Sec. 494E. Contracts; matching program
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Part G of title IV ( 20 U.S.C. 1088 et seq.), as amended by this part, is further amended by adding at the end the following: The Secretary shall, to the extent practicable, award contracts for origination, servicing, and collection described in subsection (b). In awarding such contracts, the Secretary shall ensure that such services and supplies are provided at competitive prices. The entities with which the Secretary may enter into contracts shall include entities qualified to provide such services and supplies and will comply with the procedures applicable to the award of such contracts.
In the case of awarding contracts for the origination, servicing, and collection of loans under parts D and E, the Secretary shall enter into contracts with entities that have extensive and relevant experience and demonstrated effectiveness. The entities with which the Secretary may enter into such contracts may include, where practicable, agencies with agreements with the Secretary under sections 428(b) and (c), if such agencies meet the qualifications as determined by the Secretary under this subsection and if those agencies have such experience and demonstrated effectiveness.
In awarding contracts to such State agencies, the Secretary shall, to the extent practicable and consistent with the purposes of parts D and E, give consideration to State agencies with a history of high quality performance to perform services for institutions of higher education within their State. Except as provided in subparagraph (B), the Secretary shall allocate new borrower loan accounts to entities awarded a contract under this section on the basis of— the performance of each such entity compared to other such entities performing similar work using common performance metrics (which may take into account, as appropriate, portfolio risk factors, including a borrower’s time in repayment, category of institution of higher education attended, and completion of an educational program), as determined by the Secretary; and the capacity of each such entity compared to other such entities performing similar work to service new and existing borrower loan accounts.
Any borrower who receives a Federal ONE Consolidation Loan may select the entity awarded a contract under this section to service such loan. Nothing in this section shall be construed as a limitation of the authority of any State agency to enter into an agreement for the purposes of this section as a member of a consortium of State agencies. The Secretary may enter into contracts for— the servicing and collection of loans made or purchased under part D or E; the establishment and operation of 1 or more data systems for the maintenance of records on all loans made or purchased under part D or E; and such other aspects of the direct student loan program under part D or E necessary to ensure the successful operation of the program.
Not later than 180 days after the date of enactment of the PROSPER Act and biannually thereafter, the Secretary shall consult (in writing and in person) with entities awarded contracts for loan servicing under section 456 (as in effect on the day before the date of enactment of the PROSPER Act ) and this section, to the extent practicable, to develop and update as necessary, a guidance manual for entities awarded contracts for loan servicing under this section that provides such entities with best practices to ensure borrowers receive adequate and consistent service from such entities.
The Secretary shall provide the most recent guidance manual developed and updated under paragraph
(1)to each entity awarded a contract for loan serving under this section. The Secretary shall provide to the authorizing committees a report, on a annual basis, detailing the consultation required under paragraph (1). Covered activities shall not be subject to any law or other requirement of any State or political subdivision of a State with respect to— disclosure requirements; requirements or restrictions on the content, time, quantity, or frequency of communications with borrowers, endorsers, or references with respect to such loans; or any other requirement relating to the servicing or collection of a loan made under this title. The requirements of this section with respect to any covered activity shall preempt any law or other requirement of a State or political subdivision of a State to the extent that such law or other requirement would, in the absence of this subsection, apply to such covered activity. No qualified entity engaged in a covered activity shall be required to obtain a license from, or pay a licensing fee or other assessment to, any State or political subdivision of a State relating to such covered activity. For purposes of this section: The term covered activity means any of the following activities, as carried out by a qualified entity: Origination of a loan made under this title. Servicing of a loan made under this title. Collection of a loan made under this title. Any other activity related to the activities described in clauses
(i)through (iii). The term qualified entity means an organization, other than an institution of higher education— that is responsible for the servicing or collection of a loan made under this title; that has agreement with the Secretary under subsections
(a)and
(b)of section 428; or that is under contract with an entity described in clause
(i)or clause
(ii)to support such entity’s responsibilities under this title. This subsection shall not have any legal effect on any other preemption provision under Federal law with respect to this title. . Section 456 ( 20 U.S.C. 1087f ) is repealed. Part G of title IV ( 20 U.S.C. 1088 et seq.), as amended by subsection (a), is further amended by adding at the end the following: The Secretary of Education and the Secretary of Veterans Affairs shall carry out a computer matching program under which the Secretary of Education identifies, on at least a quarterly basis, borrowers— who have been assigned a disability rating of 100 percent (or a combination of ratings equaling 100 percent or more) by the Secretary of Veterans Affairs for a service-connected disability (as defined in section 101 of title 38, United States Code); or who have been determined by the Secretary of Veterans Affairs to be unemployable due to a service-connected condition, as described in section 437(a)(2). With respect to each borrower who is identified under subsection (a), the Secretary shall, as soon as practicable after such identification— notify the borrower of the borrower’s eligibility for loan discharge under section 437(a); and provide the borrower with simple instructions on how to apply for such loan discharge, including an explanation that the borrower shall not be required to provide any documentation of the borrower’s disability rating to receive such discharge. The Secretary shall annually collect and submit to the Committees on Education and the Workforce and Veterans’ Affairs of the House of Representatives and the Committees on Health, Education, Labor, and Pensions and Veterans Affairs of the Senate, data about borrowers applying for and receiving loan discharges under section 437(a), which shall be disaggregated in the manner described in paragraph
(2)and include the following: The number of applications received under section 437(a). The number of such applications that were approved. The number of loan discharges that were completed under section 437(a). The data collected under paragraph
(1)shall be disaggregated— by borrowers who applied under this section for loan discharges under section 437(a); by borrowers who received loan discharges as a result of applying for such discharges under this section; by borrowers who applied for loan discharges under section 437(a)(2); and by borrowers who received loan discharges as a result of applying for such discharges under section 437(a)(2). The Secretary shall notify each borrower whose liability on a loan has been discharged under section 437(a) that the liability on the loan has been so discharged. .
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