II 

117TH CONGRESS 

2D SESSION S. 5065 

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

IN THE SENATE OF THE UNITED STATES 

SEPTEMBER 29, 2022 

Mr. REED (for himself, Ms. WARREN, and Mr. DURBIN) 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 2022’’. 

6 SEC. 2. PURPOSE. 

7 The purpose of this Act is to protect student loan 

8 borrowers and taxpayers by requiring institutions of high9 er education to assume some of the costs of default for 


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1 student loans under part D of title IV of the Higher Edu2 cation Act of 1965 (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 or 

25 a cohort repayment rate of 50 percent or lower shall 


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

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

3 volume of student loans under this part that are in 

4 default, as determined under paragraph (2). 

5 ‘‘(2) DETERMINATION OF RISK-SHARING PAY6 MENTS.—Subject to paragraph (3), with respect to 

7 each fiscal year, an institution of higher education 

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

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

10 ‘‘(A) that is 20 percent or higher for the 

11 most recent fiscal year for which data are avail12 able, shall pay to the Secretary for the fiscal 

13 year an amount that is equal to 20 percent of 

14 the total amount owed on loans by borrowers 

15 from the covered cohort that are in default; 

16 ‘‘(B) that is lower than 20 percent but not 

17 lower than 15 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 owed 

21 on loans by borrowers from the covered cohort 

22 that are in default; 

23 ‘‘(C) that is lower than 15 percent but not 

24 lower than 10 percent for the most recent fiscal 

25 year for which data are available, shall pay to 


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1 the Secretary for the fiscal year an amount that 

2 is equal to 10 percent of the total amount owed 

3 on loans by borrowers from the covered cohort 

4 that are in default; or 

5 ‘‘(D) that is lower than 10 percent but not 

6 lower than 5 percent for the most recent fiscal 

7 year for which data are available, shall pay to 

8 the Secretary for the fiscal year an amount that 

9 is equal to 5 percent of the total amount owed 

10 on loans by borrowers from the covered cohort 

11 that are in default. 

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

13 PAYMENTS.— 

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

15 the risk-sharing payments described in para16 graph (1) for an institution described in para17 graph (2)(D) that meets the requirements of 

18 this paragraph. 

19 ‘‘(B) REDUCED RISK-SHARING PAY20 MENTS.—If an institution has in place a stu21 dent loan management plan described in sub22 paragraph (D) that is approved by the Sec23 retary, the Secretary shall reduce the total an24 nual amount of risk-sharing payments as fol25 lows: 


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1 ‘‘(i) With respect to an institution 

2 with a cohort default rate described in 

3 paragraph (2)(A), the risk-sharing pay4 ment shall be in an amount that is equal 

5 to 15 percent of the total amount owed on 

6 loans by borrowers from the covered cohort 

7 that are in default. 

8 ‘‘(ii) With respect to an institution 

9 with a cohort default rate described in 

10 paragraph (2)(B), the risk-sharing pay11 ment shall be in an amount that is equal 

12 to 10 percent of the total amount owed on 

13 loans by borrowers from the covered cohort 

14 that are in default. 

15 ‘‘(iii) With respect to an institution 

16 with a cohort default rate described in 

17 paragraph (2)(C), the risk-sharing pay18 ment shall be in an amount that is equal 

19 to 5 percent of the total amount owed on 

20 loans by borrowers from the covered cohort 

21 that are in default. 

22 ‘‘(C) CONTINUATION OF WAIVER OR RE23 DUCED PAYMENTS.—An institution that re24 ceives a waiver under subparagraph (A) or a re25 duced risk-sharing payment under subparaVerDate Sep 11 2014 03:09 Oct 18, 2022 Jkt 039200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S5065.IS S5065

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1 graph (B) may receive a waiver or reduced pay2 ment for a subsequent fiscal year only if the 

3 Secretary determines that the institution is 

4 making satisfactory progress in carrying out the 

5 student loan management plan described in 

6 subparagraph (D), including evidence of the ef7 fectiveness of the individualized financial aid 

8 counseling for students. 

9 ‘‘(D) STUDENT LOAN MANAGEMENT

10 PLAN.—An institution that seeks a waiver or 

11 reduction of its risk-sharing payment, shall de12 velop and carry out a student loan management 

13 plan that shall include an analysis of the risk 

14 factors correlated with higher student loan de15 faults that are present at the institution and 

16 actions that the institution will take to address 

17 such factors. Such plan shall include individual18 ized financial aid counseling for students and 

19 strategies to minimize student loan default and 

20 delinquency. 

21 ‘‘(E) WAIVER OR REDUCTION FOR CER22 TAIN INSTITUTIONS.—In addition to the other 

23 risk-sharing payment waivers and reductions 

24 described in this paragraph, the Secretary may 

25 waive or reduce risk-sharing payments if— 


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

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

3 or 

4 ‘‘(II) title V; and 

5 ‘‘(ii) the Secretary determines that— 

6 ‘‘(I) the institution is making 

7 satisfactory progress in carrying out 

8 the institution’s student loan manage9 ment plan described under subpara10 graph (D); and 

11 ‘‘(II) granting a waiver or reduc12 tion of risk-sharing payments would 

13 be in the best financial interest of stu14 dents at the institution. 

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

16 education shall not deny admission or financial aid 

17 to a student who otherwise meets the admission re18 quirements of the institution based on such student 

19 having a risk factor associated with higher student 

20 loan default rates, such as those described in section 

21 456(c)(1)(C). 

22 ‘‘(5) FUND FOR THE DEPOSIT OF RISK-SHAR23 ING PAYMENTS.— 

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

25 the Treasury of the United States a separate 


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1 account for the deposit of risk-sharing pay2 ments collected under this subsection for the 

3 purpose of reducing student loan debt, delin4 quency, and default. The Secretary shall deposit 

5 any payments collected pursuant to this sub6 section into such fund. 

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

8 the fund described in subparagraph (A), for 

9 each fiscal year— 

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

11 amounts shall be made available to the 

12 Secretary to enter into contracts or cooper13 ative agreements for delinquency and de14 fault prevention or rehabilitation under 

15 section 456(c); and 

16 ‘‘(ii) the Secretary shall reserve the 

17 remainder of such amounts for a Supple18 mental Federal Grant fund that shall be 

19 used to award grants to students— 

20 ‘‘(I) who are eligible for a Fed21 eral Pell Grant; and 

22 ‘‘(II) who attend an institution— 

23 ‘‘(aa) that participates in 

24 the direct student loan program 

25 under this part; 


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1 ‘‘(bb) in which not less than 

2 33 percent of the students en3 rolled at the institution have re4 ceived a Federal Pell Grant; and 

5 ‘‘(cc) that is not subject to 

6 the risk-sharing payments under 

7 this subsection. 

8 ‘‘(C) SUPPLEMENTAL FEDERAL GRANT.— 

9 Eligibility for a Federal Pell Grant, including 

10 the duration of eligibility and the amount of a 

11 Federal Pell Grant, shall not be affected by re12 ceipt of a Supplemental Federal Grant. 

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

14 carry out this subsection beginning with the cohort 

15 default rate for the 2024 cohort and the repayment 

16 rate for the 2024 cohort. The 2024 cohort shall in17 clude current and former students who enter repay18 ment in fiscal year 2024. 

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

20 shall report on an annual basis to the Committee on 

21 Health, Education, Labor, and Pensions of the Sen22 ate and the Committee on Education and Labor of 

23 the House of Representatives the following informa24 tion: 


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

2 subject to risk-sharing payments in the previous 

3 year. 

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

5 from such institutions. 

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

7 collected from such institutions. 

8 ‘‘(D) A list of the institutions that have re9 ceived waivers from the risk-sharing payment 

10 and the reason for such waiver. 

11 ‘‘(E) A list of the institutions that have re12 ceived reductions in the required risk-sharing 

13 payment. 

14 ‘‘(F) The use of funds deposited from risk15 sharing payments, including— 

16 ‘‘(i) the amount reserved for contracts 

17 or cooperative agreements for delinquency 

18 and default prevention or rehabilitation; 

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

20 agreements entered into for delinquency 

21 and default prevention or rehabilitation; 

22 ‘‘(iii) information on the performance 

23 of such contracts or cooperative agree24 ments; 


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1 ‘‘(iv) the amount reserved for the 

2 Federal Pell Grant program; and 

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

4 students in attendance at the institution 

5 are eligible for the increased maximum 

6 Federal Pell Grant under paragraph 

7 (5)(B)(ii) and the amount of such increase. 

8 ‘‘(8) DEFINITIONS.—In this subsection: 

9 ‘‘(A) COVERED COHORT.—In this para10 graph, the term ‘covered cohort’ means the co11 hort with respect to which the cohort default 

12 rate was calculated. 

13 ‘‘(B) REPAYMENT RATE.—The term ‘re14 payment rate’ means, for any fiscal year, the 

15 percentage of student and parent borrowers 

16 who have Federal student loans for attendance 

17 at the institution who entered repayment on 

18 those loans in the second preceding fiscal year 

19 who have paid at least $1 of the principle bal20 ance of the borrower’s Federal student loans re21 ceived for attendance at the institution within 3 

22 years of entering repayment. In the case of a 

23 loan for a student who has attended and bor24 rowed at more than one institution, the bor25 rower (and such borrower’s subsequent repayVerDate Sep 11 2014 03:09 Oct 18, 2022 Jkt 039200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S5065.IS S5065

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1 ment or default) is attributed to each institu2 tion for attendance at which the borrower re3 ceived a loan that entered repayment in the fis4 cal year.’’. 

5 SEC. 4. CONTRACTS AND COOPERATIVE AGREEMENTS. 

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

7 U.S.C. 1087f) is amended by adding at the end the fol8 lowing: 

9 ‘‘(c) CONTRACTS AND COOPERATIVE AGREEMENTS

10 FOR DELINQUENCY AND DEFAULT PREVENTION AND FOR

11 DEFAULT REHABILITATION.—The Secretary may enter 

12 into contracts or cooperative agreements for— 

13 ‘‘(1) statewide or institutionally based programs 

14 for the prevention of Federal student loan delin15 quency and default at institutions of higher edu16 cation that— 

17 ‘‘(A) have a high cohort default rate as de18 fined under section 435(m); 

19 ‘‘(B) have a low repayment rate (as de20 fined in section 454(d)); or 

21 ‘‘(C) serve large numbers or percentages of 

22 student loan borrowers who have a risk factor 

23 associated with higher default rates on Federal 

24 student loans under this title, such as coming 

25 from a low-income family, being a first generaVerDate Sep 11 2014 03:09 Oct 18, 2022 Jkt 039200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\S5065.IS S5065

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1 tion postsecondary education student, not hav2 ing a secondary school diploma, or having pre3 viously defaulted on, and rehabilitated, a loan 

4 made under this title; and 

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

6 successfully repay their loans.’’. 

7 SEC. 5. FINANCIAL RESPONSIBILITY. 

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

9 1965 (20 U.S.C. 1099c(c)(1)) is amended by striking sub10 paragraph (C) and inserting the following: 

11 ‘‘(C) to meet all of its financial obligations, 

12 including institutional risk-sharing payments, 

13 refunds of institutional charges, and repay14 ments to the Secretary for liabilities and debts 

15 incurred in programs administered by the Sec16 retary.’’. 

17 SEC. 6. COHORT DEFAULT RATE, REPAYMENT RATE, AND 

18 OTHER AMENDMENTS. 

19 (a) REQUIREMENTS FOR DISBURSEMENT OF STU20 DENT LOANS.—Section 428G of the Higher Education 

21 Act of 1965 (20 U.S.C. 1078–7) is amended— 

22 (1) in subsection (a), by striking paragraph (4) 

23 and inserting the following: 

24 ‘‘(4) AMENDMENTS TO THE SPECIAL RULE.— 


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1 ‘‘(A) PRIOR TO FISCAL YEAR 2024.—Begin2 ning on October 1, 2011, and ending on Sep3 tember 30, 2023, the special rule under para4 graph (3) shall be applied by substituting ‘15 

5 percent’ for ‘10 percent’. 

6 ‘‘(B) BEGINNING FOR FISCAL YEAR 2024.— 

7 Beginning on October 1, 2023, the special rule 

8 under paragraph (3) shall be applied by sub9 stituting ‘5 percent’ for ‘10 percent’.’’; and 

10 (2) in subsection (b), by striking paragraph (3) 

11 and inserting the following: 

12 ‘‘(3) AMENDMENT TO COHORT DEFAULT RATE

13 EXEMPTION.— 

14 ‘‘(A) PRIOR TO FISCAL YEAR 2024.—Begin15 ning on October 1, 2011, and ending on Sep16 tember 30, 2023, the exemption to the require17 ments of paragraph (1) in the second sentence 

18 of such paragraph shall be applied by sub19 stituting ‘15 percent’ for ‘10 percent’. 

20 ‘‘(B) BEGINNING FOR FISCAL YEAR 2024.— 

21 Beginning on October 1, 2023, the exemption 

22 to the requirements of paragraph (1) in the sec23 ond sentence of such paragraph shall be applied 

24 by substituting ‘5 percent’ for ‘10 percent’.’’. 


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1 (b) DEFAULT MANAGEMENT PLAN FOR PROGRAM

2 PARTICIPATION AGREEMENTS.—Section 487(a)(14)(C) of 

3 the Higher Education Act of 1965 (20 U.S.C. 

4 1094(a)(14)(C)) is amended by striking ‘‘10 percent’’ and 

5 inserting ‘‘5 percent’’ each place the term appears. 

6 (c) PROGRAM REVIEW AND DATA.—Section 

7 498A(a)(2)(A) of the Higher Education Act of 1965 (20 

8 U.S.C. 1099c–1(a)(2)(A)) is amended by striking ‘‘in ex9 cess of 25 percent’’ and inserting ‘‘in excess of 20 per10 cent’’. 

11 (d) DEFINITIONS FOR STUDENT LOAN INSURANCE

12 PROGRAM.—Section 435 of the Higher Education Act of 

13 1965 (20 U.S.C. 1085) is amended— 

14 (1) in subsection (a)(2)(B)— 

15 (A) in clause (iii), by striking ‘‘and’’ after 

16 the semicolon; 

17 (B) in clause (iv), by striking ‘‘and any 

18 succeeding fiscal year.’’ and inserting ‘‘through 

19 fiscal year 2023; and’’; and 

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

21 ‘‘(v) 20 percent for fiscal year 2024 

22 and any succeeding fiscal year.’’; and 

23 (2) in subsection (m)(1)— 

24 (A) in subparagraph (A), in the first sen25 tence, by inserting ‘‘and beginning for the coVerDate Sep 11 2014 03:09 Oct 18, 2022 Jkt 039200 PO 00000 Frm 00015 Fmt 6652 Sfmt 6201 E:\BILLS\S5065.IS S5065

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1 hort that enters repayment in 2024, including 

2 borrowers who enter repayment on Federal Di3 rect PLUS Loans (including for student and 

4 parent borrowers) received for attendance at 

5 the institution’’ after ‘‘loans under section 428, 

6 428A, or 428H, received for attendance at the 

7 institution,’’; and 

8 (B) by adding at the end the following: 

9 ‘‘(D) Beginning for the cohort that enters 

10 repayment in 2024, references in this sub11 section to a student or former student shall be 

12 considered to include a parent who is a bor13 rower of a Federal Direct PLUS Loan.’’. 

Æ 


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