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[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[S. 3255 Introduced in Senate (IS)]

109th CONGRESS
  2d Session
                                S. 3255

To provide student borrowers with basic rights, including the right to 
  timely information about their loans and the right to make fair and 
           reasonable loan payments, and for other purposes.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

                              May 26, 2006

 Mrs. Clinton (for herself and Ms. Mikulski) introduced the following 
  bill; which was read twice and referred to the Committee on Health, 
                     Education, Labor, and Pensions

_______________________________________________________________________

                                 A BILL

 
To provide student borrowers with basic rights, including the right to 
  timely information about their loans and the right to make fair and 
           reasonable loan payments, and for other purposes.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Student Borrower Bill of Rights Act 
of 2006''.

SEC. 2. FINDINGS.

    Congress finds the following:
            (1) Postsecondary education is increasingly a requirement 
        for a high-paying job in the modern economy; college graduates 
        earn, on average, $1,000,000 more over their working lives than 
        people who stop their education after secondary school.
            (2) As the cost of college increases and as need-based 
        grant aid stagnates, more and more students go into debt to 
        pursue higher education and better economic opportunities.
            (3) The amount students borrowed from Federal student loan 
        programs increased by 76 percent from academic year 1994-1995 
        to academic year 2004-2005, totaling $54,000,000,000 in 
        academic year 2004-2005.
            (4) The fastest growing source of financial aid is private 
        credit, increasing by 734 percent from academic year 1994-1995 
        to academic year 2004-2005, totaling $14,000,000,000 in 
        academic year 2004-2005.
            (5) In academic year 2003-2004, 62 percent of students who 
        graduated with a baccalaureate degree from a public college or 
        university graduated with debt, and their debt averaged 
        $15,500, and 73 percent of students who graduated with a 
        baccalaureate degree from a private college or university 
        graduated with debt, and their debt averaged $19,400.
            (6) Some student borrowers need additional timely, clear, 
        and complete information about the terms and conditions of 
        their loans, beyond the counseling and information currently 
        provided.
            (7) High-interest rates and high fees have caused the 
        balance owed by some borrowers to balloon in short periods of 
        time.
            (8) Income-contingent repayment plans are unavailable to 
        many borrowers who, as a result, are required to make 
        unaffordable high monthly payments.
            (9) The prospect of high levels of debt, burdensome monthly 
        payments, and confusion about rights and repayment options 
        deters people from taking out loans and pursuing higher 
        education.
            (10) There is a need to guarantee student borrowers that 
        they will have access to timely information about student loans 
        and that their loan repayments will be affordable.

SEC. 3. DEFINITION OF LENDER.

    In this Act, the term ``lender'' means any public or private entity 
that--
            (1) lends funds to an individual to enable such individual 
        to attend an institution of higher education; or
            (2) insures, guarantees, or collects on a loan made to an 
        individual to enable such individual to attend an institution 
        of higher education.

SEC. 4. A RIGHT TO SHOP IN A FREE MARKETPLACE.

    (a) Sense of the Senate.--It is the sense of the Senate that the 
Department of Education should vigorously enforce rules requiring 
lenders to complete lender verification certificates in a timely manner 
for borrowers seeking to consolidate loans.
    (b) Accurate and Comprehensive Reporting to Credit Bureaus.--The 
Higher Education Act of 1965 (20 U.S.C. 1001 et seq.) is amended--
            (1) in section 430A(a)--
                    (A) by striking ``agreements with credit bureau 
                organizations'' and inserting ``an agreement with each 
                national credit bureau organization (as described in 
                section 603(p) of the Fair Credit Reporting Act)'';
                    (B) in paragraph (2), by striking ``and'' after the 
                semicolon;
                    (C) by redesignating paragraph (3) as paragraph 
                (4);
                    (D) in paragraph (4), as redesignated by 
                subparagraph (C), by striking the period at the end and 
                inserting ``; and'';
                    (E) by inserting after paragraph (2) the following:
            ``(3) of any on time payments made for such loan;''; and
                    (F) by inserting at the end the following:
            ``(5) that such loan is a student loan.''; and
            (2) in section 463(c)--
                    (A) in paragraph (1), by striking ``cooperative 
                agreements with credit bureau organizations'' and 
                inserting ``a cooperative agreement with each national 
                credit bureau organization (as described in section 
                603(p) of the Fair Credit Reporting Act)''; and
                    (B) in paragraph (2)--
                            (i) in subparagraph (B), by striking 
                        ``and'' after the semicolon;
                            (ii) in subparagraph (C), by striking the 
                        period at the end and inserting ``; and''; and
                            (iii) by adding at the end the following:
                    ``(D) any on time payments made for such loan; and
                    ``(E) such loan as a student loan.''.
    (c) Repeal of Single Holder Rule.--Subparagraph (A) of section 
428C(b)(1) of the Higher Education Act of 1965 (20 U.S.C. 1078-3(b)(1)) 
is amended by striking ``and (i)'' and all that follows through ``so 
selected for consolidation)''.
    (d) Consolidation Between Programs.--Section 428C(b)(5) of the 
Higher Education Act of 1965 (20 U.S.C. 1078-3(b)(5)) is amended by 
striking the first two sentences and inserting the following: ``In the 
event that a borrower is unable to obtain a consolidation loan from a 
lender with an agreement under subsection (a)(1), or is unable to 
obtain a consolidation loan with income-sensitive repayment terms 
acceptable to the borrower from such a lender, the Secretary shall 
offer any such borrower who applies for it, a Federal Direct 
Consolidation Loan.''.
    (e) A Right to Reconsolidate Loans.--
            (1) Part b.--Section 428C(a)(3)(B) of the Higher Education 
        Act of 1965 (20 U.S.C. 1078-3(a)(3)(B)) is amended to read as 
        follows:
            ``(B)(i) Except as provided in clause (ii), an individual 
        who has received a consolidation loan under this section, or 
        the consolidation lender, shall pay a fee of 1 percent of the 
        balance owed on the sum of such loans to be consolidated to the 
        Department to obtain a subsequent consolidation loan under this 
        section.
            ``(ii) An individual who has received a consolidation loan 
        under this section may obtain a subsequent consolidation loan 
        under this section for no fee if such individual was eligible 
        to obtain a subsequent consolidation loan pursuant to this 
        subparagraph on the day before the date of enactment of the 
        Student Borrower Bill of Rights Act of 2006.''.
            (2) Part d.--Section 455(g) of the Higher Education Act of 
        1965 (20 U.S.C. 1087e(g)) is amended--
                    (A) by striking ``A borrower'' and inserting the 
                following:
            ``(1) In general.--A borrower''; and
                    (B) by adding at the end the following:
            ``(2) Refinancing authority.--Notwithstanding any other 
        provision of this part, a borrower may refinance a Federal 
        Direct Consolidation Loan.''.

SEC. 5. A RIGHT TO TIMELY INFORMATION ABOUT LOANS.

    (a) In General.--Title IV of the Higher Education Act of 1965 (20 
U.S.C. 1070 et seq.) is amended by adding at the end the following:

               ``PART I--STUDENT BORROWER BILL OF RIGHTS

``SEC. 499. DEFINITIONS.

    ``In this part:
            ``(1) Federal student loan.--The term `Federal student 
        loan' means a loan made, insured, or guaranteed under this 
        title (except loans made to parents under section 428B or under 
        the Federal Direct PLUS Loan program).
            ``(2) Lender.--The term `lender' means any public or 
        private entity that--
                    ``(A) lends funds to an individual to enable such 
                individual to attend an institution of higher 
                education; or
                    ``(B) insures, guarantees, or collects on a loan 
                made to an individual to enable such individual to 
                attend an institution of higher education.

``SEC. 499A. A RIGHT TO TIMELY INFORMATION ABOUT LOANS.

    ``(a) Regular Bill Providing Pertinent Information About a Loan.--A 
lender of a Federal student loan shall provide the borrower of such 
loan a bill each month or, in the case of a loan payable less 
frequently than monthly, a bill that corresponds to each payment 
installment time period, including a clear and conspicuous notice of--
            ``(1) the borrower's principal borrowed;
            ``(2) the borrower's current balance;
            ``(3) the interest level on such loan;
            ``(4) the amount the borrower has paid in interest;
            ``(5) the amount of additional interest payments the 
        borrower is expected to pay over the life of the loan;
            ``(6) the total amount the borrower has paid for the 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;
            ``(7) a description of each fee the borrower has been 
        charged for the current payment period;
            ``(8) the applicable monthly payment amount set by the 
        Secretary under section 499B for such borrower and the amount 
        such borrower would owe each month according to the borrower's 
        repayment plan absent the provisions of section 499B, or, in 
        the case of a loan payable less frequently than monthly, the 
        amount that corresponds to the payment installment time period 
        taking into consideration the applicable monthly payment amount 
        set by the Secretary under section 499B for such borrower and 
        the amount such borrower would owe that corresponds to the 
        payment installment time period according to the borrower's 
        repayment plan absent the provisions of section 499B;
            ``(9) the date by which the borrower needs to make the 
        payment described in paragraph (8) to avoid additional fees;
            ``(10) the amount of such payment that will be put towards 
        interest, the balance, and any fees;
            ``(11) the lender's address and toll-free phone number for 
        payment purposes;
            ``(12) the lender's address and toll-free number for 
        billing error purposes; and
            ``(13) any change in the terms and conditions of the loan.
    ``(b) Information Provided Five Months After Ceasing to Be at Least 
a Half-Time Student.--A lender of a Federal student loan shall provide 
to the borrower of such loan, on the date that is 5 months after the 
borrower has ceased to be at least a half-time student at the 
institution of higher education for which the loan was made, who 
requests it, and make readily available on the Internet, a clear and 
conspicuous notice of not less than the following information:
            ``(1) The conditions under which a borrower could be 
        charged any fee, and the amount of such fee.
            ``(2) The conditions under which a loan would default and 
        the consequences of default.
            ``(3) The borrower's rights and options, including 
        repayment options, deferments, forbearances, and discharge 
        rights to which the borrower may be entitled.
            ``(4) Legitimate resources, including nonprofit 
        organizations, advocates, and counselors (including the Office 
        of the Ombudsman at the Department), where borrowers can 
        receive advice and assistance, if such resources exist.
            ``(5) Information about how a borrower can appeal to the 
        Department a decision made by a lender about their loan.
    ``(c) Information Provided During Delinquency.--
            ``(1) Sense of the senate.--It is the sense of the Senate 
        that the Secretary should vigorously enforce rules requiring 
        that a lender of a Federal student loan provide a borrower in 
        delinquency information about such borrower's rights and 
        options, means of avoiding default, and the consequences of 
        default, at such a time and in such manner as is most useful 
        for such borrower.
            ``(2) Additional information.--In addition to any other 
        information required under law, a lender of a Federal student 
        loan shall provide a borrower in delinquency with a clear and 
        conspicuous notice of the date on which the loan will default 
        if no payment is made, the minimum payment that must be made to 
        avoid default, discharge rights to which the borrower may be 
        entitled, legitimate resources, including nonprofit 
        organizations, advocates, and counselors (including the Office 
        of the Ombudsman at the Department), where borrowers can 
        receive advice and assistance, if such resources exist, and 
        information about how a borrower can appeal to the Department a 
        decision made by a lender about their loan.
    ``(d) Information Provided During Default.--A lender of a Federal 
student loan shall provide a borrower in default, on not less than 2 
separate occasions, with a clear and conspicuous notice of not less 
than the following information:
            ``(1) The options available to the borrower to get out of 
        default.
            ``(2) The cost and conditions of each option.
            ``(3) Information about how a borrower can appeal to the 
        Department a decision made by a lender about their loan.
    ``(e) Sense of the Senate.--It is the sense of the Senate that the 
Department should--
            ``(1) write and distribute a training manual for 
        organizations, advocates, and counselors who help people who 
        are having problems repaying Federal student loans, 
        describing--
                    ``(A) the rights of such borrowers; and
                    ``(B) the Department's policies for dealing with 
                particular programs; and
            ``(2) provide to such organizations, advocates, and 
        counselors technical assistance where needed.''.
    (b) Information Provided During the Transfer of a Loan to a New 
Servicer.--Section 428(b)(2)(F) of the Higher Education Act of 1965 (20 
U.S.C. 1078(b)(2)(F)) is amended--
            (1) in clause (i)--
                    (A) in subclause (III), by striking ``and'' after 
                the semicolon;
                    (B) in subclause (IV), by striking ``and'' after 
                the semicolon; and
                    (C) by adding at the end the following:
                                    ``(V) the effective date of the 
                                transfer;
                                    ``(VI) the date the current 
                                servicer will stop accepting payments;
                                    ``(VII) the date at which the new 
                                servicer will begin accepting payments; 
                                and
                                    ``(VIII) that the transfer does not 
                                affect any term or condition of their 
                                loan documents other than those terms 
                                directly related to the servicing of 
                                the loan;'';
            (2) in clause (ii)(II), by striking the comma at the end 
        and inserting ``; and''; and
            (3) by adding at the end the following:
                            ``(iii) the transferee will be required, 
                        during the 60-day period beginning on the 
                        effective date of the transfer, to not treat a 
                        payment as late if the borrower mistakenly 
                        sends such payment to the transferor instead of 
                        to the transferee and the payment is otherwise 
                        on time,''.
    (c) Information Provided During Consolidation.--Section 428C(b)(1) 
of the Higher Education Act of 1965 (20 U.S.C. 1078-3(b)(1)) is 
amended--
            (1) in subparagraph (E), by striking ``and'' after the 
        semicolon;
            (2) by redesignating subparagraph (F) as subparagraph (G); 
        and
            (3) by inserting after subparagraph (E) the following:
                    ``(F) that the lender of the consolidation loan 
                shall, upon application for such loan, provide the 
                borrower with a clear and conspicuous notice of not 
                less than the following information:
                            ``(i) the effects of consolidation on total 
                        interest to be paid, fees to be paid, and 
                        length of repayment, relative to the borrower's 
                        currently scheduled total interest to be paid, 
                        fees to be paid, and length of repayment at the 
                        borrower's current interest rate;
                            ``(ii) the effects of consolidation on a 
                        borrower's underlying loan benefits, including 
                        loan forgiveness, cancellation, deferment, and 
                        reduced interest rates on those underlying 
                        loans;
                            ``(iii) the ability of the borrower to 
                        prepay the loan, pay on a shorter schedule, and 
                        to change repayment plans;
                            ``(iv) that borrower benefit programs may 
                        vary among different loan holders, and a 
                        description of how the borrower benefits may 
                        vary among different loan holders;
                            ``(v) the tax benefits for which borrowers 
                        may be eligible;
                            ``(vi) the consequences of default; and
                            ``(vii) that by making the application the 
                        applicant is not obligated to agree to take the 
                        consolidation loan; and''.
    (d) Information Provided During Consolidation or Reconsolidation of 
a Federal Student Loan With a Private Loan.--A lender shall, upon 
application for a consolidation or reconsolidation loan of one or more 
loans made, insured, or guaranteed under part B, part D, or part E of 
title IV of the Higher Education Act of 1965 (20 U.S.C. 1071, 1087a, 
1087aa) with one or more private loans, provide the borrower with a 
clear and conspicuous notice of not less than the following 
information:
            (1) That the consolidation or reconsolidation loan would be 
        a private loan, not a Federal loan.
            (2) A description of the benefits and protections for the 
        loan made, insured, or guaranteed under part B, part D, or part 
        E that the borrower would lose by consolidating such loan with 
        a private loan.
            (3) That the lender may be eligible to consolidate two or 
        more loans made, insured, or guaranteed under part B, part D, 
        or part E within the Federal loan program.

SEC. 6. A RIGHT TO MAKE AFFORDABLE LOAN PAYMENTS.

    (a) Affordable Loan Payments.--Part I of title IV of the Higher 
Education Act of 1965, as added by section 5, is amended by adding at 
the end the following:

``SEC. 499B. A RIGHT TO MAKE AFFORDABLE LOAN PAYMENTS.

    ``(a) Limit on Monthly Payment Amounts to an Affordable Level.--
            ``(1) In general.--
                    ``(A) Limitation.--
                            ``(i) In general.--With respect to Federal 
                        student loans that are made, insured, or 
                        guaranteed after the date of enactment of this 
                        section, the Secretary shall limit the total 
                        monthly payment amount for all of such loans of 
                        a student borrower to not more than the amount 
                        determined pursuant to subparagraph (B), except 
                        as provided in subsection (b)(3).
                            ``(ii) Commencement.--The limit on the 
                        monthly payment amount described in clause (i) 
                        shall begin the day after 1 year after the date 
                        the student ceases to carry at least one-half 
                        the normal full-time academic workload (as 
                        determined by the institution).
                    ``(B) Formula amount.--
                            ``(i) In general.--The amount referred to 
                        in subparagraph (A) shall be the same amount 
                        for each month of a year. Such amount shall be 
                        an amount that is the quotient of the sum of 10 
                        percent of the borrower's annual adjusted gross 
                        income between 100 percent and 200 percent of 
                        the poverty line for the previous year and 20 
                        percent of the borrower's annual adjusted gross 
                        income above 200 percent of the poverty line 
                        for the previous year divided by 12.
                            ``(ii) Poverty line.--In this subparagraph, 
                        the term `poverty line' means the poverty line 
                        described in section 673 of the Community 
                        Services Block Grant Act (42 U.S.C. 9902), 
                        applicable to a family of the size involved.
            ``(2) Provision of information to the secretary.--
                    ``(A) In general.--The limit on the monthly payment 
                amount set by the Secretary under paragraph (1) shall 
                apply only if a borrower provides the Secretary, in 
                such form and at such time--
                            ``(i) such information as the Secretary 
                        shall require to determine the monthly payment 
                        amount that is applicable for such borrower; 
                        and
                            ``(ii) certification that the borrower is 
                        employed full time or is actively seeking full-
                        time employment.
                    ``(B) Update to information.--The Secretary shall 
                require a borrower to--
                            ``(i) provide the information required 
                        under subparagraph (A)(i) annually for the term 
                        of the loan of such borrower; or
                            ``(ii) during each year for the term of the 
                        loan of such borrower, authorize the Secretary 
                        to obtain the information required under 
                        subparagraph (A)(i) from the Internal Revenue 
                        Service for such year.
            ``(3) Continuous update.--Upon receiving information under 
        paragraph (2)(B), the Secretary shall revise the limit on the 
        monthly payment amount for such borrower under paragraph (1), 
        as necessary.
            ``(4) Applicability to all repayment plans.--Regardless of 
        which repayment plan a borrower of a loan selects under this 
        title, the limit on the monthly payment amount set by the 
        Secretary under paragraph (1) shall apply to the monthly 
        repayment amount applicable for such repayment plan.
            ``(5) No fees or charges.--Notwithstanding any other term 
        or condition of Federal student loans of a borrower that are 
        made, insured, or guaranteed after the date of enactment of 
        this section, if the borrower pays the maximum monthly payment 
        amount that is applicable for the borrower for such loans, as 
        determined under this section, on time according to the terms 
        and conditions of such loans, such borrower may not be charged 
        any late fee, underpayment fee, or finance charge for such 
        loans for such month.
            ``(6) Subsidized loans.--In the case of a Federal student 
        loan made, insured, or guaranteed after the date of enactment 
        of this section for which an interest subsidy is paid under 
        section 428(a), if the amount owed each month in interest 
        payments for such loan exceeds the applicable amount for such 
        borrower as determined under this section, and, at the 
        discretion of the Secretary, if the borrower pays such 
        applicable amount, the Federal Government shall pay the 
        difference between such amount owed in interest payments and 
        such amount that has been determined is applicable.
    ``(b) Study.--
            ``(1) In general.--The Secretary shall conduct a study to 
        determine what additional protections beyond those described in 
        subsection (a) are necessary, if any, to ensure that monthly 
        payment amounts for student borrowers of different incomes and 
        with different costs of living are affordable.
            ``(2) Content of study.--The study under paragraph (1) 
        shall--
                    ``(A) consider the payments required of student 
                borrowers in other countries, including the United 
                Kingdom, Australia, and New Zealand, and compare such 
                payments to the payments required of student borrowers 
                in the United States; and
                    ``(B) be completed and submitted to the appropriate 
                committees of Congress not later than 12 months after 
                the date of enactment of this section.
            ``(3) Additional limits on monthly repayments.--If the 
        Secretary determines in the study under paragraph (1) that 
        additional protections are necessary to ensure that monthly 
        payment amounts of student borrowers of Federal student loans 
        made, insured, or guaranteed after the date of enactment of 
        this section are affordable, the Secretary may establish rules 
        based on such study that limits the monthly payment amount for 
        a student borrower to a level that is affordable for such 
        borrower.
    ``(c) Notification of Right to Make Payments of More Than 
Minimum.--Notwithstanding any other provision of this section, a 
borrower whose applicable monthly payment amount set by the Secretary 
under this section is less than the amount such borrower would owe each 
month according to the borrower's repayment plan absent the provisions 
of this section--
            ``(1) shall be notified of the amount the borrower would 
        owe each month according to the borrower's repayment plan 
        absent the provisions of this section; and
            ``(2) may pay the amount described in paragraph (1) or 
        another amount that is greater than the applicable monthly 
        payment amount set by the Secretary under this section.''.
    (b) Income Contingent Repayment.--Section 455(e) of the Higher 
Education Act of 1965 (20 U.S.C. 1087e(e)) is amended by adding at the 
end the following:
            ``(7) Tax burden.--The balance due on a loan made under 
        this part at the end of the maximum repayment period is 
        exempted from the definition of income for the purpose of 
        taxes.''.
    (c) Discharge Rights in Cases of Severe Need.--
            (1) Discharge and cancellation rights in cases of 
        disability.--
                    (A) Amendments.--
                            (i) FFEL and direct loans.--Section 437(a) 
                        of the Higher Education Act of 1965 (20 U.S.C. 
                        1087(a)) is amended by striking ``or becomes 
                        permanently and totally disabled (as determined 
                        in accordance with regulations of the 
                        Secretary)'' and inserting ``or is unable to 
                        engage in any substantial gainful activity by 
                        reason of any medically determinable physical 
                        or mental impairment that can be expected to 
                        result in death or has lasted, or can be 
                        expected to last, for a continuous period of 
                        not less than 60 months''.
                            (ii) Perkins.--Section 464(c)(1)(F) of the 
                        Higher Education Act of 1965 (20 U.S.C. 
                        1087dd(c)(1)(F)) is amended by striking ``or if 
                        he'' and all that follows through the semicolon 
                        and inserting ``or if the borrower is unable to 
                        engage in any substantial gainful activity by 
                        reason of any medically determinable physical 
                        or mental impairment that can be expected to 
                        result in death or has lasted, or can be 
                        expected to last, for a continuous period of 
                        not less than 60 months;''.
                    (B) Sense of the senate.--It is the Sense of the 
                Senate that the Department of Education should continue 
                to administer the discharge and cancellation right 
                provisions of the Higher Education Act of 1965 amended 
                in subparagraph (A) in such a way as to prevent fraud 
                and abuse.
            (2) Discharge rights in cases of bankruptcy.--
                    (A) Sense of the senate.--It is the Sense of the 
                Senate that the Bankruptcy Abuse Prevention and 
                Consumer Protection Act of 2005 (Public Law 109-8) 
                affords sufficient protections to prevent fraud and 
                abuse in the carefully regulated discharge of student 
                loans in bankruptcy.
                    (B) Amendment.--Section 523(a)(8) of title 11, 
                United States Code, is amended to read as follows:
            ``(8) unless--
                    ``(A) excepting such debt from discharge under this 
                paragraph would impose an undue hardship on the debtor 
                and the debtor's dependents, for--
                            ``(i)(I) an educational benefit overpayment 
                        or loan made, insured, or guaranteed by a 
                        governmental unit, or made under any program 
                        funded in whole or in part by a governmental 
                        unit or nonprofit institution; or
                            ``(II) an obligation to repay funds 
                        received as an educational benefit, 
                        scholarship, or stipend;
                    ``(B) such debt is for an educational loan that is 
                a qualified education loan, as defined in section 
                221(d)(1) of the Internal Revenue Code of 1986, 
                incurred by a debtor who is an individual; or
                    ``(C) such debt is for an educational loan made, 
                insured, or guaranteed by a governmental unit, or made 
                under any program funded in whole or in part by a 
                governmental unit or nonprofit institution, after the 
                date of enactment of the Student Borrower Bill of 
                Rights Act of 2006 and such loan first became due more 
                than 7 years (exclusive of any applicable suspension of 
                the repayment period) before the date of the filing of 
                the petition;''.

SEC. 7. A RIGHT FOR INTEREST RATES AND FEES TO BE REASONABLE.

    (a) In General.--Part I of title IV of the Higher Education Act of 
1965, as added by section 5 and amended by section 6, is further 
amended by adding at the end the following:

``SEC. 499C. A RIGHT FOR INTEREST RATES AND FEES TO BE REASONABLE.

    ``(a) In General.--The Secretary shall conduct a study of the 
interest rates and fees that are charged of borrowers of private 
student loans, including--
            ``(1) the conditions under which the interest rate charged 
        of such a borrower is raised or lowered, including the 
        conditions under which the interest rate is raised on 
        delinquent payments, and the amount and frequency of such 
        interest rate changes;
            ``(2) the conditions under which fees are charged of such a 
        borrower and frequency of such fees, including fees that are 
        charged as a condition of taking a deferment or forbearance, 
        and the amount and frequency of such fees;
            ``(3) identifying such practices as described in paragraphs 
        (1) and (2) that are exploitative or unreasonable; and
            ``(4) determining what remedies exist for such practices 
        identified in paragraph (3).
    ``(b) Maximum Collection Fees.--
            ``(1) In general.--Notwithstanding any other provision of 
        this title, the fee charged to a borrower for collecting on a 
        defaulted Federal student loan shall not exceed the lesser of 
        the expenses incurred in collecting on such loan or the amount 
        calculated for such loan based on the following:
                    ``(A) In the case of a defaulted loan that is paid 
                off through consolidation by the borrower under this 
                title, the amount that is 7.5 percent of the balance of 
                such loan.
                    ``(B) In the case of a defaulted loan rehabilitated 
                under part D or pursuant to section 428F(a)(1)(A), the 
                amount that is 13.5 percent of the balance of such 
                loan.
                    ``(C) In the case of a defaulted loan collected 
                under part D or part B and not described in 
                subparagraph (A) or (B), the amount that is 18 percent 
                of the balance of such loan.
            ``(2) Itemized list of expenses.--An entity that charges a 
        borrower for collecting on a defaulted Federal student loan 
        shall provide such borrower an itemized list of any expenses 
        incurred in collecting on such loan.
    ``(c) Cap on Total Charges.--
            ``(1) In general.--The Department shall set a cap on the 
        maximum total amount that can be charged of a borrower on a 
        Federal student loan, including all interest and fees, as a 
        percentage of the original loan balance, over a period of 10 
        years, 15 years, and 20 years.
            ``(2) Level of cap.--The cap set under paragraph (1) shall 
        be set--
                    ``(A) at the minimum level beyond which additional 
                amount charged on a loan is unreasonable or 
                exploitative; and
                    ``(B) for each time period, at a level that is 
                higher than the amount the borrower, who makes 
                regularly scheduled payments in accordance with a 
                standard repayment plan, currently pays over such time 
                period.''.
    (b) Conforming Amendments.--
            (1) Loans paid off through consolidation.--Section 
        428(c)(6)(B) of the Higher Education Act of 1965 (20 U.S.C. 
        1078(c)(6)(B)) is amended--
                    (A) by striking clause (i) and inserting the 
                following:
                    ``(i) on or after October 1, 2006, not charge the 
                borrower collection costs in excess of the amount 
                provided in section 499C(b)(1)(A); and''; and
                    (B) in clause (ii), by striking ``clause (i)(I)'' 
                and inserting ``clause (i)''.
            (2) Rehabilitated loans.--Section 428F(a)(1)(C) of the 
        Higher Education Act of 1965 (20 U.S.C. 1078-6(a)(1)(C)) is 
        amended by striking ``not to exceed'' and all that follows 
        through the period and inserting ``not to exceed the amount 
        provided in section 499C(b)(1)(B).''.

SEC. 8. A RIGHT TO NOT BE EXPLOITED.

    Part I of title IV of the Higher Education Act of 1965, as added by 
section 5 and amended by sections 6 and 7, is further amended by adding 
at the end the following:

``SEC. 499D. A RIGHT TO NOT BE EXPLOITED.

    ``(a) Publication of Job Placement Information.--
            ``(1) In general.--Each institution of higher education (as 
        defined in section 102) that enrolls a student receiving 
        assistance under this Act and that is determined by the 
        Secretary, in accordance with paragraph (2), to be a disclosure 
        institution, shall make publicly available and include in 
        institution materials (including applications for admission to 
        the institution) a clear and conspicuous notice of group level 
        job placement information for each of the past 5 years of 
        graduates (or, if the institution has not been in operation for 
        5 years, for as long as the institution has been in operation), 
        including not less than the following information:
                    ``(A) The percentage of students entering the 
                institution who graduated within 150 percent of their 
                expected graduation date.
                    ``(B) The percentage of graduates employed within 6 
                months of graduating.
                    ``(C) The percentage of graduates employed in the 
                field that the graduates studied at the institution.
                    ``(D) The median annual earnings of those graduates 
                who are employed.
                    ``(E) The percentage of former students of the 
                institution who took out a loan to attend the 
                institution who defaulted on such loan at least once 
                after leaving the institution.
            ``(2) Disclosure institution.--In determining whether an 
        institution is a disclosure institution, the Secretary 
        primarily shall consider whether the institution makes claims 
        relating to the employment prospects of the graduates of the 
        institution. In addition, the Secretary shall consider each of 
        the following criteria as a supplementary factor in determining 
        whether an institution is a disclosure institution with respect 
        to a particular year:
                    ``(A) More than 75 percent of the institution's 
                revenue for such year is loan volume.
                    ``(B) Fewer than 50 percent of the students 
                enrolled in the institution the previous year, who did 
                not graduate from such institution in such previous 
                year, are still enrolled in the institution.
                    ``(C) More than 10 percent of the students who have 
                taken out loans to attend the institution have 
                defaulted on such loans at least once after leaving the 
                institution.
            ``(3) Records.--Each institution of higher education (as 
        defined in section 102) that enrolls a student receiving 
        assistance under this Act and that is determined by the 
        Secretary, in accordance with paragraph (2), to be a disclosure 
        institution, shall keep, for a period of 5 years, the records 
        that substantiate the information the institution is required 
        to publicize under paragraph (1).
    ``(b) Sense of the Senate.--It is the sense of the Senate that the 
Secretary should enforce the rights of borrowers of private student 
loans and Federal student loans to raise claims and defenses related to 
the actions of for-profit institutions of higher education against 
lenders from which the borrowers borrowed money to attend such 
institutions, including the Federal Trade Commission Rule.
    ``(c) Appeal to the Secretary.--
            ``(1) In general.--
                    ``(A) In general.--Any borrower of a Federal 
                student loan who has suffered an economic loss as a 
                result of a violation of the borrower's rights under 
                this title shall have the right to appeal such action 
                to the Secretary.
                    ``(B) Rights of borrower.--For the purpose of this 
                subsection, the rights of a borrower described in 
                subparagraph (A) are those rights involved in the 
                solicitation for, disbursement of, repayment of 
                (including rights to terminate or suspend repayment), 
                or collection of a Federal student loan, including--
                            ``(i) such rights described in this part 
                        and under the Student Borrower Bill of Rights 
                        Act of 2006 and the amendments made by such 
                        Act; and
                            ``(ii) borrower rights under the following 
                        sections of this Act: 427, 428, 428C, 428F, 
                        428J, 428K, 430A, 433, 437, 438, 463, 463A, 
                        464, 465, 484, 484B, 485 (except subsections 
                        (f) and (g) of section 485), and 488A.
            ``(2) Notification.--Not less than 30 days before making an 
        appeal under this subsection, the borrower shall jointly notify 
        the Secretary and the party whose action the borrower wishes to 
        appeal (referred to in this subsection as the `respondent') 
        that the borrower intends to make an appeal, the action that 
        the borrower intends to appeal, and the economic loss that the 
        borrower suffered as a result of the violation.
            ``(3) Settlement.--
                    ``(A) In general.--After the notification under 
                paragraph (2), the borrower and the respondent shall 
                make a good faith effort to settle the dispute. If no 
                settlement is reached or if the respondent fails to 
                respond to the borrower's notice within 30 days of the 
                borrower providing such notice, the borrower may appeal 
                the applicable action to the Secretary, which shall 
                adjudicate the borrower's claim in a fair, impartial, 
                and timely manner. In so doing, the Secretary may, if 
                it should choose, develop a policy by which borrowers 
                who make appeals work with the office of the Ombudsman 
                or another relevant office within the Department to 
                facilitate dispute resolution before providing a formal 
                hearing. Whether or not the Secretary develops such a 
                policy, the Secretary shall provide a formal hearing of 
                the borrower's appeal within 60 days of the start of 
                the appeal, unless the Secretary determines that there 
                is no basis for such a hearing or if the borrower 
                making the appeal provides written consent to waive the 
                borrower's right to a hearing or to delay or withdraw 
                the appeal.
                    ``(B) Judicial review.--Any borrower who is 
                adversely affected by the final agency action shall be 
                entitled to judicial review of such action pursuant to 
                section 706 of title 5, United States Code.
            ``(4) Information.--The Secretary shall make publicly 
        available on the Internet and elsewhere information about how 
        borrowers can make appeals under this subsection and in what 
        circumstances they can do so.
            ``(5) Same rights.--Borrowers shall have the same right to 
        appeal, including the same rights and remedies, whether their 
        loans are held under part B, part D, or part E, and whether the 
        respondent is the Department or another lender that 
        participates in programs described in part B, part D, or part 
        E.
            ``(6) Inapplicability of apa.--The Secretary shall not be 
        required to comply with the provisions of subchapter II of 
        chapter 5, and chapter 7, of title 5, United States Code 
        (commonly referred to as the Administrative Procedure Act), in 
        implementing this subsection, except as provided in paragraph 
        (3)(B).
    ``(d) Admissions Officers as Salespersons.--Notwithstanding any 
other provision of this Act, an institution of higher education that 
does not comply with section 487(a) by violating paragraph (20) of such 
section shall be liable to a borrower of a Federal student loan taken 
out to attend such institution for the entire amount of such loan.
    ``(e) Right to Pay Off Principal Faster Than Scheduled.--A lender 
of a Federal student loan shall provide a borrower who pays more than 
the amount required for any regularly scheduled payment an easy and 
unbiased means of choosing whether such overpayment payment should 
count as a--
            ``(1) prepayment for a subsequently scheduled payment; or
            ``(2) payment against the principal owed on such loan.''.
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