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| Public Act 102-0583
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| HB2746 Enrolled | LRB102 14627 JLS 19980 b |
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AN ACT concerning education.
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Be it enacted by the People of the State of Illinois,
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represented in the General Assembly:
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Section 1. Short title. This Act may be cited as the Know |
Before You Owe Private Education Loan Act.
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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 |
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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 |
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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.
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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 |
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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 |
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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 |
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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.
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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 |
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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 |
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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 |
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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 |
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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 |
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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.
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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.
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Section 99. Effective date. This Act takes effect upon |
becoming law.
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