Title: Student Loan Disclosure Modernization Act
Policy area: Education

Summary:
Student Loan Disclosure Modernization Act
This bill requires loan disclosure forms for federal student loans to be written in plain language, thus enabling borrowers to understand loan terms, total costs of loans, and estimated monthly repayments. Borrowers must acknowledge in writing that they have read the form before the loans are issued.

[Congressional Bills 116th Congress]
[From the U.S. Government Publishing Office]
[S. 2015 Introduced in Senate (IS)]

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116th CONGRESS
  1st Session
                                S. 2015

 To amend the Higher Education Act of 1965 to direct the Secretary of 
Education to develop a plain language disclosure form for borrowers of 
             Federal student loans, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             June 27, 2019

 Mr. Scott of South Carolina (for himself and Mr. Manchin) introduced 
the following bill; which was read twice and referred to the Committee 
               on Health, Education, Labor, and Pensions

_______________________________________________________________________

                                 A BILL


 
 To amend the Higher Education Act of 1965 to direct the Secretary of 
Education to develop a plain language disclosure form for borrowers of 
             Federal student loans, 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 ``Student Loan Disclosure 
Modernization Act''.

SEC. 2. ADDITIONAL DISCLOSURES.

    Section 433(a) of the Higher Education Act of 1965 (20 U.S.C. 
1083(a)) is amended--
            (1) in paragraph (4), by striking ``the origination fee 
        and'' and inserting ``finance charges, the origination fee, 
        and'';
            (2) by redesignating paragraphs (6) through (19) as 
        paragraphs (7) through (20), respectively; and
            (3) by inserting after paragraph (5), the following:
            ``(6) the annual percentage rate applicable to the loan, 
        taking into account--
                    ``(A) the amount of the loan;
                    ``(B) the stated interest rate of the loan;
                    ``(C) the standard term for a loan of the same 
                type;
                    ``(D) any fees or additional costs associated with 
                the loan; and
                    ``(E) any capitalization of interest on the 
                loan;''.

SEC. 3. PLAIN LANGUAGE DISCLOSURE FORM.

    Section 455(p) of the Higher Education Act of 1965 (20 U.S.C. 
1087e(p)) is amended--
            (1) by striking ``Each institution'' and inserting the 
        following:
            ``(1) In general.--Each institution''; and
            (2) by adding at the end the following:
            ``(2) Plain language disclosure form.--
                    ``(A) Development and issuance of form.--Not later 
                than 18 months after the date of the enactment of this 
                paragraph, the Secretary shall, based on consumer 
                testing, develop and issue a model form to be known as 
                the `Plain Language Disclosure Form' that shall be used 
                by institutions and contractors described in paragraph 
                (1) to comply with the disclosure requirements of such 
                paragraph.
                    ``(B) Format.--The Secretary shall ensure that the 
                Plain Language Disclosure Form--
                            ``(i) enables borrowers to easily identify 
                        the information required to be disclosed under 
                        section 433(a) with respect to a loan and loan 
                        repayment options (including income-based and 
                        income contingent repayment), with emphasis on 
                        the loan terms determined by the Secretary to 
                        be critical to understanding the total costs of 
                        the loan and the estimated monthly repayment;
                            ``(ii) has a clear format and design, 
                        including easily readable font; and
                            ``(iii) is as succinct as practicable.
                    ``(C) Consultation.--In developing the Plain 
                Language Disclosure Form, the Secretary shall, as 
                appropriate, consult with--
                            ``(i) the Federal Reserve Board;
                            ``(ii) institutions and contractors 
                        described in paragraph (1);
                            ``(iii) borrowers of loans under this part; 
                        and
                            ``(iv) other organizations involved in the 
                        provision of financial assistance to students, 
                        as identified by the Secretary.
            ``(3) Electronic system for compliance.--In carrying out 
        paragraph (2), Secretary shall develop and implement an 
        electronic system that may be used by institutions and 
        contractors described in paragraph (1) to generate a Plain 
        Language Disclosure Form for each borrower by--
                    ``(A) enabling institutions and contractors to 
                enter personalized loan request information 
                electronically;
                    ``(B) integrating appropriate data found in the 
                National Student Loan Data System; and
                    ``(C) generating and integrating personalized 
                borrower information.
            ``(4) Limit on liability.--Nothing in this subsection shall 
        be construed to create a private right of action against an 
        institution or contractor described in paragraph (1) with 
        respect to the form or electronic system developed under this 
        paragraph.
            ``(5) Borrower signature required.--Beginning after the 
        issuance of the Plain Language Disclosure Form by the Secretary 
        under paragraph (2), a loan may not be issued to a borrower 
        under this part unless the borrower acknowledges, in writing 
        (which may include an electronic signature), that the borrower 
        has read the Plain Language Disclosure Form for the loan 
        concerned.
            ``(6) Consumer testing defined.--In this subsection, the 
        term `consumer testing' means the solicitation of feedback from 
        individuals, including borrowers and prospective borrowers of 
        loans under this part (as determined by the Secretary), about 
        the usefulness of different methods of disclosing material 
        terms of loans on the Plain Language Disclosure Form to 
        maximize borrowers' understanding of the terms and conditions 
        of such loans.''.

SEC. 4. REPORT TO CONGRESS.

    Not later than 2 years after the date of the enactment of this Act, 
the Secretary of Education shall submit to Congress a report that 
includes a description of the methods and procedures used to develop 
the Plain Language Disclosure Form required under section 455(p)(2) of 
the Higher Education Act of 1965 (as added by section 3 of this Act).
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