Illinois General Assembly - Full Text of HB2746
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Full Text of HB2746  102nd General Assembly




HB2746 EnrolledLRB102 14627 JLS 19980 b

1    AN ACT concerning education.
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
4    Section 1. Short title. This Act may be cited as the Know
5Before You Owe Private Education Loan Act.
6    Section 5. Definitions. As used in this Act:
7    "Annual percentage rate" means the percentage rate
8calculated according to the Federal Reserve Board's
9methodology as set forth under Regulation Z, 12 CFR Part 1026.
10    "Income share agreement" means an agreement under which a
11borrower commits to pay a percentage of his or her future
12income in exchange for money, payments, or credits applied to
13or on behalf of a borrower. An income share agreement
14constitutes 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
23limited to, institutions falling under the Private Business



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1and Vocational Schools Act of 2012, the Private College Act,
2and public institutions of higher education as defined in
3Section 1 of the Board of Higher Education Act. "Institution
4of higher education" also includes a person engaged in the
5business of providing postsecondary education, via
6correspondence, online, or in this State, to a person located
7in this State, regardless of whether the person has obtained
8authorization from the Illinois Board of Higher Education to
9operate in this State or is accredited.
10    "Private educational lender" and "private education loan"
11have the meanings ascribed to the terms in Section 140 of the
12Truth in Lending Act (15 U.S.C. 1650). In addition, "private
13educational lender" includes an income share agreement
14provider and a student financing company and "private
15education loan" includes an income share agreement and student
17    "Student financing company" means a person engaged in the
18business of securing, making, or extending student financing.
19"Student financing company" does not include the following
20persons, only to the extent that State regulation is preempted
21by 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
18this Section, before a private educational lender may disburse
19any funds with respect to a private education loan described
20in this Act, the private educational lender shall obtain from
21the relevant institution of higher education where such loan
22is to be used on the behalf of the borrower, such institution's
23certification 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
12lender may disburse funds with respect to a private education
13loan described in this subsection without obtaining the
14institution's certification if the institution fails to
15provide the certification within 15 business days of the
16private educational lender's request for the certification if
17the 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
24educational lender disburses funds without obtaining the
25certification as described in subsection (b), the private
26educational lender shall report the disbursement of the funds



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1in a manner determined by the Student Loan Ombudsman.
2    (d) Notification of loans disbursed without certification.
3On or before the date a private educational lender issues any
4funds with respect to a private education loan described in
5this Section, the private educational lender shall notify the
6relevant institution of higher education, in writing, of the
7amount of the extension of credit and the borrower on whose
8behalf credit is extended.
9    (e) Annual report. A private educational lender that
10disburses funds with respect to a private education loan
11described in this Section shall prepare and submit an annual
12report to the Department of Financial and Professional
13Regulation and the Student Loan Ombudsman containing the
14required information about private education loans to be
15determined by the Student Loan Ombudsman. Such a report shall
16include, at a minimum, the following information about private
17education loans described in this Section, including any
18private 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
10funds to private educational lender. Upon the request of a
11private educational lender, acting in connection with an
12application initiated by a borrower for a private education
13loan in accordance with Section 5, the institution of higher
14education shall within 15 days of receipt of the request
15provide 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
12funds to borrower. With respect to a certification request
13described under subsection (b), and prior to providing such
14certification in paragraph (1) of subsection (b) or providing
15notice of the refusal to provide certification under paragraph
16(5) of subsection (b), the institution of higher education
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
9    (a) Certification. An institution of higher education must
10certify annually to the Board of Higher Education, and the
11Illinois Community College Board where applicable, whether it
12has made all certifications required under subsections (b) and
13(c) of Section 15.
14    (b) Maintenance of approval. In each instance where the
15Board of Higher Education or the Illinois Community College
16Board provides the institution of higher education with
17approval to operate, the certification provided pursuant to
18this Section shall be required for the maintenance of approval
19to operate.
20    Section 99. Effective date. This Act takes effect upon
21becoming law.