I 

114TH CONGRESS 

1ST SESSION H. R. 2364 

To provide for institutional risk-sharing in the Federal student loan programs. 

IN THE HOUSE OF REPRESENTATIVES 

MAY 15, 2015 

Mr. CARNEY introduced the following bill; which was referred to the 

Committee on Education and the Workforce 

A BILL 

To provide for institutional risk-sharing in the Federal 

student loan programs. 

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 ‘‘Protect Student Bor5 rowers Act of 2015’’. 

6 SEC. 2. PURPOSE. 

7 The purpose of this Act is to protect student bor8 rowers by requiring institutions of higher education to as9 sume some of the risk of default for student loans under 

10 part D of title IV of the Higher Education Act of 1965 

11 (20 U.S.C. 1087a et seq.). 


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1 SEC. 3. INSTITUTIONAL REBATES TO THE DEPARTMENT OF 

2 EDUCATION FOR DEFAULTED LOANS. 

3 Section 454 of the Higher Education Act of 1965 (20 

4 U.S.C. 1087d) is amended— 

5 (1) in subsection (a)— 

6 (A) in paragraph (5), by striking ‘‘and’’ 

7 after the semicolon; 

8 (B) in paragraph (6), by striking the pe9 riod at the end and inserting ‘‘; and’’; and 

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

11 ‘‘(7) provide that the institution accepts the in12 stitutional risk-sharing requirements under sub13 section (d), if applicable.’’; and 

14 (2) by adding at the end the following: 

15 ‘‘(d) INSTITUTIONAL RISK-SHARING FOR STUDENT

16 LOAN DEFAULTS.— 

17 ‘‘(1) IN GENERAL.—Subject to paragraph (3), 

18 each institution of higher education participating in 

19 the direct student loan program under this part for 

20 a fiscal year that has a rate of participation in such 

21 program for all students enrolled at that institution 

22 for such fiscal year that is 25 percent or higher shall 

23 remit, at such times as the Secretary may specify, 

24 a risk-sharing payment based on a percentage of the 

25 volume of student loans under this part that are in 

26 default, as determined under paragraph (2). 


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1 ‘‘(2) DETERMINATION OF RISK-SHARING PAY2 MENTS.—Subject to paragraph (3), with respect to 

3 each fiscal year, an institution of higher education 

4 described in paragraph (1) that has a cohort default 

5 rate (as defined in section 435(m))— 

6 ‘‘(A) that is 30 percent or higher for the 

7 most recent fiscal year for which data are avail8 able, shall pay to the Secretary for the fiscal 

9 year an amount that is equal to 20 percent of 

10 the total amount (including interest and collec11 tion fees) of loans made under this part to stu12 dents who are in default for such most recent 

13 fiscal year for which data are available; 

14 ‘‘(B) that is lower than 30 percent but not 

15 lower than 25 percent for the most recent fiscal 

16 year for which data are available, shall pay to 

17 the Secretary for the fiscal year an amount that 

18 is equal to 15 percent of the total amount (in19 cluding interest and collection fees) of loans 

20 made under this part to students who are in de21 fault for such most recent fiscal year for which 

22 data are available; 

23 ‘‘(C) that is lower than 25 percent but not 

24 lower than 20 percent for the most recent fiscal 

25 year for which data are available, shall pay to 


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1 the Secretary for the fiscal year an amount that 

2 is equal to 10 percent of the total amount (in3 cluding interest and collection fees) of loans 

4 made under this part to students who are in de5 fault for such most recent fiscal year for which 

6 data are available; and 

7 ‘‘(D) that is lower than 20 percent but not 

8 lower than 15 percent for the most recent fiscal 

9 year for which data are available, shall pay to 

10 the Secretary for the fiscal year an amount that 

11 is equal to 5 percent of the total amount (in12 cluding interest and collection fees) of loans 

13 made under this part to students who are in de14 fault for such most recent fiscal year for which 

15 data are available. 

16 ‘‘(3) WAIVER AND REDUCED RISK-SHARING

17 PAYMENTS.— 

18 ‘‘(A) WAIVER.—The Secretary shall waive 

19 the risk-sharing payments described in para20 graph (1) for an institution described in para21 graph (2)(D) that meets the requirements of 

22 subparagraph (D). 

23 ‘‘(B) REDUCED RISK-SHARING PAY24 MENTS.—If an institution has in place a stu25 dent loan management plan described in subVerDate Sep 11 2014 03:40 May 22, 2015 Jkt 049200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H2364.IH H2364

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1 paragraph (D) that is approved by the Sec2 retary, the Secretary shall reduce the total an3 nual amount of risk-sharing payments as fol4 lows: 

5 ‘‘(i) With respect to an institution 

6 with a cohort default rate described in 

7 paragraph (2)(A), the risk-sharing pay8 ment shall be in an amount that is equal 

9 to 15 percent of the total amount (includ10 ing interest and collection fees) of loans 

11 made under this part to students who are 

12 in default. 

13 ‘‘(ii) With respect to an institution 

14 with a cohort default rate described in 

15 paragraph (2)(B), the risk-sharing pay16 ment shall be in an amount that is equal 

17 to 10 percent of the total amount (includ18 ing interest and collection fees) of loans 

19 made under this part to students who are 

20 in default. 

21 ‘‘(iii) With respect to an institution 

22 with a cohort default rate described in 

23 paragraph (2)(C), the risk-sharing pay24 ment shall be in an amount that is equal 

25 to 5 percent of the total amount (including 


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1 interest and collection fees) of loans made 

2 under this part to students who are in de3 fault. 

4 ‘‘(C) CONTINUATION OF WAIVER OR RE5 DUCED PAYMENTS.—An institution that re6 ceives a waiver under subparagraph (A) or a re7 duced risk-sharing payment under subpara8 graph (B) may receive a waiver or reduced pay9 ment for a subsequent fiscal year only if the 

10 Secretary determines that the institution is 

11 making satisfactory progress in carrying out the 

12 student loan management plan described in 

13 subparagraph (D), including evidence of the ef14 fectiveness of the individualized financial aid 

15 counseling for students. 

16 ‘‘(D) STUDENT LOAN MANAGEMENT

17 PLAN.—An institution that seeks a waiver or 

18 reduction of its risk-sharing payment, shall de19 velop and carry out a student loan management 

20 plan that shall include an analysis of the risk 

21 factors correlated with higher student loan de22 faults that are present at the institution and 

23 actions that the institution will take to address 

24 such factors. Such plan shall include individual25 ized financial aid counseling for students and 


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1 strategies to minimize student loan default and 

2 delinquency. 

3 ‘‘(E) WAIVER OR REDUCTION FOR CER4 TAIN INSTITUTIONS.—In addition to the other 

5 risk-sharing payment waivers and reductions 

6 described in this paragraph, the Secretary may 

7 waive or reduce risk-sharing payments if— 

8 ‘‘(i) an institution is eligible under— 

9 ‘‘(I) part A or part B of title III; 

10 or 

11 ‘‘(II) title V; and 

12 ‘‘(ii) the Secretary determines that— 

13 ‘‘(I) the institution is making 

14 satisfactory progress in carrying out 

15 the institution’s student loan manage16 ment plan described under subpara17 graph (D); and 

18 ‘‘(II) granting a waiver or reduc19 tion of risk-sharing payments would 

20 be in the best interest of students at 

21 the institution. 

22 ‘‘(4) PROHIBITION.—An institution of higher 

23 education shall not deny admission or financial aid 

24 to a student based on a perception that such student 


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1 may be at risk for defaulting on a loan made under 

2 this part. 

3 ‘‘(5) FUND FOR THE DEPOSIT OF RISK-SHAR4 ING PAYMENTS.— 

5 ‘‘(A) IN GENERAL.—There is established in 

6 the Treasury of the United States a separate 

7 account for the deposit of risk-sharing pay8 ments collected under this subsection. The Sec9 retary shall deposit any payments collected pur10 suant to this subsection into such fund. 

11 ‘‘(B) USE OF FUNDS.—Of the amounts in 

12 the fund described in subparagraph (A), for 

13 each fiscal year— 

14 ‘‘(i) not more than 50 percent of such 

15 amounts shall be made available to the 

16 Secretary to enter into contracts or cooper17 ative agreements for delinquency and de18 fault prevention or rehabilitation under 

19 section 456(c); and 

20 ‘‘(ii) the Secretary shall reserve the 

21 remainder of such amounts for a Federal 

22 Pell Grant fund that shall be used to offset 

23 any future shortfalls in funding under the 

24 Federal Pell Grant program. 


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1 ‘‘(6) APPLICABILITY.—The Secretary shall 

2 carry out this subsection beginning with the cohort 

3 default rate for the 2014 cohort. The 2014 cohort 

4 shall include current and former students who enter 

5 repayment in fiscal year 2014. 

6 ‘‘(7) REPORT TO CONGRESS.—The Secretary 

7 shall report on an annual basis to the Committee on 

8 Health, Education, Labor, and Pensions of the Sen9 ate and the Committee on Education and the Work10 force of the House of Representatives the following 

11 information: 

12 ‘‘(A) A list of institutions that have been 

13 subject to risk-sharing payments in the previous 

14 year. 

15 ‘‘(B) The required risk-sharing payment 

16 from such institutions. 

17 ‘‘(C) The amount of risk-sharing payments 

18 collected from such institutions. 

19 ‘‘(D) A list of the institutions that have re20 ceived waivers from the risk-sharing payment 

21 and the reason for such waiver. 

22 ‘‘(E) A list of the institutions that have re23 ceived reductions in the required risk-sharing 

24 payment. 


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1 ‘‘(F) The use of funds deposited from risk2 sharing payments, including a list of any con3 tracts or cooperative agreements for delin4 quency and default prevention or rehabilitation 

5 and the amount reserved for the Federal Pell 

6 Grant program.’’. 

7 SEC. 4. CONTRACTS AND COOPERATIVE AGREEMENTS. 

8 Section 456 of the Higher Education Act of 1965 (20 

9 U.S.C. 1087f) is amended by adding at the end the fol10 lowing: 

11 ‘‘(c) CONTRACTS AND COOPERATIVE AGREEMENTS

12 FOR DELINQUENCY AND DEFAULT PREVENTION AND FOR

13 DEFAULT REHABILITATION.—The Secretary may enter 

14 into contracts or cooperative agreements for— 

15 ‘‘(1) statewide or institutionally based programs 

16 for the prevention of Federal student loan delin17 quency and default at institutions of higher edu18 cation that— 

19 ‘‘(A) have a high cohort default rate as de20 fined under section 435(m); or 

21 ‘‘(B) serve large numbers or percentages of 

22 student loan borrowers who have a risk factor 

23 associated with higher default rates on Federal 

24 student loans under this title, such as coming 

25 from a low-income family, being a first generaVerDate Sep 11 2014 03:40 May 22, 2015 Jkt 049200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H2364.IH H2364

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1 tion postsecondary education student, not hav2 ing a secondary school diploma, or having pre3 viously defaulted on, and rehabilitated, a loan 

4 made under this title; and 

5 ‘‘(2) increasing the number of borrowers who 

6 successfully rehabilitate defaulted loans.’’. 

7 SEC. 5. FINANCIAL RESPONSIBILITY. 

8 Section 498(c)(1) of the Higher Education Act of 

9 1965 (20 U.S.C. 1099c(c)(1)) is amended by striking sub10 paragraph (C) and inserting the following: 

11 ‘‘(C) to meet all of its financial obligations, 

12 including institutional risk-sharing payments, 

13 refunds of institutional charges, and repay14 ments to the Secretary for liabilities and debts 

15 incurred in programs administered by the Sec16 retary.’’. 

Æ 


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