House File 2244 - Introduced HOUSE FILE 2244 BY WINCKLER A BILL FOR An Act relating to interest rate limitations and disclosure 1 requirements applicable to specified postsecondary 2 educational loans, and making civil penalties applicable. 3 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 4 TLSB 5867YH (2) 86 gh/sc

H.F. 2244 Section 1. NEW SECTION . 261F.5A Interest rates —— 1 limitation. 2 1. For purposes of this section, “federal student loan 3 interest rate” means the interest rate applied to an educational 4 loan made, insured, or guaranteed under Tit. IV of the federal 5 Higher Education Act of 1965, as amended, directly to a 6 borrower solely for educational purposes and as described by 7 the federal student aid office of the United States department 8 of education. 9 2. a. Notwithstanding any provision to the contrary, the 10 interest rate collected or imposed by a lender or lending 11 institution on a private educational loan in this state shall 12 not be more than one percentage point over the corresponding 13 federal student loan interest rate for the life of the loan. 14 b. For purposes of determining the applicable corresponding 15 federal student loan interest rate, the lender or lending 16 institution shall apply the current federal interest rate that 17 corresponds to the category of the loan, including but not 18 limited to whether the loan is subsidized or unsubsidized, and 19 the category of the borrower, including but not limited to 20 whether the borrower is an undergraduate or graduate student. 21 3. This section shall not be interpreted to supersede, 22 conflict with, or apply to the requirements applicable to 23 a loan that is made, insured, or guaranteed by the federal 24 government or to any other loan providing for postsecondary 25 educational expenses pursuant to a federal program. 26 Sec. 2. Section 261F.7, Code 2016, is amended to read as 27 follows: 28 261F.7 Disclosure requirements. 29 1. Except for educational loans made, insured, or 30 guaranteed by the federal government, a lending institution 31 included on a covered institution’s preferred lender list 32 shall, upon receiving a request from a borrower, covered 33 institution, or government entity, disclose to the requester in 34 reasonable detail and form, the terms of private educational 35 -1- LSB 5867YH (2) 86 gh/sc 1/ 3

H.F. 2244 loans made to borrowers by that lending institution and the 1 rates of interest charged to borrowers for private educational 2 loans in the year preceding the disclosures. 3 2. A lender or lending institution providing a private 4 educational loan to a borrower in this state shall, prior 5 to the borrower signing a loan agreement, disclose to the 6 borrower in reasonable detail and form, the terms of the loan 7 being provided to the borrower. Such disclosure shall include 8 but is not limited to an estimate of the total cost of the 9 loan, taking into consideration the interest rate applied to 10 the loan. The borrower shall sign a statement attesting to 11 receipt of the disclosure required under this subsection, which 12 statement shall be affixed to the loan agreement. 13 EXPLANATION 14 The inclusion of this explanation does not constitute agreement with 15 the explanation’s substance by the members of the general assembly. 16 This bill relates to private educational loans provided to 17 borrowers in this state. 18 The bill provides that the interest rate applied by a lender 19 or lending institution to a private educational loan provided 20 to a borrower in Iowa cannot be more than one percentage point 21 over the corresponding federal student loan interest rate for 22 the life of the loan. The bill defines “federal student loan 23 interest rate” as the interest rate applied to an educational 24 loan made, insured, or guaranteed under title IV of the federal 25 Higher Education Act of 1965, as amended. To determine the 26 applicable corresponding federal student loan interest rate, 27 the lender or lending institution shall apply the current 28 federal interest rate that corresponds to the category of the 29 loan and the category of the borrower, as described in the 30 bill. The bill states that the interest rate limitation shall 31 not be interpreted to apply to educational loans made, insured, 32 or guaranteed by the federal government. 33 The bill requires a lender or lending institution to 34 disclose the terms of a private educational loan to a borrower 35 -2- LSB 5867YH (2) 86 gh/sc 2/ 3

H.F. 2244 prior to the borrower signing an agreement for the loan. The 1 disclosure must include an estimate of the total cost of the 2 loan, taking the applicable interest rate into account. The 3 borrower must sign a statement attesting to having received 4 the disclosure, and the statement shall be affixed to the loan 5 agreement. 6 Pursuant to current Code section 261F.8, a lender or lending 7 institution that violates a provision of Code chapter 261F is 8 subject to a civil penalty of $5,000 per violation, in addition 9 to other specified sanctions. 10 -3- LSB 5867YH (2) 86 gh/sc 3/ 3