101ST GENERAL ASSEMBLY
State of Illinois
2019 and 2020
HB5361

 

Introduced , by Rep. Lamont J. Robinson, Jr.

 

SYNOPSIS AS INTRODUCED:
 
New Act

    Amends the Higher Education Loan Act. Creates the Know Before You Owe Private Education Loan Act. Provides that before a private educational lender makes a private education loan to a student who attends an institution of higher education, the private educational lender must obtain certification from the institution about the student borrower's: (i) enrollment status, (ii) cost of attendance, and (iii) the difference between the cost of attendance and the borrower's estimated financial assistance from all sources. Allows a private educational lender to disburse the funds of a private education loan if the institution of higher education fails to provide the requested certification within 15 business days of the request. Requires the private educational lender to provide notice to the institution that the loan has been disbursed without the certification. Requires a private educational lender to submit annual reports to the Department of Financial and Professional Regulation and to the Student Loan Ombudsman. Sets forth the requirements that must be included on the loan statement of a private educational loan. Provides that the institution of higher education must inform the student borrower of his or her lending options and whether the student has applied for or exhausted all available sources of federal financial assistance. Effective immediately.


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FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

HB5361LRB101 17386 CMG 66791 b

1    AN ACT concerning education.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 1. Short title. This Act may be cited as the Know
5Before You Owe Private Education Loan Act.
 
6    Section 5. Definitions. For the purposes of this Act:
7    "Income share agreement" means an agreement between an
8income share agreement provider and a borrower under which the
9borrower commits to pay a percentage of his or her future
10income in exchange for money, payments, or credits applied to
11or on behalf of a borrower. An income share agreement shall
12constitute a loan and debt within the meaning of this Act.
13    "Income share agreement provider" means:
14        (1) Any person that directly or indirectly provides
15    money, payments, or credits directly to or on behalf of a
16    borrower pursuant to the terms of an income share
17    agreement; or
18        (2) Any person that participates in the creation or
19    administration of an income share agreement, including:
20            (A) designing terms or conditions;
21            (B) calculating the amount of eligible funding for
22        a borrower;
23            (C) calculating, collecting, or processing

 

 

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1        payments;
2            (D) collecting income from any source;
3            (E) providing underwriting assistance;
4            (F) arranging one or more income-based financing
5        transactions; or
6            (G) performing any other administrative service
7        pursuant to the terms of an income share agreement.
8    "Income share agreement provider" includes an assignee of
9an income share agreement.
10    "Institution of higher education" includes, but is not
11limited to, institutions falling under the Private Business and
12Vocational Schools Act, the Private College Act, and public
13institutions of higher education as defined in Section 1 of the
14Board of Higher Education Act.
15    "Private educational lender" and "private education loan"
16have the meanings ascribed to the terms in Section 140 of the
17Truth in Lending Act (15 U.S.C. 1650). In addition, "private
18educational lender" includes an income share agreement
19provider and "private education loan" includes an income share
20agreement.
 
21    Section 10. Institutional certification required.
22    (a) In general. Except as provided in subsection (b) of
23this Section, before a private educational lender may disburse
24any funds with respect to a private education loan described in
25this Act, the private educational lender shall obtain from the

 

 

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1relevant institution of higher education where such loan is to
2be used on the behalf of the borrower, such institution's
3certification of:
4        (1) the enrollment status of the borrower;
5        (2) the borrower's cost of attendance at the
6    institution as determined by the institution under Title
7    IV, Part F, of the Higher Education Act of 1965 as amended;
8    and
9        (3) the difference between:
10            (A) such cost of attendance; and
11            (B) the borrower's estimated financial assistance,
12        including such assistance received under Title IV of
13        the Higher Education Act of 1965 (20 U.S.C. 1070 et
14        seq.) and other financial assistance known to the
15        institution, as applicable.
16    (b) Notwithstanding subsection (a), a private educational
17lender may disburse funds with respect to a private education
18loan described in this subsection without obtaining the
19institution's certification if the institution fails to
20provide the certification within 15 business days of the
21private educational lender's request for the certification if
22the private educational lender has received:
23        (1) notification of the institution's refusal to
24    certify the request; or
25        (2) notification that the institution has received the
26    request for certification and will need additional time to

 

 

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1    comply with the certification request.
2    (c) Loans disbursed without certification. If a private
3educational lender disburse funds without obtaining the
4certification as described in subsection (b), the private
5educational lender shall report the disbursement of the funds
6in a manner determined by the Student Loan Ombudsman.
7    (d) Notification of loans disbursed without certification.
8On or before the date a private educational lender issues any
9funds with respect to a private education loan described in
10this Section, the private educational lender shall notify the
11relevant institution of higher education, in writing, of the
12amount of the extension of credit and the borrower on whose
13behalf credit is extended.
14    (e) Annual report. A private educational lender that
15disburses funds with respect to a private education loan
16described in this Section shall prepare and submit an annual
17report to the Department of Financial and Professional
18Regulation and the Student Loan Ombudsman containing the
19required information about private student loans to be
20determined by the Student Loan Ombudsman.
 
21    Section 15. Provision of information.
22    (a) Provision of loan statement to borrowers.
23        (1) Loan statement. A private educational lender that
24    disburses any funds with respect to a private education
25    loan described in this Section shall send loan statements,

 

 

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1    to the borrowers of those funds not less than once every 3
2    months during the time that the borrower is enrolled at an
3    institution of higher education.
4        (2) Contents of loan statement. Each statement
5    described in subparagraph (1) shall:
6            (A) report the borrower's total remaining debt to
7        the private educational lender, including accrued but
8        unpaid interest and capitalized interest;
9            (B) report any debt increases since the last
10        statement; and
11            (C) list the current interest rate for each loan.
12    (b) Certification of exhaustion of federal student loan
13funds to private student lender. Upon the request of a private
14educational lender, acting in connection with an application
15initiated by a borrower for a private education loan in
16accordance with Section 5 of this Act, the institution of
17higher education shall within 15 days of receipt of the request
18provide certification to such private educational lender:
19        (1) that the borrower who initiated the application for
20    the private education loan, or on whose behalf the
21    application was initiated, is enrolled or is scheduled to
22    enroll at the institution of higher education;
23        (2) of the borrower's cost of attendance at the
24    institution of higher education as determined under
25    paragraph (2) of subsection (a) of this Section; and
26        (3) of the difference between:

 

 

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1            (A) the cost of attendance at the institution of
2        higher education; and
3            (B) the borrower's estimated financial assistance
4        received under the Higher Education Act of 1965 and
5        other assistance known to the institution of higher
6        education, as applicable;
7        (4) notify the private educational lender that the
8    institution of higher education has received the request
9    for certification and will need additional time to comply
10    with the certification request; or
11        (5) provide notice to the private educational lender of
12    the institution of higher education's refusal to certify
13    the private education loan.
14    (c) Certification of exhaustion of federal student loan
15funds to borrower. With respect to a certification request
16described under subsection (b), and prior to providing such
17certification in paragraph (1) of subsection (b) or providing
18notice of the refusal to provide certification under paragraph
19(5) of subsection (b), the institution of higher education
20shall:
21        (1) determine whether the borrower who initiated the
22    application for the private education loan, or on whose
23    behalf the application was initiated, has applied for and
24    exhausted the federal financial assistance available to
25    such borrower under the Federal Higher Education Act of
26    1965 and inform the borrower accordingly; and

 

 

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1        (2) provide the borrower whose loan application has
2    prompted the certification request by a private
3    educational lender, as described in paragraph (1) of
4    subsection (b), with the following information and
5    disclosures:
6            (A) the amount of additional federal student
7        assistance for which the borrower is eligible and the
8        advantages of federal loans under the Higher Education
9        Act of 1965, including disclosure of income driven
10        repayment options, fixed interest rates, deferments,
11        flexible repayment options, loan forgiveness programs,
12        additional protections, and the higher student loan
13        limits for dependent borrowers whose parents are not
14        eligible for a Federal Direct PLUS Loan;
15            (B) the borrower's ability to select a private
16        educational lender of the borrower's choice;
17            (C) the impact of a proposed private education loan
18        on the borrower's potential eligibility for other
19        financial assistance, including federal financial
20        assistance under the Federal Higher Education Act; and
21            (D) the borrower's right to accept or reject a
22        private education loan within the 30-day period
23        following a private educational lender's approval of a
24        borrower's application and the borrower's 3-day right
25        to cancel period.
 

 

 

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1    Section 20. Annual certification and maintenance of
2approval.
3    (a) Certification. Each institution of higher education
4must certify annually to the Board of Higher Education, and the
5Illinois Community College Board where applicable, whether it
6has made all certifications required under subsections (b) and
7(c) of Section 10.
8    (b) Maintenance of approval. In each instance where the
9Board of Higher Education or the Illinois Community College
10Board provides the institution of higher education with
11approval to operate, the certification provided pursuant to
12this Section shall be required for the maintenance of approval
13to operate.
 
14    Section 99. Effective date. This Act takes effect upon
15becoming law.