II 

110TH CONGRESS 

1ST SESSION S. 1831 

To amend the Truth in Lending Act, to improve disclosures for private 

student loans, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

JULY 19, 2007 

Mr. SCHUMER introduced the following bill; which was read twice and referred 

to the Committee on Banking, Housing, and Urban Affairs 

A BILL 

To amend the Truth in Lending Act, to improve disclosures 

for private student loans, 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 ‘‘Private Student Loan 

5 Disclosure Enhancement Act of 2007’’. 

6 SEC. 2. APPLICATION OF TRUTH IN LENDING ACT . 

7 Section 104(3) of the Truth in Lending Act (15 

8 U.S.C. 1603(3)) is amended by inserting before the period 

9 at the end the following ‘‘, and other than private eduVerDate Aug 31 2005 04:13 Jul 21, 2007 Jkt 059200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S1831.IS S1831

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1 cation loans, as that term is defined in section 128(e), re2 gardless of the amount financed’’. 

3 SEC. 3. ENHANCED DISCLOSURES FOR PRIVATE STUDENT 

4 LOANS. 

5 (a) IN GENERAL.—Section 128 of the Truth in Lend6 ing Act (15 U.S.C. 1638) is amended by adding at the 

7 end the following: 

8 ‘‘(e) TERMS AND DISCLOSURE WITH RESPECT TO

9 PRIVATE STUDENT LOANS.— 

10 ‘‘(1) DISCLOSURES REQUIRED IN PRIVATE STU11 DENT LOAN APPLICATIONS AND SOLICITATIONS.—In 

12 any application for a private student loan, or a solic13 itation for a private student loan without requiring 

14 an application, the lender shall disclose to the bor15 rower, clearly and conspicuously— 

16 ‘‘(A) the potential range of annual percent17 age rates of interest applicable to the private 

18 student loan; 

19 ‘‘(B) whether the rate of interest applica20 ble to the private student loan is fixed or vari21 able; 

22 ‘‘(C) limitations on interest rate adjust23 ments, both in terms of frequency and amount, 

24 or the lack thereof; 


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1 ‘‘(D) requirements for a parent or co-bor2 rower, including any changes in the applicable 

3 interest rates without a parent or co-borrower; 

4 ‘‘(E) all potential finance charges, late 

5 fees, penalties, and adjustments to principal, 

6 based on transgressions of the borrower; 

7 ‘‘(F) fees or range of fees (along with basis 

8 for variations in fees) applicable to the private 

9 student loan; 

10 ‘‘(G) the term of loan; 

11 ‘‘(H) whether interest will accrue while the 

12 student to whom the private student loan re13 lates is enrolled at an institution of higher edu14 cation; 

15 ‘‘(I) payment deferral options, including 

16 whether the deferment would apply to interest 

17 or principal, or both; 

18 ‘‘(J) if only principal may be deferred, 

19 whether the student may postpone the payment 

20 of interest by capitalization of the interest; 

21 ‘‘(K) whether deferrals may be extended 

22 for additional periods of enrollment at an insti23 tution of higher education; 

24 ‘‘(L) the duration of any payment grace 

25 period; 


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1 ‘‘(M) eligibility criteria for the private stu2 dent loan; 

3 ‘‘(N) 3 examples of the total cost of the 

4 private student loan over the life of the loan— 

5 ‘‘(i) 2 of which shall be calculated 

6 using the same principal amount, one of 

7 those using the maximum possible rate of 

8 interest (or 36 percent, if no maximum 

9 amount is specified in the terms of the 

10 loan); and 

11 ‘‘(ii) calculated both with and without 

12 capitalization of interest if that is an op13 tion for postponing interest payments; 

14 ‘‘(O) in any case in which the applicable 

15 rate of interest is variable, a disclosure that in16 terest rates are variable and that any projected 

17 cost at less than the maximum rate of interest 

18 is likely to go up significantly; 

19 ‘‘(P) a statement that an institution of 

20 higher education may have school-specific stu21 dent loan benefits and terms not detailed on the 

22 disclosure form; and 

23 ‘‘(Q) such other information as the Board 

24 shall prescribe, by rule, as necessary for con25 sumers to make informed borrowing decisions. 


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1 ‘‘(2) DISCLOSURES AT THE TIME OF PRIVATE

2 STUDENT LOAN APPROVAL.—Contemporaneously 

3 with the approval of a private student loan applica4 tion, and before the loan transaction is con5 summated, the lender shall disclose to the borrower, 

6 clearly and conspicuously— 

7 ‘‘(A) the applicable rate of interest; 

8 ‘‘(B) whether the rate of interest applica9 ble to the private student loan is fixed or vari10 able; 

11 ‘‘(C) limitations on interest rate adjust12 ments, both in terms of frequency and amount, 

13 or the lack thereof; 

14 ‘‘(D) the principal amount for repayment; 

15 ‘‘(E) the applicable annual percentage rate 

16 (or ‘APR’) with respect to the private student 

17 loan; 

18 ‘‘(F) applicable finance charges, late fees, 

19 penalties, and adjustments to principal, based 

20 upon borrower transgressions; 

21 ‘‘(G) fees upon disbursement of the private 

22 student loan; 

23 ‘‘(H) the term of the private student loan; 

24 ‘‘(I) the monthly payment, calculated using 

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1 proval, initially required after the student to 

2 whom the private student loan relates is no 

3 longer enrolled at an institution of higher edu4 cation, and the maximum monthly payment to 

5 which such amount could increase if rates are 

6 variable, which amounts shall be calculated— 

7 ‘‘(i) using the principal amount that 

8 will be in effect at that post-enrollment 

9 time (incorporating accrual of interest dur10 ing the educational years, if applicable), 

11 rather than at the time of consummation 

12 of the loan; and 

13 ‘‘(ii) in the case of a variable rate pri14 vate student loan that has no cap on the 

15 rate of interest, assuming a maximum in16 terest rate of 36 percent; 

17 ‘‘(J) an estimate of the total amount for 

18 repayment, at both the interest rate in effect on 

19 the date of approval, and at the maximum pos20 sible rate of interest if the rate is variable (as21 suming a maximum rate of 36 percent if no 

22 maximum rate is specified by the terms of the 

23 loan); 

24 ‘‘(K) any principal and interest payments 

25 required while the student to whom the private 


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1 student loan relates is enrolled at an institution 

2 of higher education and interest which will ac3 crue during such enrollment; 

4 ‘‘(L) payment deferral options, including 

5 whether the deferment would apply to interest 

6 or principal, or both; 

7 ‘‘(M) if only principal may be deferred, 

8 whether the student may postpone the payment 

9 of interest by capitalization of the interest; 

10 ‘‘(N) whether deferrals may be extended 

11 for additional periods of enrollment at an insti12 tution of higher education; 

13 ‘‘(O) the duration of any payment grace 

14 period; 

15 ‘‘(P) any penalty for early repayment of 

16 the private student loan; 

17 ‘‘(Q) whether monthly payments are grad18 uated; 

19 ‘‘(R) that the borrower shall have 30 cal20 endar days following the date on which the ap21 plication for the private education loan is ap22 proved and the borrower receives the disclosure 

23 documents required under this subsection for 

24 the loan, to accept the terms of the private edu25 cation loan and consummate the transaction, 


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1 and the rates and terms of the loan may not be 

2 changed by the lender during that period; and 

3 ‘‘(S) such other information as the Board 

4 shall prescribe, by rule, as necessary for con5 sumers to make informed borrowing decisions. 

6 ‘‘(3) FORMAT OF DISCLOSURES.—Disclosures 

7 required under paragraphs (1) and (2) shall appear 

8 in a clearly legible (not less than 12-point font), uni9 form format, subject to section 122(c). 

10 ‘‘(4) EFFECTIVE PERIOD OF APPROVED RATE

11 OF INTEREST AND LOAN TERMS.—With respect to a 

12 private student loan, the borrower shall have 30 cal13 endar days following the date on which the applica14 tion for the private education loan is approved and 

15 the borrower receives the disclosure documents re16 quired under this subsection for the loan to accept 

17 the terms of the loan and consummate the trans18 action, and the rates and terms of the loan may not 

19 be changed by the lender during that period, subject 

20 to the rules of the Board. 

21 ‘‘(5) DEFINITIONS.—For purposes of this sub22 section— 

23 ‘‘(A) the term ‘institution of higher edu24 cation’ has the same meaning as in section 102 


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1 of the Higher Education Act of 1965 (20 

2 U.S.C. 1002); 

3 ‘‘(B) the term ‘lender’ means a creditor, 

4 other than an issuer of credit under a residen5 tial mortgage transaction, and any agent there6 of; and 

7 ‘‘(C) the term ‘private education loan’ 

8 means a private loan provided by a lender 

9 that— 

10 ‘‘(i) is not made, insured, or guaran11 teed under any Federal, State, or local 

12 government unit, including under subtitle 

13 B of title IV of the Higher Education Act 

14 of 1965 (20 U.S.C. 1070 et seq.); and 

15 ‘‘(ii) is issued by a lender for postsec16 ondary educational expenses to a student, 

17 or the parent of the student, regardless of 

18 whether the loan is provided through the 

19 educational institution that the student at20 tends or directly to the student or parent 

21 from the lender.’’. 

22 (b) REGULATIONS TO CARRY OUT PRIVATE EDU23 CATION LOAN DISCLOSURES.— 

24 (1) IN GENERAL.—The Board of Governors of 

25 the Federal Reserve System (in this section referred 


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1 to as the ‘‘Board’’) shall issue regulations in final 

2 form to carry out section 128(e) of the Truth in 

3 Lending Act, as added by this section, not later than 

4 6 months after the date of enactment of this Act. 

5 (2) DEVELOPMENT AND TESTING OF DISCLO6 SURE STATEMENT.—The Board shall, in issuing reg7 ulations under paragraph (1), develop and test for 

8 readability a disclosure statement for student bor9 rowers that is consistent with the requirements of 

10 section 122(c) of the Truth in Lending Act (15 

11 U.S.C. 1638(c)). 

12 (c) CONFORMING AMENDMENT.—Section 122(c) of 

13 the Truth in Lending Act (15 U.S.C. 1632(c)) is amended 

14 by inserting ‘‘and in section 128(e)’’ before ‘‘shall be’’. 

15 SEC. 4. ENFORCEMENT OF REQUIREMENTS FOR PRIVATE 

16 EDUCATION LOANS. 

17 Section 130 of the Truth in Lending Act (15 U.S.C. 

18 1640) is amended— 

19 (1) in subsection (a), in the fourth sentence of 

20 the undesignated matter at the end, by inserting ‘‘or 

21 section 128(e),’’ before ‘‘or for failing’’; and 

22 (2) in subsection (e), in the first sentence, by 

23 inserting before the period the following: ‘‘, except 

24 that, in the case of a private education loan (as de25 fined in section 127(e)), such an action may be 


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1 brought not later than one year after the date on 

2 which the first monthly payment on the loan is due 

3 after the student to whom the private student loan 

4 relates is no longer enrolled at an institution of 

5 higher education, unless full repayment begins ear6 lier with no deferral of interest or principal’’. 

7 SEC. 5. DISCLOSURES OF FEDERAL LOAN AVAILABILITY. 

8 (a) DISCLOSURE REQUIRED.—The Board shall issue 

9 regulations in final form not later than 6 months after 

10 the date of enactment of this Act to require each lender 

11 to disclose in accordance with subsection (b), contempora12 neously with the disclosures required under paragraphs 

13 (1) and (2) of section 128(e) of the Truth in Lending Act 

14 (as added by this Act), that the student borrower may be 

15 eligible for a Federal education loan. 

16 (b) DEVELOPMENT AND TESTING OF DISCLOSURE

17 STATEMENT.—The Board shall, in issuing regulations 

18 under subsection (a), develop and test for readability a 

19 disclosure statement for student borrowers that— 

20 (1) encourages students to maximize their use 

21 of Federal education loans; 

22 (2) discloses that Federal educational loans are 

23 less costly than private education loans; and 

24 (3) discloses the average rate of interest for 

25 Federal educational loans. 


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1 (c) FORMAT.—The disclosures developed under this 

2 section shall be made in clear language and in a con3 spicuous location separate from the disclosures made 

4 under section 128(e) of the Truth in Lending Act, as 

5 added by this Act, using at least size 12 point font. 

6 (d) DEFINITIONS.—As used in this section— 

7 (1) the term ‘‘Board’’ means the Board of Gov8 ernors of the Federal Reserve System ; 

9 (2) the term ‘‘Federal education loan’’ means a 

10 loan that is — 

11 (A) made, insured, or guaranteed under 

12 title IV of the Higher Education Act of 1965 

13 (20 U.S.C. 1070 et seq.); and 

14 (B) is issued for postsecondary educational 

15 expenses to a student, or the parent of the stu16 dent, regardless of whether the loan is provided 

17 through the educational institution that the stu18 dent attends or directly to the student or par19 ent from the lender; 

20 (3) the term ‘‘institution of higher education’’ 

21 has the same meaning as in section 102 of the High22 er Education Act of 1965 (20 U.S.C. 1002); 

23 (4) the term ‘‘lender’’ means a creditor, other 

24 than an issuer of credit under a residential mortgage 

25 transaction, and any agent thereof, as those terms 


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1 are defined in section 103 of the Truth in Lending 

2 Act; and 

3 (5) the term ‘‘private education loan’’ means a 

4 private loan provided by a lender that— 

5 (A) is not made, insured, or guaranteed 

6 under any Federal, State, or local government 

7 unit, including under subtitle B of title IV of 

8 the Higher Education Act of 1965 (20 U.S.C. 

9 1070 et seq.); and 

10 (B) is issued by a lender for postsecondary 

11 educational expenses to a student, or the parent 

12 of the student, regardless of whether the loan 

13 is provided through the educational institution 

14 that the student attends or directly to the stu15 dent or parent from the lender. 

Æ 


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