1. Short title
This Act may be cited as the “Know Before You Owe Federal Student Loan Act of 2014”.
Know Before You Owe Federal Student Loan Act of 2014
A BILL
To revise counseling requirements for certain borrowers of student loans and for other purposes.
2. Pre-Loan Counseling and certification of loan amount
Section 485(l) of the Higher Education Act of 1965 (20 U.S.C. 1092(l)) is amended—
in the subsection heading, by striking “Entrance Counseling” and inserting “Pre-Loan Counseling”;
in paragraph (1)—
in subparagraph (A)—
in the matter preceding clause (i), by striking “a disbursement to a first-time borrower of a loan” and inserting “the first disbursement of each new loan (or the first disbursement in each award year if more than one new loan is obtained in the same award year)”; and
in clause (ii)(I), by striking “an entrance counseling” and inserting “a counseling”;
in paragraph (2)—
by striking clause (i) of subparagraph (G) and inserting the following:
“(i) an estimate of the borrower's projected loan debt-to-income ratio upon graduation, calculated using the best available data on starting wages for the borrower’s program of study and the estimated total student loan debt, including Federal and private loan debt already incurred and the estimated future debt required to complete the program of study; and”
by adding at the end the following:
“(L) A statement that the borrower should borrow the minimum amount necessary to cover expenses and that the borrower does not have to accept the full amount of loans for which the borrower is eligible.
“(M) Information about the default risk of having a projected loan debt-to-income ratio greater than 12 percent.
“(N) Options for reducing borrowing through scholarships, reduced expenses, work-study, or other work opportunities.
“(O) An explanation of the importance of graduating on time to avoid additional borrowing, and information on how adding an additional year of study impacts total indebtedness.”
by adding at the end the following:
“(3) In addition to the other requirements of this subsection, each eligible institution shall, prior to certifying a Federal direct loan under part D for disbursement to a student (other than a Federal Direct Consolidation Loan or a Federal Direct PLUS loan made on behalf of a student), ensure that the student manually enter, either in writing or through electronic means, the exact dollar amount of Federal direct loan funding under part D that such student desires to borrow.”
3. Conforming Amendments
Program participation agreements— Section 487(e)(2)(B)(ii)(IV) of the Higher Education Act of 1965 (20 U.S.C. 1094(e)(2)(B)(ii)(IV)) is amended—
by striking “Entrance and exit counseling” and inserting “Pre-loan and exit counseling”; and
by striking “entrance and exit counseling” and inserting “pre-loan and exit counseling”.
Regulatory relief and improvement— Section 487A of the Higher Education Act of 1965 (20 U.S.C. 1094a) is amended by striking “entrance and exit interviews” and inserting “pre-loan and exit interviews” each place the term appears.