Empowering Students Through Enhanced Financial Counseling Act

To amend the loan counseling requirements under the Higher Education Act of 1965, and for other purposes. 1. Short title This Act may be cited as the Empowering Students Through Enhanced Financial Counseling Act 2. Annual counseling Section 485(l) of the Higher Education Act of 1965 ( 20 U.S.C. 1092(l) (l) Annual financial aid counseling (1) Annual disclosure required (A) In general Each eligible institution shall ensure that each individual who receives a Federal Pell Grant or a loan made under part D (other than a Federal Direct Consolidation Loan) receives comprehensive information on the terms and conditions of such Federal Pell Grant or loan and the responsibilities the individual has with respect to such Federal Pell Grant or loan. Such information shall be provided, for each award year for which the individual receives such Federal Pell Grant or loan, in a simple and understandable manner— (i) during a counseling session conducted in person; (ii) online, with the borrower acknowledging receipt of the information; or (iii) through the use of the online counseling tool described in subsection (n)(1)(B). (B) Use of interactive programs In the case of institutions not using the online counseling tool described in subsection (n)(1)(B), the Secretary shall require such institutions to carry out the requirements of subparagraph (A) through the use of interactive programs, during an annual counseling session that is in-person or online, that test the individual’s understanding of the terms and conditions of the Federal Pell Grant or loan awarded to the student, using simple and understandable language and clear formatting. (2) All individuals The information to be provided under paragraph (1)(A) to each individual receiving counseling under this subsection shall include the following: (A) An explanation of how the student may budget for typical educational expenses and a sample budget based on the cost of attendance for the institution. (B) An explanation that an individual has a right to annually request a disclosure of information collected by a consumer reporting agency pursuant to section 612(a) of the Fair Credit Reporting Act ( 15 U.S.C. 1681j(a) (3) Students receiving Federal Pell Grants The information to be provided under paragraph (1)(A) to each student receiving a Federal Pell Grant shall include the following: (A) An explanation of the terms and conditions of the Federal Pell Grant. (B) An explanation of approved educational expenses for which the student may use the Federal Pell Grant. (C) An explanation of why the student may have to repay the Federal Pell Grant. (D) An explanation of the maximum number of semesters or equivalent for which the student may be eligible to receive a Federal Pell Grant, and a statement of the amount of time remaining for which the student may be eligible to receive a Federal Pell Grant. (E) An explanation of how the student may seek additional financial assistance from the institution’s financial aid office due to a change in the student’s financial circumstances, and the contact information for such office. (4) Borrowers receiving loans made under part D (other than Parent PLUS Loans) The information to be provided under paragraph (1)(A) to a borrower of a loan made under part D (other than a Federal Direct PLUS Loan made on behalf of a dependent student) shall include the following: (A) To the extent practicable, the effect of accepting the loan to be disbursed on the eligibility of the borrower for other forms of student financial assistance. (B) An explanation of the use of the master promissory note. (C) An explanation that the borrower is not required to accept the full amount of the loan offered to the borrower. (D) An explanation that the borrower should consider accepting any grant, scholarship, or State or Federal work-study jobs for which the borrower is eligible prior to accepting Federal student loans. (E) A recommendation to the borrower to exhaust the borrower’s Federal student loan options prior to taking out private loans, an explanation that Federal student loans typically offer better terms and conditions than private loans, and an explanation that if a borrower decides to take out a private education loan— (i) the borrower has the ability to select a private educational lender of the borrower’s choice; (ii) the proposed private education loan may impact the borrower’s potential eligibility for other financial assistance, including Federal financial assistance under this title; and (iii) the borrower has a right— (I) to accept the terms of the private education loan within 30 calendar days following the date on which the application for such loan is approved and the borrower receives the required disclosure documents, pursuant to section 128(e)(6) of the Truth in Lending Act; and (II) to cancel such loan within 3 business days of the date on which the loan is consummated, pursuant to section 128(e)(7) of such Act. (F) An explanation of the approved educational expenses for which the borrower may use a loan made under part D. (G) Information on the annual and aggregate loan limits for Federal Direct Stafford Loans and Federal Direct Unsubsidized Stafford Loans. (H) Information on how interest accrues and is capitalized during periods when the interest is not paid by either the borrower or the Secretary. (I) In the case of a Federal Direct PLUS Loan or a Federal Direct Unsubsidized Stafford Loan, the option of the borrower to pay the interest while the borrower is in school. (J) The definition of half-time enrollment at the institution, during regular terms and summer school, if applicable, and the consequences of not maintaining at least half-time enrollment. (K) An explanation of the importance of contacting the appropriate offices at the institution of higher education if the borrower withdraws prior to completing the borrower's program of study so that the institution can provide exit counseling, including information regarding the borrower's repayment options and loan consolidation. (L) For a first-time borrower, the anticipated monthly payment amount under, at minimum, a standard repayment plan and, using the regionally available data from the Bureau of Labor Statistics of the average starting salary for the occupation the borrower intends to be employed, an income-based repayment plan under section 493C, and based on— (i) a range of levels of indebtedness of— (I) borrowers of Federal Direct Stafford Loans or Federal Direct Unsubsidized Stafford Loans; and (II) as appropriate, graduate borrowers of Federal Direct PLUS Loans or Federal Direct Unsubsidized Stafford Loans; or (ii) the average cumulative indebtedness at graduation for students who borrowed loans made under part D and who are in the same program of study as the borrower. (M) For a borrower with an outstanding balance of principal or interest due on a loan made under this title— (i) a current statement of the amount of such outstanding balance and interest accrued; (ii) based on such outstanding balance, the anticipated monthly payment amount under, at minimum, the standard repayment plan and, using regionally available data from the Bureau of Labor Statistics of the average starting salary for the occupation the borrower intends to be employed, an income-based repayment plan under section 493C; and (iii) an estimate of the projected monthly payment amount under each repayment plan described in clause (ii), based on— (I) the outstanding balance described in clause (i); (II) the anticipated outstanding balance on the loan for which the student is receiving counseling under this subsection; and (III) a projection for any other loans made under part D that the borrower is reasonably expected to accept during the borrower’s program of study based on at least the expected increase in the cost of attendance of such program. (N) The obligation of the borrower to repay the full amount of the loan, regardless of whether the borrower completes or does not complete the program in which the borrower is enrolled within the regular time for program completion. (O) The likely consequences of default on the loan, including adverse credit reports, delinquent debt collection procedures under Federal law, and litigation, and a notice of the institution’s most recent cohort default rate (defined in section 435(m)), an explanation of the cohort default rate, and the most recent national average cohort default rate for the category of institution described in section 435(m)(4) to which the institution belongs. (P) Information on the National Student Loan Data System and how the borrower can access the borrower's records. (Q) The contact information for the institution’s financial aid office or other appropriate office at the institution the borrower may contact if the borrower has any questions about the borrower's rights and responsibilities or the terms and conditions of the loan. (5) Borrowers receiving Parent PLUS Loans for dependent students The information to be provided under paragraph (1)(A) to a borrower of a Federal Direct PLUS Loan made on behalf of a dependent student shall include the following: (A) The information described in subparagraphs (A) through (C) and (N) through (Q) of paragraph (4). (B) The option of the borrower to pay the interest on the loan while the loan is in deferment. (C) For a first-time borrower of such loan, sample monthly repayment amounts under the standard repayment plan based on— (i) a range of levels of indebtedness of borrowers of Federal Direct PLUS Loans made on behalf of a dependent student; or (ii) the average cumulative indebtedness of other borrowers of Federal Direct PLUS Loans made on behalf of dependent students who are in the same program of study as the student on whose behalf the borrower borrowed the loan. (D) For a borrower with an outstanding balance of principal or interest due on such loan— (i) a statement of the amount of such outstanding balance; (ii) based on such outstanding balance, the anticipated monthly payment amount under the standard repayment plan; and (iii) an estimate of the projected monthly payment amount under the standard repayment plan, based on— (I) the outstanding balance described in clause (i); (II) the anticipated outstanding balance on the loan for which the borrower is receiving counseling under this subsection; and (III) a projection for any other Federal Direct PLUS Loan made on behalf of the dependent student that the borrower is reasonably expected to accept during the program of study of such student based on at least the expected increase in the cost of attendance of such program. (E) Debt management strategies that are designed to facilitate the repayment of such indebtedness. (F) An explanation that the borrower has the options to prepay each loan, pay each loan on a shorter schedule, and change repayment plans. (G) For each Federal Direct PLUS Loan made on behalf of a dependent student for which the borrower is receiving counseling under this subsection, the contact information for the loan servicer of the loan and a link to such servicer’s Website. (6) Annual loan acceptance Prior to making the first disbursement of a loan made under part D (other than a Federal Direct Consolidation Loan) to a borrower for an award year, an eligible institution, shall, as part of carrying out the counseling requirements of this subsection for the loan, ensure that the borrower accepts the loan for such award year by— (A) signing the master promissory note for the loan; (B) signing and returning to the institution a separate written statement that affirmatively states that the borrower accepts the loan; or (C) electronically signing an electronic version of the statement described in subparagraph (B). . 3. Exit Counseling Section 485(b) of the Higher Education Act of 1965 ( 20 U.S.C. 1092(b) (1) in paragraph (1)(A)— (A) in the matter preceding clause (i), by striking through financial aid offices or otherwise through the use of an interactive program, during an exit counseling session that is in-person or online, or through the use of the online counseling tool described in subsection (n)(1)(A) (B) by redesignating clauses (i) through (ix) as clauses (iv) through (xii), respectively; (C) by inserting before clause (iv), as so redesignated, the following: (i) a summary of the outstanding balance of principal and interest due on the loans made to the borrower under part B, D, or E; (ii) an explanation of the grace period preceding repayment and the expected date that the borrower will enter repayment; (iii) an explanation that the borrower has the option to pay any interest that has accrued while the borrower was in school or that may accrue during the grace period preceding repayment or during an authorized period of deferment or forbearance, prior to the capitalization of the interest; ; (D) in clause (iv), as so redesignated— (i) by striking sample information showing the average information, based on the borrower’s outstanding balance described in clause (i), showing the borrower’s (ii) by striking of each plan of at least the standard repayment plan and the income-based repayment plan under section 493C (E) in clause (x), as so redesignated, by striking consolidation loan under section 428C or a (F) in clauses (xi) and (xii), as so redesignated, by striking and (G) by adding at the end the following: (xiii) for each of the borrower’s loans made under part B, D, or E for which the borrower is receiving counseling under this subsection, the contact information for the loan servicer of the loan and a link to such servicer’s Website; and (xiv) an explanation that an individual has a right to annually request a disclosure of information collected by a consumer reporting agency pursuant to section 612(a) of the Fair Credit Reporting Act ( 15 U.S.C. 1681j(a) ; (2) in paragraph (1)(B)— (A) by inserting online or in writing (B) by adding before the period at the end the following: , except that in the case of an institution using the online counseling tool described in subsection (n)(1)(A), the Secretary shall attempt to provide such information to the student in the manner described in subsection (n)(3)(C) (3) in paragraph (2)(C), by inserting , such as the online counseling tool described in subsection (n)(1)(A), electronic means 4. Online counseling tools Section 485 of the Higher Education Act of 1965 ( 20 U.S.C. 1092 (n) Online counseling tools (1) In general Beginning not later than 1 year after the date of enactment of the Empowering Students Through Enhanced Financial Counseling Act (A) an online counseling tool that provides the exit counseling required under subsection (b) and meets the applicable requirements of this subsection; and (B) an online counseling tool that provides the annual counseling required under subsection (l) and meets the applicable requirements of this subsection. (2) Requirements of tools In maintaining the online counseling tools described in paragraph (1), the Secretary shall ensure that each such tool is— (A) consumer tested, in consultation with other relevant Federal agencies, to ensure that the tool is effective in helping individuals understand their rights and obligations with respect to borrowing a loan made under part D or receiving a Federal Pell Grant; (B) understandable to students receiving Federal Pell Grants and borrowers of loans made under part D; and (C) freely available to all eligible institutions. (3) Record of counseling completion The Secretary shall— (A) use each online counseling tool described in paragraph (1) to keep a record of which individuals have received counseling using the tool, and notify the applicable institutions of the individual’s completion of such counseling; (B) in the case of a borrower who receives annual counseling for a loan made under part D using the tool described in paragraph (1)(B), notify the borrower by when the borrower should accept, in a manner described in section 485(l)(6), the loan for which the borrower has received such counseling; and (C) in the case of a borrower described in subsection (b)(1)(B) at an institution that uses the online counseling tool described in paragraph (1)(A) of this subsection, the Secretary shall attempt to provide the information described in subsection (b)(1)(A) to the borrower through such tool. . 5. Availability of funds (a) Use of existing funds Of the amount authorized to be appropriated for maintaining the Department of Education’s Financial Awareness Counseling Tool, $2,000,000 shall be available to carry out this Act and the amendments made by this Act. (b) No additional funds authorized No funds are authorized to be appropriated by this Act to carry out this Act or the amendments made by this Act. July 17, 2014 Reported with an amendment, committed to the Committee of the Whole House on the State of the Union, and ordered to be printed

Summary: Empowering Students Through Enhanced Financial Counseling Act - (Sec. 2) Amends title IV (Student Assistance) of the Higher Education Act of 1965 to require institutions of higher education (IHEs) to ensure that individuals who receive a Federal Pell Grant or a William D. Ford Federal Direct Loan (other than a Federal Direct consolidation Loan) receive comprehensive counseling regarding the terms and conditions of the Pell Grant or Direct Loan for each year they receive it. (Currently, IHEs are required to provide a first-time student borrower of a Direct Loan with counseling regarding the terms and conditions of such loan prior to, or upon the student's receipt of, such loan.) Requires that counseling to be provided in a simple and understandable manner: (1) in person, (2) online, or (3) through the use of an online counseling tool maintained by the Secretary of Education. Requires the in person and online counseling sessions to use interactive programs that test the individual's understanding of the terms and conditions of the Pell Grant or Direct Loan. Includes in the counseling provided to both Pell Grant and Direct Loan recipients: an explanation regarding how the student may budget for typical educational expenses that includes a sample budget based on the cost of attending the IHE; an explanation of the individual's right to annually request a consumer credit report; the estimated average income and percentage of employment in the applicable state for persons with a high school diploma or equivalent, persons with some post-secondary education without completion of a degree or certificate, and persons with a bachelor's degree; and an introduction to the financial management resources provided by the Financial Literacy and Education Commission. Requires the annual counseling provided to each student receiving a Pell Grant to include an explanation of: the terms and conditions of the Pell Grant; the educational expenses such Grants cover; why the student may have to repay the Grant; the maximum number of semesters or equivalent periods for which the student may be eligible for the Grant and the amount of time remaining on such eligibility; the fact that if the student transfers to another IHE not all of the courses the student has taken may count in meeting the program requirements at such IHE, but the time remaining on the student's Pell Grant eligibility wont change; and how the student may seek additional financial assistance from the IHE's financial aid office due to changes in the student's financial circumstances, including contact information for that office. Requires the annual counseling provided to each student receiving a Direct Loan to include: information regarding the effect of accepting the loan on the borrower's eligibility for other forms of student aid; an explanation of the use of the master promissory note; an explanation that the borrower is not required to accept the full amount of the loan; an explanation that the borrower should consider accepting any grant, scholarship, or state or federal work-study jobs for which the borrower is eligible before accepting federal student loans; a recommendation to exhaust the borrower's federal student loan options prior to taking out private loans that typically have less favorable terms and conditions than federal loans; an explanation of the treatment of Direct Loans and private education loans in bankruptcy; an explanation of a borrower's rights in taking out a private education loan; an explanation of the educational expenses Direct Loans cover; information on the annual and aggregate limits on such loans; information on how interest accrues and is capitalized when it is not paid; information regarding the option for student borrowers of Direct Unsubsidized and PLUS Loans to pay interest while they are in school; the definition of half-time enrollment at the IHE and the consequences of not maintaining at least half-time enrollment; an explanation of the importance of contacting the appropriate offices at the IHE if the borrower withdraws prior to completing the borrower's program of study so that the IHE can provide exit counseling to the borrower; information regarding the borrower's anticipated (in the case of a first-time borrower) or outstanding balance and anticipated monthly payment amount under at least the standard repayment plan and the income-based repayment plan; information regarding the borrower's obligation to repay the full amount of the loan, regardless of the progress the borrower makes in completing the borrower's program of study; information regarding the likely consequences of defaulting on the loan and specified information regarding the IHE's cohort default rate; information on the National Student Loan Data system and how the borrower can access the borrower's records; and contact information for the IHE's financial aid office or other office the borrower may contact to ask questions concerning the loan. Requires the annual counseling provided to a borrower of a Direct PLUS Loan made on behalf of a dependent student to include: information regarding the effect of accepting the loan on the borrower's eligibility for other forms of student aid; an explanation of the use of the master promissory note; an explanation that the borrower is not required to accept the full amount of the loan; information regarding the borrower's obligation to repay the full amount of the loan, regardless of the progress the student makes in completing the student's program of study; information regarding the likely consequences of defaulting on the loan and specified information regarding the IHE's cohort default rate; information on the National Student Loan Data system and how the borrower can access the borrower's records; contact information for the IHE's financial aid office or other appropriate office at the IHE the borrower may contact to ask questions concerning the loan; information regarding the borrower's option to pay the interest on the loan while the loan is in deferment; information regarding the borrower's anticipated (in the case of a first-time borrower) or outstanding balance and anticipated monthly payment amount under the standard repayment plan; debt management strategies; an explanation that the borrower has the options to prepay each loan, pay each loan on a shorter schedule, and change repayment plans; and contact information for the loan's loan servicer and a link to such servicer's website. Requires an IHE, prior to making the first disbursement of a Direct Loan to a borrower for an award year, to ensure that the borrower accepts the loan for such award year by: (1) signing the master promissory note for the loan, (2) signing and returning to the IHE a separate written statement that affirmatively states that the borrower accepts the loan, or (3) electronically signing an electronic version of such statement. (Sec. 3) Requires the exit counseling IHEs provide to student borrowers of loans under the Federal Family Education Loan (FFEL), Direct Loan, and Federal Perkins Loan programs to be conducted through: (1) the use of an interactive program, (2) during an in-person or online session, or (3) through the use of an online counseling tool maintained by the Secretary. Adds to the information such counseling shall provide: the outstanding principal and interest due on the loans; an explanation of the grace period preceding repayment and the expected date the borrower will enter repayment; an explanation that the borrower has the option to pay any interest that accrued while the borrower was in school or that may accrue during grace, deferment, or forbearance periods, prior to the capitalization of the interest; information showing the borrower's anticipated monthly payments under at least the standard repayment plan and the income-based repayment plan; information indicating that a loan default may result in a decreased credit score, difficulty in renting or purchasing a home or car, and potential difficulty in securing employment; contact information for the loan servicer and a link to such servicer's website; and an explanation of the individual's right to annually request a consumer credit report. (Sec. 4) Directs the Secretary to maintain consumer tested online counseling tools that provide recipients of assistance under title IV with the annual counseling and exit counseling this Act requires. Requires the Secretary to: (1) use each online counseling tool to keep a record of which individuals have received counseling using the tool and notify the applicable IHE of the individual's completion of such counseling; (2) use the online annual counseling tool to notify a borrower who receives annual Direct Loan counseling through such tool regarding when the borrower should accept such loan; and (3) attempt to use the online exit counseling tool to provide exit counseling to a student who leaves an IHE without the prior knowledge of the IHE, provided the IHE provides exit counseling using such tool. (Sec. 5) Directs the Secretary, acting through the Director of the Institute of Education Sciences, to conduct a rigorous, longitudinal study of the impact and effectiveness of the student loan counseling required under title IV or provided through such other means the Secretary requires. Requires the study to include borrower information (in the aggregate and disaggregated by race, ethnicity, gender, income, and status as an individual with a disability) on: student persistence; degree attainment; program completion; successful entry into student loan repayment; cumulative borrowing levels; and such other factors the Secretary requires. Directs the Secretary to evaluate the progress of the study and report any short-term findings to Congress within 18 months of the study's commencement and annually thereafter. (Sec. 6) Makes $2 million of the amount authorized to be appropriated for maintaining the Department of Education's Financial Awareness Counseling Tool available for carrying out this Act.