Bill Text: IL HB2746 | 2021-2022 | 102nd General Assembly | Enrolled

NOTE: There are more recent revisions of this legislation. Read Latest Draft

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Bill Title: Creates the Know Before You Owe Private Education Loan Act. Requires private educational lenders to obtain from the relevant institution of higher education at which the borrower will use the loan proceeds certifications regarding cost, enrollment status of the borrower, and financial assistance available to the borrower. Provides that private educational lenders must file reports with the Department of Financial and Professional Regulation and the Student Loan Ombudsman. Provides that loan statements must be provided not less frequently than quarterly. Requires institutions of higher education to certify compliance with provisions of the Act to the Board of Higher Education or Illinois Community College Board as a condition to operate. Defines terms. Effective immediately.

Spectrum: Moderate Partisan Bill (Democrat 46-8)

Status: (Passed) 2021-08-26 - Public Act . . . . . . . . . 102-0583 [HB2746 Detail]

Download: Illinois-2021-HB2746-Enrolled.html

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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

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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.
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.
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.
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.