PRINTER'S NO. 1316
No. 985 Session of 2005
INTRODUCED BY RHOADES, FUMO, CORMAN, O'PAKE, LEMMOND, HUGHES,
TOMLINSON, LOGAN, BRIGHTBILL, PUNT, EARLL, RAFFERTY, COSTA,
WAUGH, TARTAGLIONE, ORIE, BOSCOLA, ROBBINS, KITCHEN,
D. WHITE, C. WILLIAMS, VANCE, BROWNE, KASUNIC, STACK, STOUT,
REGOLA, CONTI, GREENLEAF, FERLO, THOMPSON, SCARNATI, WOZNIAK,
LAVALLE AND M. WHITE, NOVEMBER 1, 2005
REFERRED TO EDUCATION, NOVEMBER 1, 2005
AN ACT
1 Requiring student loan companies to provide certain programs and
2 levels of funding; and providing for funding of the State
3 grant program.
4 The General Assembly of the Commonwealth of Pennsylvania
5 hereby enacts as follows:
6 Section 1. Short title.
7 This act shall be known and may be cited as the Higher
8 Education Student Opportunity Act.
9 Section 2. Legislative finding and declaration.
10 The General Assembly finds and declares as follows:
11 (1) An inequity exists in this Commonwealth relating to
12 the funding of student higher education assistance programs.
13 (2) This inequity results in fewer funds being available
14 to Commonwealth students to pursue higher education.
15 (3) There also exist improper inducements being offered
16 to institutions of higher education in order for certain
1 student loan companies to gain an unfair advantage in the
2 student loan market.
3 (4) The Federal Government in the 1970s created a
4 government-sponsored enterprise, in the form of a student
5 loan company, and funded it with tax dollars and provided it
6 significant tax breaks and funding advantages for many years.
7 (5) This student loan company completely converted to a
8 private, for-profit corporation in 2005.
9 (6) However, despite the fact that the bulk of its
10 earnings consists of profits obtained from students and
11 former students and that those profits fuel huge returns for
12 shareholders and multimillion-dollar annual compensation for
13 company executives, the company was never required to devote
14 any of its profits to benefit higher education or the
15 taxpayers in the form of public service programs.
16 (7) In addition, the company has, through legal
17 maneuvering, avoided the payment of more than $500 million in
18 fees levied on it by the Congress of the United States.
19 (8) It is the intent of this act to provide equity in
20 the student loan market in Pennsylvania and increase
21 opportunities for Commonwealth students and their families in
22 achieving higher education by providing additional funds for
23 these essential programs.
24 Section 3. Definitions.
25 The following words and phrases when used in this act shall
26 have the meanings given to them in this section unless the
27 context clearly indicates otherwise:
28 "Agency." The Pennsylvania Higher Education Assistance
29 Agency.
30 "Eligible lender." As defined under 435(d) of the Higher
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1 Education Act of 1965 (Public Law 89-329, 20 U.S.C. § 1085) and
2 in section 737 of the Health Professions Educational Assistance
3 Act of 1976 (Public Law 94-484, 42 U.S.C. § 292o) and pursuant
4 to the provisions of those acts or other applicable Federal
5 programs in which an entity is entitled to exercise all the
6 authority, rights and privileges of an eligible lender.
7 "State grant program." The scholarship award program
8 established in the act of January 25, 1966 (1965 P.L.1546,
9 No.541), referred to as the Higher Education Scholarship Law.
10 "Student loan company." A private, for-profit corporation
11 originally created as a government-sponsored enterprise by the
12 Congress of the United States to provide student loans and that
13 provides services in this Commonwealth.
14 "Third-party servicer." State or private, for-profit or
15 nonprofit organization or an individual who enters into a
16 contract with a lender or guaranty agency to administer, through
17 either manual or automated processing, any aspect of the
18 lender's or guaranty agency's Federal Family Education Loan
19 Program required by any statutory provision of or applicable to
20 Title IV of the Higher Education Act of 1965 (Public Law 89-329,
21 20 U.S.C. § 1070 et seq.), any regulatory provision prescribed
22 under that statutory authority or any applicable special
23 arrangement, agreement or limitation entered into under the
24 authority of statutes applicable to Title IV of the Higher
25 Education Act of 1965 that governs the Federal Family Education
26 Loan Program, including:
27 (1) any applicable function described in the definition
28 of "third-party servicer" in 34 CFR Pt. 668 (relating to
29 student assistance general provisions);
30 (2) originating, servicing or collecting loans;
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1 (3) claims submission; or
2 (4) billing for interest benefits and special allowance.
3 Section 4. Inducement prohibited.
4 No eligible lender, third-party servicer or student loan
5 company shall:
6 (1) Intentionally influence or coerce, or attempt to
7 influence or coerce, by withholding or threatening to
8 withhold discounts on student loan products provided to any
9 other individual or entity for failure to use a specific
10 student loan guaranty agency.
11 (2) Intentionally influence or coerce, or attempt to
12 influence or coerce, a school's choice of student loan
13 partner through actual or promised contributions to an alumni
14 association or other entity that is either formally or
15 informally affiliated with an institution of higher
16 education.
17 Section 5. Mandated programs.
18 (a) General rule.--A student loan company shall provide the
19 same loan forgiveness, scholarship and internship programs at
20 not less than the same total annual program monetary level as
21 the agency. The programs shall include, but not be limited to:
22 (1) armed forces loan forgiveness;
23 (2) nursing loan forgiveness;
24 (3) early education loan forgiveness; and
25 (4) academic excellence scholarship award.
26 (b) Agreement with agency.--The company may enter into an
27 agreement, for a negotiated fee, with the agency to administer
28 the programs on behalf of the company.
29 (c) Construction.--For purposes of this section,
30 "scholarship program" shall not be construed to include the
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1 State grant program.
2 Section 6. State grant program funding.
3 (a) Source of funding.--A student loan company shall
4 annually pay 7.5% of its gross revenues generated by student
5 loan activities in this Commonwealth to the agency.
6 (b) Use of funding.--The agency shall use the moneys paid
7 under subsection (a) for the State grant program.
8 Section 7. Public information.
9 A student loan company shall be subject to the provisions of
10 the act of June 21, 1957 (P.L.390, No.212), referred to as the
11 Right-to-Know Law and 65 Pa.C.S. Ch. 7 (relating to open
12 meetings) in the same manner and to the same extent as the
13 agency.
14 Section 8. Regulations.
15 The agency may establish rules and regulations to administer
16 the provisions of this act.
17 Section 9. Effective date.
18 This act shall take effect in 60 days.
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