II 

116TH CONGRESS 

1ST SESSION S. 968 

To provide for institutional risk-sharing in the Federal student loan programs. 

IN THE SENATE OF THE UNITED STATES 

APRIL 1, 2019 

Mr. REED (for himself, Mr. DURBIN, Ms. WARREN, and Mr. MURPHY) introduced the following bill; which was read twice and referred to the Committee on Health, Education, Labor, and Pensions 

A BILL 

To provide for institutional risk-sharing in the Federal 

student loan programs. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Protect Student Bor5 rowers Act of 2019’’. 

6 SEC. 2. PURPOSE. 

7 The purpose of this Act is to protect student bor8 rowers by requiring institutions of higher education to as9 sume some of the risk of default for student loans under 


kjohnson on DSK79L0C42 with BILLS
2 

•S 968 IS

1 part D of title IV of the Higher Education Act of 1965 

2 (20 U.S.C. 1087a et seq.). 

3 SEC. 3. INSTITUTIONAL REBATES TO THE DEPARTMENT OF 

4 EDUCATION FOR DEFAULTED LOANS. 

5 Section 454 of the Higher Education Act of 1964 (20 

6 U.S.C. 1087d) is amended— 

7 (1) in subsection (a)— 

8 (A) in paragraph (5), by striking ‘‘and’’ 

9 after the semicolon; 

10 (B) in paragraph (6), by striking the pe11 riod at the end and inserting ‘‘; and’’; and 

12 (C) by adding at the end the following: 

13 ‘‘(7) provide that the institution accepts the in14 stitutional risk-sharing requirements under sub15 section (d), if applicable.’’; and 

16 (2) by adding at the end the following: 

17 ‘‘(d) INSTITUTIONAL RISK-SHARING FOR STUDENT

18 LOAN DEFAULTS.— 

19 ‘‘(1) IN GENERAL.—Subject to paragraph (3), 

20 each institution of higher education participating in 

21 the direct student loan program under this part for 

22 a fiscal year that has a rate of participation in such 

23 program for all students enrolled at that institution 

24 for such fiscal year that is 33 percent or higher shall 

25 remit, at such times as the Secretary may specify, 


kjohnson on DSK79L0C42 with BILLS
3 

•S 968 IS

1 a risk-sharing payment based on a percentage of the 

2 volume of student loans under this part that are in 

3 default, as determined under paragraph (2). 

4 ‘‘(2) DETERMINATION OF RISK-SHARING PAY5 MENTS.—Subject to paragraph (3), with respect to 

6 each fiscal year, an institution of higher education 

7 described in paragraph (1) that has a cohort default 

8 rate (as defined in section 435(m))— 

9 ‘‘(A) that is 30 percent or higher for the 

10 most recent fiscal year for which data are avail11 able, shall pay to the Secretary for the fiscal 

12 year an amount that is equal to 20 percent of 

13 the total amount (including interest and collec14 tion fees) of loans made under this part to stu15 dents of such cohort that are in default; 

16 ‘‘(B) that is lower than 30 percent but not 

17 lower than 25 percent for the most recent fiscal 

18 year for which data are available, shall pay to 

19 the Secretary for the fiscal year an amount that 

20 is equal to 15 percent of the total amount (in21 cluding interest and collection fees) of loans 

22 made under this part to students of such cohort 

23 that are in default; 

24 ‘‘(C) that is lower than 25 percent but not 

25 lower than 20 percent for the most recent fiscal 


kjohnson on DSK79L0C42 with BILLS
4 

•S 968 IS

1 year for which data are available, shall pay to 

2 the Secretary for the fiscal year an amount that 

3 is equal to 10 percent of the total amount (in4 cluding interest and collection fees) of loans 

5 made under this part to students of such cohort 

6 that are in default; or 

7 ‘‘(D) that is lower than 20 percent but not 

8 lower than 15 percent for the most recent fiscal 

9 year for which data are available, shall pay to 

10 the Secretary for the fiscal year an amount that 

11 is equal to 5 percent of the total amount (in12 cluding interest and collection fees) of loans 

13 made under this part to students of such cohort 

14 that are in default. 

15 ‘‘(3) WAIVER AND REDUCED RISK-SHARING

16 PAYMENTS.— 

17 ‘‘(A) WAIVER.—The Secretary shall waive 

18 the risk-sharing payments described in para19 graph (1) for an institution described in para20 graph (2)(D) that meets the requirements of 

21 subparagraph (D). 

22 ‘‘(B) REDUCED RISK-SHARING PAY23 MENTS.—If an institution has in place a stu24 dent loan management plan described in sub25 paragraph (D) that is approved by the SecVerDate Sep 11 2014 22:59 Apr 05, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S968.IS S968

kjohnson on DSK79L0C42 with BILLS
5 

•S 968 IS

1 retary, the Secretary shall reduce the total an2 nual amount of risk-sharing payments as fol3 lows: 

4 ‘‘(i) With respect to an institution 

5 with a cohort default rate described in 

6 paragraph (2)(A), the risk-sharing pay7 ment shall be in an amount that is equal 

8 to 15 percent of the total amount (includ9 ing interest and collection fees) of loans 

10 made under this part to students of such 

11 cohort that are in default. 

12 ‘‘(ii) With respect to an institution 

13 with a cohort default rate described in 

14 paragraph (2)(B), the risk-sharing pay15 ment shall be in an amount that is equal 

16 to 10 percent of the total amount (includ17 ing interest and collection fees) of loans 

18 made under this part to students of such 

19 cohort that are in default. 

20 ‘‘(iii) With respect to an institution 

21 with a cohort default rate described in 

22 paragraph (2)(C), the risk-sharing pay23 ment shall be in an amount that is equal 

24 to 5 percent of the total amount (including 

25 interest and collection fees) of loans made 


kjohnson on DSK79L0C42 with BILLS
6 

•S 968 IS

1 under this part to students of such cohort 

2 that are in default. 

3 ‘‘(C) CONTINUATION OF WAIVER OR RE4 DUCED PAYMENTS.—An institution that re5 ceives a waiver under subparagraph (A) or a re6 duced risk-sharing payment under subpara7 graph (B) may receive a waiver or reduced pay8 ment for a subsequent fiscal year only if the 

9 Secretary determines that the institution is 

10 making satisfactory progress in carrying out the 

11 student loan management plan described in 

12 subparagraph (D), including evidence of the ef13 fectiveness of the individualized financial aid 

14 counseling for students. 

15 ‘‘(D) STUDENT LOAN MANAGEMENT

16 PLAN.—An institution that seeks a waiver or 

17 reduction of its risk-sharing payment, shall de18 velop and carry out a student loan management 

19 plan that shall include an analysis of the risk 

20 factors correlated with higher student loan de21 faults that are present at the institution and 

22 actions that the institution will take to address 

23 such factors. Such plan shall include individual24 ized financial aid counseling for students and 


kjohnson on DSK79L0C42 with BILLS
7 

•S 968 IS

1 strategies to minimize student loan default and 

2 delinquency. 

3 ‘‘(E) WAIVER OR REDUCTION FOR CER4 TAIN INSTITUTIONS.—In addition to the other 

5 risk-sharing payment waivers and reductions 

6 described in this paragraph, the Secretary may 

7 waive or reduce risk-sharing payments if— 

8 ‘‘(i) an institution is eligible under— 

9 ‘‘(I) part A or part B of title III; 

10 or 

11 ‘‘(II) title V; and 

12 ‘‘(ii) the Secretary determines that— 

13 ‘‘(I) the institution is making 

14 satisfactory progress in carrying out 

15 the institution’s student loan manage16 ment plan described under subpara17 graph (D); and 

18 ‘‘(II) granting a waiver or reduc19 tion of risk-sharing payments would 

20 be in the best interest of students at 

21 the institution. 

22 ‘‘(4) PROHIBITION.—An institution of higher 

23 education shall not deny admission or financial aid 

24 to a student based on a perception that such student 


kjohnson on DSK79L0C42 with BILLS
8 

•S 968 IS

1 may be at risk for defaulting on a loan made under 

2 this part. 

3 ‘‘(5) FUND FOR THE DEPOSIT OF RISK-SHAR4 ING PAYMENTS.— 

5 ‘‘(A) IN GENERAL.—There is established in 

6 the Treasury of the United States a separate 

7 account for the deposit of risk-sharing pay8 ments collected under this subsection for the 

9 purpose of reducing student loan debt, delin10 quency, and default. The Secretary shall deposit 

11 any payments collected pursuant to this sub12 section into such fund. 

13 ‘‘(B) USE OF FUNDS.—Of the amounts in 

14 the fund described in subparagraph (A), for 

15 each fiscal year— 

16 ‘‘(i) not more than 50 percent of such 

17 amounts shall be made available to the 

18 Secretary to enter into contracts or cooper19 ative agreements for delinquency and de20 fault prevention or rehabilitation under 

21 section 456(c); and 

22 ‘‘(ii) the Secretary shall reserve the 

23 remainder of such amounts for a Federal 

24 Pell Grant fund that shall be used to in25 crease the maximum Federal Pell Grant 


kjohnson on DSK79L0C42 with BILLS
9 

•S 968 IS

1 award available to students who attend an 

2 institution— 

3 ‘‘(I) that participates in the di4 rect student loan program under this 

5 part; 

6 ‘‘(II) in which not less than 33 

7 percent of the students enrolled at the 

8 institution have received a Federal 

9 Pell Grant; and 

10 ‘‘(III) that has a rate of partici11 pation in the direct student loan pro12 gram under this part for all students 

13 enrolled at that institution for such 

14 fiscal year that is— 

15 ‘‘(aa) 33 percent or higher 

16 and such institution is not sub17 ject to the risk-sharing payments 

18 under this subsection; or 

19 ‘‘(bb) less than 33 percent 

20 and such institution has a cohort 

21 default rate of less than 15 per22 cent for the most recent fiscal 

23 year for which data are available. 

24 ‘‘(6) APPLICABILITY.—The Secretary shall 

25 carry out this subsection beginning with the cohort 


kjohnson on DSK79L0C42 with BILLS
10 

•S 968 IS

1 default rate for the 2019 cohort. The 2019 cohort 

2 shall include current and former students who enter 

3 repayment in fiscal year 2019. 

4 ‘‘(7) REPORT TO CONGRESS.—The Secretary 

5 shall report on an annual basis to the Committee on 

6 Health, Education, Labor, and Pensions of the Sen7 ate and the Committee on Education and Labor of 

8 the House of Representatives the following informa9 tion: 

10 ‘‘(A) A list of institutions that have been 

11 subject to risk-sharing payments in the previous 

12 year. 

13 ‘‘(B) The required risk-sharing payment 

14 from such institutions. 

15 ‘‘(C) The amount of risk-sharing payments 

16 collected from such institutions. 

17 ‘‘(D) A list of the institutions that have re18 ceived waivers from the risk-sharing payment 

19 and the reason for such waiver. 

20 ‘‘(E) A list of the institutions that have re21 ceived reductions in the required risk-sharing 

22 payment. 

23 ‘‘(F) The use of funds deposited from risk24 sharing payments, including— 


kjohnson on DSK79L0C42 with BILLS
11 

•S 968 IS

1 ‘‘(i) the amount reserved for contracts 

2 or cooperative agreements for delinquency 

3 and default prevention or rehabilitation; 

4 ‘‘(ii) a list of contracts or cooperative 

5 agreements entered into for delinquency 

6 and default prevention or rehabilitation; 

7 ‘‘(iii) information on the performance 

8 of such contracts or cooperative agree9 ments; 

10 ‘‘(iv) the amount reserved for the 

11 Federal Pell Grant program; and 

12 ‘‘(v) a list of institutions for which 

13 students in attendance at the institution 

14 are eligible for the increased maximum 

15 Federal Pell Grant under paragraph 

16 (5)(B)(ii) and the amount of such in17 crease.’’. 

18 SEC. 4. CONTRACTS AND COOPERATIVE AGREEMENTS. 

19 Section 456 of the Higher Education Act of 1965 (20 

20 U.S.C. 1087f) is amended by adding at the end the fol21 lowing: 

22 ‘‘(c) CONTRACTS AND COOPERATIVE AGREEMENTS

23 FOR DELINQUENCY AND DEFAULT PREVENTION AND FOR

24 DEFAULT REHABILITATION.—The Secretary may enter 

25 into contracts or cooperative agreements for— 


kjohnson on DSK79L0C42 with BILLS
12 

•S 968 IS

1 ‘‘(1) statewide or institutionally based programs 

2 for the prevention of Federal student loan delin3 quency and default at institutions of higher edu4 cation that— 

5 ‘‘(A) have a high cohort default rate as de6 fined under section 435(m); or 

7 ‘‘(B) serve large numbers or percentages of 

8 student loan borrowers who have a risk factor 

9 associated with higher default rates on Federal 

10 student loans under this title, such as coming 

11 from a low-income family, being a first genera12 tion postsecondary education student, not hav13 ing a secondary school diploma, or having pre14 viously defaulted on, and rehabilitated, a loan 

15 made under this title; and 

16 ‘‘(2) increasing the number of borrowers who 

17 successfully rehabilitate defaulted loans.’’. 

18 SEC. 5. FINANCIAL RESPONSIBILITY. 

19 Section 498(c)(1) of the Higher Education Act of 

20 1965 (20 U.S.C. 1099c(c)(1)) is amended by striking sub21 paragraph (C) and inserting the following: 

22 ‘‘(C) to meet all of its financial obligations, in23 cluding institutional risk-sharing payments, refunds 

24 of institutional charges, and repayments to the SecVerDate Sep 11 2014 22:59 Apr 05, 2019 Jkt 089200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\S968.IS S968

kjohnson on DSK79L0C42 with BILLS
13 

•S 968 IS

1 retary for liabilities and debts incurred in programs 

2 administered by the Secretary.’’. 

3 SEC. 6. GENERAL ACCOUNTABILITY OFFICE STUDIES. 

4 Not later than 12 months after the date of enactment 

5 of the Protect Student Borrowers Act of 2019, the Comp6 troller General of the United States shall report to the 

7 Committee on Health, Education, Labor, and Pensions of 

8 the Senate and the Committee on Education and Labor 

9 of the House of Representatives the results of a study that 

10 addresses the following: 

11 (1) How a repayment rate metric could be used 

12 in place of or in conjunction with the cohort default 

13 rate for institutional eligibility and risk-sharing. 

14 (2) The implications of using a cohort repay15 ment rate versus other types of repayment rate. 

16 (3) The considerations that should be taken 

17 into account before transitioning from the current 

18 cohort default rate metric to a repayment rate met19 ric. 

20 (4) The impact on risk-sharing payments and 

21 institutional eligibility if the cohort default rate were 

22 based on 5 years instead of 3 years. 

Æ 


kjohnson on DSK79L0C42 with BILLS