II 

110TH CONGRESS 

1ST SESSION S. 511 

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 

FEBRUARY 7, 2007 

Mrs. CLINTON (for herself, Ms. MIKULSKI, Mr. KERRY, and Mr. LIEBERMAN) 

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 2007’’. 

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) A RIGHT TO RECONSOLIDATE LOANS.— 

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

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

7 3(a)(3)(B)) is amended to read as follows: 

8 ‘‘(B)(i) Except as provided in clause (ii), an in9 dividual who has received a consolidation loan under 

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

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

12 such loans to be consolidated to the Department to 

13 obtain a subsequent consolidation loan under this 

14 section. 

15 ‘‘(ii) An individual who has received a consoli16 dation loan under this section may obtain a subse17 quent consolidation loan under this section for no 

18 fee if such individual was eligible to obtain a subse19 quent consolidation loan pursuant to this subpara20 graph on the day before the date of enactment of 

21 the Student Borrower Bill of Rights Act of 2007.’’. 

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

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

24 amended— 


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

2 the following: 

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

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

5 ‘‘(2) REFINANCING AUTHORITY.—Notwith6 standing any other provision of this part, a borrower 

7 may refinance a Federal Direct Consolidation 

8 Loan.’’. 

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

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

11 Act of 1965 (20 U.S.C. 1070 et seq.) is amended by add12 ing at the end the following: 

13 ‘‘PART I—STUDENT BORROWER BILL OF RIGHTS 

14 ‘‘SEC. 499. DEFINITIONS. 

15 ‘‘In this part: 

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

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

18 or guaranteed under this title (except loans made to 

19 parents under section 428B or under the Federal 

20 Direct PLUS Loan program). 

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

22 public or private entity that— 

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

24 such individual to attend an institution of high25 er education; or 


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

2 loan made to an individual to enable such indi3 vidual to attend an institution of higher edu4 cation. 

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

6 LOANS. 

7 ‘‘(a) REGULAR BILL PROVIDING PERTINENT INFOR8 MATION ABOUT A LOAN.—A lender of a Federal student 

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

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

11 than monthly, a bill that corresponds to each payment in12 stallment time period, including a clear and conspicuous 

13 notice of— 

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

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

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

17 ‘‘(4) the amount the borrower has paid in inter18 est; 

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

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

21 loan; 

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

23 the loan, including the amount the borrower has 

24 paid in interest, the amount the borrower has paid 


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1 in fees, and the amount the borrower has paid 

2 against the balance; 

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

4 been charged for the current payment period; 

5 ‘‘(8) the applicable monthly payment amount 

6 set by the Secretary under section 499B for such 

7 borrower and the amount such borrower would owe 

8 each month according to the borrower’s repayment 

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

10 the case of a loan payable less frequently than 

11 monthly, the amount that corresponds to the pay12 ment installment time period taking into consider13 ation the applicable monthly payment amount set by 

14 the Secretary under section 499B for such borrower 

15 and the amount such borrower would owe that cor16 responds to the payment installment time period ac17 cording to the borrower’s repayment plan absent the 

18 provisions of section 499B; 

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

20 make the payment described in paragraph (8) to 

21 avoid additional fees; 

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

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

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

25 number for payment purposes; 


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

2 for billing error purposes; and 

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

4 of the loan. 

5 ‘‘(b) INFORMATION PROVIDED FIVE MONTHS AFTER

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

7 A lender of a Federal student loan shall provide to the 

8 borrower of such loan, on the date that is 5 months after 

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

10 at the institution of higher education for which the loan 

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

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

13 than the following information: 

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

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

16 fee. 

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

18 default and the consequences of default. 

19 ‘‘(3) The borrower’s rights and options, includ20 ing repayment options, deferments, forbearances, 

21 and discharge rights to which the borrower may be 

22 entitled. 

23 ‘‘(4) Legitimate resources, including nonprofit 

24 organizations, advocates, and counselors (including 

25 the Office of the Ombudsman at the Department), 


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1 where borrowers can receive advice and assistance, if 

2 such resources exist. 

3 ‘‘(5) Information about how a borrower can ap4 peal to the Department a decision made by a lender 

5 about their loan. 

6 ‘‘(c) INFORMATION PROVIDED DURING DELIN7 QUENCY.— 

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

9 of the Senate that the Secretary should vigorously 

10 enforce rules requiring that a lender of a Federal 

11 student loan provide a borrower in delinquency in12 formation about such borrower’s rights and options, 

13 means of avoiding default, and the consequences of 

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

15 most useful for such borrower. 

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

17 to any other information required under law, a lend18 er of a Federal student loan shall provide a borrower 

19 in delinquency with a clear and conspicuous notice 

20 of the date on which the loan will default if no pay21 ment is made, the minimum payment that must be 

22 made to avoid default, discharge rights to which the 

23 borrower may be entitled, legitimate resources, in24 cluding nonprofit organizations, advocates, and 

25 counselors (including the Office of the Ombudsman 


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1 at the Department), where borrowers can receive ad2 vice and assistance, if such resources exist, and in3 formation about how a borrower can appeal to the 

4 Department a decision made by a lender about their 

5 loan. 

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

7 A lender of a Federal student loan shall provide a bor8 rower in default, on not less than 2 separate occasions, 

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

10 following information: 

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

12 get out of default. 

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

14 ‘‘(3) Information about how a borrower can ap15 peal to the Department a decision made by a lender 

16 about their loan. 

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

18 Senate that the Department should— 

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

20 organizations, advocates, and counselors who help 

21 people who are having problems repaying Federal 

22 student loans, describing— 

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

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

25 with particular programs; and 


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

2 and counselors technical assistance where needed.’’. 

3 (b) INFORMATION PROVIDED DURING THE TRANS4 FER OF A LOAN TO A NEW SERVICER.—Section 

5 428(b)(2)(F) of the Higher Education Act of 1965 (20 

6 U.S.C. 1078(b)(2)(F)) is amended— 

7 (1) in clause (i)— 

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

9 after the semicolon; 

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

11 after the semicolon; and 

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

13 ‘‘(V) the effective date of the 

14 transfer; 

15 ‘‘(VI) the date the current 

16 servicer will stop accepting payments; 

17 ‘‘(VII) the date at which the new 

18 servicer will begin accepting pay19 ments; and 

20 ‘‘(VIII) that the transfer does 

21 not affect any term or condition of 

22 their loan documents other than those 

23 terms directly related to the servicing 

24 of the loan;’’; 


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

2 the end and inserting ‘‘; and’’; and 

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

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

5 during the 60-day period beginning on the 

6 effective date of the transfer, to not treat 

7 a payment as late if the borrower mistak8 enly sends such payment to the transferor 

9 instead of to the transferee and the pay10 ment is otherwise on time,’’. 

11 (c) INFORMATION PROVIDED DURING CONSOLIDA12 TION.—Section 428C(b)(1) of the Higher Education Act 

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

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

15 after the semicolon; 

16 (2) by redesignating subparagraph (F) as sub17 paragraph (G); and 

18 (3) by inserting after subparagraph (E) the fol19 lowing: 

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

21 loan shall, upon application for such loan, pro22 vide the borrower with a clear and conspicuous 

23 notice of not less than the following informa24 tion: 


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1 ‘‘(i) the effects of consolidation on 

2 total interest to be paid, fees to be paid, 

3 and length of repayment, relative to the 

4 borrower’s currently scheduled total inter5 est to be paid, fees to be paid, and length 

6 of repayment at the borrower’s current in7 terest rate; 

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

9 borrower’s underlying loan benefits, includ10 ing loan forgiveness, cancellation, 

11 deferment, and reduced interest rates on 

12 those underlying loans; 

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

14 prepay the loan, pay on a shorter schedule, 

15 and to change repayment plans; 

16 ‘‘(iv) that borrower benefit programs 

17 may vary among different loan holders, 

18 and a description of how the borrower ben19 efits may vary among different loan hold20 ers; 

21 ‘‘(v) the tax benefits for which bor22 rowers may be eligible; 

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


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1 ‘‘(vii) that by making the application 

2 the applicant is not obligated to agree to 

3 take the consolidation loan; and’’. 

4 (d) INFORMATION PROVIDED DURING CONSOLIDA5 TION OR RECONSOLIDATION OF A FEDERAL STUDENT

6 LOAN WITH A PRIVATE LOAN.—A lender shall, upon ap7 plication for a consolidation or reconsolidation loan of one 

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

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

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

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

12 and conspicuous notice of not less than the following infor13 mation: 

14 (1) That the consolidation or reconsolidation 

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

16 (2) A description of the benefits and protections 

17 for the loan made, insured, or guaranteed under 

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

19 lose by consolidating such loan with a private loan. 

20 (3) That the lender may be eligible to consoli21 date two or more loans made, insured, or guaranteed 

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

23 loan program. 


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

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

3 IV of the Higher Education Act of 1965, as added by sec4 tion 5, is amended by adding at the end the following: 

5 ‘‘SEC. 499B. A RIGHT TO MAKE AFFORDABLE LOAN PAY6 MENTS. 

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

8 AFFORDABLE LEVEL.— 

9 ‘‘(1) IN GENERAL.— 

10 ‘‘(A) LIMITATION.— 

11 ‘‘(i) IN GENERAL.—With respect to 

12 Federal student loans that are made, in13 sured, or guaranteed after the date of en14 actment of this section, the Secretary shall 

15 limit the total monthly payment amount 

16 for all of such loans of a student borrower 

17 to not more than the amount determined 

18 pursuant to subparagraph (B), except as 

19 provided in subsection (b)(3). 

20 ‘‘(ii) COMMENCEMENT.—The limit on 

21 the monthly payment amount described in 

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

23 after the date the student ceases to carry 

24 at least one-half the normal full-time aca25 demic workload (as determined by the in26 stitution). 


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1 ‘‘(B) FORMULA AMOUNT.— 

2 ‘‘(i) IN GENERAL.—The amount re3 ferred to in subparagraph (A) shall be the 

4 same amount for each month of a year. 

5 Such amount shall be an amount that is 

6 the quotient of the sum of 10 percent of 

7 the borrower’s annual adjusted gross in8 come between 100 percent and 200 percent 

9 of the poverty line for the previous year 

10 and 20 percent of the borrower’s annual 

11 adjusted gross income above 200 percent 

12 of the poverty line for the previous year di13 vided by 12. 

14 ‘‘(ii) POVERTY LINE.—In this sub15 paragraph, the term ‘poverty line’ means 

16 the poverty line described in section 673 of 

17 the Community Services Block Grant Act 

18 (42 U.S.C. 9902), applicable to a family of 

19 the size involved. 

20 ‘‘(2) PROVISION OF INFORMATION TO THE SEC21 RETARY.— 

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

23 monthly payment amount set by the Secretary 

24 under paragraph (1) shall apply only if a borVerDate Aug 31 2005 04:15 Feb 09, 2007 Jkt 059200 PO 00000 Frm 00018 Fmt 6652 Sfmt 6201 E:\BILLS\S511.IS S511

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1 rower provides the Secretary, in such form and 

2 at such time— 

3 ‘‘(i) such information as the Secretary 

4 shall require to determine the monthly pay5 ment amount that is applicable for such 

6 borrower; and 

7 ‘‘(ii) certification that the borrower is 

8 employed full time or is actively seeking 

9 full-time employment. 

10 ‘‘(B) UPDATE TO INFORMATION.—The 

11 Secretary shall require a borrower to— 

12 ‘‘(i) provide the information required 

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

14 term of the loan of such borrower; or 

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

16 the loan of such borrower, authorize the 

17 Secretary to obtain the information re18 quired under subparagraph (A)(i) from the 

19 Internal Revenue Service for such year. 

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

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

22 shall revise the limit on the monthly payment 

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

24 necessary. 


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1 ‘‘(4) APPLICABILITY TO ALL REPAYMENT

2 PLANS.—Regardless of which repayment plan a bor3 rower of a loan selects under this title, the limit on 

4 the monthly payment amount set by the Secretary 

5 under paragraph (1) shall apply to the monthly re6 payment amount applicable for such repayment plan. 

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

8 any other term or condition of Federal student loans 

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

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

11 borrower pays the maximum monthly payment 

12 amount that is applicable for the borrower for such 

13 loans, as determined under this section, on time ac14 cording to the terms and conditions of such loans, 

15 such borrower may not be charged any late fee, un16 derpayment fee, or finance charge for such loans for 

17 such month. 

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

19 Federal student loan made, insured, or guaranteed 

20 after the date of enactment of this section for which 

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

22 the amount owed each month in interest payments 

23 for such loan exceeds the applicable amount for such 

24 borrower as determined under this section, and, at 

25 the discretion of the Secretary, if the borrower pays 


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1 such applicable amount, the Federal Government 

2 shall pay the difference between such amount owed 

3 in interest payments and such amount that has been 

4 determined is applicable. 

5 ‘‘(b) STUDY.— 

6 ‘‘(1) IN GENERAL.—The Secretary shall con7 duct a study to determine what additional protec8 tions beyond those described in subsection (a) are 

9 necessary, if any, to ensure that monthly payment 

10 amounts for student borrowers of different incomes 

11 and with different costs of living are affordable. 

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

13 paragraph (1) shall— 

14 ‘‘(A) consider the payments required of 

15 student borrowers in other countries, including 

16 the United Kingdom, Australia, and New Zea17 land, and compare such payments to the pay18 ments required of student borrowers in the 

19 United States; and 

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

21 appropriate committees of Congress not later 

22 than 12 months after the date of enactment of 

23 this section. 

24 ‘‘(3) ADDITIONAL LIMITS ON MONTHLY REPAY25 MENTS.—If the Secretary determines in the study 


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1 under paragraph (1) that additional protections are 

2 necessary to ensure that monthly payment amounts 

3 of student borrowers of Federal student loans made, 

4 insured, or guaranteed after the date of enactment 

5 of this section are affordable, the Secretary may es6 tablish rules based on such study that limits the 

7 monthly payment amount for a student borrower to 

8 a level that is affordable for such borrower. 

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

10 OF MORE THAN MINIMUM.—Notwithstanding any other 

11 provision of this section, a borrower whose applicable 

12 monthly payment amount set by the Secretary under this 

13 section is less than the amount such borrower would owe 

14 each month according to the borrower’s repayment plan 

15 absent the provisions of this section— 

16 ‘‘(1) shall be notified of the amount the bor17 rower would owe each month according to the bor18 rower’s repayment plan absent the provisions of this 

19 section; and 

20 ‘‘(2) may pay the amount described in para21 graph (1) or another amount that is greater than 

22 the applicable monthly payment amount set by the 

23 Secretary under this section.’’. 


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1 (b) INCOME CONTINGENT REPAYMENT.—Section 

2 455(e) of the Higher Education Act of 1965 (20 U.S.C. 

3 1087e(e)) is amended by adding at the end the following: 

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

5 made under this part at the end of the maximum re6 payment period is exempted from the definition of 

7 income for the purpose of taxes.’’. 

8 (c) DISCHARGE RIGHTS IN CASES OF SEVERE

9 NEED.— 

10 (1) DISCHARGE AND CANCELLATION RIGHTS IN

11 CASES OF DISABILITY.— 

12 (A) AMENDMENTS.— 

13 (i) FFEL AND DIRECT LOANS.—Sec14 tion 437(a) of the Higher Education Act of 

15 1965 (20 U.S.C. 1087(a)) is amended by 

16 striking ‘‘or becomes permanently and to17 tally disabled (as determined in accordance 

18 with regulations of the Secretary)’’ and in19 serting ‘‘or is unable to engage in any sub20 stantial gainful activity by reason of any 

21 medically determinable physical or mental 

22 impairment that can be expected to result 

23 in death or has lasted, or can be expected 

24 to last, for a continuous period of not less 

25 than 60 months’’. 


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1 (ii) PERKINS.—Section 464(c)(1)(F) 

2 of the Higher Education Act of 1965 (20 

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

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

5 through the semicolon and inserting ‘‘or if 

6 the borrower is unable to engage in any 

7 substantial gainful activity by reason of 

8 any medically determinable physical or 

9 mental impairment that can be expected to 

10 result in death or has lasted, or can be ex11 pected to last, for a continuous period of 

12 not less than 60 months;’’. 

13 (B) SENSE OF THE SENATE.—It is the 

14 Sense of the Senate that the Department of 

15 Education should continue to administer the 

16 discharge and cancellation right provisions of 

17 the Higher Education Act of 1965 amended in 

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

19 fraud and abuse. 

20 (2) DISCHARGE RIGHTS IN CASES OF BANK21 RUPTCY.— 

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

23 Sense of the Senate that the Bankruptcy Abuse 

24 Prevention and Consumer Protection Act of 

25 2005 (Public Law 109–8) affords sufficient 


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1 protections to prevent fraud and abuse in the 

2 carefully regulated discharge of student loans in 

3 bankruptcy. 

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

5 title 11, United States Code, is amended to 

6 read as follows: 

7 ‘‘(8) unless— 

8 ‘‘(A) excepting such debt from discharge 

9 under this paragraph would impose an undue 

10 hardship on the debtor and the debtor’s de11 pendents, for a debt that does not meet the re12 quirements of subparagraph (B) and that is— 

13 ‘‘(i) an educational benefit overpay14 ment or loan made, insured, or guaranteed 

15 by a governmental unit, or made under 

16 any program funded in whole or in part by 

17 a governmental unit or nonprofit institu18 tion; 

19 ‘‘(ii) an obligation to repay funds re20 ceived as an educational benefit, scholar21 ship, or stipend; or 

22 ‘‘(iii) an educational loan that is a 

23 qualified education loan, as defined in sec24 tion 221(d)(1) of the Internal Revenue 


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1 Code of 1986, incurred by a debtor who is 

2 an individual; or 

3 ‘‘(B) such debt is for an overpayment, 

4 loan, obligation, or qualified education loan de5 scribed in clause (i), (ii) or (iii) of subpara6 graph (A) that— 

7 ‘‘(i) was made, entered into, or in8 curred after the date of enactment of the 

9 Student Borrower Bill of Rights Act of 

10 2007; and 

11 ‘‘(ii) first became due more than 7 

12 years (exclusive of any applicable suspen13 sion of the repayment period) before the 

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

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

16 REASONABLE. 

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

18 Education Act of 1965, as added by section 5 and amend19 ed by section 6, is further amended by adding at the end 

20 the following: 

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

22 BE REASONABLE. 

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

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

25 borrowers of private student loans, including— 


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

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

3 including the conditions under which the interest 

4 rate is raised on delinquent payments, and the 

5 amount and frequency of such interest rate changes; 

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

7 charged of such a borrower and frequency of such 

8 fees, including fees that are charged as a condition 

9 of taking a deferment or forbearance, and the 

10 amount and frequency of such fees; 

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

12 paragraphs (1) and (2) that are exploitative or un13 reasonable; and 

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

15 practices identified in paragraph (3). 

16 ‘‘(b) MAXIMUM COLLECTION FEES.— 

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

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

19 for collecting on a defaulted Federal student loan 

20 shall not exceed the lesser of the expenses incurred 

21 in collecting on such loan or the amount calculated 

22 for such loan based on the following: 

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

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1 rower under this title, the amount that is 7.5 

2 percent of the balance of such loan. 

3 ‘‘(B) In the case of a defaulted loan reha4 bilitated under part D or pursuant to section 

5 428F(a)(1)(A), the amount that is 13.5 percent 

6 of the balance of such loan. 

7 ‘‘(C) In the case of a defaulted loan col8 lected under part D or part B and not de9 scribed in subparagraph (A) or (B), the amount 

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

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

12 that charges a borrower for collecting on a defaulted 

13 Federal student loan shall provide such borrower an 

14 itemized list of any expenses incurred in collecting 

15 on such loan. 

16 ‘‘(c) CAP ON TOTAL CHARGES.— 

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

18 cap on the maximum total amount that can be 

19 charged of a borrower on a Federal student loan, in20 cluding all interest and fees, as a percentage of the 

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

22 years, and 20 years. 

23 ‘‘(2) LEVEL OF CAP.—The cap set under para24 graph (1) shall be set— 


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

2 additional amount charged on a loan is unrea3 sonable or exploitative; and 

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

5 is higher than the amount the borrower, who 

6 makes regularly scheduled payments in accord7 ance with a standard repayment plan, currently 

8 pays over such time period.’’. 

9 (b) CONFORMING AMENDMENTS.— 

10 (1) LOANS PAID OFF THROUGH CONSOLIDA11 TION.—Section 428(c)(6)(B) of the Higher Edu12 cation Act of 1965 (20 U.S.C. 1078(c)(6)(B)) is 

13 amended— 

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

15 following: 

16 ‘‘(i) on or after October 1, 2007, not 

17 charge the borrower collection costs in excess of 

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

19 and’’; and 

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

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

22 (2) REHABILITATED LOANS.—Section 

23 428F(a)(1)(C) of the Higher Education Act of 1965 

24 (20 U.S.C. 1078–6(a)(1)(C)) is amended by striking 

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1 riod and inserting ‘‘not to exceed the amount pro2 vided in section 499C(b)(1)(B).’’. 

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

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

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

6 and 7, is further amended by adding at the end the fol7 lowing: 

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

9 ‘‘(a) PUBLICATION OF JOB PLACEMENT INFORMA10 TION.— 

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

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

13 student receiving assistance under this Act and that 

14 is determined by the Secretary, in accordance with 

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

16 make publicly available and include in institution 

17 materials (including applications for admission to 

18 the institution) a clear and conspicuous notice of 

19 group level job placement information for each of 

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

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

22 as the institution has been in operation), including 

23 not less than the following information: 


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1 ‘‘(A) The percentage of students entering 

2 the institution who graduated within 150 per3 cent of their expected graduation date. 

4 ‘‘(B) The percentage of graduates em5 ployed within 6 months of graduating. 

6 ‘‘(C) The percentage of graduates em7 ployed in the field that the graduates studied at 

8 the institution. 

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

10 graduates who are employed. 

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

12 the institution who took out a loan to attend 

13 the institution who defaulted on such loan at 

14 least once after leaving the institution. 

15 ‘‘(2) DISCLOSURE INSTITUTION.—In deter16 mining whether an institution is a disclosure institu17 tion, the Secretary primarily shall consider whether 

18 the institution makes claims relating to the employ19 ment prospects of the graduates of the institution. 

20 In addition, the Secretary shall consider each of the 

21 following criteria as a supplementary factor in deter22 mining whether an institution is a disclosure institu23 tion with respect to a particular year: 

24 ‘‘(A) More than 75 percent of the institu25 tion’s revenue for such year is loan volume. 


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1 ‘‘(B) Fewer than 50 percent of the stu2 dents enrolled in the institution the previous 

3 year, who did not graduate from such institu4 tion in such previous year, are still enrolled in 

5 the institution. 

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

7 who have taken out loans to attend the institu8 tion have defaulted on such loans at least once 

9 after leaving the institution. 

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

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

12 student receiving assistance under this Act and that 

13 is determined by the Secretary, in accordance with 

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

15 keep, for a period of 5 years, the records that sub16 stantiate the information the institution is required 

17 to publicize under paragraph (1). 

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

19 Senate that the Secretary should enforce the rights of bor20 rowers of private student loans and Federal student loans 

21 to raise claims and defenses related to the actions of for22 profit institutions of higher education against lenders from 

23 which the borrowers borrowed money to attend such insti24 tutions, including the Federal Trade Commission Rule. 

25 ‘‘(c) APPEAL TO THE SECRETARY.— 


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1 ‘‘(1) IN GENERAL.— 

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

3 Federal student loan who has suffered an eco4 nomic loss as a result of a violation of the bor5 rower’s rights under this title shall have the 

6 right to appeal such action to the Secretary. 

7 ‘‘(B) RIGHTS OF BORROWER.—For the 

8 purpose of this subsection, the rights of a bor9 rower described in subparagraph (A) are those 

10 rights involved in the solicitation for, disburse11 ment of, repayment of (including rights to ter12 minate or suspend repayment), or collection of 

13 a Federal student loan, including— 

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

15 and under the Student Borrower Bill of 

16 Rights Act of 2007 and the amendments 

17 made by such Act; and 

18 ‘‘(ii) borrower rights under the fol19 lowing sections of this Act: 427, 428, 

20 428C, 428F, 428J, 428K, 430A, 433, 437, 

21 438, 463, 463A, 464, 465, 484, 484B, 485 

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

23 485), and 488A. 

24 ‘‘(2) NOTIFICATION.—Not less than 30 days be25 fore making an appeal under this subsection, the 


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1 borrower shall jointly notify the Secretary and the 

2 party whose action the borrower wishes to appeal 

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

4 that the borrower intends to make an appeal, the ac5 tion that the borrower intends to appeal, and the 

6 economic loss that the borrower suffered as a result 

7 of the violation. 

8 ‘‘(3) SETTLEMENT.— 

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

10 under paragraph (2), the borrower and the re11 spondent shall make a good faith effort to settle 

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

13 respondent fails to respond to the borrower’s 

14 notice within 30 days of the borrower providing 

15 such notice, the borrower may appeal the appli16 cable action to the Secretary, which shall adju17 dicate the borrower’s claim in a fair, impartial, 

18 and timely manner. In so doing, the Secretary 

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

20 which borrowers who make appeals work with 

21 the office of the Ombudsman or another rel22 evant office within the Department to facilitate 

23 dispute resolution before providing a formal 

24 hearing. Whether or not the Secretary develops 

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1 mal hearing of the borrower’s appeal within 60 

2 days of the start of the appeal, unless the Sec3 retary determines that there is no basis for 

4 such a hearing or if the borrower making the 

5 appeal provides written consent to waive the 

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

7 withdraw the appeal. 

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

9 who is adversely affected by the final agency ac10 tion shall be entitled to judicial review of such 

11 action pursuant to section 706 of title 5, United 

12 States Code. 

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

14 publicly available on the Internet and elsewhere in15 formation about how borrowers can make appeals 

16 under this subsection and in what circumstances 

17 they can do so. 

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

19 same right to appeal, including the same rights and 

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

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

22 the Department or another lender that participates 

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

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

25 shall not be required to comply with the provisions 


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

2 5, United States Code (commonly referred to as the 

3 Administrative Procedure Act), in implementing this 

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

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

6 Notwithstanding any other provision of this Act, an insti7 tution of higher education that does not comply with sec8 tion 487(a) by violating paragraph (20) of such section 

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

10 taken out to attend such institution for the entire amount 

11 of such loan. 

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

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

14 provide a borrower who pays more than the amount re15 quired for any regularly scheduled payment an easy and 

16 unbiased means of choosing whether such overpayment 

17 payment should count as a— 

18 ‘‘(1) prepayment for a subsequently scheduled 

19 payment; or 

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

21 such loan.’’. 

22 SEC. 9. PREFERRED LENDER REQUIREMENTS. 

23 Section 487(a) of the Higher Education Act of 1965 

24 (20 U.S.C. 1088) is amended by adding at the end the 

25 following: 


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1 ‘‘(24) The institution will not cause any unnec2 essary loan processing delay for a borrower who uses 

3 a lender that is not recommended or suggested by 

4 the institution.’’. 

Æ 


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