II 

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. 

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 ‘‘Student Borrower Bill 

5 of Rights Act of 2006’’. 

6 SEC. 2. FINDINGS. 

7 Congress finds the following: 


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1 (1) Postsecondary education is increasingly a 

2 requirement for a high-paying job in the modern 

3 economy; college graduates earn, on average, 

4 $1,000,000 more over their working lives than peo5 ple who stop their education after secondary school. 

6 (2) As the cost of college increases and as need7 based grant aid stagnates, more and more students 

8 go into debt to pursue higher education and better 

9 economic opportunities. 

10 (3) The amount students borrowed from Fed11 eral student loan programs increased by 76 percent 

12 from academic year 1994–1995 to academic year 

13 2004–2005, totaling $54,000,000,000 in academic 

14 year 2004–2005. 

15 (4) The fastest growing source of financial aid 

16 is private credit, increasing by 734 percent from 

17 academic year 1994–1995 to academic year 2004– 

18 2005, totaling $14,000,000,000 in academic year 

19 2004–2005. 

20 (5) In academic year 2003–2004, 62 percent of 

21 students who graduated with a baccalaureate degree 

22 from a public college or university graduated with 

23 debt, and their debt averaged $15,500, and 73 per24 cent of students who graduated with a baccalaureate 


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1 degree from a private college or university graduated 

2 with debt, and their debt averaged $19,400. 

3 (6) Some student borrowers need additional 

4 timely, clear, and complete information about the 

5 terms and conditions of their loans, beyond the 

6 counseling and information currently provided. 

7 (7) High-interest rates and high fees have 

8 caused the balance owed by some borrowers to bal9 loon in short periods of time. 

10 (8) Income-contingent repayment plans are un11 available to many borrowers who, as a result, are re12 quired to make unaffordable high monthly payments. 

13 (9) The prospect of high levels of debt, burden14 some monthly payments, and confusion about rights 

15 and repayment options deters people from taking out 

16 loans and pursuing higher education. 

17 (10) There is a need to guarantee student bor18 rowers that they will have access to timely informa19 tion about student loans and that their loan repay20 ments will be affordable. 

21 SEC. 3. DEFINITION OF LENDER. 

22 In this Act, the term ‘‘lender’’ means any public or 

23 private entity that— 


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1 (1) lends funds to an individual to enable such 

2 individual to attend an institution of higher edu3 cation; or 

4 (2) insures, guarantees, or collects on a loan 

5 made to an individual to enable such individual to 

6 attend an institution of higher education. 

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

8 (a) SENSE OF THE SENATE.—It is the sense of the 

9 Senate that the Department of Education should vigor10 ously enforce rules requiring lenders to complete lender 

11 verification certificates in a timely manner for borrowers 

12 seeking to consolidate loans. 

13 (b) ACCURATE AND COMPREHENSIVE REPORTING TO

14 CREDIT BUREAUS.—The Higher Education Act of 1965 

15 (20 U.S.C. 1001 et seq.) is amended— 

16 (1) in section 430A(a)— 

17 (A) by striking ‘‘agreements with credit 

18 bureau organizations’’ and inserting ‘‘an agree19 ment with each national credit bureau organiza20 tion (as described in section 603(p) of the Fair 

21 Credit Reporting Act)’’; 

22 (B) in paragraph (2), by striking ‘‘and’’ 

23 after the semicolon; 

24 (C) by redesignating paragraph (3) as 

25 paragraph (4); 


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1 (D) in paragraph (4), as redesignated by 

2 subparagraph (C), by striking the period at the 

3 end and inserting ‘‘; and’’; 

4 (E) by inserting after paragraph (2) the 

5 following: 

6 ‘‘(3) of any on time payments made for such 

7 loan;’’; and 

8 (F) by inserting at the end the following: 

9 ‘‘(5) that such loan is a student loan.’’; and 

10 (2) in section 463(c)— 

11 (A) in paragraph (1), by striking ‘‘coopera12 tive agreements with credit bureau organiza13 tions’’ and inserting ‘‘a cooperative agreement 

14 with each national credit bureau organization 

15 (as described in section 603(p) of the Fair 

16 Credit Reporting Act)’’; and 

17 (B) in paragraph (2)— 

18 (i) in subparagraph (B), by striking 

19 ‘‘and’’ after the semicolon; 

20 (ii) in subparagraph (C), by striking 

21 the period at the end and inserting ‘‘; 

22 and’’; and 

23 (iii) by adding at the end the fol24 lowing: 


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1 ‘‘(D) any on time payments made for such 

2 loan; and 

3 ‘‘(E) such loan as a student loan.’’. 

4 (c) REPEAL OF SINGLE HOLDER RULE.—Subpara5 graph (A) of section 428C(b)(1) of the Higher Education 

6 Act of 1965 (20 U.S.C. 1078–3(b)(1)) is amended by 

7 striking ‘‘and (i)’’ and all that follows through ‘‘so selected 

8 for consolidation)’’. 

9 (d) CONSOLIDATION BETWEEN PROGRAMS.—Section 

10 428C(b)(5) of the Higher Education Act of 1965 (20 

11 U.S.C. 1078–3(b)(5)) is amended by striking the first two 

12 sentences and inserting the following: ‘‘In the event that 

13 a borrower is unable to obtain a consolidation loan from 

14 a lender with an agreement under subsection (a)(1), or 

15 is unable to obtain a consolidation loan with income-sen16 sitive repayment terms acceptable to the borrower from 

17 such a lender, the Secretary shall offer any such borrower 

18 who applies for it, a Federal Direct Consolidation Loan.’’. 

19 (e) A RIGHT TO RECONSOLIDATE LOANS.— 

20 (1) PART B.—Section 428C(a)(3)(B) of the 

21 Higher Education Act of 1965 (20 U.S.C. 1078– 

22 3(a)(3)(B)) is amended to read as follows: 

23 ‘‘(B)(i) Except as provided in clause (ii), an in24 dividual who has received a consolidation loan under 

25 this section, or the consolidation lender, shall pay a 


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1 fee of 1 percent of the balance owed on the sum of 

2 such loans to be consolidated to the Department to 

3 obtain a subsequent consolidation loan under this 

4 section. 

5 ‘‘(ii) An individual who has received a consoli6 dation loan under this section may obtain a subse7 quent consolidation loan under this section for no 

8 fee if such individual was eligible to obtain a subse9 quent consolidation loan pursuant to this subpara10 graph on the day before the date of enactment of 

11 the Student Borrower Bill of Rights Act of 2006.’’. 

12 (2) PART D.—Section 455(g) of the Higher 

13 Education Act of 1965 (20 U.S.C. 1087e(g)) is 

14 amended— 

15 (A) by striking ‘‘A borrower’’ and inserting 

16 the following: 

17 ‘‘(1) IN GENERAL.—A borrower’’; and 

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

19 ‘‘(2) REFINANCING AUTHORITY.—Notwith20 standing any other provision of this part, a borrower 

21 may refinance a Federal Direct Consolidation 

22 Loan.’’. 


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

2 (a) IN GENERAL.—Title IV of the Higher Education 

3 Act of 1965 (20 U.S.C. 1070 et seq.) is amended by add4 ing at the end the following: 

5 ‘‘PART I—STUDENT BORROWER BILL OF RIGHTS 

6 ‘‘SEC. 499. DEFINITIONS. 

7 ‘‘In this part: 

8 ‘‘(1) FEDERAL STUDENT LOAN.—The term 

9 ‘Federal student loan’ means a loan made, insured, 

10 or guaranteed under this title (except loans made to 

11 parents under section 428B or under the Federal 

12 Direct PLUS Loan program). 

13 ‘‘(2) LENDER.—The term ‘lender’ means any 

14 public or private entity that— 

15 ‘‘(A) lends funds to an individual to enable 

16 such individual to attend an institution of high17 er education; or 

18 ‘‘(B) insures, guarantees, or collects on a 

19 loan made to an individual to enable such indi20 vidual to attend an institution of higher edu21 cation. 

22 ‘‘SEC. 499A. A RIGHT TO TIMELY INFORMATION ABOUT 

23 LOANS. 

24 ‘‘(a) REGULAR BILL PROVIDING PERTINENT INFOR25 MATION ABOUT A LOAN.—A lender of a Federal student 

26 loan shall provide the borrower of such loan a bill each 


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1 month or, in the case of a loan payable less frequently 

2 than monthly, a bill that corresponds to each payment in3 stallment time period, including a clear and conspicuous 

4 notice of— 

5 ‘‘(1) the borrower’s principal borrowed; 

6 ‘‘(2) the borrower’s current balance; 

7 ‘‘(3) the interest level on such loan; 

8 ‘‘(4) the amount the borrower has paid in inter9 est; 

10 ‘‘(5) the amount of additional interest payments 

11 the borrower is expected to pay over the life of the 

12 loan; 

13 ‘‘(6) the total amount the borrower has paid for 

14 the loan, including the amount the borrower has 

15 paid in interest, the amount the borrower has paid 

16 in fees, and the amount the borrower has paid 

17 against the balance; 

18 ‘‘(7) a description of each fee the borrower has 

19 been charged for the current payment period; 

20 ‘‘(8) the applicable monthly payment amount 

21 set by the Secretary under section 499B for such 

22 borrower and the amount such borrower would owe 

23 each month according to the borrower’s repayment 

24 plan absent the provisions of section 499B, or, in 

25 the case of a loan payable less frequently than 


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1 monthly, the amount that corresponds to the pay2 ment installment time period taking into consider3 ation the applicable monthly payment amount set by 

4 the Secretary under section 499B for such borrower 

5 and the amount such borrower would owe that cor6 responds to the payment installment time period ac7 cording to the borrower’s repayment plan absent the 

8 provisions of section 499B; 

9 ‘‘(9) the date by which the borrower needs to 

10 make the payment described in paragraph (8) to 

11 avoid additional fees; 

12 ‘‘(10) the amount of such payment that will be 

13 put towards interest, the balance, and any fees; 

14 ‘‘(11) the lender’s address and toll-free phone 

15 number for payment purposes; 

16 ‘‘(12) the lender’s address and toll-free number 

17 for billing error purposes; and 

18 ‘‘(13) any change in the terms and conditions 

19 of the loan. 

20 ‘‘(b) INFORMATION PROVIDED FIVE MONTHS AFTER

21 CEASING TO BE AT LEAST A HALF-TIME STUDENT.—A 

22 lender of a Federal student loan shall provide to the bor23 rower of such loan, on the date that is 5 months after 

24 the borrower has ceased to be at least a half-time student 

25 at the institution of higher education for which the loan 


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1 was made, who requests it, and make readily available on 

2 the Internet, a clear and conspicuous notice of not less 

3 than the following information: 

4 ‘‘(1) The conditions under which a borrower 

5 could be charged any fee, and the amount of such 

6 fee. 

7 ‘‘(2) The conditions under which a loan would 

8 default and the consequences of default. 

9 ‘‘(3) The borrower’s rights and options, includ10 ing repayment options, deferments, forbearances, 

11 and discharge rights to which the borrower may be 

12 entitled. 

13 ‘‘(4) Legitimate resources, including nonprofit 

14 organizations, advocates, and counselors (including 

15 the Office of the Ombudsman at the Department), 

16 where borrowers can receive advice and assistance, if 

17 such resources exist. 

18 ‘‘(5) Information about how a borrower can ap19 peal to the Department a decision made by a lender 

20 about their loan. 

21 ‘‘(c) INFORMATION PROVIDED DURING DELIN22 QUENCY.— 

23 ‘‘(1) SENSE OF THE SENATE.—It is the sense 

24 of the Senate that the Secretary should vigorously 

25 enforce rules requiring that a lender of a Federal 


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1 student loan provide a borrower in delinquency in2 formation about such borrower’s rights and options, 

3 means of avoiding default, and the consequences of 

4 default, at such a time and in such manner as is 

5 most useful for such borrower. 

6 ‘‘(2) ADDITIONAL INFORMATION.—In addition 

7 to any other information required under law, a lend8 er of a Federal student loan shall provide a borrower 

9 in delinquency with a clear and conspicuous notice 

10 of the date on which the loan will default if no pay11 ment is made, the minimum payment that must be 

12 made to avoid default, discharge rights to which the 

13 borrower may be entitled, legitimate resources, in14 cluding nonprofit organizations, advocates, and 

15 counselors (including the Office of the Ombudsman 

16 at the Department), where borrowers can receive ad17 vice and assistance, if such resources exist, and in18 formation about how a borrower can appeal to the 

19 Department a decision made by a lender about their 

20 loan. 

21 ‘‘(d) INFORMATION PROVIDED DURING DEFAULT.— 

22 A lender of a Federal student loan shall provide a bor23 rower in default, on not less than 2 separate occasions, 

24 with a clear and conspicuous notice of not less than the 

25 following information: 


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1 ‘‘(1) The options available to the borrower to 

2 get out of default. 

3 ‘‘(2) The cost and conditions of each option. 

4 ‘‘(3) Information about how a borrower can ap5 peal to the Department a decision made by a lender 

6 about their loan. 

7 ‘‘(e) SENSE OF THE SENATE.—It is the sense of the 

8 Senate that the Department should— 

9 ‘‘(1) write and distribute a training manual for 

10 organizations, advocates, and counselors who help 

11 people who are having problems repaying Federal 

12 student loans, describing— 

13 ‘‘(A) the rights of such borrowers; and 

14 ‘‘(B) the Department’s policies for dealing 

15 with particular programs; and 

16 ‘‘(2) provide to such organizations, advocates, 

17 and counselors technical assistance where needed.’’. 

18 (b) INFORMATION PROVIDED DURING THE TRANS19 FER OF A LOAN TO A NEW SERVICER.—Section 

20 428(b)(2)(F) of the Higher Education Act of 1965 (20 

21 U.S.C. 1078(b)(2)(F)) is amended— 

22 (1) in clause (i)— 

23 (A) in subclause (III), by striking ‘‘and’’ 

24 after the semicolon; 


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1 (B) in subclause (IV), by striking ‘‘and’’ 

2 after the semicolon; and 

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

4 ‘‘(V) the effective date of the 

5 transfer; 

6 ‘‘(VI) the date the current 

7 servicer will stop accepting payments; 

8 ‘‘(VII) the date at which the new 

9 servicer will begin accepting pay10 ments; and 

11 ‘‘(VIII) that the transfer does 

12 not affect any term or condition of 

13 their loan documents other than those 

14 terms directly related to the servicing 

15 of the loan;’’; 

16 (2) in clause (ii)(II), by striking the comma at 

17 the end and inserting ‘‘; and’’; and 

18 (3) by adding at the end the following: 

19 ‘‘(iii) the transferee will be required, 

20 during the 60-day period beginning on the 

21 effective date of the transfer, to not treat 

22 a payment as late if the borrower mistak23 enly sends such payment to the transferor 

24 instead of to the transferee and the pay25 ment is otherwise on time,’’. 


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1 (c) INFORMATION PROVIDED DURING CONSOLIDA2 TION.—Section 428C(b)(1) of the Higher Education Act 

3 of 1965 (20 U.S.C. 1078–3(b)(1)) is amended— 

4 (1) in subparagraph (E), by striking ‘‘and’’ 

5 after the semicolon; 

6 (2) by redesignating subparagraph (F) as sub7 paragraph (G); and 

8 (3) by inserting after subparagraph (E) the fol9 lowing: 

10 ‘‘(F) that the lender of the consolidation 

11 loan shall, upon application for such loan, pro12 vide the borrower with a clear and conspicuous 

13 notice of not less than the following informa14 tion: 

15 ‘‘(i) the effects of consolidation on 

16 total interest to be paid, fees to be paid, 

17 and length of repayment, relative to the 

18 borrower’s currently scheduled total inter19 est to be paid, fees to be paid, and length 

20 of repayment at the borrower’s current in21 terest rate; 

22 ‘‘(ii) the effects of consolidation on a 

23 borrower’s underlying loan benefits, includ24 ing loan forgiveness, cancellation, 


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1 deferment, and reduced interest rates on 

2 those underlying loans; 

3 ‘‘(iii) the ability of the borrower to 

4 prepay the loan, pay on a shorter schedule, 

5 and to change repayment plans; 

6 ‘‘(iv) that borrower benefit programs 

7 may vary among different loan holders, 

8 and a description of how the borrower ben9 efits may vary among different loan hold10 ers; 

11 ‘‘(v) the tax benefits for which bor12 rowers may be eligible; 

13 ‘‘(vi) the consequences of default; and 

14 ‘‘(vii) that by making the application 

15 the applicant is not obligated to agree to 

16 take the consolidation loan; and’’. 

17 (d) INFORMATION PROVIDED DURING CONSOLIDA18 TION OR RECONSOLIDATION OF A FEDERAL STUDENT

19 LOAN WITH A PRIVATE LOAN.—A lender shall, upon ap20 plication for a consolidation or reconsolidation loan of one 

21 or more loans made, insured, or guaranteed under part 

22 B, part D, or part E of title IV of the Higher Education 

23 Act of 1965 (20 U.S.C. 1071, 1087a, 1087aa) with one 

24 or more private loans, provide the borrower with a clear 


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1 and conspicuous notice of not less than the following infor2 mation: 

3 (1) That the consolidation or reconsolidation 

4 loan would be a private loan, not a Federal loan. 

5 (2) A description of the benefits and protections 

6 for the loan made, insured, or guaranteed under 

7 part B, part D, or part E that the borrower would 

8 lose by consolidating such loan with a private loan. 

9 (3) That the lender may be eligible to consoli10 date two or more loans made, insured, or guaranteed 

11 under part B, part D, or part E within the Federal 

12 loan program. 

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

14 (a) AFFORDABLE LOAN PAYMENTS.—Part I of title 

15 IV of the Higher Education Act of 1965, as added by sec16 tion 5, is amended by adding at the end the following: 

17 ‘‘SEC. 499B. A RIGHT TO MAKE AFFORDABLE LOAN PAY18 MENTS. 

19 ‘‘(a) LIMIT ON MONTHLY PAYMENT AMOUNTS TO AN

20 AFFORDABLE LEVEL.— 

21 ‘‘(1) IN GENERAL.— 

22 ‘‘(A) LIMITATION.— 

23 ‘‘(i) IN GENERAL.—With respect to 

24 Federal student loans that are made, in25 sured, or guaranteed after the date of enVerDate Aug 31 2005 04:01 Jun 06, 2006 Jkt 049200 PO 00000 Frm 00017 Fmt 6652 Sfmt 6201 E:\BILLS\S3255.IS S3255

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1 actment of this section, the Secretary shall 

2 limit the total monthly payment amount 

3 for all of such loans of a student borrower 

4 to not more than the amount determined 

5 pursuant to subparagraph (B), except as 

6 provided in subsection (b)(3). 

7 ‘‘(ii) COMMENCEMENT.—The limit on 

8 the monthly payment amount described in 

9 clause (i) shall begin the day after 1 year 

10 after the date the student ceases to carry 

11 at least one-half the normal full-time aca12 demic workload (as determined by the in13 stitution). 

14 ‘‘(B) FORMULA AMOUNT.— 

15 ‘‘(i) IN GENERAL.—The amount re16 ferred to in subparagraph (A) shall be the 

17 same amount for each month of a year. 

18 Such amount shall be an amount that is 

19 the quotient of the sum of 10 percent of 

20 the borrower’s annual adjusted gross in21 come between 100 percent and 200 percent 

22 of the poverty line for the previous year 

23 and 20 percent of the borrower’s annual 

24 adjusted gross income above 200 percent 


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1 of the poverty line for the previous year di2 vided by 12. 

3 ‘‘(ii) POVERTY LINE.—In this sub4 paragraph, the term ‘poverty line’ means 

5 the poverty line described in section 673 of 

6 the Community Services Block Grant Act 

7 (42 U.S.C. 9902), applicable to a family of 

8 the size involved. 

9 ‘‘(2) PROVISION OF INFORMATION TO THE SEC10 RETARY.— 

11 ‘‘(A) IN GENERAL.—The limit on the 

12 monthly payment amount set by the Secretary 

13 under paragraph (1) shall apply only if a bor14 rower provides the Secretary, in such form and 

15 at such time— 

16 ‘‘(i) such information as the Secretary 

17 shall require to determine the monthly pay18 ment amount that is applicable for such 

19 borrower; and 

20 ‘‘(ii) certification that the borrower is 

21 employed full time or is actively seeking 

22 full-time employment. 

23 ‘‘(B) UPDATE TO INFORMATION.—The 

24 Secretary shall require a borrower to— 


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1 ‘‘(i) provide the information required 

2 under subparagraph (A)(i) annually for the 

3 term of the loan of such borrower; or 

4 ‘‘(ii) during each year for the term of 

5 the loan of such borrower, authorize the 

6 Secretary to obtain the information re7 quired under subparagraph (A)(i) from the 

8 Internal Revenue Service for such year. 

9 ‘‘(3) CONTINUOUS UPDATE.—Upon receiving 

10 information under paragraph (2)(B), the Secretary 

11 shall revise the limit on the monthly payment 

12 amount for such borrower under paragraph (1), as 

13 necessary. 

14 ‘‘(4) APPLICABILITY TO ALL REPAYMENT

15 PLANS.—Regardless of which repayment plan a bor16 rower of a loan selects under this title, the limit on 

17 the monthly payment amount set by the Secretary 

18 under paragraph (1) shall apply to the monthly re19 payment amount applicable for such repayment plan. 

20 ‘‘(5) NO FEES OR CHARGES.—Notwithstanding 

21 any other term or condition of Federal student loans 

22 of a borrower that are made, insured, or guaranteed 

23 after the date of enactment of this section, if the 

24 borrower pays the maximum monthly payment 

25 amount that is applicable for the borrower for such 


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1 loans, as determined under this section, on time ac2 cording to the terms and conditions of such loans, 

3 such borrower may not be charged any late fee, un4 derpayment fee, or finance charge for such loans for 

5 such month. 

6 ‘‘(6) SUBSIDIZED LOANS.—In the case of a 

7 Federal student loan made, insured, or guaranteed 

8 after the date of enactment of this section for which 

9 an interest subsidy is paid under section 428(a), if 

10 the amount owed each month in interest payments 

11 for such loan exceeds the applicable amount for such 

12 borrower as determined under this section, and, at 

13 the discretion of the Secretary, if the borrower pays 

14 such applicable amount, the Federal Government 

15 shall pay the difference between such amount owed 

16 in interest payments and such amount that has been 

17 determined is applicable. 

18 ‘‘(b) STUDY.— 

19 ‘‘(1) IN GENERAL.—The Secretary shall con20 duct a study to determine what additional protec21 tions beyond those described in subsection (a) are 

22 necessary, if any, to ensure that monthly payment 

23 amounts for student borrowers of different incomes 

24 and with different costs of living are affordable. 


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1 ‘‘(2) CONTENT OF STUDY.—The study under 

2 paragraph (1) shall— 

3 ‘‘(A) consider the payments required of 

4 student borrowers in other countries, including 

5 the United Kingdom, Australia, and New Zea6 land, and compare such payments to the pay7 ments required of student borrowers in the 

8 United States; and 

9 ‘‘(B) be completed and submitted to the 

10 appropriate committees of Congress not later 

11 than 12 months after the date of enactment of 

12 this section. 

13 ‘‘(3) ADDITIONAL LIMITS ON MONTHLY REPAY14 MENTS.—If the Secretary determines in the study 

15 under paragraph (1) that additional protections are 

16 necessary to ensure that monthly payment amounts 

17 of student borrowers of Federal student loans made, 

18 insured, or guaranteed after the date of enactment 

19 of this section are affordable, the Secretary may es20 tablish rules based on such study that limits the 

21 monthly payment amount for a student borrower to 

22 a level that is affordable for such borrower. 

23 ‘‘(c) NOTIFICATION OF RIGHT TO MAKE PAYMENTS

24 OF MORE THAN MINIMUM.—Notwithstanding any other 

25 provision of this section, a borrower whose applicable 


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1 monthly payment amount set by the Secretary under this 

2 section is less than the amount such borrower would owe 

3 each month according to the borrower’s repayment plan 

4 absent the provisions of this section— 

5 ‘‘(1) shall be notified of the amount the bor6 rower would owe each month according to the bor7 rower’s repayment plan absent the provisions of this 

8 section; and 

9 ‘‘(2) may pay the amount described in para10 graph (1) or another amount that is greater than 

11 the applicable monthly payment amount set by the 

12 Secretary under this section.’’. 

13 (b) INCOME CONTINGENT REPAYMENT.—Section 

14 455(e) of the Higher Education Act of 1965 (20 U.S.C. 

15 1087e(e)) is amended by adding at the end the following: 

16 ‘‘(7) TAX BURDEN.—The balance due on a loan 

17 made under this part at the end of the maximum re18 payment period is exempted from the definition of 

19 income for the purpose of taxes.’’. 

20 (c) DISCHARGE RIGHTS IN CASES OF SEVERE

21 NEED.— 

22 (1) DISCHARGE AND CANCELLATION RIGHTS IN

23 CASES OF DISABILITY.— 

24 (A) AMENDMENTS.— 


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1 (i) FFEL AND DIRECT LOANS.—Sec2 tion 437(a) of the Higher Education Act of 

3 1965 (20 U.S.C. 1087(a)) is amended by 

4 striking ‘‘or becomes permanently and to5 tally disabled (as determined in accordance 

6 with regulations of the Secretary)’’ and in7 serting ‘‘or is unable to engage in any sub8 stantial gainful activity by reason of any 

9 medically determinable physical or mental 

10 impairment that can be expected to result 

11 in death or has lasted, or can be expected 

12 to last, for a continuous period of not less 

13 than 60 months’’. 

14 (ii) PERKINS.—Section 464(c)(1)(F) 

15 of the Higher Education Act of 1965 (20 

16 U.S.C. 1087dd(c)(1)(F)) is amended by 

17 striking ‘‘or if he’’ and all that follows 

18 through the semicolon and inserting ‘‘or if 

19 the borrower is unable to engage in any 

20 substantial gainful activity by reason of 

21 any medically determinable physical or 

22 mental impairment that can be expected to 

23 result in death or has lasted, or can be ex24 pected to last, for a continuous period of 

25 not less than 60 months;’’. 


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1 (B) SENSE OF THE SENATE.—It is the 

2 Sense of the Senate that the Department of 

3 Education should continue to administer the 

4 discharge and cancellation right provisions of 

5 the Higher Education Act of 1965 amended in 

6 subparagraph (A) in such a way as to prevent 

7 fraud and abuse. 

8 (2) DISCHARGE RIGHTS IN CASES OF BANK9 RUPTCY.— 

10 (A) SENSE OF THE SENATE.—It is the 

11 Sense of the Senate that the Bankruptcy Abuse 

12 Prevention and Consumer Protection Act of 

13 2005 (Public Law 109–8) affords sufficient 

14 protections to prevent fraud and abuse in the 

15 carefully regulated discharge of student loans in 

16 bankruptcy. 

17 (B) AMENDMENT.—Section 523(a)(8) of 

18 title 11, United States Code, is amended to 

19 read as follows: 

20 ‘‘(8) unless— 

21 ‘‘(A) excepting such debt from discharge 

22 under this paragraph would impose an undue 

23 hardship on the debtor and the debtor’s de24 pendents, for— 


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1 ‘‘(i)(I) an educational benefit overpay2 ment or loan made, insured, or guaranteed 

3 by a governmental unit, or made under 

4 any program funded in whole or in part by 

5 a governmental unit or nonprofit institu6 tion; or 

7 ‘‘(II) an obligation to repay funds re8 ceived as an educational benefit, scholar9 ship, or stipend; 

10 ‘‘(B) such debt is for an educational loan 

11 that is a qualified education loan, as defined in 

12 section 221(d)(1) of the Internal Revenue Code 

13 of 1986, incurred by a debtor who is an indi14 vidual; or 

15 ‘‘(C) such debt is for an educational loan 

16 made, insured, or guaranteed by a govern17 mental unit, or made under any program fund18 ed in whole or in part by a governmental unit 

19 or nonprofit institution, after the date of enact20 ment of the Student Borrower Bill of Rights 

21 Act of 2006 and such loan first became due 

22 more than 7 years (exclusive of any applicable 

23 suspension of the repayment period) before the 

24 date of the filing of the petition;’’. 


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

2 REASONABLE. 

3 (a) IN GENERAL.—Part I of title IV of the Higher 

4 Education Act of 1965, as added by section 5 and amend5 ed by section 6, is further amended by adding at the end 

6 the following: 

7 ‘‘SEC. 499C. A RIGHT FOR INTEREST RATES AND FEES TO 

8 BE REASONABLE. 

9 ‘‘(a) IN GENERAL.—The Secretary shall conduct a 

10 study of the interest rates and fees that are charged of 

11 borrowers of private student loans, including— 

12 ‘‘(1) the conditions under which the interest 

13 rate charged of such a borrower is raised or lowered, 

14 including the conditions under which the interest 

15 rate is raised on delinquent payments, and the 

16 amount and frequency of such interest rate changes; 

17 ‘‘(2) the conditions under which fees are 

18 charged of such a borrower and frequency of such 

19 fees, including fees that are charged as a condition 

20 of taking a deferment or forbearance, and the 

21 amount and frequency of such fees; 

22 ‘‘(3) identifying such practices as described in 

23 paragraphs (1) and (2) that are exploitative or un24 reasonable; and 

25 ‘‘(4) determining what remedies exist for such 

26 practices identified in paragraph (3). 


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1 ‘‘(b) MAXIMUM COLLECTION FEES.— 

2 ‘‘(1) IN GENERAL.—Notwithstanding any other 

3 provision of this title, the fee charged to a borrower 

4 for collecting on a defaulted Federal student loan 

5 shall not exceed the lesser of the expenses incurred 

6 in collecting on such loan or the amount calculated 

7 for such loan based on the following: 

8 ‘‘(A) In the case of a defaulted loan that 

9 is paid off through consolidation by the bor10 rower under this title, the amount that is 7.5 

11 percent of the balance of such loan. 

12 ‘‘(B) In the case of a defaulted loan reha13 bilitated under part D or pursuant to section 

14 428F(a)(1)(A), the amount that is 13.5 percent 

15 of the balance of such loan. 

16 ‘‘(C) In the case of a defaulted loan col17 lected under part D or part B and not de18 scribed in subparagraph (A) or (B), the amount 

19 that is 18 percent of the balance of such loan. 

20 ‘‘(2) ITEMIZED LIST OF EXPENSES.—An entity 

21 that charges a borrower for collecting on a defaulted 

22 Federal student loan shall provide such borrower an 

23 itemized list of any expenses incurred in collecting 

24 on such loan. 

25 ‘‘(c) CAP ON TOTAL CHARGES.— 


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1 ‘‘(1) IN GENERAL.—The Department shall set a 

2 cap on the maximum total amount that can be 

3 charged of a borrower on a Federal student loan, in4 cluding all interest and fees, as a percentage of the 

5 original loan balance, over a period of 10 years, 15 

6 years, and 20 years. 

7 ‘‘(2) LEVEL OF CAP.—The cap set under para8 graph (1) shall be set— 

9 ‘‘(A) at the minimum level beyond which 

10 additional amount charged on a loan is unrea11 sonable or exploitative; and 

12 ‘‘(B) for each time period, at a level that 

13 is higher than the amount the borrower, who 

14 makes regularly scheduled payments in accord15 ance with a standard repayment plan, currently 

16 pays over such time period.’’. 

17 (b) CONFORMING AMENDMENTS.— 

18 (1) LOANS PAID OFF THROUGH CONSOLIDA19 TION.—Section 428(c)(6)(B) of the Higher Edu20 cation Act of 1965 (20 U.S.C. 1078(c)(6)(B)) is 

21 amended— 

22 (A) by striking clause (i) and inserting the 

23 following: 

24 ‘‘(i) on or after October 1, 2006, not 

25 charge the borrower collection costs in excess of 


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1 the amount provided in section 499C(b)(1)(A); 

2 and’’; and 

3 (B) in clause (ii), by striking ‘‘clause 

4 (i)(I)’’ and inserting ‘‘clause (i)’’. 

5 (2) REHABILITATED LOANS.—Section 

6 428F(a)(1)(C) of the Higher Education Act of 1965 

7 (20 U.S.C. 1078–6(a)(1)(C)) is amended by striking 

8 ‘‘not to exceed’’ and all that follows through the pe9 riod and inserting ‘‘not to exceed the amount pro10 vided in section 499C(b)(1)(B).’’. 

11 SEC. 8. A RIGHT TO NOT BE EXPLOITED. 

12 Part I of title IV of the Higher Education Act of 

13 1965, as added by section 5 and amended by sections 6 

14 and 7, is further amended by adding at the end the fol15 lowing: 

16 ‘‘SEC. 499D. A RIGHT TO NOT BE EXPLOITED. 

17 ‘‘(a) PUBLICATION OF JOB PLACEMENT INFORMA18 TION.— 

19 ‘‘(1) IN GENERAL.—Each institution of higher 

20 education (as defined in section 102) that enrolls a 

21 student receiving assistance under this Act and that 

22 is determined by the Secretary, in accordance with 

23 paragraph (2), to be a disclosure institution, shall 

24 make publicly available and include in institution 

25 materials (including applications for admission to 


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1 the institution) a clear and conspicuous notice of 

2 group level job placement information for each of 

3 the past 5 years of graduates (or, if the institution 

4 has not been in operation for 5 years, for as long 

5 as the institution has been in operation), including 

6 not less than the following information: 

7 ‘‘(A) The percentage of students entering 

8 the institution who graduated within 150 per9 cent of their expected graduation date. 

10 ‘‘(B) The percentage of graduates em11 ployed within 6 months of graduating. 

12 ‘‘(C) The percentage of graduates em13 ployed in the field that the graduates studied at 

14 the institution. 

15 ‘‘(D) The median annual earnings of those 

16 graduates who are employed. 

17 ‘‘(E) The percentage of former students of 

18 the institution who took out a loan to attend 

19 the institution who defaulted on such loan at 

20 least once after leaving the institution. 

21 ‘‘(2) DISCLOSURE INSTITUTION.—In deter22 mining whether an institution is a disclosure institu23 tion, the Secretary primarily shall consider whether 

24 the institution makes claims relating to the employ25 ment prospects of the graduates of the institution. 


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1 In addition, the Secretary shall consider each of the 

2 following criteria as a supplementary factor in deter3 mining whether an institution is a disclosure institu4 tion with respect to a particular year: 

5 ‘‘(A) More than 75 percent of the institu6 tion’s revenue for such year is loan volume. 

7 ‘‘(B) Fewer than 50 percent of the stu8 dents enrolled in the institution the previous 

9 year, who did not graduate from such institu10 tion in such previous year, are still enrolled in 

11 the institution. 

12 ‘‘(C) More than 10 percent of the students 

13 who have taken out loans to attend the institu14 tion have defaulted on such loans at least once 

15 after leaving the institution. 

16 ‘‘(3) RECORDS.—Each institution of higher 

17 education (as defined in section 102) that enrolls a 

18 student receiving assistance under this Act and that 

19 is determined by the Secretary, in accordance with 

20 paragraph (2), to be a disclosure institution, shall 

21 keep, for a period of 5 years, the records that sub22 stantiate the information the institution is required 

23 to publicize under paragraph (1). 

24 ‘‘(b) SENSE OF THE SENATE.—It is the sense of the 

25 Senate that the Secretary should enforce the rights of borVerDate Aug 31 2005 04:01 Jun 06, 2006 Jkt 049200 PO 00000 Frm 00032 Fmt 6652 Sfmt 6201 E:\BILLS\S3255.IS S3255

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1 rowers of private student loans and Federal student loans 

2 to raise claims and defenses related to the actions of for3 profit institutions of higher education against lenders from 

4 which the borrowers borrowed money to attend such insti5 tutions, including the Federal Trade Commission Rule. 

6 ‘‘(c) APPEAL TO THE SECRETARY.— 

7 ‘‘(1) IN GENERAL.— 

8 ‘‘(A) IN GENERAL.—Any borrower of a 

9 Federal student loan who has suffered an eco10 nomic loss as a result of a violation of the bor11 rower’s rights under this title shall have the 

12 right to appeal such action to the Secretary. 

13 ‘‘(B) RIGHTS OF BORROWER.—For the 

14 purpose of this subsection, the rights of a bor15 rower described in subparagraph (A) are those 

16 rights involved in the solicitation for, disburse17 ment of, repayment of (including rights to ter18 minate or suspend repayment), or collection of 

19 a Federal student loan, including— 

20 ‘‘(i) such rights described in this part 

21 and under the Student Borrower Bill of 

22 Rights Act of 2006 and the amendments 

23 made by such Act; and 

24 ‘‘(ii) borrower rights under the fol25 lowing sections of this Act: 427, 428, 


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1 428C, 428F, 428J, 428K, 430A, 433, 437, 

2 438, 463, 463A, 464, 465, 484, 484B, 485 

3 (except subsections (f) and (g) of section 

4 485), and 488A. 

5 ‘‘(2) NOTIFICATION.—Not less than 30 days be6 fore making an appeal under this subsection, the 

7 borrower shall jointly notify the Secretary and the 

8 party whose action the borrower wishes to appeal 

9 (referred to in this subsection as the ‘respondent’) 

10 that the borrower intends to make an appeal, the ac11 tion that the borrower intends to appeal, and the 

12 economic loss that the borrower suffered as a result 

13 of the violation. 

14 ‘‘(3) SETTLEMENT.— 

15 ‘‘(A) IN GENERAL.—After the notification 

16 under paragraph (2), the borrower and the re17 spondent shall make a good faith effort to settle 

18 the dispute. If no settlement is reached or if the 

19 respondent fails to respond to the borrower’s 

20 notice within 30 days of the borrower providing 

21 such notice, the borrower may appeal the appli22 cable action to the Secretary, which shall adju23 dicate the borrower’s claim in a fair, impartial, 

24 and timely manner. In so doing, the Secretary 

25 may, if it should choose, develop a policy by 


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1 which borrowers who make appeals work with 

2 the office of the Ombudsman or another rel3 evant office within the Department to facilitate 

4 dispute resolution before providing a formal 

5 hearing. Whether or not the Secretary develops 

6 such a policy, the Secretary shall provide a for7 mal hearing of the borrower’s appeal within 60 

8 days of the start of the appeal, unless the Sec9 retary determines that there is no basis for 

10 such a hearing or if the borrower making the 

11 appeal provides written consent to waive the 

12 borrower’s right to a hearing or to delay or 

13 withdraw the appeal. 

14 ‘‘(B) JUDICIAL REVIEW.—Any borrower 

15 who is adversely affected by the final agency ac16 tion shall be entitled to judicial review of such 

17 action pursuant to section 706 of title 5, United 

18 States Code. 

19 ‘‘(4) INFORMATION.—The Secretary shall make 

20 publicly available on the Internet and elsewhere in21 formation about how borrowers can make appeals 

22 under this subsection and in what circumstances 

23 they can do so. 

24 ‘‘(5) SAME RIGHTS.—Borrowers shall have the 

25 same right to appeal, including the same rights and 


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1 remedies, whether their loans are held under part B, 

2 part D, or part E, and whether the respondent is 

3 the Department or another lender that participates 

4 in programs described in part B, part D, or part E. 

5 ‘‘(6) INAPPLICABILITY OF APA.—The Secretary 

6 shall not be required to comply with the provisions 

7 of subchapter II of chapter 5, and chapter 7, of title 

8 5, United States Code (commonly referred to as the 

9 Administrative Procedure Act), in implementing this 

10 subsection, except as provided in paragraph (3)(B). 

11 ‘‘(d) ADMISSIONS OFFICERS AS SALESPERSONS.— 

12 Notwithstanding any other provision of this Act, an insti13 tution of higher education that does not comply with sec14 tion 487(a) by violating paragraph (20) of such section 

15 shall be liable to a borrower of a Federal student loan 

16 taken out to attend such institution for the entire amount 

17 of such loan. 

18 ‘‘(e) RIGHT TO PAY OFF PRINCIPAL FASTER THAN

19 SCHEDULED.—A lender of a Federal student loan shall 

20 provide a borrower who pays more than the amount re21 quired for any regularly scheduled payment an easy and 

22 unbiased means of choosing whether such overpayment 

23 payment should count as a— 

24 ‘‘(1) prepayment for a subsequently scheduled 

25 payment; or 


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1 ‘‘(2) payment against the principal owed on 

2 such loan.’’. 

Æ 


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