II 

112TH CONGRESS 

2D SESSION S. 2280 

To amend the Truth in Lending Act and the Higher Education Act of 

1965 to require certain creditors to obtain certifications from institutions 

of higher education, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

MARCH 29, 2012 

Mr. DURBIN (for himself and Mr. HARKIN) introduced the following bill; 

which was read twice and referred to the Committee on Banking, Housing, and Urban Affairs 

A BILL 

To amend the Truth in Lending Act and the Higher Education Act of 1965 to require certain creditors to obtain 

certifications from institutions of higher education, 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 ‘‘Know Before You Owe 

5 Private Student Loan Act of 2012’’. 

6 SEC. 2. AMENDMENTS TO THE TRUTH IN LENDING ACT. 

7 (a) IN GENERAL.—Section 128(e) of the Truth in 

8 Lending Act (15 U.S.C. 1638(e)) is amended— 


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1 (1) by striking paragraph (3) and inserting the 

2 following: 

3 ‘‘(3) INSTITUTIONAL CERTIFICATION RE4 QUIRED.— 

5 ‘‘(A) IN GENERAL.—Except as provided in 

6 subparagraph (B), before a creditor may issue 

7 any funds with respect to an extension of credit 

8 described in this subsection, the creditor shall 

9 obtain from the relevant institution of higher 

10 education where such loan is to be used for a 

11 student, such institution’s certification of— 

12 ‘‘(i) the enrollment status of the stu13 dent; 

14 ‘‘(ii) the student’s cost of attendance 

15 at the institution as determined by the in16 stitution under part F of title IV of the 

17 Higher Education Act of 1965; and 

18 ‘‘(iii) the difference between— 

19 ‘‘(I) such cost of attendance; and 

20 ‘‘(II) the student’s estimated fi21 nancial assistance, including such as22 sistance received under title IV of the 

23 Higher Education Act of 1965 and 

24 other financial assistance known to 

25 the institution, as applicable. 


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1 ‘‘(B) EXCEPTION.—Notwithstanding sub2 paragraph (A), a creditor may issue funds with 

3 respect to an extension of credit described in 

4 this subsection without obtaining from the rel5 evant institution of higher education such insti6 tution’s certification if such institution fails to 

7 provide within 15 business days of the credi8 tor’s request for such certification— 

9 ‘‘(i) the requested certification; or 

10 ‘‘(ii) notification that the institution 

11 has received the request for certification 

12 and will need additional time to comply 

13 with the certification request. 

14 ‘‘(C) LOANS DISBURSED WITHOUT CER15 TIFICATION.—If a creditor issues funds without 

16 obtaining a certification, as described in sub17 paragraph (B), such creditor shall report the 

18 issuance of such funds in a manner determined 

19 by the Director of the Consumer Financial Pro20 tection Bureau.’’; 

21 (2) by redesignating paragraphs (9), (10), and 

22 (11) as paragraphs (10), (11), and (12), respec23 tively; and 

24 (3) by inserting after paragraph (8) the fol25 lowing: 


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1 ‘‘(9) PROVISION OF INFORMATION.— 

2 ‘‘(A) PROVISION OF INFORMATION TO STU3 DENTS.— 

4 ‘‘(i) LOAN STATEMENT.—A creditor 

5 that issues any funds with respect to an 

6 extension of credit described in this sub7 section shall send loan statements, where 

8 such loan is to be used for a student, to 

9 borrowers of such funds not less than once 

10 every 3 months during the time that such 

11 student is enrolled at an institution of 

12 higher education. 

13 ‘‘(ii) CONTENTS OF LOAN STATE14 MENT.—Each statement described in 

15 clause (i) shall— 

16 ‘‘(I) report the borrower’s total 

17 remaining debt to the creditor, includ18 ing accrued but unpaid interest and 

19 capitalized interest; 

20 ‘‘(II) report any debt increases 

21 since the last statement; and 

22 ‘‘(III) list the current interest 

23 rate for each loan. 

24 ‘‘(B) NOTIFICATION OF LOANS DISBURSED

25 WITHOUT CERTIFICATION.—On or before the 


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1 date a creditor issues any funds with respect to 

2 an extension of credit described in this sub3 section, the creditor shall notify the relevant in4 stitution of higher education, in writing, of the 

5 amount of the extension of credit and the stu6 dent on whose behalf credit is extended. The 

7 form of such written notification shall be sub8 ject to the regulations of the Consumer Finan9 cial Protection Bureau. 

10 ‘‘(C) ANNUAL REPORT.—A creditor that 

11 issues funds with respect to an extension of 

12 credit described in this subsection shall prepare 

13 and submit an annual report to the Consumer 

14 Financial Protection Bureau containing the re15 quired information about private student loans 

16 to be determined by the Consumer Financial 

17 Protection Bureau, in consultation with the 

18 Secretary of Education.’’. 

19 (b) DEFINITION OF PRIVATE EDUCATION LOAN.— 

20 Section 140(a)(7)(A) of the Truth in Lending Act (15 

21 U.S.C. 1650(a)(7)(A)) is amended— 

22 (1) by redesignating clause (ii) as clause (iii); 

23 (2) in clause (i), by striking ‘‘and’’ after the 

24 semicolon; and 

25 (3) by adding after clause (i) the following: 


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1 ‘‘(ii) is not made, insured, or guaran2 teed under title VII or title VIII of the 

3 Public Health Service Act (42 U.S.C. 292 

4 et seq. and 296 et seq.); and’’. 

5 (c) REGULATIONS.—Not later than 365 days after 

6 the date of enactment of this Act, the Consumer Financial 

7 Protection Bureau shall issue regulations in final form to 

8 implement paragraphs (3) and (9) of section 128(e) of the 

9 Truth in Lending Act (15 U.S.C. 1638(e)), as amended 

10 by subsection (a). Such regulations shall become effective 

11 not later than 6 months after their date of issuance. 

12 SEC. 3. AMENDMENT TO THE HIGHER EDUCATION ACT OF 

13 1965. 

14 (a) AMENDMENT TO THE HIGHER EDUCATION ACT

15 OF 1965.—Section 487(a) of the Higher Education Act 

16 of 1965 (20 U.S.C. 1094(a)) is amended by striking para17 graph (28) and inserting the following: 

18 ‘‘(28)(A) The institution shall— 

19 ‘‘(i) upon the request of a private edu20 cational lender, acting in connection with 

21 an application initiated by a borrower for 

22 a private education loan in accordance with 

23 section 128(e)(3) of the Truth in Lending 

24 Act, provide certification to such private 

25 educational lender— 


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1 ‘‘(I) that the student who initi2 ated the application for the private 

3 education loan, or on whose behalf the 

4 application was initiated, is enrolled 

5 or is scheduled to enroll at the institu6 tion; 

7 ‘‘(II) of such student’s cost of at8 tendance at the institution as deter9 mined under part F of this title; and 

10 ‘‘(III) of the difference be11 tween— 

12 ‘‘(aa) the cost of attendance 

13 at the institution; and 

14 ‘‘(bb) the student’s esti15 mated financial assistance re16 ceived under this title and other 

17 assistance known to the institu18 tion, as applicable; and 

19 ‘‘(ii) provide the certification de20 scribed in clause (i), or notify the creditor 

21 that the institution has received the re22 quest for certification and will need addi23 tional time to comply with the certification 

24 request— 


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1 ‘‘(I) within 15 business days of 

2 receipt of such certification request; 

3 and 

4 ‘‘(II) only after the institution 

5 has completed the activities described 

6 in subparagraph (B). 

7 ‘‘(B) The institution shall, upon receipt of 

8 a certification request described in subpara9 graph (A)(i), and prior to providing such cer10 tification— 

11 ‘‘(i) determine whether the student 

12 who initiated the application for the pri13 vate education loan, or on whose behalf the 

14 application was initiated, has applied for 

15 and exhausted the Federal financial assist16 ance available to such student under this 

17 title and inform the student accordingly; 

18 and 

19 ‘‘(ii) provide the borrower whose loan 

20 application has prompted the certification 

21 request by a private education lender, as 

22 described in subparagraph (A)(i), with the 

23 following information and disclosures: 

24 ‘‘(I) The availability of, and the 

25 borrower’s potential eligibility for, 


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1 Federal financial assistance under this 

2 title, including disclosing the terms, 

3 conditions, interest rates, and repay4 ment options and programs of Federal 

5 student loans. 

6 ‘‘(II) The borrower’s ability to 

7 select a private educational lender of 

8 the borrower’s choice. 

9 ‘‘(III) The impact of a proposed 

10 private education loan on the bor11 rower’s potential eligibility for other 

12 financial assistance, including Federal 

13 financial assistance under this title. 

14 ‘‘(IV) The borrower’s right to ac15 cept or reject a private education loan 

16 within the 30-day period following a 

17 private educational lender’s approval 

18 of a borrower’s application and about 

19 a borrower’s 3-day right to cancel pe20 riod. 

21 ‘‘(C) For purposes of this paragraph, the 

22 terms ‘private educational lender’ and ‘private 

23 education loan’ have the meanings given such 

24 terms in section 140 of the Truth in Lending 

25 Act (15 U.S.C. 1650).’’. 


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

2 subsection (a) shall take effect on the effective date of the 

3 regulations described in section 2(c). 

4 SEC. 4. REPORT. 

5 Not later than 24 months after the issuance of regu6 lations under section 2(c), the Director of the Consumer 

7 Financial Protection Bureau and the Secretary of Edu8 cation shall jointly submit to Congress a report on the 

9 compliance of institutions of higher education and private 

10 educational lenders with section 128(e)(3) of the Truth 

11 in Lending Act (15 U.S.C. 1638(e)), as amended by sec12 tion 2, and section 487(a)(28) of the Higher Education 

13 Act of 1965 (20 U.S.C. 1094(a)), as amended by section 

14 3. Such report shall include information about the degree 

15 to which specific institutions utilize certifications in effec16 tively encouraging the exhaustion of Federal student loan 

17 eligibility and lowering student private education loan 

18 debt. 

Æ 


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