Summary of Student Borrower Bill of Rights Act of 2008

Here is a summary of recently presented Student Borrower Bill of Rights Act of 2008.

Goal: To provide student borrowers with basic rights, including the right to timely information about their loans and the right to make fair and reasonable loan payments, and for other purposes.

SEC. 2. FINDINGS.

I skip this part.

SEC. 4. A RIGHT TO SHOP IN A FREE MARKETPLACE.

There are interesting snippets here:

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(iii) by adding at the end the following:
`(D) any on time payments made for such loan; and
`(E) such loan as a student loan.'.

© A Right To Reconsolidate Loans-
`(B)(i) Except as provided in clause (ii), an individual who has received a consolidation loan under this section, or the consolidation lender, shall pay a fee of 1 percent of the balance owed on the sum of such loans to be consolidated to the Department to obtain a subsequent consolidation loan under this section.

`(ii) An individual who has received a consolidation loan under this section may obtain a subsequent consolidation loan under this section for no fee if such individual was eligible to obtain a subsequent consolidation loan pursuant to this subparagraph on the day before the date of enactment of the Student Borrower Bill of Rights Act of 2007.'.

`(1) FEDERAL STUDENT LOAN- The term `Federal student loan' means a loan made, insured, or guaranteed under this title (except loans made to parents under section 428B or under the Federal Direct PLUS Loan program).

`SEC. 499A. A RIGHT TO TIMELY INFORMATION ABOUT LOANS.
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`(7) a description of each fee the borrower has been charged for the current payment period;
`(8) the applicable monthly payment amount set by the Secretary under section 499B for such borrower and the amount such borrower would owe each month according to the borrower's repayment plan absent the provisions of section 499B, or, in the case of a loan payable less frequently than monthly, the amount that corresponds to the payment installment time period taking into consideration the applicable monthly payment amount set by the Secretary under section 499B for such borrower and the amount such borrower would owe that corresponds to the payment installment time period according to the borrower's repayment plan absent the provisions of section 499B;
`(9) the date by which the borrower needs to make the payment described in paragraph (8) to avoid additional fees;
`(10) the amount of such payment that will be put towards interest, the balance, and any fees;

`(b) Information Provided Five Months After Ceasing To Be at Least a Half-Time Student- A lender of a Federal student loan shall provide to the borrower of such loan, on the date that is 5 months after the borrower has ceased to be at least a half-time student at the institution of higher education for which the loan was made, who requests it, and make readily available on the Internet, a clear and conspicuous notice of not less than the following information:

`(1) The conditions under which a borrower could be charged any fee, and the amount of such fee.
`(2) The conditions under which a loan would default and the consequences of default.
`(3) The borrower's rights and options, including repayment options, deferments, forbearances, and discharge rights to which the borrower may be entitled.
`(4) Legitimate resources, including nonprofit organizations, advocates, and counselors (including the Office of the Ombudsman at the Department), where borrowers can receive advice and assistance, if such resources exist.

`(5) Information about how a borrower can appeal to the Department a decision made by a lender about their loan.

`© Information Provided During Delinquency-

`(2) ADDITIONAL INFORMATION- In addition to any other information required under law, a lender of a Federal student loan shall provide a borrower in delinquency with a clear and conspicuous notice of the date on which the loan will default if no payment is made, the minimum payment that must be made to avoid default, discharge rights to which the borrower may be entitled, legitimate resources, including nonprofit organizations, advocates, and counselors (including the Office of the Ombudsman at the Department), where borrowers can receive advice and assistance, if such resources exist, and information about how a borrower can appeal to the Department a decision made by a lender about their loan.

© Information Provided During Consolidation- Section 428C(b)(1) of the Higher Education Act of 1965 (20 U.S.C. 1078-3(b)(1)) is amended--

(d) Information Provided During Consolidation or Reconsolidation of a Federal Student Loan With a Private Loan- A lender shall, upon application for a consolidation or reconsolidation loan of one or more loans made, insured, or guaranteed under part B, part D, or part E of title IV of the Higher Education Act of 1965 (20 U.S.C. 1071, 1087a, 1087aa) with one or more private loans, provide the borrower with a clear and conspicuous notice of not less than the following information:

(1) That the consolidation or reconsolidation loan would be a private loan, not a Federal loan.

(2) A description of the benefits and protections for the loan made, insured, or guaranteed under part B, part D, or part E that the borrower would lose by consolidating such loan with a private loan.

(3) That the lender may be eligible to consolidate two or more loans made, insured, or guaranteed under part B, part D, or part E within the Federal loan program.

SEC. 6. A RIGHT TO MAKE AFFORDABLE LOAN PAYMENTS.

(a) Affordable Loan Payments- Part I of title IV of the Higher Education Act of 1965, as added by section 5, is amended by adding at the end the following:

`SEC. 499B. A RIGHT TO MAKE AFFORDABLE LOAN PAYMENTS.

`(a) Limit on Monthly Payment Amounts to an Affordable Level-

`(1) IN GENERAL-

`(A) LIMITATION-

`(i) IN GENERAL- With respect to Federal student loans that are made, insured, or guaranteed after the date of enactment of this section, the Secretary shall limit the total monthly payment amount for all of such loans of a student borrower to not more than the amount determined pursuant to subparagraph (B), except as provided in subsection (b)(3).

`(ii) COMMENCEMENT- The limit on the monthly payment amount described in clause (i) shall begin the day after 1 year after the date the student ceases to carry at least one-half the normal full-time academic workload (as determined by the institution).

`(B) FORMULA AMOUNT-

`(i) IN GENERAL- The amount referred to in subparagraph (A) shall be the same amount for each month of a year. Such amount shall be an amount that is the quotient of the sum of 10 percent of the borrower's annual adjusted gross income between 100 percent and 200 percent of the poverty line for the previous year and 20 percent of the borrower's annual adjusted gross income above 200 percent of the poverty line for the previous year divided by 12.

`(ii) POVERTY LINE- In this subparagraph, the term `poverty line' means the poverty line described in section 673 of the Community Services Block Grant Act (42 U.S.C. 9902), applicable to a family of the size involved.

`(2) PROVISION OF INFORMATION TO THE SECRETARY-

`(A) IN GENERAL- The limit on the monthly payment amount set by the Secretary under paragraph (1) shall apply only if a borrower provides the Secretary, in such form and at such time--

`(i) such information as the Secretary shall require to determine the monthly payment amount that is applicable for such borrower; and

`(ii) certification that the borrower is employed full time or is actively seeking full-time employment.

`(B) UPDATE TO INFORMATION- The Secretary shall require a borrower to--

`(i) provide the information required under subparagraph (A)(i) annually for the term of the loan of such borrower; or

`(ii) during each year for the term of the loan of such borrower, authorize the Secretary to obtain the information required under subparagraph (A)(i) from the Internal Revenue Service for such year.

`(3) CONTINUOUS UPDATE- Upon receiving information under paragraph (2)(B), the Secretary shall revise the limit on the monthly payment amount for such borrower under paragraph (1), as necessary.

`(4) APPLICABILITY TO ALL REPAYMENT PLANS- Regardless of which repayment plan a borrower of a loan selects under this title, the limit on the monthly payment amount set by the Secretary under paragraph (1) shall apply to the monthly repayment amount applicable for such repayment plan.

`(5) NO FEES OR CHARGES- Notwithstanding any other term or condition of Federal student loans of a borrower that are made, insured, or guaranteed after the date of enactment of this section, if the borrower pays the maximum monthly payment amount that is applicable for the borrower for such loans, as determined under this section, on time according to the terms and conditions of such loans, such borrower may not be charged any late fee, underpayment fee, or finance charge for such loans for such month.

`(6) SUBSIDIZED LOANS- In the case of a Federal student loan made, insured, or guaranteed after the date of enactment of this section for which an interest subsidy is paid under section 428(a), if the amount owed each month in interest payments for such loan exceeds the applicable amount for such borrower as determined under this section, and, at the discretion of the Secretary, if the borrower pays such applicable amount, the Federal Government shall pay the difference between such amount owed in interest payments and such amount that has been determined is applicable.

`(b) Study-

`(A) consider the payments required of student borrowers in other countries, including the United Kingdom, Australia, and New Zealand, and compare such payments to the payments required of student borrowers in the United States; and

`(B) be completed and submitted to the appropriate committees of Congress not later than 12 months after the date of enactment of this section.

`(3) ADDITIONAL LIMITS ON MONTHLY REPAYMENTS- If the Secretary determines in the study under paragraph (1) that additional protections are necessary to ensure that monthly payment amounts of student borrowers of Federal student loans made, insured, or guaranteed after the date of enactment of this section are affordable, the Secretary may establish rules based on such study that limits the monthly payment amount for a student borrower to a level that is affordable for such borrower.


(1) DISCHARGE AND CANCELLATION RIGHTS IN CASES OF DISABILITY-

(B) SENSE OF THE CONGRESS- It is the Sense of the Congress that the Department of Education should continue to administer the discharge and cancellation right provisions of the Higher Education Act of 1965 amended in subparagraph (A) in such a way as to prevent fraud and abuse.

(A) SENSE OF THE CONGRESS- It is the Sense of the Congress that the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (Public Law 109-8) affords sufficient protections to prevent fraud and abuse in the carefully regulated discharge of student loans in bankruptcy.

SEC. 7. A RIGHT FOR INTEREST RATES AND FEES TO BE REASONABLE.

(a) In General- Part I of title IV of the Higher Education Act of 1965, as added by section 5 and amended by section 6, is further amended by adding at the end the following:

`SEC. 499C. A RIGHT FOR INTEREST RATES AND FEES TO BE REASONABLE.

`(a) In General- The Secretary shall conduct a study of the interest rates and fees that are charged of borrowers of private student loans, including--

`(1) the conditions under which the interest rate charged of such a borrower is raised or lowered, including the conditions under which the interest rate is raised on delinquent payments, and the amount and frequency of such interest rate changes;

`(2) the conditions under which fees are charged of such a borrower and frequency of such fees, including fees that are charged as a condition of taking a deferment or forbearance, and the amount and frequency of such fees;

`(3) identifying such practices as described in paragraphs (1) and (2) that are exploitative or unreasonable; and

`(4) determining what remedies exist for such practices identified in paragraph (3).


`© Cap on Total Charges-

`(1) IN GENERAL- The Department shall set a cap on the maximum total amount that can be charged of a borrower on a Federal student loan, including all interest and fees, as a percentage of the original loan balance, over a period of 10 years, 15 years, and 20 years.

`(2) LEVEL OF CAP- The cap set under paragraph (1) shall be set--

`(A) at the minimum level beyond which additional amount charged on a loan is unreasonable or exploitative; and

`(B) for each time period, at a level that is higher than the amount the borrower, who makes regularly scheduled payments in accordance with a standard repayment plan, currently pays over such time period.'.

(b) Conforming Amendments-

(1) LOANS PAID OFF THROUGH CONSOLIDATION- Section 428©(6)(B) of the Higher Education Act of 1965 (20 U.S.C. 1078©(6)(B)) is amended--

(A) by striking clause (i) and inserting the following:

`(i) on or after October 1, 2007, not charge the borrower collection costs in excess of the amount provided in section 499C(b)(1)(A); and'; and

(B) in clause (ii), by striking `clause (i)(I)' and inserting `clause (i)'.

(2) REHABILITATED LOANS- Section 428F(a)(1)© of the Higher Education Act of 1965 (20 U.S.C. 1078-6(a)(1)©) is amended by striking `not to exceed' and all that follows through the period and inserting `not to exceed the amount provided in section 499C(b)(1)(B).'.

`SEC. 499D. A RIGHT TO NOT BE EXPLOITED.

`(b) Sense of the Congress- It is the sense of the Congress that the Secretary should enforce the rights of borrowers of private student loans and Federal student loans to raise claims and defenses related to the actions of for-profit institutions of higher education against lenders from which the borrowers borrowed money to attend such institutions, including the Federal Trade Commission Rule.