Title: Empowering Students Through Enhanced Financial Counseling Act
Policy area: Education

Summary:
Empowering Students Through Enhanced Financial Counseling Act
This bill amends the Higher Education Act of 1965 to modify loan counseling requirements applicable to institutions of higher education (IHEs).
Currently, an IHE must provide entrance counseling to a student who is a first-time federal student loan borrower. This bill replaces required entrance counseling with required annual financial counseling concerning information on the terms, conditions, and responsibilities of the grant or loan. Also, it expands the required recipients of such annual counseling to include, in addition to student borrowers, Pell Grant recipients and parent PLUS Loan borrowers.
Additionally, the bill revises, expands, or establishes specific annual counseling information requirements for student borrowers, Pell Grant recipients, or parent PLUS Loan borrowers.
The bill revises and expands exit counseling information requirements for borrowers to include an outstanding loan balance summary, the anticipated monthly payments under standard and income-based repayment plans, an explanation of the grace period preceding repayment, the option to pay accrued interest before it capitalizes, the right to request an annual credit report, and loan servicer contact information.
It directs the Department of Education to maintain a consumer-tested online counseling tool that provides annual and exit counseling.
The Institute of Education Sciences must study the impact and effectiveness of exit counseling, annual counseling, and the online counseling tool.

[Congressional Bills 115th Congress]
[From the U.S. Government Publishing Office]
[S. 2081 Introduced in Senate (IS)]

<DOC>






115th CONGRESS
  1st Session
                                S. 2081

 To amend the loan counseling requirements under the Higher Education 
                  Act of 1965, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            November 6, 2017

   Mr. Warner (for himself, Mr. Heller, Mr. Kaine, and Mr. Gardner) 
introduced the following bill; which was read twice and referred to the 
          Committee on Health, Education, Labor, and Pensions

_______________________________________________________________________

                                 A BILL


 
 To amend the loan counseling requirements under the Higher Education 
                  Act of 1965, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Empowering Students Through Enhanced 
Financial Counseling Act''.

SEC. 2. ANNUAL COUNSELING.

    Section 485(l) of the Higher Education Act of 1965 (20 U.S.C. 
1092(l)) is amended to read as follows:
    ``(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 individual 
                        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 individual, 
                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 individual 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)).
                    ``(C) Based on the most recent data available from 
                the American Community Survey available from the 
                Department of Commerce, the estimated average income 
                and percentage of employment in the State of domicile 
                of the individual for persons with--
                            ``(i) a high school diploma or equivalent;
                            ``(ii) some postsecondary education without 
                        completion of a degree or certificate; and
                            ``(iii) a bachelor's degree.
                    ``(D) An introduction to the financial management 
                resources provided by the Financial Literacy and 
                Education Commission.
            ``(3) Students receiving federal pell grants.--The 
        information to be provided under paragraph (1)(A) to each 
        student receiving a Federal Pell Grant may 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 that if the student transfers 
                to another institution not all of the student's courses 
                may be acceptable in transfer toward meeting specific 
                degree or program requirements at such institution, but 
                the amount of time remaining for which a student may be 
                eligible to receive a Federal Pell Grant, as provided 
                under subparagraph (D), will not change.
                    ``(F) 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, an explanation of 
                treatment of loans made under part D and private 
                education loans in bankruptcy, 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 (15 U.S.C. 1638(e)(6)); 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--
                            ``(i) a statement of the anticipated 
                        balance on the loan for which the borrower is 
                        receiving counseling under this subsection;
                            ``(ii) based on such anticipated balance, 
                        the anticipated monthly payment amount under, 
                        at minimum--
                                    ``(I) the standard repayment plan; 
                                and
                                    ``(II) an income-based repayment 
                                plan under section 493C, as determined 
                                using regionally available data from 
                                the Bureau of Labor Statistics of the 
                                average starting salary for the 
                                occupation in which the borrower has an 
                                interest in or intends to be employed; 
                                and
                            ``(iii) an estimate of the projected 
                        monthly payment amount under each repayment 
                        plan described in clause (ii), based on the 
                        average cumulative indebtedness at graduation 
                        for borrowers of loans made under part D 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, the most 
                recent national average 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--
                            ``(i) a statement of the anticipated 
                        balance on the loan for which the borrower is 
                        receiving counseling under this subsection;
                            ``(ii) based on such anticipated 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 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 after receiving the applicable counseling under paragraphs 
        (2), (4), and (5) for the loan 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).''.

SEC. 3. EXIT COUNSELING.

    Section 485(b) of the Higher Education Act of 1965 (20 U.S.C. 
1092(b)) is amended--
            (1) in paragraph (1)(A)--
                    (A) in the matter preceding clause (i), by striking 
                ``through financial aid offices or otherwise'' and 
                inserting ``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 
                redesignated by subparagraph (B), 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 redesignated by subparagraph 
                (B)--
                            (i) by striking ``sample information 
                        showing the average'' and inserting 
                        ``information, based on the borrower's 
                        outstanding balance described in clause (i), 
                        showing the borrower's''; and
                            (ii) by striking ``of each plan'' and 
                        inserting ``of at least the standard repayment 
                        plan and the income-based repayment plan under 
                        section 493C'';
                    (E) in clause (ix), as redesignated by subparagraph 
                (B)--
                            (i) by inserting ``decreased credit 
                        score,'' after ``credit reports,''; and
                            (ii) by inserting ``reduced ability to rent 
                        or purchase a home or car, potential difficulty 
                        in securing employment,'' after ``Federal 
                        law,'';
                    (F) in clause (x), as redesignated by subparagraph 
                (B), by striking ``consolidation loan under section 
                428C or a'';
                    (G) in clauses (xi) and (xii), as redesignated by 
                subparagraph (B), by striking ``and'' after the 
                semicolon; and
                    (H) 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'' before ``in 
                writing''; and
                    (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)''; and
            (3) in paragraph (2)(C), by inserting ``, such as the 
        online counseling tool described in subsection (n)(1)(A),'' 
        after ``electronic means''.

SEC. 4. ONLINE COUNSELING TOOLS.

    Section 485 of the Higher Education Act of 1965 (20 U.S.C. 1092) is 
amended by adding at the end the following:
    ``(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, the Secretary shall 
        maintain--
                    ``(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.''.

SEC. 5. LONGITUDINAL STUDY ON THE EFFECTIVENESS OF STUDENT LOAN 
              COUNSELING.

    (a) In General.--Not later than 1 year after the date of enactment 
of this Act, the Secretary of Education, acting through the Director of 
the Institute of Education Sciences, shall begin conducting a rigorous, 
longitudinal study of the impact and effectiveness of the student loan 
counseling--
            (1) provided under subsections (b), (l), and (n) of section 
        485 of the Higher Education Act of 1965 (20 U.S.C. 1092), as 
        amended by this Act; and
            (2) provided through such other means as the Secretary of 
        Education may determine.
    (b) Contents.--
            (1) Borrower information.--The longitudinal study carried 
        out under subsection (a) shall include borrower information, in 
        the aggregate and disaggregated by race, ethnicity, gender, 
        income, and status as an individual with a disability, on--
                    (A) student persistence;
                    (B) degree attainment;
                    (C) program completion;
                    (D) successful entry into student loan repayment;
                    (E) cumulative borrowing levels; and
                    (F) such other factors as the Secretary of 
                Education may determine.
            (2) Exception.--The disaggregation under paragraph (1) 
        shall not be required in a case in which the number of 
        borrowers in a category is insufficient to yield statistically 
        reliable information or the results would reveal personally 
        identifiable information about an individual borrower.
    (c) Interim Reports.--Not later than 18 months after the 
commencement of the study under subsection (a), and annually 
thereafter, the Secretary of Education shall evaluate the progress of 
the study and report any short-term findings to the appropriate 
committees of Congress.

SEC. 6. 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.
                                 <all>