H. R. 2874
IN THE HOUSE OF REPRESENTATIVES
April 28, 2021
Mr. Cleaver (for himself and Mr. Banks) introduced the following bill; which was referred to the Committee on Education and Labor
To amend the Higher Education Act of 1965 to direct the Secretary of Education to develop a plain language disclosure form for borrowers of Federal student loans, and for other purposes.
This Act may be cited as the
Student Loan Disclosure Modernization Act.
Section 433(a) of the Higher Education Act of 1965 is amended—
in paragraph (4), by striking
the origination fee and and inserting
finance charges, the origination fee, and;
by redesignating paragraphs (6) through (19) as paragraphs (7) through (20), respectively; and
by inserting after paragraph (5), the following:
the annual percentage rate applicable to the loan, taking into account—
the amount of the loan;
the stated interest rate of the loan;
the standard term for a loan of the same type;
any fees or additional costs associated with the loan; and
any capitalization of interest on the loan;
Plain language disclosure form
Section 455(p) of the Higher Education Act of 1965 (20 U.S.C. 1087e(p)) is amended—
Each institution and inserting the following:
by adding at the end the following:
Plain language disclosure form
Development and issuance of form
Not later than 18 months after the date of the enactment of this paragraph, the Secretary shall, based on consumer testing, develop and issue a model form to be known as the
Plain Language Disclosure Form that shall be used by institutions and contractors described in paragraph (1) to comply with the disclosure requirements of such paragraph.
The Secretary shall ensure that the Plain Language Disclosure Form—
enables borrowers to easily identify the information required to be disclosed under section 433(a) with respect to a loan, with emphasis on the loan terms determined by the Secretary to be critical to understanding the total costs of the loan and the estimated monthly repayment;
has a clear format and design, including easily readable font; and
is as succinct as practicable.
In developing Plain Language Disclosure Form, the Secretary shall, as appropriate, consult with—
the Federal Reserve Board;
institutions and contractors described in paragraph (1);
borrowers of loans under this part; and
other organizations involved in the provision of financial assistance to students, as identified by the Secretary.
Electronic system for compliance
In carrying out paragraph (2), Secretary shall develop and implement an electronic system that may be used by institutions and contractors described in paragraph (1) to generate a Plain Language Disclosure Form for each borrower by—
enabling institutions and contractors to enter personalized loan request information electronically;
integrating appropriate data found in the National Student Loan Data System; and
generating and integrating personalized borrower information.
Limit on liability
Nothing in this paragraph shall be construed to create a private right of action against an institution or contractor described in paragraph (1) with respect to the form or electronic system developed under this paragraph.
Borrower signature required
Beginning after the issuance of the Plain Language Disclosure Form by the Secretary under paragraph (2), a loan may not be issued to a borrower under this part unless the borrower acknowledges, in writing (which may include an electronic signature), that the borrower has read the Plain Language Disclosure Form for the loan concerned.
Consumer testing defined
In this subsection, the term consumer testing means the solicitation of feedback from individuals, including borrowers and prospective borrowers of loans under this part (as determined by the Secretary), about the usefulness of different methods of disclosing material terms of loans on the Plain Language Disclosure Form to maximize borrowers’ understanding of the terms and conditions of such loans.
Report to Congress
Not later than 2 years after the date of the enactment of this Act, the Secretary of Education shall submit to Congress a report that includes a description of the methods and procedures used to develop the Plain Language Disclosure Form required under section 455(p)(2) of the Higher Education Act of 1965 (as added by section 3 of this Act).