103RD GENERAL ASSEMBLY
State of Illinois
2023 and 2024
SB0059

 

Introduced 1/20/2023, by Sen. Laura Fine

 

SYNOPSIS AS INTRODUCED:
 
110 ILCS 983/5
110 ILCS 983/15
110 ILCS 983/25 new
110 ILCS 983/30 new
110 ILCS 983/35 new
110 ILCS 983/40 new
110 ILCS 983/45 new
110 ILCS 983/50 new

    Amends the Know Before You Owe Private Education Loan Act. Provides that the information regarding loans shall be provided to borrowers and cosigners (instead of just borrowers). Sets forth provisions for cosigner disclosure and notice, cosigner release, cosigner rights, what happens in the event of the bankruptcy or death of a cosigner, the total and permanent disability of a borrower or cosigner, and refinancing and modified or flexible repayment plans. Effective immediately.


LRB103 03451 RJT 48457 b

 

 

A BILL FOR

 

SB0059LRB103 03451 RJT 48457 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 5. The Know Before You Owe Private Education Loan
5Act is amended by changing Sections 5 and 15 and by adding
6Sections 25, 30, 35, 40, 45, and 50 as follows:
 
7    (110 ILCS 983/5)
8    Sec. 5. Definitions. As used in this Act:
9    "Annual percentage rate" means the percentage rate
10calculated according to the Federal Reserve Board's
11methodology as set forth under Regulation Z, 12 CFR Part 1026.
12    "Cosigner" means any individual who is liable for the
13obligation of another without compensation, regardless of how
14the individual is designated in the contract or instrument
15with respect to that obligation, including an obligation under
16a private education loan extended to consolidate a borrower's
17preexisting student loans. The term includes any individual
18whose signature is requested, as a condition, to grant credit
19or to forbear on collection. The term does not include a spouse
20of an individual if the spouse's signature is needed solely to
21perfect the security interest in a loan.
22    "Educational expense" means any expense, in whole or in
23part, expressly used to finance postsecondary education,

 

 

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1regardless of whether the debt incurred by a student to pay
2that expense is owed to the provider of postsecondary
3education whose school, program, or facility the student
4attends.
5    "Income share agreement" means an agreement under which a
6borrower commits to pay a percentage of his or her future
7income in exchange for money, payments, or credits applied to
8or on behalf of a borrower. An income share agreement
9constitutes a loan and debt within the meaning of this Act.
10    "Income share agreement provider" means:
11        (1) a person that provides money, payments, or credits
12    to or on behalf of a borrower pursuant to the terms of an
13    income share agreement; or
14        (2) any other person engaged in the business of
15    soliciting, making, funding, or extending income share
16    agreements.
17    "Institution of higher education" includes, but is not
18limited to, institutions falling under the Private Business
19and Vocational Schools Act of 2012, the Private College Act,
20and public institutions of higher education as defined in
21Section 1 of the Board of Higher Education Act. "Institution
22of higher education" also includes a person engaged in the
23business of providing postsecondary education, via
24correspondence, online, or in this State, to a person located
25in this State, regardless of whether the person has obtained
26authorization from the Illinois Board of Higher Education to

 

 

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1operate in this State or is accredited.
2    "Private educational lender" and "private education loan"
3have the meanings ascribed to the terms in Section 140 of the
4Truth in Lending Act (15 U.S.C. 1650). In addition, "private
5educational lender" includes an income share agreement
6provider and a student financing company and "private
7education loan" includes an income share agreement and student
8financing.
9    "Student financing company" means a person engaged in the
10business of securing, making, or extending student financing.
11"Student financing company" does not include the following
12persons, only to the extent that State regulation is preempted
13by federal law:
14        (1) a federally chartered bank, savings bank, savings
15    and loan association, or credit union;
16        (2) a wholly owned subsidiary of a federally chartered
17    bank or credit union; and
18        (3) an operating subsidiary where each owner of the
19    operating subsidiary is wholly owned by the same federally
20    chartered bank or credit union.
21    "Student financing" means an extension of credit that:
22        (1) is not made, insured, or guaranteed under Title IV
23    of the Higher Education Act of 1965 (20 U.S.C. 1070 et
24    seq.);
25        (2) is extended to a consumer expressly, in whole or
26    in part, for postsecondary educational expenses,

 

 

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1    regardless of whether the extension of credit is provided
2    by the institution of higher education that the student
3    attends;
4        (3) does not include a private education loan;
5        (4) does not include an income share agreement; and
6        (5) does not include a loan that is secured by real
7    property or a dwelling.
8    "Total and permanent disability" means a physical or
9mental impairment, disease, or loss of a permanent nature that
10prevents employment with or without reasonable accommodation,
11with proof of disability being in the form of a declaration
12from the United States Social Security Administration, the
13Illinois Workers' Compensation Commission, the United States
14Department of Defense, or an insurer authorized to transact
15business in this State who is providing disability insurance
16coverage to a contractor. The term does not include a
17condition that has not progressed or been exacerbated or that
18the individual did not acquire until after the closing of the
19loan agreement. In addition, documentation sufficient to
20establish a total and permanent disability for a federal
21student loan made pursuant to Title IV of the federal Higher
22Education Act of 1965 is sufficient to establish a total and
23permanent disability under this Act.
24(Source: P.A. 102-583, eff. 8-26-21.)
 
25    (110 ILCS 983/15)

 

 

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1    Sec. 15. Provision of information.
2    (a) Provision of loan statement to borrowers and
3cosigners.
4        (1) Loan statement. A private educational lender that
5    disburses any funds with respect to a private education
6    loan described in this Section shall send loan statements
7    to the borrowers and cosigners of those funds not less
8    than once every 3 months during the time that the borrower
9    is enrolled at an institution of higher education.
10        (2) Contents of statements for income share
11    agreements. Each statement described in subparagraph (1)
12    with respect to income share agreements, shall:
13            (A) report the consumer's total amounts financed
14        under each income share agreement;
15            (B) report the percentage of income payable under
16        each income share agreement;
17            (C) report the maximum number of monthly payments
18        required to be paid under each income share agreement;
19            (D) report the maximum amount payable under each
20        income share agreement;
21            (E) report the maximum duration of each income
22        share agreement;
23            (F) report the minimum annual income above which
24        payments are required under each income share
25        agreement; and
26            (G) report the annual percentage rate for each

 

 

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1        income share agreement at the minimum annual income
2        above which payments are required and at $10,000
3        income increments thereafter up to the annual income
4        where the maximum number of monthly payments results
5        in the maximum amount payable.
6        (3) Contents of all other loan statements. Each
7    statement described in subparagraph (1) that does not fall
8    under subparagraph (2) shall:
9            (A) report the borrower's total remaining debt to
10        the private educational lender, including accrued but
11        unpaid interest and capitalized interest;
12            (B) report any debt increases since the last
13        statement; and
14            (C) list the current annual percentage rate for
15        each loan.
16    (b) Certification of exhaustion of federal student loan
17funds to private educational lender. Upon the request of a
18private educational lender, acting in connection with an
19application initiated by a borrower for a private education
20loan in accordance with Section 5, the institution of higher
21education shall within 15 days of receipt of the request
22provide certification to such private educational lender:
23        (1) that the borrower who initiated the application
24    for the private education loan, or on whose behalf the
25    application was initiated, is enrolled or is scheduled to
26    enroll at the institution of higher education;

 

 

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

 

 

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

 

 

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1            (D) the borrower's right to accept or reject a
2        private education loan within the 30-day period
3        following a private educational lender's approval of a
4        borrower's application and the borrower's 3-day right
5        to cancel period; and
6        (3) Any institution of higher education that is also
7    acting as a private educational lender shall provide the
8    certification of exhaustion of federal student loan funds
9    described in paragraphs (1) and (2) of this subsection (c)
10    to the borrower and any cosigners prior to disbursing
11    funds to the borrower. Any institution of higher education
12    that is not eligible for funding under Title IV of the
13    federal Higher Education Act of 1965 is not required to
14    provide this certification to the borrower or any
15    cosigners.
16(Source: P.A. 102-583, eff. 8-26-21; 102-813, eff. 5-13-22.)
 
17    (110 ILCS 983/25 new)
18    Sec. 25. Cosigner disclosure; notice.
19    (a) Before extending a private education loan that
20requires a cosigner, a private educational lender shall
21disclose to the cosigner:
22        (1) how the private education loan obligation will
23    appear on the cosigner's credit report;
24        (2) how the cosigner will be notified if the private
25    education loan becomes delinquent, including how the

 

 

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1    cosigner can cure the delinquency in order to avoid
2    negative credit furnishing and the loss of cosigner
3    release eligibility; and
4        (3) eligibility for release of the cosigner's
5    obligation on the private education loan, including the
6    number of on-time payments and any other criteria required
7    to approve the release of the cosigner from the loan
8    obligation.
9    (b) For any private education loan that obligates a
10cosigner, a private educational lender shall provide the
11borrower and the cosigner an annual written notice containing
12information about cosigner release, including the
13administrative and objective criteria the lender requires to
14approve the release of the cosigner from the loan obligation
15and the process for applying for cosigner release. If the
16borrower has met the applicable payment requirement to be
17eligible for cosigner release, the lender shall send the
18borrower and the cosigner a written notification by mail, and
19by electronic mail if the borrower or cosigner has elected to
20receive electronic communications from the lender, informing
21the borrower and cosigner that the payments requirement to be
22eligible for cosigner release has been met. The notification
23must also include information about any additional criteria to
24qualify for cosigner release and the procedure to apply for
25cosigner release.
26    (c) A private educational lender shall provide written

 

 

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1notice to a borrower who applies for cosigner release but
2whose application is incomplete. The written notice must
3include a description of the information needed to consider
4the application complete and the date by which the applicant
5must furnish the missing information in order to complete the
6application.
7    (d) Within 30 days after a borrower submits a completed
8application for cosigner release, the private educational
9lender shall send the borrower and cosigner a written notice
10that informs the borrower and cosigner whether the lender has
11approved or denied the cosigner release application. If the
12lender denies a request for cosigner release, the borrower may
13request copies of any documents or information used in the
14determination, including the credit score threshold used by
15the lender, the borrower's credit report, the borrower's
16credit score, and any other documents or information specific
17to the borrower. The lender shall also provide any adverse
18action notices required under applicable federal law if the
19denial is based in whole or in part on any information
20contained in a credit report.
21    (e) In response to a written or oral request by the
22borrower for cosigner release, a private educational lender
23shall provide to the borrower the information described in
24subsection (b) of this Section.
 
25    (110 ILCS 983/30 new)

 

 

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1    Sec. 30. Cosigner release.
2    (a) A private educational lender may not impose any
3restriction that permanently bars a borrower from qualifying
4for cosigner release, including restricting the number of
5times a borrower may apply for cosigner release.
6    (b) A private educational lender may not impose any
7negative consequences on a borrower or cosigner during the 60
8days following the issuance of the notice required pursuant to
9subsection (c) of Section 25 or until the lender makes a final
10determination about a borrower's cosigner release application,
11whichever occurs later. As used in this subsection, "negative
12consequences" includes the imposition of additional
13eligibility criteria, negative credit reporting, lost
14eligibility for cosigner release, late fees, interest
15capitalization, or other financial injury.
16    (c) For any private education loan issued on or after the
17effective date of this amendatory Act of the 102nd General
18Assembly, a private educational lender may not require proof
19of more than 12 consecutive, on-time payments as part of the
20criteria for cosigner release. A borrower who has paid the
21equivalent of 12 months of principal and interest payments
22within any 12-month period is deemed to have satisfied the
23consecutive, on-time payment requirement even if the borrower
24has not made payments monthly during the 12-month period. If a
25borrower or cosigner requests a change in terms that restarts
26the count of consecutive, on-time payments required for

 

 

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1cosigner release, the lender shall notify the borrower and
2cosigner in writing of the impact of the change and provide the
3borrower and cosigner with the right to withdraw or reverse
4the request to avoid that impact.
5    (d) A borrower may request an appeal of a private
6educational lender's determination to deny a request for
7cosigner release, and the lender shall permit the borrower to
8submit additional documentation evidencing the borrower's
9ability, willingness, and stability to meet the payment
10obligations. The borrower may request that another employee of
11the lender review the cosigner release determination.
12    (e) A private educational lender shall establish and
13maintain a comprehensive record management system reasonably
14designed to ensure the accuracy, integrity, and completeness
15of information about cosigner release applications and to
16ensure compliance with applicable State and federal laws. The
17system must include the number of cosigner-release
18applications received, the approval and denial rate, and the
19primary reasons for any denial.
 
20    (110 ILCS 983/35 new)
21    Sec. 35. Cosigner rights.
22    (a) A private educational lender shall provide a cosigner
23with access to all documents or records related to the
24cosigned private education loan that are available to the
25borrower.

 

 

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1    (b) If a private educational lender provides electronic
2access to documents and records for a borrower, it shall
3provide equivalent electronic access to the cosigner.
4    (c) Upon the borrower's request, the private educational
5lender shall redact the borrower's contact information from
6documents and records provided to a cosigner.
7    (d) A private educational lender may not include in a
8private education loan executed on or after the effective date
9of this amendatory Act of the 102nd General Assembly a
10provision that permits the lender to accelerate payments, in
11whole or in part, except upon a payment default. A private
12educational lender may not place any loan or account into
13default or accelerate a loan for any reason other than payment
14default.
15    (e) A private education loan executed before the effective
16date of this amendatory Act of the 102nd General Assembly may
17permit the private educational lender to accelerate payments
18only if the promissory note or loan agreement explicitly
19authorizes an acceleration and only for the reasons stated in
20the note or agreement.
 
21    (110 ILCS 983/40 new)
22    Sec. 40. Bankruptcy or death of cosigner.
23    (a) If a cosigner dies, the private educational lender may
24not attempt to collect against the cosigner's estate other
25than for payment default.

 

 

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1    (b) With regard to the death or bankruptcy of a cosigner,
2if a private education loan is not more than 60 days delinquent
3at the time the private educational lender is notified of the
4cosigner's death or bankruptcy, the lender may not change any
5terms or benefits under the promissory note, the repayment
6schedule, the repayment terms, or the monthly payment amount
7or any other provision associated with the loan.
 
8    (110 ILCS 983/45 new)
9    Sec. 45. Total and permanent disability of a borrower or
10cosigner.
11    (a) For any private education loan issued on or after the
12effective date of this amendatory Act of the 102nd General
13Assembly, a private educational lender, when notified of the
14total and permanent disability of a borrower or cosigner,
15shall release the cosigner from the obligations of a cosigner
16under the private education loan. The lender may not attempt
17to collect a payment from a cosigner following a notification
18of total and permanent disability of the borrower or cosigner.
19    (b) A private educational lender shall be notified of the
20total and permanent disability of a borrower and discharge the
21liability of the borrower and cosigner on the loan.
22    (c) After receiving a notification described in subsection
23(b) of this Section, the private educational lender may not:
24        (1) attempt to collect on the outstanding liability of
25    the borrower or cosigner; or

 

 

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1        (2) monitor the disability status of the borrower at
2    any point after the date of discharge.
3    (d) A private educational lender shall, within 30 days
4after the release of either a cosigner or borrower from the
5obligation of a private education loan pursuant to subsection
6(a) or (b) of this Section, notify both the borrower and
7cosigner of the release.
8    (e) A private educational lender shall, within 30 days
9after receiving notice of the total and permanent disability
10of a borrower pursuant to subsection (a) of this Section,
11provide the borrower with an option to designate an individual
12to have the legal authority to act on behalf of the borrower.
13    (f) If a cosigner is released from the obligations of a
14private education loan pursuant to subsection (a) of this
15Section, the private educational lender may not require the
16borrower to obtain another cosigner on the loan obligation.
17    (g) A private educational lender may not declare a default
18or accelerate the debt against a borrower on the sole basis of
19the release of the cosigner from the loan obligation due to
20total and permanent disability pursuant to subsection (a) of
21this Section.
 
22    (110 ILCS 983/50 new)
23    Sec. 50. Refinancing; modified or flexible repayment plan
24or loan modification.
25    (a) Before offering a person a private education loan that

 

 

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1is being used to refinance an existing education loan, a
2private educational lender shall provide the person with a
3disclosure explaining that the benefits and protections
4applicable to the existing loan may be lost due to the
5refinancing. The disclosure must be provided on a one-page
6information sheet in at least 12-point type and must be
7written in simple, clear, understandable, and easily readable
8language.
9    (b) A private educational lender shall:
10        (1) provide on its website a description of any
11    modified or flexible repayment options offered by the
12    lender for private education loans;
13        (2) establish policies and procedures and implement
14    modified or flexible repayment options consistently in
15    order to facilitate the evaluation of such option
16    requests, including providing accurate information
17    regarding any options that may be available to the
18    borrower through the promissory note or that may have been
19    marketed to the borrower through marketing materials; and
20        (3) consistently present and offer private education
21    loan modified or flexible repayment options to borrowers
22    with similar financial circumstances if the lender offers
23    such repayment options.
24    (c) A private educational lender may not place a loan or
25account into default or accelerate a loan while a borrower is
26seeking a loan modification or enrollment in a modified or

 

 

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1flexible repayment plan, except that a private educational
2lender may place a loan or account into default or accelerate a
3loan for payment default 90 days or more after the borrower's
4default.
 
5    Section 99. Effective date. This Act takes effect upon
6becoming law.