Protect Student Borrowers Act - 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.
Requires an IHE, for any fiscal year in which at least 25% of the IHE's student body is participating in the Direct Loan program, to remit, at such times as the Secretary of Education specifies, a risk-sharing payment set at:
Directs the Secretary to make specified modifications to such risk-sharing requirements if an IHE develops and implements a student loan management plan that is approved by the Secretary. Requires that plan to include individualized financial aid counseling for students and strategies to minimize student loan default and delinquency.
Allows the Secretary to waive or reduce an IHE's risk-sharing payments in certain other instances.
Prohibits IHEs from denying admission or financial aid to a student based on a perception that the student may be at risk for defaulting on a Direct loan.
Authorizes the Secretary to 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 or percentages 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
Establishes a separate account in the Treasury for the deposit of the risk-sharing payments, of which: (1) up to 50% are to be used by the Secretary to enter into the contracts or cooperative agreements for delinquency and default prevention or rehabilitation, and (2) the remainder are to be used to offset any future shortfalls in funding under the Federal Pell Grant program.
Makes an IHE's ability to meet its obligation to make risk-sharing payments part of the determination of its eligibility to participate in title IV programs.
[Congressional Bills 113th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5565 Introduced in House (IH)]
113th CONGRESS
2d Session
H. R. 5565
To provide for institutional risk-sharing in the Federal student loan
programs.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
September 18, 2014
Mr. Carney introduced the following bill; which was referred to the
Committee on Education and the Workforce
_______________________________________________________________________
A BILL
To provide for institutional risk-sharing in the Federal student loan
programs.
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 ``Protect Student Borrowers Act''.
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 1964 (20 U.S.C. 1087d)
is amended--
(1) in subsection (a)--
(A) in paragraph (5), by striking ``and'';
(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 that are in default;
``(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 that are in default;
``(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 that are in default; 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 that are in default.
``(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 that
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 that
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 that
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(d); 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:
``(d) 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.''.
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Education and the Workforce.
Referred to the Subcommittee on Higher Education and Workforce Training.
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