Bill Summary
The "State-Based Education Loan Awareness Act" aims to clarify that state-based education loan programs are exempt from certain federal requirements that typically apply to preferred lender arrangements. This legislation modifies the Higher Education Act of 1965 to define a "State-based education loan program" as one that meets specific criteria, including being administered by a state agency or nonprofit, not being federally funded or guaranteed, and offering interest rates and fees that are at least as favorable as federal Direct PLUS loans. Additionally, the program must ensure that borrowers are informed about their eligibility for federal loans and the associated benefits before accepting private loans. Overall, the Act seeks to promote state-level education loan options while ensuring that borrowers are adequately informed about their financing choices.
Possible Impacts
The proposed "State-Based Education Loan Awareness Act" could affect people in several ways:
1. **Increased Access to Education Financing**: By establishing a framework for state-based education loan programs, the legislation could provide students with more financing options. This could be particularly beneficial for those who may not qualify for federal loans or who find federal loans insufficient to cover their educational expenses. State programs may offer competitive interest rates and terms tailored to the needs of local students.
2. **Enhanced Financial Education**: The requirement for institutions of higher education to advise borrowers about federal loan options and the details of state-based loans may lead to more informed decision-making among students. This could empower borrowers to choose the most beneficial financing route for their education, potentially lowering their long-term debt burden by ensuring they understand available federal benefits such as income-driven repayment plans and loan forgiveness options.
3. **Potential Risk of Confusion or Misinformation**: While the legislation aims to clarify the distinction between state-based and federal loan programs, the complexity of multiple loan options could lead to confusion for some borrowers. If students do not fully understand the differences in terms, benefits, and requirements between state and federal loans, they may inadvertently choose a loan that is not in their best interest, resulting in higher costs or less favorable repayment terms.
[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[S. 4097 Introduced in Senate (IS)]
<DOC>
119th CONGRESS
2d Session
S. 4097
To establish that a State-based education loan program is excluded from
certain requirements relating to a preferred lender arrangement.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
March 16, 2026
Ms. Murkowski (for herself, Mr. Reed, Mr. Cassidy, and Mrs. Shaheen)
introduced the following bill; which was read twice and referred to the
Committee on Health, Education, Labor, and Pensions
_______________________________________________________________________
A BILL
To establish that a State-based education loan program is excluded from
certain requirements relating to a preferred lender arrangement.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``State-Based Education Loan Awareness
Act''.
SEC. 2. STATE-BASED EDUCATION LOAN PROGRAMS.
Section 151 of the Higher Education Act of 1965 (20 U.S.C. 1019) is
amended--
(1) in paragraph (8)(B)--
(A) in clause (i), by striking ``or'' after the
semicolon;
(B) in clause (ii), by striking the period at the
end and inserting ``; or''; and
(C) by adding at the end the following:
``(iii) arrangements or agreements with
respect to education loans made under a State-
based education loan program.''; and
(2) by adding at the end the following:
``(10) State-based education loan program.--The term
`State-based education loan program' means an education loan
program that--
``(A) is provided by a State agency, State
authority, or nonprofit organization, separately or
jointly;
``(B) makes loans that are not funded, insured, or
guaranteed by the Federal Government;
``(C) is authorized, established, or chartered by
State law, or otherwise approved by the State;
``(D) offers one or more loans for which the
interest rate and fees, as calculated in accordance
with sections 106 and 107 of the Truth in Lending Act
(15 U.S.C. 1605; 1606), are at least as favorable as
the interest rate and fees of the Direct PLUS loans
authorized under part D of title IV at the time such
loan is originated; and
``(E) is available only to a borrower who has been
advised, such as in a financial aid offer, by an
institution of higher education (as defined under
section 102)--
``(i) that the borrower has the opportunity
to exhaust eligibility for Federal education
loans made under part D of title IV prior to
accepting a private education loan; and
``(ii) of the interest rates, fees, and
benefits of such Federal education loans,
including income-driven repayment options,
opportunities for loan forgiveness, forbearance
or deferment options, interest subsidies, and
tax benefits.''.
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