text: SECTION 1. SHORT TITLE.
  
      This Act may be cited as the ``Know Before You Owe Private 
  Education Loan Act of 2016''.
  
  SEC. 2. AMENDMENTS TO THE TRUTH IN LENDING ACT.
  
      (a) In General.--Section 128(e) of the Truth in Lending Act (15 
  U.S.C. 1638(e)) is amended--
              (1) by striking paragraph (3) and inserting the following:
              ``(3) Institutional certification required.--
                      ``(A) In general.--Except as provided in 
                  subparagraph (B), before a creditor may issue any funds 
                  with respect to an extension of credit described in 
                  this subsection, the creditor shall obtain from the 
                  relevant institution of higher education where such 
                  loan is to be used for a student, such institution's 
                  certification of--
                              ``(i) the enrollment status of the student;
                              ``(ii) the student's cost of attendance at 
                          the institution as determined by the 
                          institution under part F of title IV of the 
                          Higher Education Act of 1965; and
                              ``(iii) the difference between--
                                      ``(I) such cost of attendance; and
                                      ``(II) the student's estimated 
                                  financial assistance, including such 
                                  assistance received under title IV of 
                                  the Higher Education Act of 1965 and 
                                  other financial assistance known to the 
                                  institution, as applicable.
                      ``(B) Exception.--Notwithstanding subparagraph (A), 
                  a creditor may issue funds with respect to an extension 
                  of credit described in this subsection without 
                  obtaining from the relevant institution of higher 
                  education such institution's certification if such 
                  institution fails to provide within 15 business days of 
                  the creditor's request for such certification--
                              ``(i) the requested certification; or
                              ``(ii) notification that the institution 
                          has received the request for certification and 
                          will need additional time to comply with the 
                          certification request.
                      ``(C) Loans disbursed without certification.--If a 
                  creditor issues funds without obtaining a 
                  certification, as described in subparagraph (B), such 
                  creditor shall report the issuance of such funds in a 
                  manner determined by the Director of the Bureau of 
                  Consumer Financial Protection.'';
              (2) by redesignating paragraphs (9), (10), and (11) as 
          paragraphs (10), (11), and (12), respectively; and
              (3) by inserting after paragraph (8) the following:
              ``(9) Provision of information.--
                      ``(A) Provision of information to students.--
                              ``(i) Loan statement.--A creditor that 
                          issues any funds with respect to an extension 
                          of credit described in this subsection shall 
                          send loan statements, where such loan is to be 
                          used for a student, to borrowers of such funds 
                          not less than once every 3 months during the 
                          time that such student is enrolled at an 
                          institution of higher education.
                              ``(ii) Contents of loan statement.--Each 
                          statement described in clause (i) shall--
                                      ``(I) report the borrower's total 
                                  remaining debt to the creditor, 
                                  including accrued but unpaid interest 
                                  and capitalized interest;
                                      ``(II) report any debt increases 
                                  since the last statement; and
                                      ``(III) list the current interest 
                                  rate for each loan.
                      ``(B) Notification of loans disbursed without 
                  certification.--On or before the date a creditor issues 
                  any funds with respect to an extension of credit 
                  described in this subsection, the creditor shall notify 
                  the relevant institution of higher education, in 
                  writing, of the amount of the extension of credit and 
                  the student on whose behalf credit is extended. The 
                  form of such written notification shall be subject to 
                  the regulations of the Bureau.
                      ``(C) Annual report.--A creditor that issues funds 
                  with respect to an extension of credit described in 
                  this subsection shall prepare and submit an annual 
                  report to the Bureau containing the required 
                  information about private student loans to be 
                  determined by the Bureau, in consultation with the 
                  Secretary of Education.''.
      (b) Definition of Private Education Loan.--Section 140(a)(7)(A) of 
  the Truth in Lending Act (15 U.S.C. 1650(a)(7)(A)) is amended--
              (1) by redesignating clause (ii) as clause (iii);
              (2) in clause (i), by striking ``and'' after the semicolon; 
          and
              (3) by adding after clause (i) the following:
                              ``(ii) is not made, insured, or guaranteed 
                          under title VII or title VIII of the Public 
                          Health Service Act (42 U.S.C. 292 et seq. and 
                          296 et seq.); and''.
      (c) Regulations.--Not later than 365 days after the date of 
  enactment of this Act, the Bureau of Consumer Financial Protection 
  shall issue regulations in final form to implement paragraphs (3) and 
  (9) of section 128(e) of the Truth in Lending Act (15 U.S.C. 1638(e)), 
  as amended by subsection (a). Such regulations shall become effective 
  not later than 6 months after their date of issuance.
  
  SEC. 3. AMENDMENT TO THE HIGHER EDUCATION ACT OF 1965.
  
      (a) Amendment to the Higher Education Act of 1965.--Section 487(a) 
  of the Higher Education Act of 1965 (20 U.S.C. 1094(a)) is amended by 
  striking paragraph (28) and inserting the following:
              ``(28)(A) The institution shall--
                      ``(i) upon the request of a private educational 
                  lender, acting in connection with an application 
                  initiated by a borrower for a private education loan in 
                  accordance with section 128(e)(3) of the Truth in 
                  Lending Act, provide certification to such private 
                  educational lender--
                              ``(I) that the student who initiated the 
                          application for the private education loan, or 
                          on whose behalf the application was initiated, 
                          is enrolled or is scheduled to enroll at the 
                          institution;
                              ``(II) of such student's cost of attendance 
                          at the institution as determined under part F 
                          of this title; and
                              ``(III) of the difference between--
                                      ``(aa) the cost of attendance at 
                                  the institution; and
                                      ``(bb) the student's estimated 
                                  financial assistance received under 
                                  this title and other assistance known 
                                  to the institution, as applicable; and
                      ``(ii) provide the certification described in 
                  clause (i), or notify the creditor that the institution 
                  has received the request for certification and will 
                  need additional time to comply with the certification 
                  request--
                              ``(I) within 15 business days of receipt of 
                          such certification request; and
                              ``(II) only after the institution has 
                          completed the activities described in 
                          subparagraph (B).
              ``(B) The institution shall, upon receipt of a 
          certification request described in subparagraph (A)(i), and 
          prior to providing such certification--
                      ``(i) determine whether the student who initiated 
                  the application for the private education loan, or on 
                  whose behalf the application was initiated, has applied 
                  for and exhausted the Federal financial assistance 
                  available to such student under this title and inform 
                  the student accordingly; and
                      ``(ii) provide the borrower whose loan application 
                  has prompted the certification request by a private 
                  education lender, as described in subparagraph (A)(i), 
                  with the following information and disclosures:
                              ``(I) The amount of additional Federal 
                          student assistance for which the borrower is 
                          eligible and the potential advantages of 
                          Federal loans under this title, including 
                          disclosure of the fixed interest rates, 
                          deferments, flexible repayment options, loan 
                          forgiveness programs, and additional 
                          protections, and the higher student loan limits 
                          for dependent students whose parents are not 
                          eligible for a Federal Direct PLUS Loan.
                              ``(II) The borrower's ability to select a 
                          private educational lender of the borrower's 
                          choice.
                              ``(III) The impact of a proposed private 
                          education loan on the borrower's potential 
                          eligibility for other financial assistance, 
                          including Federal financial assistance under 
                          this title.
                              ``(IV) The borrower's right to accept or 
                          reject a private education loan within the 30-
                          day period following a private educational 
                          lender's approval of a borrower's application 
                          and about a borrower's 3-day right to cancel 
                          period.
              ``(C) For purposes of this paragraph, the terms `private 
          educational lender' and `private education loan' have the 
          meanings given such terms in section 140 of the Truth in 
          Lending Act (15 U.S.C. 1650).''.
      (b) Effective Date.--The amendment made by subsection (a) shall 
  take effect on the effective date of the regulations described in 
  section 2(c).
  
  SEC. 4. REPORT.
  
      Not later than 24 months after the issuance of regulations under 
  section 2(c), the Director of the Bureau of Consumer Financial 
  Protection and the Secretary of Education shall jointly submit to 
  Congress a report on the compliance of institutions of higher education 
  and private educational lenders with section 128(e)(3) of the Truth in 
  Lending Act (15 U.S.C. 1638(e)), as amended by section 2, and section 
  487(a)(28) of the Higher Education Act of 1965 (20 U.S.C. 1094(a)), as 
  amended by section 3. Such report shall include information about the 
  degree to which specific institutions utilize certifications in 
  effectively encouraging the exhaustion of Federal student loan 
  eligibility and lowering student private education loan debt.
target: Know Before You Owe Private Student Loan Act of 2016 This bill amends the Truth in Lending Act to revise requirements for disclosures in private education loan applications. Before issuing a private education loan for a student attending an institution of higher education (IHE), lenders must obtain the IHE's certification of the student's enrollment status, the student's cost of attendance, and the difference between that cost and the student's estimated financial assistance.   Lenders must: (1) send loan statements to borrowers at least once every three months a student is enrolled at an IHE, (2) notify the relevant IHE of the loan amount and the student to whom it applies no later than the date funds are issued, and (3) submit an annual report to the Consumer Financial Protection Bureau (CFPB) containing information the CFPB requires concerning private student loans. This bill amends title IV (Student Assistance) of the Higher Education Act of 1965 by requiring IHEs, before providing lenders with certifications, to determine whether students have exhausted their options for title IV assistance and notify borrowers of: (1) the availability of federal financial aid assistance, (2) their ability to choose their own private educational lender, (3) the impact of the proposed private education loan on their eligibility for other financial assistance, and (4) their right to accept or reject a private education loan within 30 days of the lender's approval of their application and to cancel the loan within 3 business days of its consummation.
feat_title: Know Before You Owe Private Education Loan Act of 2016