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Public Act 102-0583


 

Public Act 0583 102ND GENERAL ASSEMBLY

  
  
  

 


 
Public Act 102-0583
 
HB2746 EnrolledLRB102 14627 JLS 19980 b

    AN ACT concerning education.
 
    Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
 
    Section 1. Short title. This Act may be cited as the Know
Before You Owe Private Education Loan Act.
 
    Section 5. Definitions. As used in this Act:
    "Annual percentage rate" means the percentage rate
calculated according to the Federal Reserve Board's
methodology as set forth under Regulation Z, 12 CFR Part 1026.
    "Income share agreement" means an agreement under which a
borrower commits to pay a percentage of his or her future
income in exchange for money, payments, or credits applied to
or on behalf of a borrower. An income share agreement
constitutes a loan and debt within the meaning of this Act.
    "Income share agreement provider" means:
        (1) a person that provides money, payments, or credits
    to or on behalf of a borrower pursuant to the terms of an
    income share agreement; or
        (2) any other person engaged in the business of
    soliciting, making, funding, or extending income share
    agreements.
    "Institution of higher education" includes, but is not
limited to, institutions falling under the Private Business
and Vocational Schools Act of 2012, the Private College Act,
and public institutions of higher education as defined in
Section 1 of the Board of Higher Education Act. "Institution
of higher education" also includes a person engaged in the
business of providing postsecondary education, via
correspondence, online, or in this State, to a person located
in this State, regardless of whether the person has obtained
authorization from the Illinois Board of Higher Education to
operate in this State or is accredited.
    "Private educational lender" and "private education loan"
have the meanings ascribed to the terms in Section 140 of the
Truth in Lending Act (15 U.S.C. 1650). In addition, "private
educational lender" includes an income share agreement
provider and a student financing company and "private
education loan" includes an income share agreement and student
financing.
    "Student financing company" means a person engaged in the
business of securing, making, or extending student financing.
"Student financing company" does not include the following
persons, only to the extent that State regulation is preempted
by federal law:
        (1) a federally chartered bank, savings bank, savings
    and loan association, or credit union;
        (2) a wholly owned subsidiary of a federally chartered
    bank or credit union; and
        (3) an operating subsidiary where each owner of the
    operating subsidiary is wholly owned by the same federally
    chartered bank or credit union.
    "Student financing" means an extension of credit that:
        (1) is not made, insured, or guaranteed under Title IV
    of the Higher Education Act of 1965 (20 U.S.C. 1070 et
    seq.);
        (2) is extended to a consumer expressly, in whole or
    in part, for postsecondary educational expenses,
    regardless of whether the extension of credit is provided
    by the institution of higher education that the student
    attends;
        (3) does not include a private education loan;
        (4) does not include an income share agreement; and
        (5) does not include a loan that is secured by real
    property or a dwelling.
 
    Section 10. Institutional certification required.
    (a) In general. Except as provided in subsection (b) of
this Section, before a private educational lender may disburse
any funds with respect to a private education loan described
in this Act, the private educational lender shall obtain from
the relevant institution of higher education where such loan
is to be used on the behalf of the borrower, such institution's
certification of:
        (1) the enrollment status of the borrower;
        (2) the borrower's cost of attendance at the
    institution as determined by the institution under Title
    IV, Part F, of the Higher Education Act of 1965 as amended;
    and
        (3) the difference between:
            (A) such cost of attendance; and
            (B) the borrower's estimated financial assistance,
        including such assistance received under Title IV of
        the Higher Education Act of 1965 (20 U.S.C. 1070 et
        seq.) and other financial assistance known to the
        institution, as applicable.
    (b) Notwithstanding subsection (a), a private educational
lender may disburse funds with respect to a private education
loan described in this subsection without obtaining the
institution's certification if the institution fails to
provide the certification within 15 business days of the
private educational lender's request for the certification if
the private educational lender has received:
        (1) notification of the institution's refusal to
    certify the request; or
        (2) notification that the institution has received the
    request for certification and will need additional time to
    comply with the certification request.
    (c) Loans disbursed without certification. If a private
educational lender disburses funds without obtaining the
certification as described in subsection (b), the private
educational lender shall report the disbursement of the funds
in a manner determined by the Student Loan Ombudsman.
    (d) Notification of loans disbursed without certification.
On or before the date a private educational lender issues any
funds with respect to a private education loan described in
this Section, the private educational lender shall notify the
relevant institution of higher education, in writing, of the
amount of the extension of credit and the borrower on whose
behalf credit is extended.
    (e) Annual report. A private educational lender that
disburses funds with respect to a private education loan
described in this Section shall prepare and submit an annual
report to the Department of Financial and Professional
Regulation and the Student Loan Ombudsman containing the
required information about private education loans to be
determined by the Student Loan Ombudsman. Such a report shall
include, at a minimum, the following information about private
education loans described in this Section, including any
private education loans disbursed without certification:
        (A) a list of all institutions of higher education at
    which a private educational lender disburses funds with
    respect to a private education loan described in this
    Section;
        (B) the volume of private education loans described in
    this Section made annually by a private educational
    lender;
        (C) the volume of private education loans described in
    this Section made annually at each school identified under
    paragraph (A);
        (D) the historical lifetime default rate for borrowers
    obtaining a private education loan described in this
    Section from the private educational lender; and
        (E) a copy of each model or template promissory note,
    agreement, contract or other instrument used by a private
    educational lender during the previous year to
    substantiate that a private education loan described in
    this Section has been extended to the borrower or that a
    borrower owes a debt to the private educational lender.
        (f) Annual report exemption. A private educational
    lender that funds 10 or fewer new private education loans
    in a calendar year shall be exempt from submitting the
    annual report for that year. Any lender claiming this
    exemption shall submit a statement to the Department of
    Financial and Professional Regulation and the Student Loan
    Ombudsman certifying the number of private education loans
    made in that calendar year.
 
    Section 15. Provision of information.
    (a) Provision of loan statement to borrowers.
        (1) Loan statement. A private educational lender that
    disburses any funds with respect to a private education
    loan described in this Section shall send loan statements,
    to the borrowers of those funds not less than once every 3
    months during the time that the borrower is enrolled at an
    institution of higher education.
        (2) Contents of statements for income share
    agreements. Each statement described in subparagraph (1)
    with respect to income share agreements, shall:
            (A) report the consumer's total amounts financed
        under each income share agreement;
            (B) report the percentage of income payable under
        each income share agreement;
            (C) report the maximum number of monthly payments
        required to be paid under each income share agreement;
            (D) report the maximum amount payable under each
        income share agreement;
            (E) report the maximum duration of each income
        share agreement;
            (F) report the minimum annual income above which
        payments are required under each income share
        agreement; and
            (G) report the annual percentage rate for each
        income share agreement at the minimum annual income
        above which payments are required and at $10,000
        income increments thereafter up to the annual income
        where the maximum number of monthly payments results
        in the maximum amount payable.
        (3) Contents of all other loan statements. Each
    statement described in subparagraph (1) that does not fall
    under subparagraph (2) shall:
            (A) report the borrower's total remaining debt to
        the private educational lender, including accrued but
        unpaid interest and capitalized interest;
            (B) report any debt increases since the last
        statement; and
            (C) list the current annual percentage rate for
        each loan.
    (b) Certification of exhaustion of federal student loan
funds to private educational lender. Upon the request of a
private educational lender, acting in connection with an
application initiated by a borrower for a private education
loan in accordance with Section 5, the institution of higher
education shall within 15 days of receipt of the request
provide certification to such private educational lender:
        (1) that the borrower who initiated the application
    for the private education loan, or on whose behalf the
    application was initiated, is enrolled or is scheduled to
    enroll at the institution of higher education;
        (2) of the borrower's cost of attendance at the
    institution of higher education as determined under
    paragraph (2) of subsection (a) of this Section;
        (3) of the difference between:
            (A) the cost of attendance at the institution of
        higher education; and
            (B) the borrower's estimated financial assistance
        received under the federal Higher Education Act of
        1965 and other assistance known to the institution of
        higher education, as applicable;
        (4) that the institution of higher education has
    received the request for certification and will need
    additional time to comply with the certification request;
    and
        (5) if applicable, that the institution of higher
    education is refusing to certify the private education
    loan.
    (c) Certification of exhaustion of federal student loan
funds to borrower. With respect to a certification request
described under subsection (b), and prior to providing such
certification in paragraph (1) of subsection (b) or providing
notice of the refusal to provide certification under paragraph
(5) of subsection (b), the institution of higher education
shall:
        (1) determine whether the borrower who initiated the
    application for the private education loan, or on whose
    behalf the application was initiated, has applied for and
    exhausted the federal financial assistance available to
    such borrower under the federal Higher Education Act of
    1965 and inform the borrower accordingly;
        (2) provide the borrower whose loan application has
    prompted the certification request by a private
    educational lender, as described in paragraph (1) of
    subsection (b), with the following information and
    disclosures:
            (A) the amount of additional federal student
        assistance for which the borrower is eligible and the
        advantages of federal loans under the federal Higher
        Education Act of 1965, including disclosure of income
        driven repayment options, fixed interest rates,
        deferments, flexible repayment options, loan
        forgiveness programs, additional protections, and the
        higher student loan limits for dependent borrowers
        whose parents are not eligible for a Federal Direct
        PLUS Loan;
            (B) the borrower's ability to select a private
        educational lender of the borrower's choice;
            (C) the impact of a proposed private education
        loan on the borrower's potential eligibility for other
        financial assistance, including federal financial
        assistance under the federal Higher Education Act; and
            (D) the borrower's right to accept or reject a
        private education loan within the 30-day period
        following a private educational lender's approval of a
        borrower's application and the borrower's 3-day right
        to cancel period; and
        (3) Any institution of higher education that is also
    acting as a private educational lender shall provide the
    certification of exhaustion of federal student loan funds
    described in paragraphs (1) and (2) of this subsection (c)
    to the borrower prior to disbursing funds to the borrower.
    Any institution of higher education that is not eligible
    for funding under Title IV of the federal Higher Education
    Act of 1965 is not required to provide this certification
    to the borrower.
 
    Section 20. Annual certification and maintenance of
approval.
    (a) Certification. An institution of higher education must
certify annually to the Board of Higher Education, and the
Illinois Community College Board where applicable, whether it
has made all certifications required under subsections (b) and
(c) of Section 15.
    (b) Maintenance of approval. In each instance where the
Board of Higher Education or the Illinois Community College
Board provides the institution of higher education with
approval to operate, the certification provided pursuant to
this Section shall be required for the maintenance of approval
to operate.
 
    Section 99. Effective date. This Act takes effect upon
becoming law.

Effective Date: 8/26/2021