Full Text of HB2746 102nd General Assembly
HB2746enr 102ND GENERAL ASSEMBLY |
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| 1 | | AN ACT concerning education.
| 2 | | Be it enacted by the People of the State of Illinois,
| 3 | | represented in the General Assembly:
| 4 | | Section 1. Short title. This Act may be cited as the Know | 5 | | Before You Owe Private Education Loan Act. | 6 | | Section 5. Definitions. As used in this Act: | 7 | | "Annual percentage rate" means the percentage rate | 8 | | calculated according to the Federal
Reserve Board's | 9 | | methodology as set forth under Regulation Z, 12 CFR Part 1026. | 10 | | "Income share agreement" means an agreement under which a | 11 | | borrower commits to pay a percentage of his or her future | 12 | | income in exchange for money, payments, or credits applied to | 13 | | or on behalf of a borrower. An income share agreement | 14 | | constitutes a loan and debt within the meaning of this Act. | 15 | | "Income share agreement provider" means: | 16 | | (1) a person that provides money, payments, or credits | 17 | | to or on behalf of a borrower pursuant to the terms of an | 18 | | income share agreement; or | 19 | | (2) any other person engaged in the business of | 20 | | soliciting, making, funding, or extending
income share | 21 | | agreements. | 22 | | "Institution of higher education" includes, but is not | 23 | | limited to, institutions falling under the Private Business |
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| 1 | | and Vocational Schools Act of 2012, the Private College Act, | 2 | | and public institutions of higher education as defined in | 3 | | Section 1 of the Board of Higher Education Act. "Institution | 4 | | of higher education" also includes a person engaged in the | 5 | | business of providing postsecondary education, via | 6 | | correspondence, online, or in this State, to a person located | 7 | | in this State, regardless of whether the person has obtained | 8 | | authorization from the Illinois Board of Higher Education to | 9 | | operate in this State or is accredited. | 10 | | "Private educational lender" and "private education loan" | 11 | | have the meanings ascribed to the terms in Section 140 of the | 12 | | Truth in Lending Act (15 U.S.C. 1650). In addition, "private | 13 | | educational lender" includes an income share agreement | 14 | | provider and a student financing company and "private | 15 | | education loan" includes an income share agreement and student | 16 | | financing. | 17 | | "Student financing company" means a person engaged in the | 18 | | business of securing, making, or extending student financing. | 19 | | "Student financing company" does not include the following | 20 | | persons, only to the extent that State regulation is preempted | 21 | | by federal law: | 22 | | (1) a federally chartered bank, savings bank, savings | 23 | | and loan association, or credit union; | 24 | | (2) a wholly owned subsidiary of a federally chartered | 25 | | bank or credit union; and | 26 | | (3) an operating subsidiary where each owner of the |
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| 1 | | operating subsidiary is wholly owned by the same federally | 2 | | chartered bank or credit union. | 3 | | "Student financing" means an extension of credit that: | 4 | | (1) is not made, insured, or guaranteed under Title IV | 5 | | of the Higher Education Act of 1965 (20 U.S.C. 1070 et | 6 | | seq.); | 7 | | (2) is extended to a consumer expressly, in whole or | 8 | | in part, for postsecondary educational expenses, | 9 | | regardless of whether the extension of credit is provided | 10 | | by the institution of higher education that the student | 11 | | attends; | 12 | | (3) does not include a private education loan; | 13 | | (4) does not include an income share agreement; and | 14 | | (5) does not include a loan that is secured by real | 15 | | property or a dwelling. | 16 | | Section 10. Institutional certification required. | 17 | | (a) In general. Except as provided in subsection (b) of | 18 | | this Section, before a private educational lender may disburse | 19 | | any funds with respect to a private education loan described | 20 | | in this Act, the private educational lender shall obtain from | 21 | | the relevant institution of higher education where such loan | 22 | | is to be used on the behalf of the borrower, such institution's | 23 | | certification of: | 24 | | (1) the enrollment status of the borrower; | 25 | | (2) the borrower's cost of attendance at the |
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| 1 | | institution as determined by the institution under Title | 2 | | IV, Part F, of the Higher Education Act of 1965 as amended; | 3 | | and | 4 | | (3) the difference between: | 5 | | (A) such cost of attendance; and | 6 | | (B) the borrower's estimated financial assistance, | 7 | | including such assistance received under Title IV of | 8 | | the Higher Education Act of 1965 (20 U.S.C. 1070 et | 9 | | seq.) and other financial assistance known to the | 10 | | institution, as applicable. | 11 | | (b) Notwithstanding subsection (a), a private educational | 12 | | lender may disburse funds with respect to a private education | 13 | | loan described in this subsection without obtaining the | 14 | | institution's certification if the institution fails to | 15 | | provide the certification within 15 business days of the | 16 | | private educational lender's request for the certification if | 17 | | the private educational lender has received: | 18 | | (1) notification of the institution's refusal to | 19 | | certify the request; or | 20 | | (2) notification that the institution has received the | 21 | | request for certification and will need additional time to | 22 | | comply with the certification request. | 23 | | (c) Loans disbursed without certification. If a private | 24 | | educational lender disburses funds without obtaining the | 25 | | certification as described in subsection (b), the private | 26 | | educational lender shall report the disbursement of the funds |
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| 1 | | in a manner determined by the Student Loan Ombudsman. | 2 | | (d) Notification of loans disbursed without certification. | 3 | | On or before the date a private educational lender issues any | 4 | | funds with respect to a private education loan described in | 5 | | this Section, the private educational lender shall notify the | 6 | | relevant institution of higher education, in writing, of the | 7 | | amount of the extension of credit and the borrower on whose | 8 | | behalf credit is extended. | 9 | | (e) Annual report. A private educational lender that | 10 | | disburses funds with respect to a private education loan | 11 | | described in this Section shall prepare and submit an annual | 12 | | report to the Department of Financial and Professional | 13 | | Regulation and the Student Loan Ombudsman containing the | 14 | | required information about private education loans to be | 15 | | determined by the Student Loan Ombudsman. Such a report shall | 16 | | include, at a minimum, the following information about private | 17 | | education loans described in this Section, including any | 18 | | private education loans disbursed without certification: | 19 | | (A) a list of all institutions of higher education at | 20 | | which a private educational lender disburses funds with | 21 | | respect to a private education loan described in this | 22 | | Section; | 23 | | (B) the volume of private education loans described in | 24 | | this Section made annually by a private educational | 25 | | lender; | 26 | | (C) the volume of private education loans described in |
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| 1 | | this Section made annually at each school identified under | 2 | | paragraph (A); | 3 | | (D) the historical lifetime default rate for borrowers | 4 | | obtaining a private education loan described in this | 5 | | Section from the private educational lender; and | 6 | | (E) a copy of each model or template promissory note, | 7 | | agreement, contract or other instrument used by a private | 8 | | educational lender during the previous year to | 9 | | substantiate that a private education loan described in | 10 | | this Section has been extended to the borrower or that a | 11 | | borrower owes a debt to the private educational lender. | 12 | | (f) Annual report exemption. A private educational | 13 | | lender that funds 10 or fewer new private education loans | 14 | | in a calendar year shall be exempt from submitting the | 15 | | annual report for that year. Any lender claiming this | 16 | | exemption shall submit a statement to the Department of | 17 | | Financial and Professional Regulation and the Student Loan | 18 | | Ombudsman certifying the number of private education loans | 19 | | made in that calendar year. | 20 | | Section 15. Provision of information. | 21 | | (a) Provision of loan statement to borrowers. | 22 | | (1) Loan statement. A private educational lender that | 23 | | disburses any funds with respect to a private education | 24 | | loan described in this Section shall send loan statements, | 25 | | to the borrowers of those funds not less than once every 3 |
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| 1 | | months during the time that the borrower is enrolled at an | 2 | | institution of higher education. | 3 | | (2) Contents of statements for income share | 4 | | agreements. Each statement described in
subparagraph (1) | 5 | | with respect to income share agreements, shall: | 6 | | (A) report the consumer's total amounts financed | 7 | | under each income share
agreement; | 8 | | (B) report the percentage of income payable under | 9 | | each income share agreement; | 10 | | (C) report the maximum number of monthly payments | 11 | | required to be paid under
each income share agreement; | 12 | | (D) report the maximum amount payable under each | 13 | | income share agreement; | 14 | | (E) report the maximum duration of each income | 15 | | share agreement; | 16 | | (F) report the minimum annual income above which | 17 | | payments are required under
each income share | 18 | | agreement; and | 19 | | (G) report the annual percentage rate for each | 20 | | income share agreement at the
minimum annual income | 21 | | above which payments are required and at $10,000 | 22 | | income
increments thereafter up to the annual income | 23 | | where the maximum number of monthly
payments results | 24 | | in the maximum amount payable. | 25 | | (3) Contents of all other loan statements. Each | 26 | | statement described in subparagraph (1) that does not fall |
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| 1 | | under subparagraph (2) shall: | 2 | | (A) report the borrower's total remaining debt to | 3 | | the private educational lender, including accrued but | 4 | | unpaid interest and capitalized interest; | 5 | | (B) report any debt increases since the last | 6 | | statement; and | 7 | | (C) list the current annual percentage rate for | 8 | | each loan. | 9 | | (b) Certification of exhaustion of federal student loan | 10 | | funds to private educational lender. Upon the request of a | 11 | | private educational lender, acting in connection with an | 12 | | application initiated by a borrower for a private education | 13 | | loan in accordance with Section 5, the institution of higher | 14 | | education shall within 15 days of receipt of the request | 15 | | provide certification to such private educational lender: | 16 | | (1) that the borrower who initiated the application | 17 | | for the private education loan, or on whose behalf the | 18 | | application was initiated, is enrolled or is scheduled to | 19 | | enroll at the institution of higher education; | 20 | | (2) of the borrower's cost of attendance at the | 21 | | institution of higher education as determined under | 22 | | paragraph (2) of subsection (a) of this Section; | 23 | | (3) of the difference between: | 24 | | (A) the cost of attendance at the institution of | 25 | | higher education; and | 26 | | (B) the borrower's estimated financial assistance |
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| 1 | | received under the federal Higher Education Act of | 2 | | 1965 and other assistance known to the institution of | 3 | | higher education, as applicable; | 4 | | (4) that the institution of higher education has | 5 | | received the request for certification and will need | 6 | | additional time to comply with the certification request; | 7 | | and | 8 | | (5) if applicable, that the institution of higher | 9 | | education is refusing to certify the private education | 10 | | loan. | 11 | | (c) Certification of exhaustion of federal student loan | 12 | | funds to borrower. With respect to a certification request | 13 | | described under subsection (b), and prior to providing such | 14 | | certification in paragraph (1) of subsection (b) or providing | 15 | | notice of the refusal to provide certification under paragraph | 16 | | (5) of subsection (b), the institution of higher education | 17 | | shall: | 18 | | (1) determine whether the borrower who initiated the | 19 | | application for the private education loan, or on whose | 20 | | behalf the application was initiated, has applied for and | 21 | | exhausted the federal financial assistance available to | 22 | | such borrower under the federal Higher Education Act of | 23 | | 1965 and inform the borrower accordingly; | 24 | | (2) provide the borrower whose loan application has | 25 | | prompted the certification request by a private | 26 | | educational lender, as described in paragraph (1) of |
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| 1 | | subsection (b), with the following information and | 2 | | disclosures: | 3 | | (A) the amount of additional federal student | 4 | | assistance for which the borrower is eligible and the | 5 | | advantages of federal loans under the federal Higher | 6 | | Education Act of 1965, including disclosure of income | 7 | | driven repayment options, fixed interest rates, | 8 | | deferments, flexible repayment options, loan | 9 | | forgiveness programs, additional protections, and the | 10 | | higher student loan limits for dependent borrowers | 11 | | whose parents are not eligible for a Federal Direct | 12 | | PLUS Loan; | 13 | | (B) the borrower's ability to select a private | 14 | | educational lender of the borrower's choice; | 15 | | (C) the impact of a proposed private education | 16 | | loan on the borrower's potential eligibility for other | 17 | | financial assistance, including federal financial | 18 | | assistance under the federal Higher Education Act; and | 19 | | (D) the borrower's right to accept or reject a | 20 | | private education loan within the 30-day period | 21 | | following a private educational lender's approval of a | 22 | | borrower's application and the borrower's 3-day right | 23 | | to cancel period; and | 24 | | (3) Any institution of higher education that is also | 25 | | acting as a private educational lender shall provide the | 26 | | certification of exhaustion of federal student loan funds |
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| 1 | | described in paragraphs (1) and (2) of this subsection (c) | 2 | | to the borrower prior to disbursing funds to the borrower. | 3 | | Any institution of higher education that is not eligible | 4 | | for funding under Title IV of the federal Higher
Education | 5 | | Act of 1965 is not required to provide this certification | 6 | | to the borrower. | 7 | | Section 20. Annual certification and maintenance of | 8 | | approval. | 9 | | (a) Certification. An institution of higher education must | 10 | | certify annually to the Board of Higher Education, and the | 11 | | Illinois Community College Board where applicable, whether it | 12 | | has made all certifications required under subsections (b) and | 13 | | (c) of Section 15. | 14 | | (b) Maintenance of approval. In each instance where the | 15 | | Board of Higher Education or the Illinois Community College | 16 | | Board provides the institution of higher education with | 17 | | approval to operate, the certification provided pursuant to | 18 | | this Section shall be required for the maintenance of approval | 19 | | to operate.
| 20 | | Section 99. Effective date. This Act takes effect upon | 21 | | becoming law.
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