[Congressional Bills 117th Congress]
[From the U.S. Government Publishing Office]
[S. 5065 Introduced in Senate (IS)]
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117th CONGRESS
2d Session
S. 5065
To provide for institutional risk-sharing in the Federal student loan
programs.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
September 29, 2022
Mr. Reed (for himself, Ms. Warren, and Mr. Durbin) introduced the
following bill; which was read twice and referred to the Committee on
Health, Education, Labor, and Pensions
_______________________________________________________________________
A BILL
To provide for institutional risk-sharing in the Federal student loan
programs.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Protect Student Borrowers Act of
2022''.
SEC. 2. PURPOSE.
The purpose of this Act is to protect student loan borrowers and
taxpayers by requiring institutions of higher education to assume some
of the costs of default for student loans under part D of title IV of
the Higher Education Act of 1965 (20 U.S.C. 1087a et seq.).
SEC. 3. INSTITUTIONAL REBATES TO THE DEPARTMENT OF EDUCATION FOR
DEFAULTED LOANS.
Section 454 of the Higher Education Act of 1964 (20 U.S.C. 1087d)
is amended--
(1) in subsection (a)--
(A) in paragraph (5), by striking ``and'' after the
semicolon;
(B) in paragraph (6), by striking the period at the
end and inserting ``; and''; and
(C) by adding at the end the following:
``(7) provide that the institution accepts the
institutional risk-sharing requirements under subsection (d),
if applicable.''; and
(2) by adding at the end the following:
``(d) Institutional Risk-Sharing for Student Loan Defaults.--
``(1) In general.--Subject to paragraph (3), each
institution of higher education participating in the direct
student loan program under this part for a fiscal year that has
a rate of participation in such program for all students
enrolled at that institution for such fiscal year that is 33
percent or higher or a cohort repayment rate of 50 percent or
lower shall remit, at such times as the Secretary may specify,
a risk-sharing payment based on a percentage of the volume of
student loans under this part that are in default, as
determined under paragraph (2).
``(2) Determination of risk-sharing payments.--Subject to
paragraph (3), with respect to each fiscal year, an institution
of higher education described in paragraph (1) that has a
cohort default rate (as defined in section 435(m))--
``(A) that is 20 percent or higher for the most
recent fiscal year for which data are available, shall
pay to the Secretary for the fiscal year an amount that
is equal to 20 percent of the total amount owed on
loans by borrowers from the covered cohort that are in
default;
``(B) that is lower than 20 percent but not lower
than 15 percent for the most recent fiscal year for
which data are available, shall pay to the Secretary
for the fiscal year an amount that is equal to 15
percent of the total amount owed on loans by borrowers
from the covered cohort that are in default;
``(C) that is lower than 15 percent but not lower
than 10 percent for the most recent fiscal year for
which data are available, shall pay to the Secretary
for the fiscal year an amount that is equal to 10
percent of the total amount owed on loans by borrowers
from the covered cohort that are in default; or
``(D) that is lower than 10 percent but not lower
than 5 percent for the most recent fiscal year for
which data are available, shall pay to the Secretary
for the fiscal year an amount that is equal to 5
percent of the total amount owed on loans by borrowers
from the covered cohort that are in default.
``(3) Waiver and reduced risk-sharing payments.--
``(A) Waiver.--The Secretary shall waive the risk-
sharing payments described in paragraph (1) for an
institution described in paragraph (2)(D) that meets
the requirements of this paragraph.
``(B) Reduced risk-sharing payments.--If an
institution has in place a student loan management plan
described in subparagraph (D) that is approved by the
Secretary, the Secretary shall reduce the total annual
amount of risk-sharing payments as follows:
``(i) With respect to an institution with a
cohort default rate described in paragraph
(2)(A), the risk-sharing payment shall be in an
amount that is equal to 15 percent of the total
amount owed on loans by borrowers from the
covered cohort that are in default.
``(ii) With respect to an institution with
a cohort default rate described in paragraph
(2)(B), the risk-sharing payment shall be in an
amount that is equal to 10 percent of the total
amount owed on loans by borrowers from the
covered cohort that are in default.
``(iii) With respect to an institution with
a cohort default rate described in paragraph
(2)(C), the risk-sharing payment shall be in an
amount that is equal to 5 percent of the total
amount owed on loans by borrowers from the
covered cohort that are in default.
``(C) Continuation of waiver or reduced payments.--
An institution that receives a waiver under
subparagraph (A) or a reduced risk-sharing payment
under subparagraph (B) may receive a waiver or reduced
payment for a subsequent fiscal year only if the
Secretary determines that the institution is making
satisfactory progress in carrying out the student loan
management plan described in subparagraph (D),
including evidence of the effectiveness of the
individualized financial aid counseling for students.
``(D) Student loan management plan.--An institution
that seeks a waiver or reduction of its risk-sharing
payment, shall develop and carry out a student loan
management plan that shall include an analysis of the
risk factors correlated with higher student loan
defaults that are present at the institution and
actions that the institution will take to address such
factors. Such plan shall include individualized
financial aid counseling for students and strategies to
minimize student loan default and delinquency.
``(E) Waiver or reduction for certain
institutions.--In addition to the other risk-sharing
payment waivers and reductions described in this
paragraph, the Secretary may waive or reduce risk-
sharing payments if--
``(i) an institution is eligible under--
``(I) part A or part B of title
III; or
``(II) title V; and
``(ii) the Secretary determines that--
``(I) the institution is making
satisfactory progress in carrying out
the institution's student loan
management plan described under
subparagraph (D); and
``(II) granting a waiver or
reduction of risk-sharing payments
would be in the best financial interest
of students at the institution.
``(4) Prohibition.--An institution of higher education
shall not deny admission or financial aid to a student who
otherwise meets the admission requirements of the institution
based on such student having a risk factor associated with
higher student loan default rates, such as those described in
section 456(c)(1)(C).
``(5) Fund for the deposit of risk-sharing payments.--
``(A) In general.--There is established in the
Treasury of the United States a separate account for
the deposit of risk-sharing payments collected under
this subsection for the purpose of reducing student
loan debt, delinquency, and default. The Secretary
shall deposit any payments collected pursuant to this
subsection into such fund.
``(B) Use of funds.--Of the amounts in the fund
described in subparagraph (A), for each fiscal year--
``(i) not more than 50 percent of such
amounts shall be made available to the
Secretary to enter into contracts or
cooperative agreements for delinquency and
default prevention or rehabilitation under
section 456(c); and
``(ii) the Secretary shall reserve the
remainder of such amounts for a Supplemental
Federal Grant fund that shall be used to award
grants to students--
``(I) who are eligible for a
Federal Pell Grant; and
``(II) who attend an institution--
``(aa) that participates in
the direct student loan program
under this part;
``(bb) in which not less
than 33 percent of the students
enrolled at the institution
have received a Federal Pell
Grant; and
``(cc) that is not subject
to the risk-sharing payments
under this subsection.
``(C) Supplemental federal grant.--Eligibility for
a Federal Pell Grant, including the duration of
eligibility and the amount of a Federal Pell Grant,
shall not be affected by receipt of a Supplemental
Federal Grant.
``(6) Applicability.--The Secretary shall carry out this
subsection beginning with the cohort default rate for the 2024
cohort and the repayment rate for the 2024 cohort. The 2024
cohort shall include current and former students who enter
repayment in fiscal year 2024.
``(7) Report to congress.--The Secretary shall report on an
annual basis to the Committee on Health, Education, Labor, and
Pensions of the Senate and the Committee on Education and Labor
of the House of Representatives the following information:
``(A) A list of institutions that have been subject
to risk-sharing payments in the previous year.
``(B) The required risk-sharing payment from such
institutions.
``(C) The amount of risk-sharing payments collected
from such institutions.
``(D) A list of the institutions that have received
waivers from the risk-sharing payment and the reason
for such waiver.
``(E) A list of the institutions that have received
reductions in the required risk-sharing payment.
``(F) The use of funds deposited from risk-sharing
payments, including--
``(i) the amount reserved for contracts or
cooperative agreements for delinquency and
default prevention or rehabilitation;
``(ii) a list of contracts or cooperative
agreements entered into for delinquency and
default prevention or rehabilitation;
``(iii) information on the performance of
such contracts or cooperative agreements;
``(iv) the amount reserved for the Federal
Pell Grant program; and
``(v) a list of institutions for which
students in attendance at the institution are
eligible for the increased maximum Federal Pell
Grant under paragraph (5)(B)(ii) and the amount
of such increase.
``(8) Definitions.--In this subsection:
``(A) Covered cohort.--In this paragraph, the term
`covered cohort' means the cohort with respect to which
the cohort default rate was calculated.
``(B) Repayment rate.--The term `repayment rate'
means, for any fiscal year, the percentage of student
and parent borrowers who have Federal student loans for
attendance at the institution who entered repayment on
those loans in the second preceding fiscal year who
have paid at least $1 of the principle balance of the
borrower's Federal student loans received for
attendance at the institution within 3 years of
entering repayment. In the case of a loan for a student
who has attended and borrowed at more than one
institution, the borrower (and such borrower's
subsequent repayment or default) is attributed to each
institution for attendance at which the borrower
received a loan that entered repayment in the fiscal
year.''.
SEC. 4. CONTRACTS AND COOPERATIVE AGREEMENTS.
Section 456 of the Higher Education Act of 1965 (20 U.S.C. 1087f)
is amended by adding at the end the following:
``(c) Contracts and Cooperative Agreements for Delinquency and
Default Prevention and for Default Rehabilitation.--The Secretary may
enter into contracts or cooperative agreements for--
``(1) statewide or institutionally based programs for the
prevention of Federal student loan delinquency and default at
institutions of higher education that--
``(A) have a high cohort default rate as defined
under section 435(m);
``(B) have a low repayment rate (as defined in
section 454(d)); or
``(C) serve large numbers or percentages of student
loan borrowers who have a risk factor associated with
higher default rates on Federal student loans under
this title, such as coming from a low-income family,
being a first generation postsecondary education
student, not having a secondary school diploma, or
having previously defaulted on, and rehabilitated, a
loan made under this title; and
``(2) increasing the number of borrowers who successfully
repay their loans.''.
SEC. 5. FINANCIAL RESPONSIBILITY.
Section 498(c)(1) of the Higher Education Act of 1965 (20 U.S.C.
1099c(c)(1)) is amended by striking subparagraph (C) and inserting the
following:
``(C) to meet all of its financial obligations,
including institutional risk-sharing payments, refunds
of institutional charges, and repayments to the
Secretary for liabilities and debts incurred in
programs administered by the Secretary.''.
SEC. 6. COHORT DEFAULT RATE, REPAYMENT RATE, AND OTHER AMENDMENTS.
(a) Requirements for Disbursement of Student Loans.--Section 428G
of the Higher Education Act of 1965 (20 U.S.C. 1078-7) is amended--
(1) in subsection (a), by striking paragraph (4) and
inserting the following:
``(4) Amendments to the special rule.--
``(A) Prior to fiscal year 2024.--Beginning on
October 1, 2011, and ending on September 30, 2023, the
special rule under paragraph (3) shall be applied by
substituting `15 percent' for `10 percent'.
``(B) Beginning for fiscal year 2024.--Beginning on
October 1, 2023, the special rule under paragraph (3)
shall be applied by substituting `5 percent' for `10
percent'.''; and
(2) in subsection (b), by striking paragraph (3) and
inserting the following:
``(3) Amendment to cohort default rate exemption.--
``(A) Prior to fiscal year 2024.--Beginning on
October 1, 2011, and ending on September 30, 2023, the
exemption to the requirements of paragraph (1) in the
second sentence of such paragraph shall be applied by
substituting `15 percent' for `10 percent'.
``(B) Beginning for fiscal year 2024.--Beginning on
October 1, 2023, the exemption to the requirements of
paragraph (1) in the second sentence of such paragraph
shall be applied by substituting `5 percent' for `10
percent'.''.
(b) Default Management Plan for Program Participation Agreements.--
Section 487(a)(14)(C) of the Higher Education Act of 1965 (20 U.S.C.
1094(a)(14)(C)) is amended by striking ``10 percent'' and inserting ``5
percent'' each place the term appears.
(c) Program Review and Data.--Section 498A(a)(2)(A) of the Higher
Education Act of 1965 (20 U.S.C. 1099c-1(a)(2)(A)) is amended by
striking ``in excess of 25 percent'' and inserting ``in excess of 20
percent''.
(d) Definitions for Student Loan Insurance Program.--Section 435 of
the Higher Education Act of 1965 (20 U.S.C. 1085) is amended--
(1) in subsection (a)(2)(B)--
(A) in clause (iii), by striking ``and'' after the
semicolon;
(B) in clause (iv), by striking ``and any
succeeding fiscal year.'' and inserting ``through
fiscal year 2023; and''; and
(C) by adding at the end the following:
``(v) 20 percent for fiscal year 2024 and
any succeeding fiscal year.''; and
(2) in subsection (m)(1)--
(A) in subparagraph (A), in the first sentence, by
inserting ``and beginning for the cohort that enters
repayment in 2024, including borrowers who enter
repayment on Federal Direct PLUS Loans (including for
student and parent borrowers) received for attendance
at the institution'' after ``loans under section 428,
428A, or 428H, received for attendance at the
institution,''; and
(B) by adding at the end the following:
``(D) Beginning for the cohort that enters
repayment in 2024, references in this subsection to a
student or former student shall be considered to
include a parent who is a borrower of a Federal Direct
PLUS Loan.''.
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