I 
110TH CONGRESS 
1ST SESSION H. R. 1994 
To provide more transparency in the financial aid process and to ensure 
that students are receiving the best information about financial aid 
opportunities. 
IN THE HOUSE OF REPRESENTATIVES 
APRIL 23, 2007 
Mr. MCKEON (for himself and Mr. KELLER of Florida) introduced the fol-
lowing bill; which was referred to the Committee on Education and 
Labor, and in addition to the Committee on Financial Services, for a pe-
riod to be subsequently determined by the Speaker, in each case for con-
sideration of such provisions as fall within the jurisdiction of the com-
mittee concerned 
A BILL 
To provide more transparency in the financial aid process 
and to ensure that students are receiving the best infor-
mation about financial aid opportunities. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Financial Aid Account-
ability and Transparency Act of 2007’’. 
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SEC. 2. ACCOUNTABILITY AND TRANSPARENCY. 
Title I of the Higher Education Act of 1965 (20 
U.S.C. 1001 et seq.) is amended by adding at the end 
the following: 
‘‘PART E—INSTITUTIONAL REQUIREMENTS 
RELATED TO STUDENT LOANS 
‘‘SEC. 151. DEFINITIONS. 
‘‘In this part: 
‘‘(1) AGENT.—The term ‘agent’, when used 
with respect to an institution of higher education, 
means an organization such as an alumni association 
or booster club. 
‘‘(2) LENDER.— 
‘‘(A) IN GENERAL.—The term ‘lender’— 
‘‘(i) means a creditor, except that 
such term shall not include an issuer of 
credit under a residential mortgage trans-
action; and 
‘‘(ii) includes an agent of a lender. 
‘‘(B) INCORPORATION
OF
TILA
DEFINI-
TIONS.—The terms ‘creditor’ and ‘residential 
mortgage transaction’ have the meanings given 
such terms in section 103 of the Truth in 
Lending Act (15 U.S.C. 1602). 
‘‘(3) LOAN.— 
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‘‘(A) STUDENT LOAN.—The term ‘student 
loan’ means— 
‘‘(i) any Federal student loan; or 
‘‘(ii) a private educational loan. 
‘‘(B) FEDERAL
STUDENT
LOAN.—The 
term ‘Federal student loan’ means any loan 
made, insured, or guaranteed under title IV of 
this Act. 
‘‘(C) FEDERAL DIRECT LOAN.—The term 
‘Federal Direct loan’ means any loan made 
under part D of title IV of this Act. 
‘‘(D) PRIVATE EDUCATIONAL LOAN.—The 
term ‘private educational loan’ means a private 
loan provided by a lender that— 
‘‘(i) is not made, insured, or guaran-
teed under title IV; and 
‘‘(ii) is issued by a lender for postsec-
ondary educational expenses to a student, 
or the parent of the student, regardless of 
whether the loan is provided through the 
educational institution that the student at-
tends or directly to the student or parent 
from the lender. 
‘‘(4) 
POSTSECONDARY
EDUCATIONAL
EX-
PENSES.—The term ‘postsecondary educational ex-
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penses’ means any of the expenses that are included 
as part of a student’s cost of attendance, as defined 
under section 472. 
‘‘(5) RECOMMEND.—An institution shall be con-
sidered to recommend any lender if the institution 
communicates to any student or parent of any stu-
dent any recommendation, referral, promotion, or 
endorsement of any lender or the loan products of 
any lender. 
‘‘SEC. 152. RECOMMENDED LENDERS. 
‘‘No institution of higher education or agent of an 
institution of higher education may recommend any lender 
unless— 
‘‘(1) the institution has adopted a formal writ-
ten policy concerning the procedures and criteria by 
which the institution will select lenders for inclusion 
in or exclusion from those recommendations; 
‘‘(2) the policy, procedures, and criteria adopted 
by the institution are disclosed in accordance with 
section 153(a); and 
‘‘(3) if the institution recommends— 
‘‘(A) any lender for making a Federal stu-
dent loan, other than a Federal Direct loan, the 
institution recommends a minimum of 3 eligible 
lenders (as that term is defined in section 435) 
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that are not affiliated lenders (as determined in 
accordance with regulations of the Secretary) 
for making such loans; and 
‘‘(B) any lender for making a private edu-
cational loan, the institution recommends a 
minimum of 3 lenders that are not affiliated 
lenders (as so determined) for making such 
loans. 
‘‘SEC. 153. DISCLOSURES. 
‘‘(a) LENDER RECOMMENDATIONS.—An institution 
of higher education shall disclose, on its website and in 
the informational materials listed in subsection (d), the 
policy, procedures, and criteria that the institution has 
adopted in accordance with section 152(1), and the proc-
ess by which the institution adopted such policy, proce-
dures, and criteria. 
‘‘(b) MODEL DISCLOSURE FORM
FOR LOAN OP-
TIONS.— 
‘‘(1) REQUIREMENT.—The Secretary shall de-
velop and prescribe an easy-to-read model disclosure 
form that will provide students with the relevant in-
formation about the terms and conditions for both 
Federal loans and private educational loans for use 
by both institutions of higher education and lenders. 
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‘‘(2) CONSULTATION.—In developing the model 
disclosure forms required by this subsection, the 
Secretary shall consult with— 
‘‘(A) students; 
‘‘(B) representatives from institutions of 
higher education, including financial aid admin-
istrators, registrars, business officers, and stu-
dent affairs officials; 
‘‘(C) lenders; 
‘‘(D) loan servicers; and 
‘‘(E) guaranty agencies. 
‘‘(3) INFORMATION
ON
FEDERAL
STUDENT 
LOANS.—The model disclosure forms under this sub-
section with respect to Federal student loans shall 
include at a minimum the following information with 
respect to loans provided through each lender rec-
ommended by the institution and, in the case of a 
Federal Direct loan, with respect to loans provided 
through the institution: 
‘‘(A) the interest rate of the loan; 
‘‘(B) any fees associated with the loan; 
‘‘(C) the repayment terms available on the 
loan; 
‘‘(D) the opportunity for deferment or for-
bearance with the loan, including whether the 
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loan payments can be deferred if the student is 
in school; and 
‘‘(E) contact information for the lender. 
‘‘(4) INFORMATION ON PRIVATE EDUCATIONAL 
LOANS.—The model disclosure forms under this sub-
section with respect to private educational loans 
shall include at a minimum the following informa-
tion with respect to loans made by each lender rec-
ommended by the institution: 
‘‘(A) the method of determining the inter-
est rate of the loan; 
‘‘(B) types of repayment plans that are 
available; 
‘‘(C) whether, and under what conditions, 
early repayment may be available without pen-
alty; 
‘‘(D) other borrower benefits such as in- 
school deferments; 
‘‘(E) late payment penalties; and 
‘‘(F) such other information as the Sec-
retary may require. 
‘‘(5) DEADLINE.—The model disclosure forms 
required by this subsection shall be developed and 
prescribed within one year after the date of enact-
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ment of the Financial Aid Accountability and Trans-
parency Act of 2007. 
‘‘(c) DISCLOSURES
BY INSTITUTIONS
OF HIGHER 
EDUCATION.—An institution of higher education that par-
ticipates in the Federal student loan programs under part 
B of title IV of this Act, or any institution that rec-
ommends any lender of private educational loans for its 
students, shall disclose, on its website and in the informa-
tional materials described in subsection (e)— 
‘‘(1) a statement that— 
‘‘(A) indicates that students are not lim-
ited to or required to use the lenders the insti-
tutions recommends; and 
‘‘(B) the institution is required to process 
the documents required to obtain a loan from 
any eligible lender the student selects; 
‘‘(2) at a minimum, all of the information pro-
vided by the model disclosure form prescribed under 
subsection (b) with respect to any lender rec-
ommended by the institution for Federal student 
loans and, as applicable, private educational loans; 
‘‘(3) disclose the maximum amount of Federal 
grant and loan aid available to students in an easy- 
to-understand format; and 
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‘‘(4) the institution’s cost of attendance (as de-
termined under section 472). 
‘‘(d) DISCLOSURES FOR FEDERAL DIRECT LOANS.— 
An institution of higher education that participates in the 
Federal Direct loan program shall disclose, on its website 
and in the informational materials described in subsection 
(e), the information required under paragraphs (2), (3), 
and (4) of subsection (c), and the policies, procedures, and 
criteria the institution used to make the determination to 
participate in such Federal Direct loan program. 
‘‘(e) INFORMATIONAL MATERIALS.—The informa-
tional materials described in this subsection are any publi-
cations, mailings, or electronic messages or media distrib-
uted to prospective or current students that describe, dis-
cuss, or relate to the financial aid opportunities available 
to students at an institution of higher education. 
‘‘SEC. 154. CODE OF CONDUCT. 
‘‘(a) CODE OF CONDUCT REQUIRED.—Each institu-
tion of higher education that participates in the Federal 
student loan program or has students that obtain private 
educational loans shall— 
‘‘(1) develop a code of conduct in accordance 
with subsection (b) with which its employees, trust-
ees, and directors are required to comply with re-
spect to student loans; 
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‘‘(2) publish the code of conduct prominently on 
its website; and 
‘‘(3) administer and enforce such code in ac-
cordance with the requirements of this section. 
‘‘(b) CONTENTS OF CODE.— 
‘‘(1) IN GENERAL.—The code required by this 
section shall contain a limitation on the acceptance 
of gifts, payments, or other financial benefits (in-
cluding the opportunity to purchase stock) provided 
to officers and employees of the institution (and, 
when appropriate, family members of such officers 
and employees) by any lender or guaranty agency 
that present or may present a conflict of interest or 
the appearance of a conflict of interest with the re-
sponsibilities of such officer or employee with respect 
to student loans or other financial aid. 
‘‘(2) FEES FROM LENDERS FOR SERVICE PRO-
HIBITED.—The code required by this section shall 
prohibit any officer or employee who is employed in 
the financial aid office of the institution, or who oth-
erwise has responsibilities with respect to student 
loans or other financial aid, from accepting from any 
lender or affiliate of any lender any fee, payment, or 
other financial benefit (including the opportunity to 
purchase stock) as compensation for consulting serv-
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ices, serving on an advisory council, or otherwise ad-
vising such lender or affiliate. 
‘‘(3) PERMITTED EXCLUSIONS FROM GIFT LIMI-
TATIONS.—An institution may exclude from treat-
ment as a gift, payment, or other financial benefit 
under the code of conduct required by this section— 
‘‘(A) standard informational material re-
lated to a loan, such as a brochure; 
‘‘(B) reimbursement for necessary trans-
portation, lodging, and related expenses (includ-
ing food and refreshments) for travel to a meet-
ing in connection with serving on an advisory 
council, if such reimbursement is for travel for 
a period not exceeding 2 days and 1 night for 
each such meeting; 
‘‘(C) training or informational material 
furnished to an officer, employee, or agent of 
an institution as an integral part of a training 
session or through participation in an advisory 
council that is designed to improve the lender’s 
service to the institution, if such training or 
participation contributes to the professional de-
velopment of the employee or agent of the insti-
tution; and 
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‘‘(D) favorable terms, conditions, and bor-
rower benefits on an educational loan provided 
to a student, or a parent of a student, employed 
by the covered institution. 
‘‘(c) TRAINING AND COMPLIANCE.—An institution of 
higher education shall administer and enforce a code of 
conduct required by this section by, at a minimum, requir-
ing all of its officers and employees with responsibilities 
with respect to student loans or other financial aid to ob-
tain training annually in compliance with the code. 
‘‘(d) BAN ON EDUCATION LOAN ARRANGEMENTS.— 
An institution of higher education shall be prohibited from 
entering into an education loan arrangement. For pur-
poses of this section, an education loan arrangement is 
an arrangement between an institution of higher education 
(or an agent of the institution) and a lender under 
which— 
‘‘(1) a lender provides or issues student loans 
to students attending the institution or to parents of 
such students; 
‘‘(2) the institution recommends the lender or 
the loan products of the lender; and 
‘‘(3) the lender pays a fee or provides other ma-
terial benefits to the institution or officers, employ-
ees, or agents of the institution. 
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‘‘(e) BAN ON STAFFING ASSISTANCE.— 
‘‘(1) PROHIBITION.—An institution of higher 
education shall be prohibited from requesting or ac-
cepting from any lender any assistance with call cen-
ter staffing or financial aid office staffing. 
‘‘(2) CERTAIN ASSISTANCE PERMITTED.—Noth-
ing in paragraph (1) shall be construed to prohibit 
an institution from requesting or accepting assist-
ance from a lender related to— 
‘‘(A) professional development training for 
financial aid administrators; or 
‘‘(B) providing educational counseling ma-
terials, financial literacy materials, or debt 
management materials to borrowers, provided 
that such materials disclose to borrowers the 
identification of any lender that assisted in pre-
paring or providing such materials. 
‘‘SEC. 155. RULE OF CONSTRUCTION. 
‘‘Nothing in this part shall be construed to prohibit 
an institution of higher education from negotiating with 
lenders for reduced interest rates or fees on student loans 
for students or parents.’’. 
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SEC. 3. DISCLOSURES REQUIRED FOR PRIVATE EDU-
CATIONAL LOANS. 
(a) IN GENERAL.—Section 128 of the Truth in Lend-
ing Act (15 U.S.C. 1638) is amended by adding at the 
end the following new subsection: 
‘‘(e) DISCLOSURES REQUIRED FOR PRIVATE EDU-
CATIONAL LOANS.— 
‘‘(1) IN GENERAL.—In addition to any other 
disclosures required under this chapter with respect 
to a consumer credit transaction, a creditor shall 
provide any consumer with the following informa-
tion, and obtain the acknowledgment of the con-
sumer under paragraph (3), before executing any 
contract or agreement between the creditor and the 
consumer relating to any extension of credit con-
sisting of or involving a private educational loan: 
‘‘(A) The consumer may qualify for Fed-
eral financial assistance for education through a 
program under title IV of the Higher Education 
Act of 1965 (20 U.S.C. 1070 et seq.). 
‘‘(B) In many cases, a Federal student 
loan may provide the consumer with more bene-
ficial terms and conditions , including a lower 
annual percentage rate and fewer and lower 
fees, than private educational loans. 
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‘‘(C) The consumer may obtain additional 
information concerning such Federal financial 
assistance at the website of the Department of 
Education. 
‘‘(2) CLEAR AND CONSPICUOUS DISCLOSURE.— 
The disclosure required under paragraph (1) shall be 
placed in a conspicuous and prominent location on 
or with any written application, solicitation, or other 
document or paper relating to any extension of cred-
it consisting of or involving a private educational 
loan for which such disclosure is required. 
‘‘(3) WRITTEN
ACKNOWLEDGMENT
OF
RE-
CEIPT.—In each case in which a disclosure is pro-
vided pursuant to paragraph (1), a creditor shall ob-
tain a written acknowledgment from the consumer 
that the consumer has read and understood the dis-
closure. 
‘‘(4) DEFINITIONS.—For purposes of this sub-
section, the terms ‘Federal student loan’ and ‘pri-
vate educational loan’ have the same meanings as in 
section 151 of the Higher Education Act of 1965. 
‘‘(5) REGULATIONS.—In prescribing regulations 
to implement this subsection, the Board shall con-
sult with the Secretary of Education.’’. 
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(b) EFFECTIVE DATE.—The amendments made by 
subsection (a) shall apply with respect to any credit con-
sisting of or involving a private educational loan that is 
extended pursuant to a contract or agreement entered into 
after July 1, 2007. 
Æ 
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