Protect Student Borrowers Act of 2015

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Protect Student Borrowers Act of 
2015''.

SEC. 2. PURPOSE.

    The purpose of this Act is to protect student borrowers by 
requiring institutions of higher education to assume 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.).

SEC. 3. INSTITUTIONAL REBATES TO THE DEPARTMENT OF EDUCATION FOR 
              DEFAULTED LOANS.

    Section 454 of the Higher Education Act of 1965 (20 U.S.C. 1087d) 
is amended--
            (1) in subsection (a)--
                    (A) in paragraph (5), by striking ``and'' after the 
                semicolon;
                    (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 
        institutional risk-sharing requirements under subsection (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).
            ``(2) Determination of risk-sharing payments.--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 available, shall 
                pay to the Secretary for the fiscal year an amount that 
                is equal to 20 percent of the total amount (including 
                interest and collection fees) of loans made under this 
                part to students who are in default for such most 
                recent fiscal year for which data are available;
                    ``(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 (including interest and 
                collection fees) of loans made under this part to 
                students who are in default for such most recent fiscal 
                year for which data are available;
                    ``(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 (including interest and 
                collection fees) of loans made under this part to 
                students who are in default for such most recent fiscal 
                year for which data are available; 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 (including interest and 
                collection fees) of loans made under this part to 
                students who are in default for such most recent fiscal 
                year for which data are available.
            ``(3) Waiver and reduced risk-sharing payments.--
                    ``(A) Waiver.--The Secretary shall waive the risk-
                sharing payments described in paragraph (1) for an 
                institution described in paragraph (2)(D) that meets 
                the requirements of subparagraph (D).
                    ``(B) Reduced risk-sharing payments.--If an 
                institution has in place a student loan management plan 
                described in subparagraph (D) that is approved by the 
                Secretary, the Secretary shall reduce the total annual 
                amount of risk-sharing payments as follows:
                            ``(i) With respect to an institution with a 
                        cohort default rate described in paragraph 
                        (2)(A), the risk-sharing payment shall be in an 
                        amount that is equal to 15 percent of the total 
                        amount (including interest and collection fees) 
                        of loans made under this part to students who 
                        are in default.
                            ``(ii) With respect to an institution with 
                        a cohort default rate described in paragraph 
                        (2)(B), the risk-sharing payment shall be in an 
                        amount that is equal to 10 percent of the total 
                        amount (including interest and collection fees) 
                        of loans made under this part to students who 
                        are in default.
                            ``(iii) With respect to an institution with 
                        a cohort default rate described in paragraph 
                        (2)(C), the risk-sharing payment 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 who 
                        are in default.
                    ``(C) Continuation of waiver or reduced payments.--
                An institution that receives a waiver under 
                subparagraph (A) or a reduced risk-sharing payment 
                under subparagraph (B) may receive a waiver or reduced 
                payment 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 effectiveness 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 develop and carry out a student loan 
                management plan that shall include an analysis of the 
                risk factors correlated with higher student loan 
                defaults that are present at the institution and 
                actions that the institution will take to address such 
                factors. Such plan shall include individualized 
                financial aid counseling for students and strategies to 
                minimize student loan default and delinquency.
                    ``(E) Waiver or reduction for certain 
                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 
                                management plan described under 
                                subparagraph (D); and
                                    ``(II) granting a waiver or 
                                reduction 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.
            ``(5) Fund for the deposit of risk-sharing payments.--
                    ``(A) In general.--There is established in the 
                Treasury of the United States a separate account for 
                the deposit of risk-sharing payments collected under 
                this subsection. The Secretary shall deposit any 
                payments collected pursuant 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 
                        cooperative agreements for delinquency and 
                        default prevention or rehabilitation under 
                        section 456(c); 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 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 Senate and the Committee on Education and the 
        Workforce 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 received 
                waivers from the risk-sharing payment and the reason 
                for such waiver.
                    ``(E) A list of the institutions that have received 
                reductions in the required risk-sharing payment.
                    ``(F) The use of funds deposited from risk-sharing 
                payments, including a list of any contracts or 
                cooperative agreements for delinquency and default 
                prevention or rehabilitation 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 following:
    ``(c) 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 delinquency and default at 
        institutions of higher education that--
                    ``(A) have a high cohort default rate as defined 
                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 generation postsecondary education 
                student, not having a secondary school diploma, or 
                having previously defaulted on, and rehabilitated, a 
                loan made under this title; and
            ``(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 subparagraph (C) and inserting the 
following:
                    ``(C) to meet all of its financial obligations, 
                including institutional risk-sharing payments, refunds 
                of institutional charges, and repayments to the 
                Secretary for liabilities and debts incurred in 
                programs administered by the Secretary.''.

Summary: Protect Student Borrowers Act of 2015 This bill amends title IV (Student Assistance) of the Higher Education Act of 1965 to require institutions of higher education (IHEs) participating in the William D. Ford Federal Direct Loan program to accept specified risk-sharing requirements.  For any fiscal year in which at least 25% of the IHE's student body is participating in the Direct Loan program, the IHE must remit a risk-sharing payment (a percentage of the total amount of its defaulted Direct Loans) that declines as the cohort default rate declines.  If an IHE develops and implements an approved student loan management plan that includes individualized financial aid counseling for students and strategies to minimize student loan default and delinquency, the Department of Education (ED) must modify the risk-sharing requirements. ED may waive or reduce an IHE's risk-sharing payments in certain other instances.  An IHE may not deny admission or financial aid based on a perception that a student may be at risk for defaulting on a Direct Loan.  ED may enter into contracts or cooperative agreements for: (1) statewide or institutionally-based programs for the prevention of federal student loan delinquency and default at IHEs that have a high cohort default rate or serve large numbers of students who have a higher risk of defaulting on student loans under title IV, and (2) increasing the number of borrowers who successfully rehabilitate defaulted loans. Risk-sharing payments are to be deposited in a separate account in the Treasury and used as follows: (1) up to 50% for ED to enter into the contracts or cooperative agreements for delinquency and default prevention or rehabilitation, and (2) the remainder to offset any future shortfalls in funding under the Federal Pell Grant program. An IHE's ability to meet its obligation to make risk-sharing payments shall be part of the determination of its eligibility to participate in title IV programs.