Sec. 401. School accountability for student loans
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Section 487 of the Higher Education Act of 1965 ( 20 U.S.C. 1094 ), as amended by section 201, is further amended— in subsection (a), by adding at the end the following: The institution will pay a default rate fine that is determined pursuant to subsection (k). ; and by adding at the end the following: Each institution described in paragraph
(2)shall pay to the Secretary an annual default rate fine in accordance with this subsection. An institution shall pay a default rate fine under this subsection for a fiscal year based on the cohort default rate (as defined in section 435(m)) on loans made under this title for such fiscal year. Each institution described in paragraph
(2)shall pay a default rate fine for a fiscal year that is equal to 10 percent of the applicable amount determined under subparagraph (B)(i) for such fiscal year. The applicable amount for a fiscal year with respect to an institution shall be an amount equal to the product of the amount of loans made under this title for such fiscal year, and the applicable rate determined in clause (ii). If the applicable rate is equal to or less than zero percent then the applicable amount shall be equal to zero. The applicable rate for a fiscal year with respect to an institution shall be the rate that is equal to the difference between the cohort default rate on loans made under this title (as defined in section 435(m)) for such fiscal year and the average rate of total unemployment in the United States for the 3-year period covered by that cohort default rate (as defined in section 435(m)), as determined by the Secretary of Labor. Each institution that is described in paragraph
(2)shall receive a $400 credit for the fiscal year for each graduate of the institution during such fiscal year who received a Federal Pell Grant while enrolled at the institution. Notwithstanding any other provision of the Act, the Secretary shall grant institutions of higher education flexibility under this Act to counsel and advise students on Federal financial aid, including granting flexibility for institutions to award less than the maximum amount of Federal student aid for which an individual is eligible if the cost of tuition, room, and board at the institution is less than such maximum amount. . Section 485(l) of the Higher Education Act of 1965 ( 20 U.S.C. 1092(l) ) is amended by adding at the end the following: In addition to the entrance counseling under paragraph (1), an eligible institution may require any borrower, at or prior to the time of a disbursement to the borrower of a loan made under part D, to receive the information described in paragraph
(2)with respect to such loan, or any other financial counseling, including financial literacy counseling. .
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