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H.R. 1635: Empowering Students Through Enhanced Financial Counseling Act

H.R. 1635 amends the loan counseling requirements under the Higher Education Act of 1965 to promote greater financial literacy in the following ways:

  • Ensuring borrowers who participate in the federal loan program receive interactive counseling each year that reflects their individual borrowing situation before they accept their loan;
  • Providing awareness about the financial obligations students and parents are accumulating by requiring borrowers to consent each year before receiving federal student loans;
  • Informing low-income students about the terms and conditions of the Pell Grant program through annual counseling that will be provided to all grant recipients, and;
  • Directing the Secretary of Education to maintain and disseminate a consumer-tested, online counseling tool that institutions can use to provide annual loan counseling, exit counseling, and annual Pell Grant counseling.
Last updated Sep 9, 2018. Source: Republican Policy Committee

The summary below was written by the Congressional Research Service, which is a nonpartisan division of the Library of Congress, and was published on Mar 20, 2017.

Empowering Students Through Enhanced Financial Counseling Act

This bill amends title IV (Student Assistance) of the Higher Education Act of 1965 to modify loan counseling requirements for an institution of higher education (IHE) that participates in federal student aid programs.

Currently, an IHE must provide entrance counseling to a student who is a first-time federal student loan borrower. This bill replaces required entrance counseling with required annual counseling. Also, it expands the required recipients of such annual counseling to include, in addition to student borrowers, Federal Pell Grant recipients and parent PLUS Loan borrowers.

Each annual counseling recipient must receive comprehensive information on the terms, conditions, and responsibilities with respect to a grant or loan and general information on a typical student budget, the right to request an annual credit report, average income and employment data, and financial management resources. Additionally, the bill revises, expands, or establishes specific annual counseling information requirements for student borrowers, Pell Grant recipients, or parent PLUS Loan borrowers.

The bill revises and expands exit counseling information requirements to include an outstanding loan balance summary, the anticipated monthly payments under standard and income-based repayment plans, an explanation of the grace period preceding repayment, the option to pay accrued interest before it capitalizes, the right to request an annual credit report, and loan servicer contact information.

It directs the Department of Education to maintain a consumer-tested online counseling tool that provides annual and exit counseling.

The Institute of Education Sciences must study the impact and effectiveness of exit counseling, annual counseling, and the online counseling tool.