SF 283 (LSB 1603XS (8) 87)

SENATE FILE 283

BY  ZAUN, GUTH, CHELGREN, SEGEBART, SHIPLEY, KAPUCIAN, BERTRAND, ANDERSON, KRAAYENBRINK, and C. JOHNSON

A BILL FOR

An Act relating to the administration and servicing of certain federal educational loans by certain entities and including applicability provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  Section 261F.1, Code 2017, is amended by adding the following new subsection:
   NEW SUBSECTION.  9A.  “Prime rate” means the same as defined in section 421.7, subsection 5.
    Sec. 2.  Section 261F.3, Code 2017, is amended by adding the following new subsection:
   NEW SUBSECTION.  6A.  Federal educational loan administration.
   a.  A covered institution shall not administer any loan that is made, insured, or guaranteed under Tit. IV of the federal Higher Education Act of 1965, as amended, on behalf of a borrower if the interest rate on the loan exceeds the prime rate plus two percent.
   b.  Student loan servicers that contract with the United States department of education, provide customer service for federal educational loans held by other lenders, or purchase federal educational loans from other lenders shall not operate or conduct business in this state if the interest rate on the federal educational loan that was obtained by a borrower who is a resident of this state and which is administered, managed, or serviced by the student loan servicer, exceeds the prime rate plus two percent.
    Sec. 3.  APPLICABILITY.  This Act applies to the administration of a loan made, insured, or guaranteed on or after the effective date of this Act.
EXPLANATION
The inclusion of this explanation does not constitute agreement with
the explanation’s substance by the members of the general assembly.
   This bill prohibits certain entities from administering federal educational loans to borrowers, which under Code section 261F.1 include students and their parents or persons in parental relation to such students, if the interest rates on those loans exceed the prime rate plus 2 percent.
   The bill prohibits public and private postsecondary institutions from administering federal educational loans to borrowers if the interest rates on the loans exceed the prime rate plus 2 percent.
   The bill also prohibits student loan servicers that contract with the United States department of education, provide customer service for federal educational loans held by other lenders, or purchase federal educational loans from other lenders from operating in this state if the interest rate on the federal educational loan that was obtained by a resident borrower and which is administered, managed, or serviced by the student loan servicer, exceeds the prime rate plus 2 percent.
   Currently, the attorney general is authorized to conduct investigations to determine whether to initiate proceedings under Code chapter 261F. An institution in violation of the Code chapter may be liable for civil penalties.
   The term “prime rate” is defined to mean the prime rate charged by banks on short-term business loans, as determined by the board of governors of the federal reserve system and published in the federal reserve bulletin.
   The bill applies to loans made, insured, or guaranteed on or after the effective date of the bill.