Tom Harkin (D-IA), chairman of the Senate Committee on Health, Education, Labor and Pensions (HELP), introduced a comprehensive Higher Education Act reauthorization bill on June 25. The Higher Education Affordability Act (HEAA), which includes several provisions for which NASFAA has been advocating, takes the form of a discussion draft and marks the HELP Committee’s first step toward reauthorization of the Higher Education Act. This article is the sixth in a series that examines various provisions proposed by this bill.
The Harkin discussion draft bill seeks to improve loan servicing and introduces new counseling requirements. This article examines the following provisions of the draft bill:
The Harkin bill would replace information required to be given during exit counseling about average monthly payments with personalized information that reflects the borrower’s actual borrowing as it relates to each available repayment plan. It would add two elements to exit counseling: a statement that student loans must be repaid even if the student does not complete the academic program (the Department of Education’s online counseling already does this), and information and resources related to financial literacy and planning, including budgeting (regulations currently require inclusion of debt-management strategies). The bill would also require the counseling to check for comprehension. Students would have to provide more information in addition to what is already required during exit counseling, including any phone number and personal electronic mailing address that the student has.
The bill would require that entrance counseling be conducted prior to the signing of the promissory note, rather than prior to disbursement as is now required. It would eliminate the option of providing the information on a separate written form and require either in person or online sessions. It would add several items to the information that must be imparted:
The Harkin bill would expand institutions’ counseling responsibilities beyond one-time entrance and exit counseling. The bill adds written notifications and disclosures that all institutions would have to provide to students annually, and adds other counseling requirements for only certain students at an institution or for all borrowers at certain schools.
All institutions would have to provide certain personalized written notifications annually to enrolled students who are borrowers. Generally, these notifications could be fulfilled at same time as existing methods of communication, such as accompanying the annual financial aid award letter, unless the school is subject to interim counseling requirements, described further below. These notifications would inform students of the following, as applicable:
Additional counseling session
Borrowers who have transferred from another institution or who are deemed to be at greater risk of default under criteria defined by ED would have to undergo an additional counseling session. The bill specifically prohibits schools from selecting their own criteria. The financial aid office and the student’s academic advisor would have to coordinate the counseling jointly, and:
Interim in-school counseling
The Harkin bill proposes a new measure of institutional performance, the student default risk. This measure was described in the Today’s News article that addressed institutional eligibility. Schools that have a student default risk greater than the national average would have to require borrowers to undertake at least one additional in-person or online counseling session at the beginning of each academic year of enrollment. This interim in-school counseling would have to be the vehicle for providing the annual notifications described above, that would otherwise be provided as part of other existing communications such as the award letter. The counseling would also have to remind the student that he or she must repay student loans regardless of program completion.
Parent PLUS counseling
The Harkin bill would institute pre-disbursement in-person or online counseling for parent PLUS borrowers using interactive programs that test understanding. The counseling would have to explain:
The Harkin bill would direct ED to reduce duplication in the administration of the loan programs. It would require that ED’s contracts with servicers:
The bill would require ED to conduct a study of Direct Loan collection to determine whether it is efficient and effective to contract with private entities to collect loans that are in default. Another required study would determine whether specialty contracts could better serve varying segments of student loan borrowers, and, in particular, the unique needs of borrowers in delinquency or experiencing partial financial hardship and the allocation of servicer resources to assist that borrower segment.
The Harkin bill would amend TILA by adding a chapter on postsecondary education loans. Among many other things, the new provisions would:
Publication Date: 7/30/2014