“A bill to revise counseling requirements for certain borrowers of student loans, and for other purposes.”
No CRS summary available for this bill.
This section revises pre-loan counseling requirements for Federal Direct Loans made to students at institutions participating in federal student aid programs under the Higher Education Act of 1965 by (1) changing the subsection heading from "Entrance Counseling" to "Pre-Loan Counseling" and expanding the counseling obligation from a disbursement to a first-time borrower to the first disbursement of each new loan (or the first disbursement in each award year if multiple new loans are obtained); (2) replacing the information on total borrowing in counseling materials with an estimate of the borrower's projected monthly loan payment relative to estimated monthly after-tax income (after living expenses from Consumer Expenditure Survey data, health insurance, and other relevant costs), based on program-specific starting wages (if available) and the borrower's projected total debt (federal, known private, and estimated future debt to complete the program); (3) adding to counseling materials statements on borrowing only the minimum necessary (not the full eligible amount), warnings on high debt-to-income ratios complicating repayment, options to reduce borrowing (e.g., scholarships, work-study), and the importance of on-time graduation to limit debt; and (4) requiring students to manually specify (in writing or electronically) the exact dollar amount of Federal Direct Loan funding desired during the loan acceptance process, prior to institutional certification for disbursement and after completing counseling (excluding consolidation loans and parent PLUS loans). (Thus, the changes aim to promote informed borrowing decisions and reduce overborrowing by providing affordability projections and mandating explicit loan amount confirmation.)
This section establishes a requirement for eligible lenders to provide quarterly statements, in simple and understandable terms, to borrowers of loans made, insured, or guaranteed under the Federal Family Education Loan (FFEL) Program or the William D. Ford Federal Direct Loan Program during periods when payments are not required (e.g., while in school, deferment, or forbearance). The statements must include (1) the original principal amount of each loan and in the aggregate; (2) the current balance; (3) the interest rate on each loan; (4) total interest paid on each loan; (5) aggregate amount paid on each loan, including interest, fees, and principal; (6) the lender's or servicer's contact information, including for voluntary payments; (7) an explanation of the option to pay accruing interest and the consequences of capitalization; (8) interest accrued since the last statement (based on a typical installment period) and in the aggregate to date; and (9) an explanation that small voluntary payments can reduce interest accrual over the loan's life.
This section makes conforming amendments to revise terminology in two Higher Education Act provisions. Specifically, it (1) amends program participation agreement requirements (under which institutions must provide student loan counseling) by replacing "entrance and exit counseling" with "pre-loan and exit counseling"; and (2) makes parallel changes in regulatory relief and improvement provisions by replacing "entrance and exit interviews" with "pre-loan and exit interviews" each place it appears.