SENATE FILE 440

BY  COMMITTEE ON EDUCATION

(SUCCESSOR TO SSB 1021)

A BILL FOR

An Act relating to the powers and duties of the college student aid commission in administering certain federal postsecondary financial aid initiatives.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

   Section 1.  Section 261.36, Code 2011, is amended to read as follows:
   261.36  Powers and duties of commission.
   1.  The commission shall have necessary powers to carry out its purposes and duties under this division, including but not limited to the power to do the following:
   1.  a.  Sue and be sued in its own name.
   2.  b.  Incur and discharge debts including the payment of any defaulted loan obligations which have been guaranteed by the commission.
   3.  c.  Make and execute agreements, contracts, and other instruments with any public or private person or agency including the United States secretary of education.  The commission shall also have the power to enter into any agreements with the United States secretary of education or other federal agency as are necessary to provide programs and services administered pursuant to this chapter to current and future Iowa postsecondary students, to the students’ school counselors, parents, and guardians, and to the elementary, secondary, and postsecondary institutions the students attend.
   4.  d.  Guarantee loans made by eligible lenders to eligible borrowers who are, or whose children are, enrolled or will be enrolled at eligible institutions as at least half-time students as defined by the commission.
   5.  e.  Approve educational institutions as eligible institutions upon their meeting if and when the institutions meet the requirements established by the commission.
   6.  f.  Approve financial or credit institutions, insurance companies, or other lenders as eligible lenders upon their meeting if and when such entities meet the standards established by the commission for making guaranteed loans.
   7.  g.  Accept appropriations, gifts, grants, loans or other aid from public or private persons or agencies including the United States secretary of education.
   8.  h.  Implement various means of encouraging maximum lender participation in the Iowa guaranteed loan program.
   i.  Administer the college access initiative authorized by 20 U.S.C. § 1092e, or its successor program.
   j.  Administer the gaining early awareness and readiness for undergraduate programs initiative authorized by 20 U.S.C. § 1070a–21 through 1070a–28, or its successor program.
   2.  The duties of the commission under this division shall be as follows:
   a.  To review the Iowa guaranteed loan program.
   b.  To review and make disposition of all applications for the guarantee of student loans.
   c.  To collect an insurance premium of not more than the amount authorized by the Higher Education Act of 1965. The premium shall be collected by the lender upon the disbursement of the loan and shall be remitted promptly to the commission.
   d.  To enter into any agreements with the United States secretary of education necessary for purposes of receiving full benefit of the state program incentives offered pursuant to the Higher Education Act of 1965.
   e.  To adopt rules pursuant to chapter 17A to implement the provisions of this division, including establishing standards for educational institutions, lenders, and individuals to become eligible institutions, eligible lenders, and eligible borrowers. Notwithstanding any contrary provisions in chapter 537, the rules and standards established shall be consistent with the requirements provided in the Higher Education Act of 1965. The commission shall expend all property and moneys belonging to the agency operating account to execute the commission’s powers and duties under this chapter.
   f.  To reimburse eligible lenders for the amount authorized by the Higher Education Act of 1965 on defaulted loans guaranteed by the commission upon receipt of written notice of the default accompanied by evidence that the lender has exercised the required degree of diligence in efforts to collect the loan.
   g.  To establish an effective system for the collection of delinquent loans, including the adoption of an agreement with the department of administrative services to set off against a defaulter’s income tax refund or rebate the amount that is due because of a default on a guaranteed student or parental loan made under this division. The commission shall adopt rules under chapter 17A necessary to assist the department of administrative services in the implementation of the student loan setoff program as established under section 8A.504. The commission shall apply administrative wage garnishment procedures authorized under the Higher Education Act of 1965 for all delinquent loans, including loans authorized under section 261.38, when a defaulter who is financially capable of paying fails to voluntarily enter into a reasonable payment agreement. In no case shall the commission garnish more than the amount authorized by federal law for all loans being collected by the commission, including those authorized under section 261.38.
   h.  To develop and provide information, forms, publications, internet-based resources, and other educational services to eligible lenders, postsecondary institutions, elementary and secondary schools, students, parents, education loan borrowers, and the general public. The commission, as it deems necessary, shall provide applicants with information about the past default rates of borrowers, enrollment, and placement statistics by postsecondary institutions.
   i.  To develop all forms necessary to the proper administration of the guaranteed student loan program.
   j.  To report annually to the governor and the general assembly on the status of the guaranteed student loan program.
   k.  To implement all possible assistance to eligible lenders for the purpose of easing the workload entailed in participation in the guaranteed student loan program.
   l.  To develop and implement programs and other initiatives or services necessary to perform duties that include but are not limited to postsecondary student aid outreach, financial literacy education, career planning, postsecondary student aid program compliance assistance and training, postsecondary student aid program monitoring and compliance review of eligible lenders and eligible institutions, default prevention, default aversion, and defaulted federal student loan collection.
   m.  To conduct college access initiative activities as required by 20 U.S.C. § 1092e, including but not limited to providing publications, programs, training, and internet-based resources for the public relating to college planning, career preparation, and paying for college.
   n.  To develop and implement all policies and procedures necessary to the proper administration of the guaranteed student loan program and any other program or activity related to postsecondary financial aid that the commission administers or conducts.
   Sec. 2.  Section 261.38, subsections 1 and 2, Code 2011, are amended to read as follows:
   1.  The commission shall establish a loan reserve account and an agency operating account as authorized by thefederal Higher Education Act of 1965. The commission shall credit to these accounts all moneys provided for the state student guaranteed loan program by the United States, the state of Iowa, or any of their agencies, departments, or instrumentalities, as well as any funds accruing to the program which are not required for current administrative expenses. The commission may expend moneys in the loan reserve and agency operating accounts as authorized by thefederal Higher Education Act of 1965.  The commission shall expend all property and moneys belonging to the agency operating account to execute the commission’s powers and duties under this chapter.
   2.  The payment of any funds for the default on a guaranteed student loan shall be solely from the loan reserve and agency operating accounts account. The general assembly shall not be obligated to appropriate any moneys to pay for any defaults or to appropriate any moneys to be credited to the loan reserve account. The commission shall not give or lend the credit of the state of Iowa.
   Sec. 3.  Section 261.39, unnumbered paragraph 1, Code 2011, is amended by striking the unnumbered paragraph.
   Sec. 4.  Section 261.41, Code 2011, is amended to read as follows:
   261.41  Account dissolved—— balance to general fund.
   1.  The loan program and the loan reserve account established by this division shall not be dissolved until all either of the following applies:
   a.  All guaranteed loans have been repaid by the borrower or, if in default, by the commission.
   b.  The commission is directed by the United States secretary of education to dispose of the program and account.
   2.  Upon dissolution of the loan program, all the property and moneys of the program and in belonging to the loan reserve account not owed to the federal government shall be transferred to the state general fund are the property of the United States secretary of education under 20 U.S.C. § 1072(a)(3).
   Sec. 5.  REPEAL.  Section 261.37, Code 2011, is repealed.
EXPLANATION
   This bill amends the Code division that provides for the guaranteed loan program administered by the college student aid commission. The bill modifies the commission’s powers and duties in response to recent changes made in the federal government’s student financial aid initiatives.
   The bill authorizes the commission to enter into any agreements with the United States secretary of education or other federal agency that are necessary to provide education programs and services to current and future Iowa postsecondary students and their counselors, parents and guardians, and to elementary, secondary, and postsecondary institutions. The bill also specifically authorizes the commission to administer the college access initiative and the gaining early awareness and readiness for undergraduate programs authorized under federal law.
   The bill requires the commission to develop and provide information, materials, and services to eligible lenders, postsecondary institutions, elementary and secondary schools, students, parents, education loan borrowers, and the general public; to develop and implement programs, initiatives and services relating to postsecondary student aid outreach, financial literacy education, career planning, student aid program compliance assistance and training, program monitoring and compliance review, default prevention, default aversion, and defaulted federal student loan collection; and to conduct college access initiative activities as required under federal law.
   The bill modifies and transfers the language of Code section 261.37, relating to the duties of the commission to Code section 261.36, relating to the powers of the commission. The bill specifies that the payment of funds for the default on a guaranteed student loan shall be solely from the commission’s loan reserve account and eliminates the option of paying the funds from the agency operating account.
   The bill requires the commission to expend property and moneys belonging to the agency operating account to execute the commission’s powers and duties.
   Currently, the student loan program and the loan reserve account can only be dissolved if all guaranteed loans have been repaid by the borrower or, if in default, by the commission. The bill adds that the program and the account may also be dissolved if the United States secretary of education directs the commission to dispose of the program and account. Upon dissolution, the bill states that the property and moneys belonging to the loan reserve account are the property of the United States secretary of education.