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Senate File 283 - IntroducedA Bill ForAn Act 1relating to the administration and servicing of certain
2federal educational loans by certain entities and including
3applicability provisions.
4BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
1 Section 1. Section 261F.1, Code 2017, is amended by adding
2the following new subsection:
3 NEW SUBSECTION. 9A. “Prime rate” means the same as defined
4in section 421.7, subsection 5.
5 Sec. 2. Section 261F.3, Code 2017, is amended by adding the
6following new subsection:
7 NEW SUBSECTION. 6A. Federal educational loan administration.
8a. A covered institution shall not administer any loan
9that is made, insured, or guaranteed under Tit.IV of the
10federal Higher Education Act of 1965, as amended, on behalf of
11a borrower if the interest rate on the loan exceeds the prime
12rate plus two percent.
13b. Student loan servicers that contract with the United
14States department of education, provide customer service for
15federal educational loans held by other lenders, or purchase
16federal educational loans from other lenders shall not operate
17or conduct business in this state if the interest rate on the
18federal educational loan that was obtained by a borrower who is
19a resident of this state and which is administered, managed, or
20serviced by the student loan servicer, exceeds the prime rate
21plus two percent.
22 Sec. 3. APPLICABILITY. This Act applies to the
23administration of a loan made, insured, or guaranteed on or
24after the effective date of this Act.
25EXPLANATION
26The inclusion of this explanation does not constitute agreement with
27the explanation’s substance by the members of the general assembly.
28This bill prohibits certain entities from administering
29federal educational loans to borrowers, which under Code
30section 261F.1 include students and their parents or persons in
31parental relation to such students, if the interest rates on
32those loans exceed the prime rate plus 2 percent.
33The bill prohibits public and private postsecondary
34institutions from administering federal educational loans to
35borrowers if the interest rates on the loans exceed the prime
-1-1rate plus 2 percent.
2The bill also prohibits student loan servicers that contract
3with the United States department of education, provide
4customer service for federal educational loans held by other
5lenders, or purchase federal educational loans from other
6lenders from operating in this state if the interest rate on
7the federal educational loan that was obtained by a resident
8borrower and which is administered, managed, or serviced by the
9student loan servicer, exceeds the prime rate plus 2 percent.
10Currently, the attorney general is authorized to conduct
11investigations to determine whether to initiate proceedings
12under Code chapter 261F. An institution in violation of the
13Code chapter may be liable for civil penalties.
14The term “prime rate” is defined to mean the prime rate
15charged by banks on short-term business loans, as determined
16by the board of governors of the federal reserve system and
17published in the federal reserve bulletin.
18The bill applies to loans made, insured, or guaranteed on or
19after the effective date of the bill.
-2-kh/rj
2federal educational loans by certain entities and including
3applicability provisions.
4BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
1 Section 1. Section 261F.1, Code 2017, is amended by adding
2the following new subsection:
3 NEW SUBSECTION. 9A. “Prime rate” means the same as defined
4in section 421.7, subsection 5.
5 Sec. 2. Section 261F.3, Code 2017, is amended by adding the
6following new subsection:
7 NEW SUBSECTION. 6A. Federal educational loan administration.
8a. A covered institution shall not administer any loan
9that is made, insured, or guaranteed under Tit.IV of the
10federal Higher Education Act of 1965, as amended, on behalf of
11a borrower if the interest rate on the loan exceeds the prime
12rate plus two percent.
13b. Student loan servicers that contract with the United
14States department of education, provide customer service for
15federal educational loans held by other lenders, or purchase
16federal educational loans from other lenders shall not operate
17or conduct business in this state if the interest rate on the
18federal educational loan that was obtained by a borrower who is
19a resident of this state and which is administered, managed, or
20serviced by the student loan servicer, exceeds the prime rate
21plus two percent.
22 Sec. 3. APPLICABILITY. This Act applies to the
23administration of a loan made, insured, or guaranteed on or
24after the effective date of this Act.
25EXPLANATION
26The inclusion of this explanation does not constitute agreement with
27the explanation’s substance by the members of the general assembly.
28This bill prohibits certain entities from administering
29federal educational loans to borrowers, which under Code
30section 261F.1 include students and their parents or persons in
31parental relation to such students, if the interest rates on
32those loans exceed the prime rate plus 2 percent.
33The bill prohibits public and private postsecondary
34institutions from administering federal educational loans to
35borrowers if the interest rates on the loans exceed the prime
-1-1rate plus 2 percent.
2The bill also prohibits student loan servicers that contract
3with the United States department of education, provide
4customer service for federal educational loans held by other
5lenders, or purchase federal educational loans from other
6lenders from operating in this state if the interest rate on
7the federal educational loan that was obtained by a resident
8borrower and which is administered, managed, or serviced by the
9student loan servicer, exceeds the prime rate plus 2 percent.
10Currently, the attorney general is authorized to conduct
11investigations to determine whether to initiate proceedings
12under Code chapter 261F. An institution in violation of the
13Code chapter may be liable for civil penalties.
14The term “prime rate” is defined to mean the prime rate
15charged by banks on short-term business loans, as determined
16by the board of governors of the federal reserve system and
17published in the federal reserve bulletin.
18The bill applies to loans made, insured, or guaranteed on or
19after the effective date of the bill.
-2-kh/rj