II 

113TH CONGRESS 

1ST SESSION S. 546 

To amend entrance counseling and exit counseling for borrowers under the 

Higher Education Act of 1965, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

MARCH 13, 2013 

Mr. HARKIN (for himself, Ms. MIKULSKI, Mrs. MURRAY, Mr. FRANKEN, Ms. 

WARREN, Mr. BLUMENTHAL, Mr. SANDERS, Mr. ROCKEFELLER, Mr. 

DURBIN, Mr. LAUTENBERG, and Mr. MURPHY) introduced the following 

bill; which was read twice and referred to the Committee on Health, Education, Labor, and Pensions 

A BILL 

To amend entrance counseling and exit counseling for borrowers under the Higher Education Act of 1965, 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 ‘‘Smarter Borrowing 

5 Act’’. 

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1 SEC. 2. AMENDMENTS TO THE HIGHER EDUCATION ACT OF 

2 1965. 

3 (a) NOTIFICATION OF PELL GRANT ELIGIBILITY.— 

4 Section 401 of the Higher Education Act of 1965 (20 

5 U.S.C. 1070a) is amended by adding at the end the fol6 lowing: 

7 ‘‘(k) NOTIFICATION OF PELL GRANT ELIGIBILITY.— 

8 ‘‘(1) IN GENERAL.—Each eligible institution 

9 shall, not less than once every 2 years while a stu10 dent is enrolled in the institution, notify each stu11 dent enrolled in the institution who is receiving a 

12 Federal Pell Grant of the period of time that the 

13 student has remaining before the student will not be 

14 eligible for a Federal Pell Grant in accordance with 

15 subsection (c)(5) because the period of time for 

16 which the student has received a Federal Pell Grant, 

17 in the aggregate, exceeds the period of enrollment 

18 described in subsection (c)(5). 

19 ‘‘(2) PELL GRANT RECIPIENTS WHO ARE BOR20 ROWERS.—In the case of a student who is receiving 

21 a Federal Pell Grant who is also a borrower of a 

22 loan made, insured, or guaranteed under part B 

23 (other than a loan made pursuant to section 428C 

24 or a loan made on behalf of a student pursuant to 

25 section 428B) or made under part D (other than a 

26 Federal Direct Consolidation Loan or a Federal Dimstockstill on DSK4VPTVN1PROD with BILLS

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1 rect PLUS loan made on behalf of a student), the 

2 requirement described in paragraph (1) shall be car3 ried out in accordance with the notification and 

4 counseling requirements described in section 

5 485(o).’’. 

6 (b) INSTITUTION ELIGIBILITY.—Section 435 of the 

7 Higher Education Act of 1965 (20 U.S.C. 1085) is 

8 amended— 

9 (1) in subsection (a)(7)— 

10 (A) in subparagraph (A), by adding at the 

11 end the following: 

12 ‘‘(iii) SUMMARY OF DEFAULT PRE13 VENTION PLAN.—Each institution subject 

14 to this subparagraph shall prepare a sum15 mary of the plan described under clause (i) 

16 that is directed to a student audience, and 

17 shall make the summary available to stu18 dents at the institution.’’; and 

19 (B) by inserting after subparagraph (B) 

20 the following: 

21 ‘‘(C) ADDITIONAL NOTIFICATION AND

22 LOAN COUNSELING REQUIREMENTS.—An insti23 tution whose cohort default rate is equal to or 

24 greater than the threshold percentage specified 

25 in paragraph (2)(B)(iv) in any fiscal year shall, 

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1 in order to retain or regain, as the case may be, 

2 status as an eligible institution, carry out the 

3 additional notification and loan counseling re4 quirements described under section 485(o)(3).’’. 

5 (c) STUDENT LOAN COUNSELING.—Section 485 of 

6 the Higher Education Act of 1965 (20 U.S.C. 1092) is 

7 amended— 

8 (1) in subsection (b)— 

9 (A) in paragraph (1)(A)— 

10 (i) by striking clause (i) and inserting 

11 the following: 

12 ‘‘(i) personalized information that reflects the 

13 borrower’s actual borrowing circumstances, which 

14 shall include— 

15 ‘‘(I) the repayment plans available, includ16 ing income-based and pay-as-you-earn repay17 ment options; 

18 ‘‘(II) a description of the different features 

19 of each plan; and 

20 ‘‘(III) personalized information showing es21 timates of the borrower’s anticipated monthly 

22 payments and the difference in total interest 

23 paid and total payments under each plan;’’; 

24 (ii) by redesignating clauses (viii) and 

25 (ix) as clauses (ix) and (x), respectively; 

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1 (iii) by inserting after clause (vii) the 

2 following: 

3 ‘‘(viii) a statement that student loans must be 

4 repaid even if the student is dissatisfied with the 

5 quality of education that the student receives;’’; and 

6 (iv) by adding at the end the fol7 lowing: 

8 ‘‘(C) The counseling described in subparagraph (A)— 

9 ‘‘(i) shall be provided in a simple and under10 standable manner that includes mechanisms to check 

11 for comprehension; and 

12 ‘‘(ii) shall be provided— 

13 ‘‘(I) during an exit counseling session con14 ducted in person; or 

15 ‘‘(II) online.’’; and 

16 (B) in paragraph (2)(A)(iv), by striking ‘‘, 

17 address, social security number, references, and 

18 driver’s license number’’ and inserting ‘‘, postal 

19 address, social security number, references, 

20 driver’s license number, phone number, and 

21 personal electronic mailing address’’; 

22 (2) in subsection (l)— 

23 (A) by striking paragraph (1) and insert24 ing the following: 

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1 ‘‘(1) DISCLOSURE REQUIRED PRIOR TO SIGNING

2 MASTER PROMISSORY NOTE.—Each eligible institu3 tion shall, prior to the signing of the master promis4 sory note to a first-time borrower at such institution 

5 of a loan made under part D (other than a Federal 

6 Direct Consolidation Loan or a Federal Direct 

7 PLUS loan made on behalf of a student), ensure 

8 that the borrower receives comprehensive informa9 tion on the terms and conditions of the loan and of 

10 the responsibilities the borrower has with respect to 

11 such loan in accordance with paragraph (2). Such 

12 information— 

13 ‘‘(A) shall be provided through the use of 

14 interactive programs that test the borrower’s 

15 understanding of the terms and conditions of 

16 the borrower’s loans under part D, using simple 

17 and understandable language and clear for18 matting; and 

19 ‘‘(B) shall be provided— 

20 ‘‘(i) during an entrance counseling 

21 session conducted in person; or 

22 ‘‘(ii) online.’’; 

23 (B) in paragraph (2), by adding at the end 

24 the following: 

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1 ‘‘(L)(i) A disclosure that Federal student 

2 loans offer generally more favorable terms and 

3 beneficial repayment options than private edu4 cation loans, an explanation of the difference 

5 and relevance between student loans with a 

6 fixed interest rate as compared to student loans 

7 with a variable interest rate, and a rec8 ommendation that students examine available 

9 Federal student loan options before applying for 

10 private education loans. 

11 ‘‘(ii) An explanation written by the Sec12 retary, in consultation with the heads of rel13 evant Federal agencies, including the Director 

14 of the Consumer Financial Protection Bureau 

15 and the Commissioner of the Internal Revenue 

16 Service, of— 

17 ‘‘(I) the benefits unique to student 

18 loans made under part D, including repay19 ment plans, loan forgiveness, and loan 

20 deferment; and 

21 ‘‘(II) the loan terms that borrowers 

22 should examine carefully if considering a 

23 private education loan. 

24 ‘‘(M) An explanation, if applicable, that a 

25 student may refuse all or part of a student loan 

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1 made under part D that is made to the student, 

2 which could help minimize the student’s debt 

3 obligations. 

4 ‘‘(N) Information relating to the institu5 tion’s cohort default rate, including— 

6 ‘‘(i) the cohort default rate, as de7 scribed in section 435(m), of the institu8 tion and an easy to understand description 

9 of what a cohort default rate is; 

10 ‘‘(ii) the percentage of students at the 

11 institution of higher education who borrow 

12 Federal student loans under this title; 

13 ‘‘(iii) the national average cohort de14 fault rate (as determined by the Secretary 

15 in accordance with section 435(m)); and 

16 ‘‘(iv) if the cohort default rate for the 

17 institution (as described in clause (i)) is 

18 greater than the national average cohort 

19 default rate (as described in clause (iii)), 

20 then the institution shall provide— 

21 ‘‘(I) the loan repayment rate at 

22 the institution, as calculated by the 

23 Secretary in accordance with sub24 section (n), and, if applicable, the loan 

25 repayment rate of each program at 

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1 the institution that is subject to gain2 ful employment regulations under sec3 tion 668.7 of title 34, Code of Federal 

4 Regulations; 

5 ‘‘(II) an easy to understand de6 scription of what a loan repayment 

7 rate is; and 

8 ‘‘(III) a disclosure to the student 

9 that the institution’s cohort default 

10 rate is above the national average. 

11 ‘‘(O) A statement that student loans must 

12 be repaid even if the student is dissatisfied with 

13 the quality of education that the student re14 ceives. 

15 ‘‘(P) The percent of students at the insti16 tution who obtain a degree or certificate within 

17 150 percent of the normal time for completion 

18 of, or graduation from, the student’s pro19 gram.’’; and 

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

21 ‘‘(3) BORROWER CONTACT INFORMATION.— 

22 Each eligible institution shall require that a bor23 rower who receives entrance counseling under this 

24 subsection on or after the date of enactment of the 

25 Smarter Borrowing Act submit to the institution, 

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1 during the entrance counseling required by this sub2 section, the borrower’s contact information at the 

3 time of the entrance counseling, including the bor4 rower’s— 

5 ‘‘(A) phone number; 

6 ‘‘(B) postal address; and 

7 ‘‘(C) personal electronic mailing address.’’; 

8 and 

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

10 ‘‘(n) LOAN REPAYMENT RATE.— 

11 ‘‘(1) IN GENERAL.—Not less than once every 

12 fiscal year, the Secretary shall calculate the loan re13 payment rate for each institution of higher education 

14 that is participating in a program under this title or 

15 seeking to regain eligibility to participate in a pro16 gram under this title. The Secretary shall make the 

17 loan repayment rate for each such institution pub18 licly available on the ‘College Navigator’ website of 

19 the National Center for Education Statistics. 

20 ‘‘(2) METHOD OF CALCULATION.— 

21 ‘‘(A) IN GENERAL.—For purposes of this 

22 subsection, the loan repayment rate for an in23 stitution shall be equal to the proportion that— 

24 ‘‘(i) the sum of the total original out25 standing principal balance of all loans paid 

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1 in full of the institution plus the total 

2 original outstanding principal balance of 

3 all payments-made loans of the institution; 

4 bears to 

5 ‘‘(ii) the original outstanding principal 

6 balance of all loans described in subpara7 graph (B) of the institution. 

8 ‘‘(B) ORIGINAL OUTSTANDING PRINCIPAL

9 BALANCE.— 

10 ‘‘(i) IN GENERAL.—For purposes of 

11 subparagraph (A), the original outstanding 

12 principal balance is the total amount of the 

13 outstanding balance, including capitalized 

14 interest, on loans under part B and part D 

15 owed by students for attendance at the in16 stitution on the date those loans first en17 tered repayment, subject to clauses (ii) and 

18 (iii). 

19 ‘‘(ii) EXCLUSION.—The original out20 standing principal balance does not include 

21 loans made to parent borrowers under sec22 tion 428B or the Federal Direct PLUS 

23 Loan Program. 

24 ‘‘(iii) CONSOLIDATION LOANS.—For 

25 loans made under section 428C or Federal 

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1 Direct Consolidation Loans, the original 

2 outstanding principal balance is the origi3 nal outstanding principal balance of the 

4 loans under part B and part D attrib5 utable to a borrower’s attendance at the 

6 institution. 

7 ‘‘(C) LOANS PAID IN FULL.— 

8 ‘‘(i) IN GENERAL.—For purposes of 

9 subparagraph (A)(i), a loan paid in full is 

10 a loan described in subparagraph (B) 

11 that— 

12 ‘‘(I)(aa) has never been in de13 fault; or 

14 ‘‘(bb) in the case of a loan made 

15 under section 428C or a Federal Di16 rect Consolidation Loan, neither the 

17 consolidation loan nor the underlying 

18 loan or loans has ever been in default; 

19 and 

20 ‘‘(II) has been paid in full by a 

21 borrower. 

22 ‘‘(ii) CONSOLIDATION LOANS AND RE23 FINANCING.—A loan that is paid through a 

24 loan made under section 428C, a Federal 

25 Direct Consolidation Loan, or under anmstockstill on DSK4VPTVN1PROD with BILLS

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1 other refinancing process provided for 

2 under this Act, is not counted as a loan 

3 paid in full for purposes of this subpara4 graph until the consolidation loan or other 

5 financial instrument is paid in full by the 

6 borrower. 

7 ‘‘(D) PAYMENTS-MADE LOANS.— 

8 ‘‘(i) IN GENERAL.—In this paragraph, 

9 the term payments-made loan is a loan de10 scribed in subparagraph (B) that has never 

11 been in default or, in the case of a loan 

12 made under section 428C or a Federal Di13 rect Consolidation Loan, neither the con14 solidation loan nor the underlying loan or 

15 loans have ever been in default, where— 

16 ‘‘(I) for all undergraduate pro17 grams, payments made by a borrower 

18 during the most recently completed 

19 fiscal year reduce the outstanding bal20 ance of a loan, including the out21 standing balance of a loan made 

22 under section 428C or a Federal Di23 rect Consolidation Loan, to an 

24 amount that is less than the outmstockstill on DSK4VPTVN1PROD with BILLS

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1 standing balance of the loan at the be2 ginning of that fiscal year; 

3 ‘‘(II) for post-baccalaureate cer4 tificate, master’s degree, doctoral de5 gree, or first-professional degree pro6 grams, the total outstanding balance 

7 of a loan made under section 428C or 

8 a Federal Direct Consolidation Loan 

9 at the end of the most recently com10 pleted fiscal year is less than the total 

11 outstanding balance of the consolida12 tion loan at the beginning of the fiscal 

13 year; or 

14 ‘‘(III) a borrower is in the proc15 ess of qualifying for public service 

16 loan forgiveness under section 455(m) 

17 and submits an employment certifi18 cation to the Secretary that dem19 onstrates the borrower is engaged in 

20 qualifying employment and the bor21 rower made qualifying payments on 

22 the loan during the most recently 

23 completed fiscal year. 

24 ‘‘(ii) OUTSTANDING BALANCE OF A

25 LOAN.— 

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1 ‘‘(I) IN GENERAL.—The out2 standing balance of a loan includes 

3 any unpaid accrued interest that has 

4 not been capitalized. 

5 ‘‘(II) CONSOLIDATION LOAN.— 

6 The outstanding balance of a loan 

7 made under section 428C or a Fed8 eral Direct Consolidation Loan in9 cludes any unpaid accrued interest 

10 that has not been capitalized. 

11 ‘‘(E) EXCLUSIONS.—For the most recently 

12 completed fiscal year, the original outstanding 

13 principal balance of the following loans is ex14 cluded from both the numerator and the de15 nominator of the ratio: 

16 ‘‘(i) Loans that were in an in-school 

17 deferment status under section 

18 428(b)(1)(M)(i) or 455(f)(2)(A) during 

19 any part of the fiscal year. 

20 ‘‘(ii) Loans that were in a military-re21 lated deferment status under section 

22 428(b)(1)(M)(ii) or 455(f)(2)(C) during 

23 any part of the fiscal year. 

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1 ‘‘(iii) Loans that were discharged as a 

2 result of the death of the borrower under 

3 subsection (a)(1) or (d) of section 437. 

4 ‘‘(iv) Loans that were assigned or 

5 transferred to the Secretary and that are 

6 being considered for discharge as a result 

7 of the total and permanent disability of the 

8 borrower, or were discharged by the Sec9 retary on that basis under section 437(a). 

10 ‘‘(o) ADDITIONAL NOTIFICATIONS AND COUNSELING

11 FOR BORROWERS.— 

12 ‘‘(1) ANNUAL NOTIFICATIONS.—Subject to sub13 paragraph (E), each eligible institution shall, not 

14 less than once every year while a student is enrolled 

15 in the institution, carry out the notification require16 ments described in subparagraphs (A), (B), (C), and 

17 (D) with respect to a borrower of a loan made, in18 sured, or guaranteed under part B (other than a 

19 loan made pursuant to section 428C or a loan made 

20 on behalf of a student pursuant to section 428B) or 

21 made under part D (other than a Federal Direct 

22 Consolidation Loan or a Federal Direct PLUS loan 

23 made on behalf of a student). Such notification re24 quirements may be fulfilled by notifications provided 

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1 through existing methods of communication, such as 

2 the annual financial aid award letter. 

3 ‘‘(A) STUDENT LOAN BALANCE; LOAN

4 TERMS.—The eligible institution shall provide 

5 the borrower with a written notification of— 

6 ‘‘(i) the borrower’s outstanding bal7 ance of principal and interest owing on any 

8 loan made, insured, or guaranteed under 

9 this title; 

10 ‘‘(ii) the borrower’s repayment op11 tions; and 

12 ‘‘(iii) a disclosure that Federal stu13 dent loans offer generally more favorable 

14 terms and beneficial repayment options 

15 than private education loans, an expla16 nation of the difference and relevance be17 tween student loans with a fixed interest 

18 rate as compared to student loans with a 

19 variable interest rate, and a recommenda20 tion that students examine available Fed21 eral student loan options before applying 

22 for private education loans. 

23 ‘‘(B) FEDERAL DIRECT STAFFORD LOAN

24 ELIGIBILITY.—In addition to the notifications 

25 under subparagraph (A) and under subparamstockstill on DSK4VPTVN1PROD with BILLS

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1 graph (C), if applicable, in the case of a bor2 rower described in paragraph (1) who qualifies 

3 for a Federal Direct Stafford Loan and who 

4 was a new borrower on or after July 1, 2013, 

5 the institution shall provide— 

6 ‘‘(i) a written notification of the pe7 riod of time that the borrower has remain8 ing before the borrower will not be eligible 

9 for a Federal Direct Stafford Loan in ac10 cordance with section 455(q) because the 

11 period of time for which the borrower has 

12 received Federal Direct Stafford Loans, in 

13 the aggregate, exceeds the period of enroll14 ment described in section 455(q)(3); and 

15 ‘‘(ii) a written notification to such 

16 student when the period of time for which 

17 the borrower has received Federal Direct 

18 Stafford Loans, in the aggregate, 

19 reaches— 

20 ‘‘(I) except as provided in sub21 clause (II) or (III), a period equal to 

22 100 percent of the published length of 

23 the educational program in which the 

24 student is enrolled; 

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1 ‘‘(II) in the case of a borrower 

2 who was previously enrolled in 1 or 

3 more other educational programs that 

4 began on or after July 1, 2013, a period equivalent to 2 5 ⁄3 of the maximum 

6 period of time that the borrower is eli7 gible to receive a Federal Direct Staf8 ford Loan, as calculated in accordance 

9 with section 455(q)(3)(A)(ii); or 

10 ‘‘(III) in the case of a borrower 

11 who was or is enrolled on less than a 

12 full-time basis or in the case of a bor13 rower whose course of study or pro14 gram is described in paragraph (3)(B) 

15 or (4)(B) of section 484(b), a period 

equivalent to 2 16 ⁄3 of the maximum pe17 riod of time that the borrower is eligi18 ble to receive a Federal Direct Staf19 ford Loan, as calculated in accordance 

20 with section 455(q)(3)(B). 

21 ‘‘(C) PELL GRANT ELIGIBILITY.—In addi22 tion to the notifications under subparagraph 

23 (A) and under subparagraph (B), if applicable, 

24 in the case of a borrower described in para25 graph (1) who is receiving a Federal Pell 

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1 Grant, the institution shall provide a written 

2 notification to such borrower of the period of 

3 time that the borrower has remaining before 

4 the borrower will not be eligible for a Federal 

5 Pell Grant in accordance with section 401(c)(5) 

6 because the period of time for which the bor7 rower has received a Federal Pell Grant, in the 

8 aggregate, exceeds the period of enrollment de9 scribed in section 401(c)(5). 

10 ‘‘(D) CONFIRMATION OF RECEIPT OF NO11 TIFICATION.—Each eligible institution shall re12 quire the borrower, for each applicable notifica13 tion described in this paragraph, to provide 

14 written confirmation (including through elec15 tronic means) that the borrower has received 

16 the notification and understands the informa17 tion contained in that notification. 

18 ‘‘(E) NOTIFICATIONS BY CERTAIN INSTI19 TUTIONS.—In the case of an institution de20 scribed in paragraph (2)(A), the notification re21 quirements under this paragraph (including the 

22 confirmation of notification described in sub23 paragraph (D)) shall be carried out annually 

24 during the interim in-school counseling de25 scribed in paragraph (2)(B). 

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1 ‘‘(2) ADDITIONAL COUNSELING REQUIREMENTS

2 FOR INSTITUTIONS WITH GREATER THAN AVERAGE

3 COHORT DEFAULT RATES.— 

4 ‘‘(A) APPLICABILITY.—In addition to the 

5 counseling required under subsections (b) and 

6 (l), and any other requirements under this sub7 section, each eligible institution that has a co8 hort default rate that is greater than the na9 tional average cohort default rate (as deter10 mined by the Secretary in accordance with sec11 tion 435(m)) shall carry out the additional loan 

12 counseling described in subparagraphs (B), (C), 

13 and (D). Such counseling shall be provided in 

14 a simple and understandable manner that in15 cludes mechanisms to check for comprehension. 

16 ‘‘(B) INTERIM IN-SCHOOL COUNSELING.— 

17 Each eligible institution described in subpara18 graph (A) shall require each borrower of a loan 

19 made, insured, or guaranteed under part B 

20 (other than a loan made pursuant to section 

21 428C or a loan made on behalf of a student 

22 pursuant to section 428B) or made under part 

23 D (other than a Federal Direct Consolidation 

24 Loan or a Federal Direct PLUS loan made on 

25 behalf of a student), to undertake not less than 

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1 1 online, or in-person, counseling session at the 

2 beginning of each academic year that the bor3 rower is enrolled at such institution, which shall 

4 include— 

5 ‘‘(i) the applicable notification re6 quirements described in paragraph (1); 

7 and 

8 ‘‘(ii) a statement that student loans 

9 must be repaid even if the borrower is dis10 satisfied with the quality of education that 

11 the borrower receives. 

12 ‘‘(C) ADDITIONAL LOAN COUNSELING RE13 QUIREMENTS FOR CERTAIN STUDENT BOR14 ROWERS.— 

15 ‘‘(i) IN GENERAL.—Each eligible insti16 tution described in subparagraph (A) shall 

17 require each borrower described in clause 

18 (ii) to participate in an additional loan 

19 counseling session, which shall— 

20 ‘‘(I) be coordinated jointly by the 

21 student’s academic advisor and the fi22 nancial aid office; 

23 ‘‘(II) include disclosure of the es24 timated additional cost of attendance 

25 that the borrower may incur by failing 

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1 to progress through the borrower’s 

2 educational program at a pace that 

3 meets the requirements for satisfac4 tory progress, as described in section 

5 484(c); and 

6 ‘‘(III) in the case of a borrower 

7 described in clause (ii)(II)(bb), include 

8 the development of an institutionally 

9 approved academic plan designed to 

10 ensure that the borrower will complete 

11 the borrower’s educational program 

12 within a reasonable timeframe. 

13 ‘‘(ii) BORROWERS IN NEED OF ADDI14 TIONAL LOAN COUNSELING.—A borrower 

15 shall be subject to the requirements de16 scribed in clause (i) if— 

17 ‘‘(I) the borrower has a loan 

18 made, insured, or guaranteed under 

19 part B (other than a loan made pur20 suant to section 428C or a loan made 

21 on behalf of a student pursuant to 

22 section 428B) or made under part D 

23 (other than a Federal Direct Consoli24 dation Loan or a Federal Direct 

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1 PLUS loan made on behalf of a stu2 dent); and 

3 ‘‘(II)(aa) the borrower has trans4 ferred to the institution from another 

5 institution of higher education; or 

6 ‘‘(bb) the borrower meets certain 

7 criteria that the institution has deter8 mined may place a borrower at great9 er risk of defaulting on student loans, 

10 such as switching majors or declaring 

11 a major late, withdrawing prematurely 

12 from an educational program, or 

13 being in danger of failing to meet 

14 standards of academic progress. 

15 ‘‘(D) COUNSELING FOR PARENT PLUS

16 BORROWERS.— 

17 ‘‘(i) IN GENERAL.—Each eligible insti18 tution described in subparagraph (A) shall, 

19 prior to disbursement of a Federal Direct 

20 PLUS loan made on behalf of a student in 

21 an amount that is greater than $10,000 

22 (either in a single award year or in the ag23 gregate), ensure that the borrower receives 

24 comprehensive information on the terms 

25 and conditions of the loan and of the remstockstill on DSK4VPTVN1PROD with BILLS

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1 sponsibilities the borrower has with respect 

2 to such loan. Such information— 

3 ‘‘(I) shall be provided through 

4 the use of interactive programs that 

5 test the borrower’s understanding of 

6 the terms and conditions of the bor7 rower’s loan, using simple and under8 standable language and clear for9 matting; and 

10 ‘‘(II) shall be provided— 

11 ‘‘(aa) during a counseling 

12 session conducted in person; or 

13 ‘‘(bb) online. 

14 ‘‘(ii) INFORMATION TO BE PRO15 VIDED.—The information to be provided to 

16 the borrower under clause (i) shall include 

17 the following: 

18 ‘‘(I) Information on how interest 

19 accrues and is capitalized during peri20 ods when the interest is not paid by 

21 the borrower. 

22 ‘‘(II) An explanation of when 

23 loan repayment begins and what op24 tions are available for a borrower who 

25 may need a deferment. 

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1 ‘‘(III) The repayment plans that 

2 are available to the borrower, includ3 ing personalized information show4 ing— 

5 ‘‘(aa) estimates of the bor6 rower’s anticipated monthly pay7 ments under each repayment 

8 plan that is available; and 

9 ‘‘(bb) the difference in inter10 est paid and total payments 

11 under each repayment plan. 

12 ‘‘(IV) The obligation of the bor13 rower to repay the full amount of the 

14 loan, regardless of whether the stu15 dent on whose behalf the loan was 

16 made completes or does not complete 

17 the program in which the student is 

18 enrolled within the regular time for 

19 program completion. 

20 ‘‘(V) The obligation of the bor21 rower to repay the full amount of the 

22 loan even if the student on whose be23 half the loan was made is dissatisfied 

24 with the quality of education that the 

25 student receives. 

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1 ‘‘(VI) The likely consequences of 

2 default on the loan, including adverse 

3 credit reports, delinquent debt collec4 tion procedures under Federal law, 

5 and litigation. 

6 ‘‘(VII) The name of and contact 

7 information for the individual the bor8 rower may contact if the borrower has 

9 any questions about the borrower’s 

10 rights and responsibilities or the 

11 terms and conditions of the loan. 

12 ‘‘(3) ADDITIONAL COUNSELING REQUIREMENTS

13 FOR CERTAIN INSTITUTIONS.— 

14 ‘‘(A) APPLICABLE INSTITUTIONS.— 

15 ‘‘(i) INSTITUTIONS THAT MAY LOSE

16 ELIGIBILITY.—The Secretary shall require 

17 that an institution that has a cohort de18 fault rate that is equal to or greater than 

19 the threshold percentage specified in sec20 tion 435(a)(2)(B) for the most recent fis21 cal year for which data is available (except 

22 in the case of an institution that meets the 

23 criteria for a participation rate index ap24 peal, as described in section 435(a)(8)) 

25 shall certify that the institution has met 

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1 the counseling requirements under sub2 sections (b) and (l) and under this sub3 section, including the requirements de4 scribed in subparagraph (B). The coun5 seling shall be provided in a simple and 

6 understandable manner that includes 

7 mechanisms to check for comprehension. 

8 ‘‘(ii) INSTITUTIONS THAT WISH TO

9 REGAIN ELIGIBILITY.—The Secretary shall 

10 require that an institution that loses eligi11 bility under part B or part D of this title, 

12 or under any other program described in 

13 this Act, in accordance with section 

14 435(a)(2)(B) or section 668.206a of title 

15 34, Code of Federal Regulations (as in ef16 fect on the day before the date of enact17 ment of the Smarter Borrowing Act), shall 

18 certify that the institution has met the 

19 counseling requirements described in sub20 paragraph (B) as a condition of regaining 

21 such eligibility. The counseling shall be 

22 provided in a simple and understandable 

23 manner that includes mechanisms to check 

24 for comprehension. 

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1 ‘‘(B) NOTIFICATION AND COUNSELING RE2 QUIREMENTS.—In addition to the counseling 

3 required under subsections (b) and (l), and any 

4 other requirements under this subsection, an in5 stitution described in subparagraph (A) shall, 

6 for each fiscal year that the institution has a 

7 cohort default rate that is equal to or greater 

8 than the threshold percentage specified in sec9 tion 435(a)(2)(B), include in the institution’s 

10 default prevention plan described under section 

11 668.217 of title 34, Code of Federal Regula12 tions (as in effect on the day before the date of 

13 enactment of the Smarter Borrowing Act) a 

14 specification that the institution will— 

15 ‘‘(i) provide each student at the insti16 tution with a notification that the institu17 tion is an at-risk institution that is subject 

18 to losing eligibility (or has lost eligibility, 

19 as the case may be) for certain Federal 

20 student aid programs due to the institu21 tion’s cohort default rate; and 

22 ‘‘(ii) provide each student at the insti23 tution who is receiving funds under this 

24 title with a counseling session, either in 

25 person or over the telephone, for the purmstockstill on DSK4VPTVN1PROD with BILLS

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1 pose of helping the student to develop a 

2 budget.’’. 

3 (d) PROGRAM PARTICIPATION AGREEMENTS.—Sec4 tion 487(a) is amended by adding at the end the following: 

5 ‘‘(30) The institution will provide the Secretary 

6 with any information that the Secretary requests in 

7 order to meet the requirements of section 435(n).’’. 

8 (e) REQUIRED DATA.—Any data that an institution 

9 of higher education does not have access to and that is 

10 required for compliance with this section shall be provided 

11 or made available by the Department of Education, or 

12 other Federal agencies, as appropriate. 

13 SEC. 3. EXPLANATION OF THE BENEFITS OF FEDERAL 

14 LOANS. 

15 The Secretary of Education, in consultation with the 

16 heads of relevant Federal agencies, shall prepare and 

17 make available to eligible institutions, as described under 

18 section 485(l)(2)(L)(ii) of the Higher Education Act of 

19 1965 (20 U.S.C. 1092(l)(2)(L)(ii)), a written explanation 

20 of the benefits that are unique to Federal student loans 

21 (including repayment plans, loan forgiveness, and loan 

22 deferment) and a description of the loan terms that bor23 rowers should examine carefully if considering a private 

24 education loan. 

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1 SEC. 4. LONGITUDINAL STUDY OF THE EFFECTIVENESS OF 

2 STUDENT LOAN COUNSELING. 

3 (a) IN GENERAL.—Not later than 1 year after the 

4 date of enactment of the Smarter Borrowing Act, the Sec5 retary of Education, acting through the Director of the 

6 Institute of Education Sciences, shall begin conducting a 

7 rigorous longitudinal study of the impact and effectiveness 

8 of student loan counseling, as provided in accordance with 

9 subsections (b), (l), and (o) of section 485 of the Higher 

10 Education Act of 1965 (20 U.S.C. 1092) and through 

11 such other means of providing student loan counseling 

12 services as the Secretary may determine. The longitudinal 

13 study shall include information about student persistence, 

14 degree attainment, program completion, successful entry 

15 into student loan repayment, cumulative borrowing levels, 

16 and such other factors as the Secretary may determine. 

17 (b) INTERIM REPORTS.—Not later than 18 months 

18 after the commencement of the study described under this 

19 section, and annually thereafter, the Secretary shall evalu20 ate the progress of the study and report any short-term 

21 findings to the appropriate committees of Congress. 

22 (c) AUTHORIZATION OF APPROPRIATIONS.—There 

23 are authorized to be appropriated to carry out this section 

24 such sums as may be necessary for fiscal year 2013 and 

25 each of the 5 succeeding fiscal years. 

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1 SEC. 5. RECOMMENDATIONS. 

2 (a) NATIONAL STUDENT LOAN DATA SYSTEM.—Not 

3 later than 160 days after the date of enactment of this 

4 Act, the Secretary of Education and the Director of the 

5 Consumer Financial Protection Bureau shall prepare and 

6 submit to Congress a report containing joint recommenda7 tions relating to the inclusion of private student loans into 

8 the National Student Loan Data System established under 

9 section 485B of the Higher Education Act of 1965 (20 

10 U.S.C. 1092b). 

11 (b) RECOMMENDATIONS FOR STUDENT LOAN COUN12 SELING.—The Secretary of the Treasury, acting through 

13 the President’s Advisory Council on Financial Capability 

14 and the Financial Literacy and Education Commission 

15 (FLEC), shall prepare and submit to Congress a report 

16 containing recommendations about information that 

17 should be included in financial literacy counseling for first18 time student loan borrowers. 

19 SEC. 6. CONSUMER TESTING OF LOAN COUNSELING AND 

20 MASTER PROMISSORY NOTE. 

21 (a) ESTABLISHMENT OF CONSUMER TESTING PROC22 ESS.—Not later than 3 months after the date of enact23 ment of the Smarter Borrowing Act, the Secretary of Edu24 cation shall establish a process for consumer testing the 

25 master promissory note and online entrance, exit, and in26 terim loan counseling tools, including online tools that 

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1 may be used during the counseling that is required under 

2 subsections (b), (l), and (o) of section 485 of the Higher 

3 Education Act of 1965 (20 U.S.C. 1092). 

4 (b) PARTICIPANTS IN CONSUMER TESTING.—The 

5 consumer testing process described in subsection (a) shall 

6 include— 

7 (1) representatives of students (including low8 income students, first generation college students, 

9 adult students, and prospective students); 

10 (2) students’ families (including low-income 

11 families, families with first generation college stu12 dents, and families with prospective students); 

13 (3) institutions of higher education; 

14 (4) postsecondary financial aid officers; and 

15 (5) nonprofit consumer groups. 

16 (c) DURATION.—The Secretary of Education shall 

17 ensure that the consumer testing described in this section 

18 lasts not longer than 6 months after the process for con19 sumer testing has been established under subsection (a). 

20 (d) USE OF CONSUMER TESTING RESULTS.—The 

21 Secretary of Education shall use the results of the con22 sumer testing in the final development of online entrance, 

23 exit, and interim loan counseling tools, including online 

24 tools that may be used during the counseling that is re25 quired under subsections (b), (l), and (o) of section 485 

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1 of the Higher Education Act of 1965 (20 U.S.C. 1092), 

2 and the final development of a revised master promissory 

3 note. 

4 (e) REPORT TO CONGRESS.—Not later than 3 

5 months after the date the consumer testing concludes, the 

6 Secretary of Education shall submit to Congress a report 

7 that contains— 

8 (1) the final online entrance, exit, and interim 

9 loan counseling tools that the Department of Edu10 cation plans to implement, as described under sub11 section (d), and a revised master promissory note; 

12 and 

13 (2) the results of the consumer testing con14 ducted under this section. 

Æ 

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