Title: Know Before You Owe Private Education Loan Act of 2019
Policy area: Education

Summary:
Know Before You Owe Private Education Loan Act of 2019
This bill expands requirements for lenders and institutions of higher education (IHEs) with respect to the certification of private education loans.
Specifically, the bill revises requirements for disclosures in private education loan applications. Before issuing a private education loan for a student attending an IHE, lenders must obtain the IHE's certification of the student's enrollment status, the student's cost of attendance, and the difference between that cost and the student's estimated financial assistance.
Lenders must (1) send loan statements to borrowers at least once every three months a student is enrolled at an IHE, (2) notify the relevant IHE of the loan amount and the student to whom it applies no later than the date funds are issued, and (3) submit an annual report to the Consumer Financial Protection Bureau (CFPB) containing information the CFPB requires concerning private student loans.
The bill requires IHEs, before providing lenders with certifications, to determine whether students have exhausted their options for federal financial aid assistance and notify borrowers of (1) the availability of assistance, (2) their ability to choose their own private educational lender, (3) the impact of the proposed private education loan on their eligibility for other financial assistance, and (4) their right to accept or reject a private education loan within 30 days of the lender's approval of their application and to cancel the loan within 3 business days of its consummation.

[Congressional Bills 116th Congress]
[From the U.S. Government Publishing Office]
[S. 2184 Introduced in Senate (IS)]

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116th CONGRESS
  1st Session
                                S. 2184

To amend the Truth in Lending Act and the Higher Education Act of 1965 
to require certain creditors to obtain certifications from institutions 
              of higher education, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             July 18, 2019

Mr. Durbin (for himself, Mr. Reed, Mr. Brown, Mr. Cardin, Ms. Baldwin, 
and Ms. Smith) introduced the following bill; which was read twice and 
    referred to the Committee on Banking, Housing, and Urban Affairs

_______________________________________________________________________

                                 A BILL


 
To amend the Truth in Lending Act and the Higher Education Act of 1965 
to require certain creditors to obtain certifications from institutions 
              of higher education, 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 ``Know Before You Owe Private 
Education Loan Act of 2019''.

SEC. 2. AMENDMENTS TO THE TRUTH IN LENDING ACT.

    (a) In General.--Section 128(e) of the Truth in Lending Act (15 
U.S.C. 1638(e)) is amended--
            (1) by striking paragraph (3) and inserting the following:
            ``(3) Institutional certification required.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), before a creditor may issue any funds 
                with respect to an extension of credit described in 
                this subsection, the creditor shall obtain from the 
                relevant institution of higher education where such 
                loan is to be used for a student, such institution's 
                certification of--
                            ``(i) the enrollment status of the student;
                            ``(ii) the student's cost of attendance at 
                        the institution as determined by the 
                        institution under part F of title IV of the 
                        Higher Education Act of 1965; and
                            ``(iii) the difference between--
                                    ``(I) such cost of attendance; and
                                    ``(II) the student's estimated 
                                financial assistance, including such 
                                assistance received under title IV of 
                                the Higher Education Act of 1965 (20 
                                U.S.C. 1070 et seq.) and other 
                                financial assistance known to the 
                                institution, as applicable.
                    ``(B) Exception.--Notwithstanding subparagraph (A), 
                a creditor may issue funds with respect to an extension 
                of credit described in this subsection without 
                obtaining from the relevant institution of higher 
                education such institution's certification if such 
                institution fails to provide within 15 business days of 
                the creditor's request for such certification--
                            ``(i) notification of the institution's 
                        refusal to certify the request; or
                            ``(ii) notification that the institution 
                        has received the request for certification and 
                        will need additional time to comply with the 
                        certification request.
                    ``(C) Loans disbursed without certification.--If a 
                creditor issues funds without obtaining a 
                certification, as described in subparagraph (B), such 
                creditor shall report the issuance of such funds in a 
                manner determined by the Director of the Consumer 
                Financial Protection Bureau.'';
            (2) by redesignating paragraphs (9), (10), and (11) as 
        paragraphs (10), (11), and (12), respectively; and
            (3) by inserting after paragraph (8) the following:
            ``(9) Provision of information.--
                    ``(A) Provision of information to students.--
                            ``(i) Loan statement.--A creditor that 
                        issues any funds with respect to an extension 
                        of credit described in this subsection shall 
                        send loan statements, where such loan is to be 
                        used for a student, to borrowers of such funds 
                        not less than once every 3 months during the 
                        time that such student is enrolled at an 
                        institution of higher education.
                            ``(ii) Contents of loan statement.--Each 
                        statement described in clause (i) shall--
                                    ``(I) report the borrower's total 
                                remaining debt to the creditor, 
                                including accrued but unpaid interest 
                                and capitalized interest;
                                    ``(II) report any debt increases 
                                since the last statement; and
                                    ``(III) list the current interest 
                                rate for each loan.
                    ``(B) Notification of loans disbursed without 
                certification.--On or before the date a creditor issues 
                any funds with respect to an extension of credit 
                described in this subsection, the creditor shall notify 
                the relevant institution of higher education, in 
                writing, of the amount of the extension of credit and 
                the student on whose behalf credit is extended. The 
                form of such written notification shall be subject to 
                the regulations of the Bureau.
                    ``(C) Annual report.--A creditor that issues funds 
                with respect to an extension of credit described in 
                this subsection shall prepare and submit an annual 
                report to the Bureau containing the required 
                information about private student loans to be 
                determined by the Director of the Bureau, in 
                consultation with the Secretary of Education.''.
    (b) Definition of Private Education Loan.--Section 140(a)(8)(A) of 
the Truth in Lending Act (15 U.S.C. 1650(a)(8)(A)) is amended--
            (1) by redesignating clause (ii) as clause (iii);
            (2) in clause (i), by striking ``and'' after the semicolon; 
        and
            (3) by adding after clause (i) the following:
                            ``(ii) is not made, insured, or guaranteed 
                        under title VII or title VIII of the Public 
                        Health Service Act (42 U.S.C. 292 et seq. and 
                        296 et seq.); and''.
    (c) Regulations.--Not later than 365 days after the date of 
enactment of this Act, the Director of the Consumer Financial 
Protection Bureau shall issue regulations in final form to implement 
paragraphs (3) and (9) of section 128(e) of the Truth in Lending Act 
(15 U.S.C. 1638(e)), as amended by subsection (a). Such regulations 
shall become effective not later than 6 months after their date of 
issuance.

SEC. 3. AMENDMENT TO THE HIGHER EDUCATION ACT OF 1965.

    (a) Amendment to the Higher Education Act of 1965.--Section 487(a) 
of the Higher Education Act of 1965 (20 U.S.C. 1094(a)) is amended by 
striking paragraph (28) and inserting the following:
            ``(28)(A) Upon the request of a private educational lender, 
        acting in connection with an application initiated by a 
        borrower for a private education loan in accordance with 
        section 128(e)(3) of the Truth in Lending Act, the institution 
        shall within 15 days of receipt of the request--
                    ``(i) provide certification to such private 
                educational lender--
                            ``(I) that the student who initiated the 
                        application for the private education loan, or 
                        on whose behalf the application was initiated, 
                        is enrolled or is scheduled to enroll at the 
                        institution;
                            ``(II) of such student's cost of attendance 
                        at the institution as determined under part F 
                        of this title; and
                            ``(III) of the difference between--
                                    ``(aa) the cost of attendance at 
                                the institution; and
                                    ``(bb) the student's estimated 
                                financial assistance received under 
                                this title and other assistance known 
                                to the institution, as applicable;
                    ``(ii) notify the creditor that the institution has 
                received the request for certification and will need 
                additional time to comply with the certification 
                request; or
                    ``(iii) provide notice to the private educational 
                lender of the institution's refusal to certify the 
                private education loan pursuant to subparagraph (D).
            ``(B) With respect to a certification request described in 
        subparagraph (A), and prior to providing such certification 
        under subparagraph (A)(i) or providing notice of the refusal to 
        provide certification under subparagraph (A)(iii), the 
        institution shall--
                    ``(i) determine whether the student who initiated 
                the application for the private education loan, or on 
                whose behalf the application was initiated, has applied 
                for and exhausted the Federal financial assistance 
                available to such student under this title and inform 
                the student accordingly; and
                    ``(ii) provide the borrower whose loan application 
                has prompted the certification request by a private 
                educational lender, as described in subparagraph 
                (A)(i), with the following information and disclosures:
                            ``(I) The amount of additional Federal 
                        student assistance for which the borrower is 
                        eligible and the advantages of Federal loans 
                        under this title, including disclosure of the 
                        fixed interest rates, deferments, flexible 
                        repayment options, loan forgiveness programs, 
                        and additional protections, and the higher 
                        student loan limits for dependent students 
                        whose parents are not eligible for a Federal 
                        Direct PLUS Loan.
                            ``(II) The borrower's ability to select a 
                        private educational lender of the borrower's 
                        choice.
                            ``(III) The impact of a proposed private 
                        education loan on the borrower's potential 
                        eligibility for other financial assistance, 
                        including Federal financial assistance under 
                        this title.
                            ``(IV) The borrower's right to accept or 
                        reject a private education loan within the 30-
                        day period following a private educational 
                        lender's approval of a borrower's application 
                        and about a borrower's 3-day right to cancel 
                        period.
            ``(C) For purposes of this paragraph, the terms `private 
        educational lender' and `private education loan' have the 
        meanings given such terms in section 140 of the Truth in 
        Lending Act (15 U.S.C. 1650).''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
take effect on the effective date of the regulations described in 
section 2(c).
    (c) Preferred Lender Arrangement.--Section 151(8)(A)(ii) of the 
Higher Education Act of 1965 (20 U.S.C. 1019(8)(A)(ii)) is amended by 
inserting ``certifying,'' after ``promoting,''.

SEC. 4. REPORT.

    (a) In General.--Not later than 24 months after the issuance of 
regulations under section 2(c), the Director of the Consumer Financial 
Protection Bureau and the Secretary of Education shall jointly submit 
to Congress a report on the compliance of--
            (1) private educational lenders with section 128(e)(3) of 
        the Truth in Lending Act (15 U.S.C. 1638(e)(3)), as amended by 
        section 2; and
            (2) institutions of higher education with section 
        487(a)(28) of the Higher Education Act of 1965 (20 U.S.C. 
        1094(a)(28)), as amended by section 3.
    (b) Contents.--The contents of the report described in subsection 
(a) shall include information about the degree to which specific 
institutions utilize certifications in effectively--
            (1) encouraging the exhaustion of Federal student loan 
        eligibility by borrowers prior to taking on private education 
        loan debt; and
            (2) lowering private education loan debt by borrowers.
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