Sec. 342. Pre-loan information and counseling requirements
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Section 485(l) ( 20 U.S.C. 1092(l) ) is amended to read as follows: Each eligible institution shall ensure that, prior to the date of the disbursement of a loan for a period of enrollment at such institution, each individual for whom the institution has knowledge that the individual has accepted, or will accept, 1 or more student loans under part D (including any such loans for attendance at another institution from which the student transferred or in which the student had previously enrolled, other than a Federal Direct Consolidation Loan) for such period of enrollment, receives comprehensive information on the terms and conditions of such loans and the responsibilities the individual has with respect to such loans.
Such information shall be provided in a simple, understandable, and consumer-friendly manner during a counseling session conducted— in person; online, with the individual acknowledging receipt of the information; or through the use of the online counseling tool described in subsection (n)(1)(B). In the case of institutions not using the online counseling tool described in subsection (n)(1)(B), the Secretary shall require such institutions to carry out the requirements of subparagraph
(A)through the use of interactive programs, during a counseling session that is in-person or online, that test the individual’s understanding of the terms and conditions of the loan awarded to the individual, using simple and understandable language and clear formatting. The information to be provided under paragraph (1)(A) to a borrower of a loan made under part D (other than a Federal Direct PLUS Loan made on behalf of a dependent student) shall include the following: A notification that some students may qualify for other financial aid that does not need to be repaid, and an explanation that the borrower should consider accepting any such grant, scholarship, military tuition assistance, veterans benefits, Federal or State work-study, or other programs for which the borrower is eligible, prior to accepting student loans. An explanation of the use of the student loan contract referred to in section 455(c). A recommendation to the borrower to exhaust the borrower’s Federal student loan options prior to taking out private education loans, an explanation that Federal student loans typically offer better terms and conditions than private education loans, an explanation that Federal student loans offer consumer protections typically not available in the private education loan market, an explanation of treatment of loans made under part D and private education loans in bankruptcy, and an explanation that if a borrower decides to take out a private education loan— the borrower has the ability to select a private educational lender of the borrower’s choice; the proposed private education loan may impact the borrower’s potential eligibility for other financial assistance, including Federal financial assistance under this title; and the borrower has a right— to accept the terms of the private education loan within 30 calendar days following the date on which the application for such loan is approved and the borrower receives the required disclosure documents, pursuant to section 128(e) of the Truth in Lending Act ( 15 U.S.C. 1638(e) ); and to cancel such loan within 3 business days of the date on which the loan is consummated, pursuant to section 128(e)(7) of such Act ( 15 U.S.C. 1638(e)(7) ). An explanation of the importance of contacting the appropriate offices at the institution of higher education if the student withdraws prior to completing a program of study so that the institution can provide exit counseling, including information regarding the borrower’s repayment options and loan consolidation. A general description of the terms and conditions under which the student may obtain forgiveness or cancellation of any principal and interest of a loan issued under this title. Information as to how the borrower can access their loan records and the contact information for inquiries regarding repaying the loan. The contact information for the financial aid office, or other appropriate office, at the institution that the borrower may contact if the borrower has any questions about the borrower’s rights and responsibilities or the terms and conditions of the loan. An explanation that the borrower has the right to annually request a copy of the credit report of the borrower from a consumer reporting agency pursuant to section 612(a) of the Fair Credit Reporting Act ( 15 U.S.C. 1681j(a) ). An explanation that— the borrower may be contacted during the repayment period by a third-party student debt relief company; the borrower should use caution when dealing with such a company; and the services that such a company typically provides are offered to borrowers free of charge through the Department or the borrower's servicer. The information to be provided under paragraph (1)(A) to a borrower of a Federal Direct PLUS Loan made on behalf of a dependent student shall include the following: A notification that some students may qualify for other financial aid and an explanation that the student for whom the borrower is taking out the loan should consider accepting any such grant, scholarship, military tuition assistance, veterans benefits, Federal or State work-study jobs, or other programs for which the student for whom the borrower is taking out the loan is eligible, prior to borrowing any Federal Direct PLUS Loan on behalf of a dependent student. The information described in subparagraphs
(B)through
(I)of paragraph (2), as applicable. The circumstances under which a borrower of a Federal Direct PLUS Loan made on behalf of a dependent student may transfer such loan to the student for whom the loan was taken out. .
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