Bill Text: IL SB0059 | 2023-2024 | 103rd General Assembly | Introduced

---

Bill Title: Amends the Know Before You Owe Private Education Loan Act. Provides that the information regarding loans shall be provided to borrowers and cosigners (instead of just borrowers). Sets forth provisions for cosigner disclosure and notice, cosigner release, cosigner rights, what happens in the event of the bankruptcy or death of a cosigner, the total and permanent disability of a borrower or cosigner, refinancing, and modified or flexible repayment plans. Effective immediately.

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Introduced) 2023-01-20 - Referred to Assignments [SB0059 Detail]

Download: Illinois-2023-SB0059-Introduced.html

---

103RD GENERAL ASSEMBLY State of Illinois 2023 and 2024 SB0059 Introduced 1/20/2023, by Sen. Laura Fine SYNOPSIS AS INTRODUCED:
110 ILCS 983/5
110 ILCS 983/15
110 ILCS 983/25 new
110 ILCS 983/30 new
110 ILCS 983/35 new
110 ILCS 983/40 new
110 ILCS 983/45 new
110 ILCS 983/50 new
Amends the Know Before You Owe Private Education Loan Act. Provides that the information regarding loans shall be provided to borrowers and cosigners (instead of just borrowers). Sets forth provisions for cosigner disclosure and notice, cosigner release, cosigner rights, what happens in the event of the bankruptcy or death of a cosigner, the total and permanent disability of a borrower or cosigner, and refinancing and modified or flexible repayment plans. Effective immediately.
LRB103 03451 RJT 48457 b
A BILL FOR
SB0059 LRB103 03451 RJT 48457 b
AN ACT concerning education.
Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
Section 5. The Know Before You Owe Private Education Loan
Act is amended by changing Sections 5 and 15 and by adding
Sections 25, 30, 35, 40, 45, and 50 as follows:
(110 ILCS 983/5)
Sec. 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.
"Cosigner" means any individual who is liable for the
obligation of another without compensation, regardless of how
the individual is designated in the contract or instrument
with respect to that obligation, including an obligation under
a private education loan extended to consolidate a borrower's
preexisting student loans. The term includes any individual
whose signature is requested, as a condition, to grant credit
or to forbear on collection. The term does not include a spouse
of an individual if the spouse's signature is needed solely to
perfect the security interest in a loan.
"Educational expense" means any expense, in whole or in
part, expressly used to finance postsecondary education,

SB0059 - 2 - LRB103 03451 RJT 48457 b
regardless of whether the debt incurred by a student to pay
that expense is owed to the provider of postsecondary
education whose school, program, or facility the student
attends.
"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
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

SB0059 - 3 - LRB103 03451 RJT 48457 b
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
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,

SB0059 - 4 - LRB103 03451 RJT 48457 b
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.
"Total and permanent disability" means a physical or
mental impairment, disease, or loss of a permanent nature that
prevents employment with or without reasonable accommodation,
with proof of disability being in the form of a declaration
from the United States Social Security Administration, the
Illinois Workers' Compensation Commission, the United States
Department of Defense, or an insurer authorized to transact
business in this State who is providing disability insurance
coverage to a contractor. The term does not include a
condition that has not progressed or been exacerbated or that
the individual did not acquire until after the closing of the
loan agreement. In addition, documentation sufficient to
establish a total and permanent disability for a federal
student loan made pursuant to Title IV of the federal Higher
Education Act of 1965 is sufficient to establish a total and
permanent disability under this Act.
(Source: P.A. 102-583, eff. 8-26-21.)
(110 ILCS 983/15)

SB0059 - 5 - LRB103 03451 RJT 48457 b
Sec. 15. Provision of information.
(a) Provision of loan statement to borrowers and
cosigners.
(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 and cosigners of those funds not less
than once every 3 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

SB0059 - 6 - LRB103 03451 RJT 48457 b
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
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;

SB0059 - 7 - LRB103 03451 RJT 48457 b
(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
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

SB0059 - 8 - LRB103 03451 RJT 48457 b
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 and any cosigners
accordingly;
(2) provide the borrower and any cosigners whose loan
application has prompted the certification request by a
private educational lender, as described in paragraph (1)
of 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

SB0059 - 9 - LRB103 03451 RJT 48457 b
(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
described in paragraphs (1) and (2) of this subsection (c)
to the borrower and any cosigners 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 or any
cosigners.
(Source: P.A. 102-583, eff. 8-26-21; 102-813, eff. 5-13-22.)
(110 ILCS 983/25 new)
Sec. 25. Cosigner disclosure; notice.
(a) Before extending a private education loan that
requires a cosigner, a private educational lender shall
disclose to the cosigner:
(1) how the private education loan obligation will
appear on the cosigner's credit report;
(2) how the cosigner will be notified if the private
education loan becomes delinquent, including how the

SB0059 - 10 - LRB103 03451 RJT 48457 b
cosigner can cure the delinquency in order to avoid
negative credit furnishing and the loss of cosigner
release eligibility; and
(3) eligibility for release of the cosigner's
obligation on the private education loan, including the
number of on-time payments and any other criteria required
to approve the release of the cosigner from the loan
obligation.
(b) For any private education loan that obligates a
cosigner, a private educational lender shall provide the
borrower and the cosigner an annual written notice containing
information about cosigner release, including the
administrative and objective criteria the lender requires to
approve the release of the cosigner from the loan obligation
and the process for applying for cosigner release. If the
borrower has met the applicable payment requirement to be
eligible for cosigner release, the lender shall send the
borrower and the cosigner a written notification by mail, and
by electronic mail if the borrower or cosigner has elected to
receive electronic communications from the lender, informing
the borrower and cosigner that the payments requirement to be
eligible for cosigner release has been met. The notification
must also include information about any additional criteria to
qualify for cosigner release and the procedure to apply for
cosigner release.
(c) A private educational lender shall provide written

SB0059 - 11 - LRB103 03451 RJT 48457 b
notice to a borrower who applies for cosigner release but
whose application is incomplete. The written notice must
include a description of the information needed to consider
the application complete and the date by which the applicant
must furnish the missing information in order to complete the
application.
(d) Within 30 days after a borrower submits a completed
application for cosigner release, the private educational
lender shall send the borrower and cosigner a written notice
that informs the borrower and cosigner whether the lender has
approved or denied the cosigner release application. If the
lender denies a request for cosigner release, the borrower may
request copies of any documents or information used in the
determination, including the credit score threshold used by
the lender, the borrower's credit report, the borrower's
credit score, and any other documents or information specific
to the borrower. The lender shall also provide any adverse
action notices required under applicable federal law if the
denial is based in whole or in part on any information
contained in a credit report.
(e) In response to a written or oral request by the
borrower for cosigner release, a private educational lender
shall provide to the borrower the information described in
subsection (b) of this Section.
(110 ILCS 983/30 new)

SB0059 - 12 - LRB103 03451 RJT 48457 b
Sec. 30. Cosigner release.
(a) A private educational lender may not impose any
restriction that permanently bars a borrower from qualifying
for cosigner release, including restricting the number of
times a borrower may apply for cosigner release.
(b) A private educational lender may not impose any
negative consequences on a borrower or cosigner during the 60
days following the issuance of the notice required pursuant to
subsection (c) of Section 25 or until the lender makes a final
determination about a borrower's cosigner release application,
whichever occurs later. As used in this subsection, "negative
consequences" includes the imposition of additional
eligibility criteria, negative credit reporting, lost
eligibility for cosigner release, late fees, interest
capitalization, or other financial injury.
(c) For any private education loan issued on or after the
effective date of this amendatory Act of the 102nd General
Assembly, a private educational lender may not require proof
of more than 12 consecutive, on-time payments as part of the
criteria for cosigner release. A borrower who has paid the
equivalent of 12 months of principal and interest payments
within any 12-month period is deemed to have satisfied the
consecutive, on-time payment requirement even if the borrower
has not made payments monthly during the 12-month period. If a
borrower or cosigner requests a change in terms that restarts
the count of consecutive, on-time payments required for

SB0059 - 13 - LRB103 03451 RJT 48457 b
cosigner release, the lender shall notify the borrower and
cosigner in writing of the impact of the change and provide the
borrower and cosigner with the right to withdraw or reverse
the request to avoid that impact.
(d) A borrower may request an appeal of a private
educational lender's determination to deny a request for
cosigner release, and the lender shall permit the borrower to
submit additional documentation evidencing the borrower's
ability, willingness, and stability to meet the payment
obligations. The borrower may request that another employee of
the lender review the cosigner release determination.
(e) A private educational lender shall establish and
maintain a comprehensive record management system reasonably
designed to ensure the accuracy, integrity, and completeness
of information about cosigner release applications and to
ensure compliance with applicable State and federal laws. The
system must include the number of cosigner-release
applications received, the approval and denial rate, and the
primary reasons for any denial.
(110 ILCS 983/35 new)
Sec. 35. Cosigner rights.
(a) A private educational lender shall provide a cosigner
with access to all documents or records related to the
cosigned private education loan that are available to the
borrower.

SB0059 - 14 - LRB103 03451 RJT 48457 b
(b) If a private educational lender provides electronic
access to documents and records for a borrower, it shall
provide equivalent electronic access to the cosigner.
(c) Upon the borrower's request, the private educational
lender shall redact the borrower's contact information from
documents and records provided to a cosigner.
(d) A private educational lender may not include in a
private education loan executed on or after the effective date
of this amendatory Act of the 102nd General Assembly a
provision that permits the lender to accelerate payments, in
whole or in part, except upon a payment default. A private
educational lender may not place any loan or account into
default or accelerate a loan for any reason other than payment
default.
(e) A private education loan executed before the effective
date of this amendatory Act of the 102nd General Assembly may
permit the private educational lender to accelerate payments
only if the promissory note or loan agreement explicitly
authorizes an acceleration and only for the reasons stated in
the note or agreement.
(110 ILCS 983/40 new)
Sec. 40. Bankruptcy or death of cosigner.
(a) If a cosigner dies, the private educational lender may
not attempt to collect against the cosigner's estate other
than for payment default.

SB0059 - 15 - LRB103 03451 RJT 48457 b
(b) With regard to the death or bankruptcy of a cosigner,
if a private education loan is not more than 60 days delinquent
at the time the private educational lender is notified of the
cosigner's death or bankruptcy, the lender may not change any
terms or benefits under the promissory note, the repayment
schedule, the repayment terms, or the monthly payment amount
or any other provision associated with the loan.
(110 ILCS 983/45 new)
Sec. 45. Total and permanent disability of a borrower or
cosigner.
(a) For any private education loan issued on or after the
effective date of this amendatory Act of the 102nd General
Assembly, a private educational lender, when notified of the
total and permanent disability of a borrower or cosigner,
shall release the cosigner from the obligations of a cosigner
under the private education loan. The lender may not attempt
to collect a payment from a cosigner following a notification
of total and permanent disability of the borrower or cosigner.
(b) A private educational lender shall be notified of the
total and permanent disability of a borrower and discharge the
liability of the borrower and cosigner on the loan.
(c) After receiving a notification described in subsection
(b) of this Section, the private educational lender may not:
(1) attempt to collect on the outstanding liability of
the borrower or cosigner; or

SB0059 - 16 - LRB103 03451 RJT 48457 b
(2) monitor the disability status of the borrower at
any point after the date of discharge.
(d) A private educational lender shall, within 30 days
after the release of either a cosigner or borrower from the
obligation of a private education loan pursuant to subsection
(a) or (b) of this Section, notify both the borrower and
cosigner of the release.
(e) A private educational lender shall, within 30 days
after receiving notice of the total and permanent disability
of a borrower pursuant to subsection (a) of this Section,
provide the borrower with an option to designate an individual
to have the legal authority to act on behalf of the borrower.
(f) If a cosigner is released from the obligations of a
private education loan pursuant to subsection (a) of this
Section, the private educational lender may not require the
borrower to obtain another cosigner on the loan obligation.
(g) A private educational lender may not declare a default
or accelerate the debt against a borrower on the sole basis of
the release of the cosigner from the loan obligation due to
total and permanent disability pursuant to subsection (a) of
this Section.
(110 ILCS 983/50 new)
Sec. 50. Refinancing; modified or flexible repayment plan
or loan modification.
(a) Before offering a person a private education loan that

SB0059 - 17 - LRB103 03451 RJT 48457 b
is being used to refinance an existing education loan, a
private educational lender shall provide the person with a
disclosure explaining that the benefits and protections
applicable to the existing loan may be lost due to the
refinancing. The disclosure must be provided on a one-page
information sheet in at least 12-point type and must be
written in simple, clear, understandable, and easily readable
language.
(b) A private educational lender shall:
(1) provide on its website a description of any
modified or flexible repayment options offered by the
lender for private education loans;
(2) establish policies and procedures and implement
modified or flexible repayment options consistently in
order to facilitate the evaluation of such option
requests, including providing accurate information
regarding any options that may be available to the
borrower through the promissory note or that may have been
marketed to the borrower through marketing materials; and
(3) consistently present and offer private education
loan modified or flexible repayment options to borrowers
with similar financial circumstances if the lender offers
such repayment options.
(c) A private educational lender may not place a loan or
account into default or accelerate a loan while a borrower is
seeking a loan modification or enrollment in a modified or

SB0059 - 18 - LRB103 03451 RJT 48457 b
flexible repayment plan, except that a private educational
lender may place a loan or account into default or accelerate a
loan for payment default 90 days or more after the borrower's
default.
Section 99. Effective date. This Act takes effect upon
becoming law.