I 

110TH CONGRESS 

1ST SESSION H. R. 1994 

To provide more transparency in the financial aid process and to ensure 

that students are receiving the best information about financial aid 

opportunities. 

IN THE HOUSE OF REPRESENTATIVES 

APRIL 23, 2007 

Mr. MCKEON (for himself and Mr. KELLER of Florida) introduced the following bill; which was referred to the Committee on Education and 

Labor, and in addition to the Committee on Financial Services, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned 

A BILL 

To provide more transparency in the financial aid process 

and to ensure that students are receiving the best information about financial aid opportunities. 

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 ‘‘Financial Aid Account5 ability and Transparency Act of 2007’’. 


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1 SEC. 2. ACCOUNTABILITY AND TRANSPARENCY. 

2 Title I of the Higher Education Act of 1965 (20 

3 U.S.C. 1001 et seq.) is amended by adding at the end 

4 the following: 

5 ‘‘PART E—INSTITUTIONAL REQUIREMENTS 

6 RELATED TO STUDENT LOANS 

7 ‘‘SEC. 151. DEFINITIONS. 

8 ‘‘In this part: 

9 ‘‘(1) AGENT.—The term ‘agent’, when used 

10 with respect to an institution of higher education, 

11 means an organization such as an alumni association 

12 or booster club. 

13 ‘‘(2) LENDER.— 

14 ‘‘(A) IN GENERAL.—The term ‘lender’— 

15 ‘‘(i) means a creditor, except that 

16 such term shall not include an issuer of 

17 credit under a residential mortgage trans18 action; and 

19 ‘‘(ii) includes an agent of a lender. 

20 ‘‘(B) INCORPORATION OF TILA DEFINI21 TIONS.—The terms ‘creditor’ and ‘residential 

22 mortgage transaction’ have the meanings given 

23 such terms in section 103 of the Truth in 

24 Lending Act (15 U.S.C. 1602). 

25 ‘‘(3) LOAN.— 


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1 ‘‘(A) STUDENT LOAN.—The term ‘student 

2 loan’ means— 

3 ‘‘(i) any Federal student loan; or 

4 ‘‘(ii) a private educational loan. 

5 ‘‘(B) FEDERAL STUDENT LOAN.—The 

6 term ‘Federal student loan’ means any loan 

7 made, insured, or guaranteed under title IV of 

8 this Act. 

9 ‘‘(C) FEDERAL DIRECT LOAN.—The term 

10 ‘Federal Direct loan’ means any loan made 

11 under part D of title IV of this Act. 

12 ‘‘(D) PRIVATE EDUCATIONAL LOAN.—The 

13 term ‘private educational loan’ means a private 

14 loan provided by a lender that— 

15 ‘‘(i) is not made, insured, or guaran16 teed under title IV; and 

17 ‘‘(ii) is issued by a lender for postsec18 ondary educational expenses to a student, 

19 or the parent of the student, regardless of 

20 whether the loan is provided through the 

21 educational institution that the student at22 tends or directly to the student or parent 

23 from the lender. 

24 ‘‘(4) POSTSECONDARY EDUCATIONAL EX25 PENSES.—The term ‘postsecondary educational exVerDate Aug 31 2005 01:58 Apr 24, 2007 Jkt 059200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H1994.IH H1994

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1 penses’ means any of the expenses that are included 

2 as part of a student’s cost of attendance, as defined 

3 under section 472. 

4 ‘‘(5) RECOMMEND.—An institution shall be con5 sidered to recommend any lender if the institution 

6 communicates to any student or parent of any stu7 dent any recommendation, referral, promotion, or 

8 endorsement of any lender or the loan products of 

9 any lender. 

10 ‘‘SEC. 152. RECOMMENDED LENDERS. 

11 ‘‘No institution of higher education or agent of an 

12 institution of higher education may recommend any lender 

13 unless— 

14 ‘‘(1) the institution has adopted a formal writ15 ten policy concerning the procedures and criteria by 

16 which the institution will select lenders for inclusion 

17 in or exclusion from those recommendations; 

18 ‘‘(2) the policy, procedures, and criteria adopted 

19 by the institution are disclosed in accordance with 

20 section 153(a); and 

21 ‘‘(3) if the institution recommends— 

22 ‘‘(A) any lender for making a Federal stu23 dent loan, other than a Federal Direct loan, the 

24 institution recommends a minimum of 3 eligible 

25 lenders (as that term is defined in section 435) 


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1 that are not affiliated lenders (as determined in 

2 accordance with regulations of the Secretary) 

3 for making such loans; and 

4 ‘‘(B) any lender for making a private edu5 cational loan, the institution recommends a 

6 minimum of 3 lenders that are not affiliated 

7 lenders (as so determined) for making such 

8 loans. 

9 ‘‘SEC. 153. DISCLOSURES. 

10 ‘‘(a) LENDER RECOMMENDATIONS.—An institution 

11 of higher education shall disclose, on its website and in 

12 the informational materials listed in subsection (d), the 

13 policy, procedures, and criteria that the institution has 

14 adopted in accordance with section 152(1), and the proc15 ess by which the institution adopted such policy, proce16 dures, and criteria. 

17 ‘‘(b) MODEL DISCLOSURE FORM FOR LOAN OP18 TIONS.— 

19 ‘‘(1) REQUIREMENT.—The Secretary shall de20 velop and prescribe an easy-to-read model disclosure 

21 form that will provide students with the relevant in22 formation about the terms and conditions for both 

23 Federal loans and private educational loans for use 

24 by both institutions of higher education and lenders. 


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1 ‘‘(2) CONSULTATION.—In developing the model 

2 disclosure forms required by this subsection, the 

3 Secretary shall consult with— 

4 ‘‘(A) students; 

5 ‘‘(B) representatives from institutions of 

6 higher education, including financial aid admin7 istrators, registrars, business officers, and stu8 dent affairs officials; 

9 ‘‘(C) lenders; 

10 ‘‘(D) loan servicers; and 

11 ‘‘(E) guaranty agencies. 

12 ‘‘(3) INFORMATION ON FEDERAL STUDENT

13 LOANS.—The model disclosure forms under this sub14 section with respect to Federal student loans shall 

15 include at a minimum the following information with 

16 respect to loans provided through each lender rec17 ommended by the institution and, in the case of a 

18 Federal Direct loan, with respect to loans provided 

19 through the institution: 

20 ‘‘(A) the interest rate of the loan; 

21 ‘‘(B) any fees associated with the loan; 

22 ‘‘(C) the repayment terms available on the 

23 loan; 

24 ‘‘(D) the opportunity for deferment or for25 bearance with the loan, including whether the 


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1 loan payments can be deferred if the student is 

2 in school; and 

3 ‘‘(E) contact information for the lender. 

4 ‘‘(4) INFORMATION ON PRIVATE EDUCATIONAL

5 LOANS.—The model disclosure forms under this sub6 section with respect to private educational loans 

7 shall include at a minimum the following informa8 tion with respect to loans made by each lender rec9 ommended by the institution: 

10 ‘‘(A) the method of determining the inter11 est rate of the loan; 

12 ‘‘(B) types of repayment plans that are 

13 available; 

14 ‘‘(C) whether, and under what conditions, 

15 early repayment may be available without pen16 alty; 

17 ‘‘(D) other borrower benefits such as in18 school deferments; 

19 ‘‘(E) late payment penalties; and 

20 ‘‘(F) such other information as the Sec21 retary may require. 

22 ‘‘(5) DEADLINE.—The model disclosure forms 

23 required by this subsection shall be developed and 

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1 ment of the Financial Aid Accountability and Trans2 parency Act of 2007. 

3 ‘‘(c) DISCLOSURES BY INSTITUTIONS OF HIGHER

4 EDUCATION.—An institution of higher education that par5 ticipates in the Federal student loan programs under part 

6 B of title IV of this Act, or any institution that rec7 ommends any lender of private educational loans for its 

8 students, shall disclose, on its website and in the informa9 tional materials described in subsection (e)— 

10 ‘‘(1) a statement that— 

11 ‘‘(A) indicates that students are not lim12 ited to or required to use the lenders the insti13 tutions recommends; and 

14 ‘‘(B) the institution is required to process 

15 the documents required to obtain a loan from 

16 any eligible lender the student selects; 

17 ‘‘(2) at a minimum, all of the information pro18 vided by the model disclosure form prescribed under 

19 subsection (b) with respect to any lender rec20 ommended by the institution for Federal student 

21 loans and, as applicable, private educational loans; 

22 ‘‘(3) disclose the maximum amount of Federal 

23 grant and loan aid available to students in an easy24 to-understand format; and 


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1 ‘‘(4) the institution’s cost of attendance (as de2 termined under section 472). 

3 ‘‘(d) DISCLOSURES FOR FEDERAL DIRECT LOANS.— 

4 An institution of higher education that participates in the 

5 Federal Direct loan program shall disclose, on its website 

6 and in the informational materials described in subsection 

7 (e), the information required under paragraphs (2), (3), 

8 and (4) of subsection (c), and the policies, procedures, and 

9 criteria the institution used to make the determination to 

10 participate in such Federal Direct loan program. 

11 ‘‘(e) INFORMATIONAL MATERIALS.—The informa12 tional materials described in this subsection are any publi13 cations, mailings, or electronic messages or media distrib14 uted to prospective or current students that describe, dis15 cuss, or relate to the financial aid opportunities available 

16 to students at an institution of higher education. 

17 ‘‘SEC. 154. CODE OF CONDUCT. 

18 ‘‘(a) CODE OF CONDUCT REQUIRED.—Each institu19 tion of higher education that participates in the Federal 

20 student loan program or has students that obtain private 

21 educational loans shall— 

22 ‘‘(1) develop a code of conduct in accordance 

23 with subsection (b) with which its employees, trust24 ees, and directors are required to comply with re25 spect to student loans; 


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1 ‘‘(2) publish the code of conduct prominently on 

2 its website; and 

3 ‘‘(3) administer and enforce such code in ac4 cordance with the requirements of this section. 

5 ‘‘(b) CONTENTS OF CODE.— 

6 ‘‘(1) IN GENERAL.—The code required by this 

7 section shall contain a limitation on the acceptance 

8 of gifts, payments, or other financial benefits (in9 cluding the opportunity to purchase stock) provided 

10 to officers and employees of the institution (and, 

11 when appropriate, family members of such officers 

12 and employees) by any lender or guaranty agency 

13 that present or may present a conflict of interest or 

14 the appearance of a conflict of interest with the re15 sponsibilities of such officer or employee with respect 

16 to student loans or other financial aid. 

17 ‘‘(2) FEES FROM LENDERS FOR SERVICE PRO18 HIBITED.—The code required by this section shall 

19 prohibit any officer or employee who is employed in 

20 the financial aid office of the institution, or who oth21 erwise has responsibilities with respect to student 

22 loans or other financial aid, from accepting from any 

23 lender or affiliate of any lender any fee, payment, or 

24 other financial benefit (including the opportunity to 

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1 ices, serving on an advisory council, or otherwise ad2 vising such lender or affiliate. 

3 ‘‘(3) PERMITTED EXCLUSIONS FROM GIFT LIMI4 TATIONS.—An institution may exclude from treat5 ment as a gift, payment, or other financial benefit 

6 under the code of conduct required by this section— 

7 ‘‘(A) standard informational material re8 lated to a loan, such as a brochure; 

9 ‘‘(B) reimbursement for necessary trans10 portation, lodging, and related expenses (includ11 ing food and refreshments) for travel to a meet12 ing in connection with serving on an advisory 

13 council, if such reimbursement is for travel for 

14 a period not exceeding 2 days and 1 night for 

15 each such meeting; 

16 ‘‘(C) training or informational material 

17 furnished to an officer, employee, or agent of 

18 an institution as an integral part of a training 

19 session or through participation in an advisory 

20 council that is designed to improve the lender’s 

21 service to the institution, if such training or 

22 participation contributes to the professional de23 velopment of the employee or agent of the insti24 tution; and 


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1 ‘‘(D) favorable terms, conditions, and bor2 rower benefits on an educational loan provided 

3 to a student, or a parent of a student, employed 

4 by the covered institution. 

5 ‘‘(c) TRAINING AND COMPLIANCE.—An institution of 

6 higher education shall administer and enforce a code of 

7 conduct required by this section by, at a minimum, requir8 ing all of its officers and employees with responsibilities 

9 with respect to student loans or other financial aid to ob10 tain training annually in compliance with the code. 

11 ‘‘(d) BAN ON EDUCATION LOAN ARRANGEMENTS.— 

12 An institution of higher education shall be prohibited from 

13 entering into an education loan arrangement. For pur14 poses of this section, an education loan arrangement is 

15 an arrangement between an institution of higher education 

16 (or an agent of the institution) and a lender under 

17 which— 

18 ‘‘(1) a lender provides or issues student loans 

19 to students attending the institution or to parents of 

20 such students; 

21 ‘‘(2) the institution recommends the lender or 

22 the loan products of the lender; and 

23 ‘‘(3) the lender pays a fee or provides other ma24 terial benefits to the institution or officers, employ25 ees, or agents of the institution. 


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1 ‘‘(e) BAN ON STAFFING ASSISTANCE.— 

2 ‘‘(1) PROHIBITION.—An institution of higher 

3 education shall be prohibited from requesting or ac4 cepting from any lender any assistance with call cen5 ter staffing or financial aid office staffing. 

6 ‘‘(2) CERTAIN ASSISTANCE PERMITTED.—Noth7 ing in paragraph (1) shall be construed to prohibit 

8 an institution from requesting or accepting assist9 ance from a lender related to— 

10 ‘‘(A) professional development training for 

11 financial aid administrators; or 

12 ‘‘(B) providing educational counseling ma13 terials, financial literacy materials, or debt 

14 management materials to borrowers, provided 

15 that such materials disclose to borrowers the 

16 identification of any lender that assisted in pre17 paring or providing such materials. 

18 ‘‘SEC. 155. RULE OF CONSTRUCTION. 

19 ‘‘Nothing in this part shall be construed to prohibit 

20 an institution of higher education from negotiating with 

21 lenders for reduced interest rates or fees on student loans 

22 for students or parents.’’. 


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1 SEC. 3. DISCLOSURES REQUIRED FOR PRIVATE EDU2 CATIONAL LOANS. 

3 (a) IN GENERAL.—Section 128 of the Truth in Lend4 ing Act (15 U.S.C. 1638) is amended by adding at the 

5 end the following new subsection: 

6 ‘‘(e) DISCLOSURES REQUIRED FOR PRIVATE EDU7 CATIONAL LOANS.— 

8 ‘‘(1) IN GENERAL.—In addition to any other 

9 disclosures required under this chapter with respect 

10 to a consumer credit transaction, a creditor shall 

11 provide any consumer with the following informa12 tion, and obtain the acknowledgment of the con13 sumer under paragraph (3), before executing any 

14 contract or agreement between the creditor and the 

15 consumer relating to any extension of credit con16 sisting of or involving a private educational loan: 

17 ‘‘(A) The consumer may qualify for Fed18 eral financial assistance for education through a 

19 program under title IV of the Higher Education 

20 Act of 1965 (20 U.S.C. 1070 et seq.). 

21 ‘‘(B) In many cases, a Federal student 

22 loan may provide the consumer with more bene23 ficial terms and conditions , including a lower 

24 annual percentage rate and fewer and lower 

25 fees, than private educational loans. 


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1 ‘‘(C) The consumer may obtain additional 

2 information concerning such Federal financial 

3 assistance at the website of the Department of 

4 Education. 

5 ‘‘(2) CLEAR AND CONSPICUOUS DISCLOSURE.— 

6 The disclosure required under paragraph (1) shall be 

7 placed in a conspicuous and prominent location on 

8 or with any written application, solicitation, or other 

9 document or paper relating to any extension of cred10 it consisting of or involving a private educational 

11 loan for which such disclosure is required. 

12 ‘‘(3) WRITTEN ACKNOWLEDGMENT OF RE13 CEIPT.—In each case in which a disclosure is pro14 vided pursuant to paragraph (1), a creditor shall ob15 tain a written acknowledgment from the consumer 

16 that the consumer has read and understood the dis17 closure. 

18 ‘‘(4) DEFINITIONS.—For purposes of this sub19 section, the terms ‘Federal student loan’ and ‘pri20 vate educational loan’ have the same meanings as in 

21 section 151 of the Higher Education Act of 1965. 

22 ‘‘(5) REGULATIONS.—In prescribing regulations 

23 to implement this subsection, the Board shall con24 sult with the Secretary of Education.’’. 


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1 (b) EFFECTIVE DATE.—The amendments made by 

2 subsection (a) shall apply with respect to any credit con3 sisting of or involving a private educational loan that is 

4 extended pursuant to a contract or agreement entered into 

5 after July 1, 2007. 

Æ 


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