I 
113TH CONGRESS 
2D SESSION 
H. R. 5565 
To provide for institutional risk-sharing in the Federal student loan programs. 
IN THE HOUSE OF REPRESENTATIVES 
SEPTEMBER 18, 2014 
Mr. CARNEY introduced the following bill; which was referred to the 
Committee on Education and the Workforce 
A BILL 
To provide for institutional risk-sharing in the Federal 
student loan programs. 
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 ‘‘Protect Student Bor-
rowers Act’’. 
SEC. 2. PURPOSE. 
The purpose of this Act is to protect student bor-
rowers by requiring institutions of higher education to as-
sume some of the risk of default for student loans under 
part D of title IV of the Higher Education Act of 1965 
(20 U.S.C. 1087a et seq.). 
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SEC. 3. INSTITUTIONAL REBATES TO THE DEPARTMENT OF 
EDUCATION FOR DEFAULTED LOANS. 
Section 454 of the Higher Education Act of 1964 (20 
U.S.C. 1087d) is amended— 
(1) in subsection (a)— 
(A) in paragraph (5), by striking ‘‘and’’; 
(B) in paragraph (6) by striking the period 
at the end and inserting ‘‘; and’’; and 
(C) by adding at the end the following: 
‘‘(7) provide that the institution accepts the in-
stitutional risk-sharing requirements under sub-
section (d), if applicable.’’; and 
(2) by adding at the end the following: 
‘‘(d) INSTITUTIONAL RISK-SHARING FOR STUDENT 
LOAN DEFAULTS.— 
‘‘(1) IN GENERAL.—Subject to paragraph (3), 
each institution of higher education participating in 
the direct student loan program under this part for 
a fiscal year that has a rate of participation in such 
program for all students enrolled at that institution 
for such fiscal year that is 25 percent or higher shall 
remit, at such times as the Secretary may specify, 
a risk-sharing payment based on a percentage of the 
volume of student loans under this part that are in 
default, as determined under paragraph (2). 
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‘‘(2) DETERMINATION OF RISK-SHARING PAY-
MENTS.—Subject to paragraph (3), with respect to 
each fiscal year, an institution of higher education 
described in paragraph (1) that has a cohort default 
rate (as defined in section 435(m))— 
‘‘(A) that is 30 percent or higher for the 
most recent fiscal year for which data are avail-
able, shall pay to the Secretary for the fiscal 
year an amount that is equal to 20 percent of 
the total amount (including interest and collec-
tion fees) of loans made under this part to stu-
dents that are in default; 
‘‘(B) that is lower than 30 percent but not 
lower than 25 percent for the most recent fiscal 
year for which data are available, shall pay to 
the Secretary for the fiscal year an amount that 
is equal to 15 percent of the total amount (in-
cluding interest and collection fees) of loans 
made under this part to students that are in 
default; 
‘‘(C) that is lower than 25 percent but not 
lower than 20 percent for the most recent fiscal 
year for which data are available, shall pay to 
the Secretary for the fiscal year an amount that 
is equal to 10 percent of the total amount (in-
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cluding interest and collection fees) of loans 
made under this part to students that are in 
default; and 
‘‘(D) that is lower than 20 percent but not 
lower than 15 percent for the most recent fiscal 
year for which data are available, shall pay to 
the Secretary for the fiscal year an amount that 
is equal to 5 percent of the total amount (in-
cluding interest and collection fees) of loans 
made under this part to students that are in 
default. 
‘‘(3) WAIVER
AND
REDUCED
RISK-SHARING 
PAYMENTS.— 
‘‘(A) WAIVER.—The Secretary shall waive 
the risk-sharing payments described in para-
graph (1) for an institution described in para-
graph (2)(D) that meets the requirements of 
subparagraph (D). 
‘‘(B) 
REDUCED
RISK-SHARING
PAY-
MENTS.—If an institution has in place a stu-
dent loan management plan described in sub-
paragraph (D) that is approved by the Sec-
retary, the Secretary shall reduce the total an-
nual amount of risk-sharing payments as fol-
lows: 
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‘‘(i) With respect to an institution 
with a cohort default rate described in 
paragraph (2)(A), the risk-sharing pay-
ment shall be in an amount that is equal 
to 15 percent of the total amount (includ-
ing interest and collection fees) of loans 
made under this part to students that are 
in default. 
‘‘(ii) With respect to an institution 
with a cohort default rate described in 
paragraph (2)(B), the risk-sharing pay-
ment shall be in an amount that is equal 
to 10 percent of the total amount (includ-
ing interest and collection fees) of loans 
made under this part to students that are 
in default. 
‘‘(iii) With respect to an institution 
with a cohort default rate described in 
paragraph (2)(C), the risk-sharing pay-
ment shall be in an amount that is equal 
to 5 percent of the total amount (including 
interest and collection fees) of loans made 
under this part to students that are in de-
fault. 
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‘‘(C) CONTINUATION OF WAIVER OR RE-
DUCED
PAYMENTS.—An institution that re-
ceives a waiver under subparagraph (A) or a re-
duced risk-sharing payment under subpara-
graph (B) may receive a waiver or reduced pay-
ment for a subsequent fiscal year only if the 
Secretary determines that the institution is 
making satisfactory progress in carrying out the 
student loan management plan described in 
subparagraph (D), including evidence of the ef-
fectiveness of the individualized financial aid 
counseling for students. 
‘‘(D) 
STUDENT
LOAN
MANAGEMENT 
PLAN.—An institution that seeks a waiver or 
reduction of its risk-sharing payment, shall de-
velop and carry out a student loan management 
plan that shall include an analysis of the risk 
factors correlated with higher student loan de-
faults that are present at the institution and 
actions that the institution will take to address 
such factors. Such plan shall include individual-
ized financial aid counseling for students and 
strategies to minimize student loan default and 
delinquency. 
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‘‘(E) WAIVER
OR
REDUCTION
FOR
CER-
TAIN INSTITUTIONS.—In addition to the other 
risk-sharing payment waivers and reductions 
described in this paragraph, the Secretary may 
waive or reduce risk-sharing payments if— 
‘‘(i) an institution is eligible under— 
‘‘(I) part A or part B of title III; 
or 
‘‘(II) title V; and 
‘‘(ii) the Secretary determines that— 
‘‘(I) the institution is making 
satisfactory progress in carrying out 
the institution’s student loan manage-
ment plan described under subpara-
graph (D); and 
‘‘(II) granting a waiver or reduc-
tion of risk-sharing payments would 
be in the best interest of students at 
the institution. 
‘‘(4) PROHIBITION.—An institution of higher 
education shall not deny admission or financial aid 
to a student based on a perception that such student 
may be at risk for defaulting on a loan made under 
this part. 
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‘‘(5) FUND FOR THE DEPOSIT OF RISK-SHAR-
ING PAYMENTS.— 
‘‘(A) IN GENERAL.—There is established in 
the Treasury of the United States a separate 
account for the deposit of risk-sharing pay-
ments collected under this subsection. The Sec-
retary shall deposit any payments collected pur-
suant to this subsection into such fund. 
‘‘(B) USE OF FUNDS.—Of the amounts in 
the fund described in subparagraph (A), for 
each fiscal year— 
‘‘(i) not more than 50 percent of such 
amounts shall be made available to the 
Secretary to enter into contracts or cooper-
ative agreements for delinquency and de-
fault prevention or rehabilitation under 
section 456(d); and 
‘‘(ii) the Secretary shall reserve the 
remainder of such amounts for a Federal 
Pell Grant fund that shall be used to offset 
any future shortfalls in funding under the 
Federal Pell Grant program. 
‘‘(6) 
APPLICABILITY.—The 
Secretary 
shall 
carry out this subsection beginning with the cohort 
default rate for the 2014 cohort. The 2014 cohort 
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shall include current and former students who enter 
repayment in fiscal year 2014. 
‘‘(7) REPORT
TO
CONGRESS.—The Secretary 
shall report on an annual basis to the Committee on 
Health, Education, Labor, and Pensions of the Sen-
ate and the Committee on Education and the Work-
force of the House of Representatives the following 
information: 
‘‘(A) A list of institutions that have been 
subject to risk-sharing payments in the previous 
year. 
‘‘(B) The required risk-sharing payment 
from such institutions. 
‘‘(C) The amount of risk-sharing payments 
collected from such institutions. 
‘‘(D) A list of the institutions that have re-
ceived waivers from the risk-sharing payment 
and the reason for such waiver. 
‘‘(E) A list of the institutions that have re-
ceived reductions in the required risk-sharing 
payment. 
‘‘(F) The use of funds deposited from risk- 
sharing payments, including a list of any con-
tracts or cooperative agreements for delin-
quency and default prevention or rehabilitation 
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and the amount reserved for the Federal Pell 
Grant program.’’. 
SEC. 4. CONTRACTS AND COOPERATIVE AGREEMENTS. 
Section 456 of the Higher Education Act of 1965 (20 
U.S.C. 1087f) is amended by adding at the end the fol-
lowing: 
‘‘(d) CONTRACTS AND COOPERATIVE AGREEMENTS 
FOR DELINQUENCY AND DEFAULT PREVENTION AND FOR 
DEFAULT REHABILITATION.—The Secretary may enter 
into contracts or cooperative agreements for— 
‘‘(1) statewide or institutionally based programs 
for the prevention of Federal student loan delin-
quency and default at institutions of higher edu-
cation that— 
‘‘(A) have a high cohort default rate as de-
fined under section 435(m); or 
‘‘(B) serve large numbers or percentages of 
student loan borrowers who have a risk factor 
associated with higher default rates on Federal 
student loans under this title, such as coming 
from a low-income family, being a first genera-
tion postsecondary education student, not hav-
ing a secondary school diploma, or having pre-
viously defaulted on, and rehabilitated, a loan 
made under this title; and 
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‘‘(2) increasing the number of borrowers who 
successfully rehabilitate defaulted loans.’’. 
SEC. 5. FINANCIAL RESPONSIBILITY. 
Section 498(c)(1) of the Higher Education Act of 
1965 (20 U.S.C. 1099c(c)(1)) is amended by striking sub-
paragraph (C) and inserting the following: 
‘‘(C) to meet all of its financial obligations, 
including institutional risk-sharing payments, 
refunds of institutional charges, and repay-
ments to the Secretary for liabilities and debts 
incurred in programs administered by the Sec-
retary.’’. 
Æ 
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