                        aid; and
                            ``(iii) information about options for 
                        repayment, deferment, and the ability to 
                        discharge or cancel education loans.
                    ``(E) Renting and housing, including information on 
                renting an apartment, the basics of getting a mortgage, 
                and assistance with determining a borrower's readiness 
                to have a space of their own.
                    ``(F) Credit scores and ratings, including 
                information about credit (such as that credit is a sum 
                of money lent by a bank or institution for repayment in 
                the future and includes interest on the balance that is 
                borrowed), what factors go into a credit score, and the 
                importance of having a good credit record (particularly 
                the influence of credit records on interest rates, 
                loans, insurance rates, and job offers).
                    ``(G) Investing, including information about the 
                risks and benefits of investing money, setting goals 
                and time horizons for when money may be needed, 
                establishing risk tolerance, and the differences 
                between stocks, bonds, and dividends.
            ``(4) Use of interactive programs.--The Secretary shall 
        encourage institutions to carry out the requirements of this 
        subsection through the use of interactive programs that test 
        the borrower's understanding of the financial literacy 
        information provided through counseling under this subsection, 
        using simple and understandable language and clear 
        formatting.''.