Understanding the Know Before You Owe (KBYO) Act

Tuesday, February 13, 2024

Institutions play a critical role in monitoring and supporting students’ financial health and wellness as they navigate their academic journey. That’s one of the reasons that Illinois passed the Illinois Know Before You Owe Private Loan Education Act

What is the KBYO Act?

The KBYO Act "aims to provide potential student borrowers with critical information, allowing them to make informed decisions about how to responsibly finance their education," by ensuring student borrowers are informed of their federal loan eligibility before taking out private loans. The act also requires new certification and reporting measures for private student lenders and higher education institutions.

Although this act was passed in Illinois, it affects any private education lender, including any institution that enrolls students who are Illinois residents and receiving private loans.

KBYO Requirements

The KBYO Act has different requirements based on the number of private education loans issued each year. Lenders that make greater than 10 private education loans are required to submit a detailed annual report. Those that issue 10 or fewer must submit an annual statement. The annual report and the annual statement should be completed as Microsoft Excel templates

The report should reflect information including the total number of private education loans originated in the calendar year, the historical lifetime default rate on the Lender’s private education loans, information about loan volume, and more. The bill also requires private lenders to provide detailed loan statements to borrowers at least every three months to students, demonstrating how borrower's private student loan obligations increase while they are still enrolled in school.

The statement provides students with basic information about their loans that meet the requirements in the KBYO Act, including: 

  • Account type
  • Annual percentage rate
  • Current balance
  • Accrued interest
  • Capitalized interest
  • Loan amount increases between statements

How can ECSI support your institution?


As an optional service to help schools meet KBYO obligations, ECSI can send statements to students on behalf of institutions. Know Before You Owe statements are required to be sent quarterly to students who:

  • Are an Illinois resident
  • Are currently enrolled
  • Have private loans with the institution

The method in which students receive this statement will be based on whether or not they are enrolled for e-bill/email delivery. ECSI clients who have opted into this service receive a monthly report of which borrowers have issued KBYO statements. While ECSI’s service reduces institutions’ manual effort and paperwork associated with this Act, the service does not meet every KBYO obligation, as the institution is responsible for some requirements such as reporting to the State of Illinois Attorney General’s Office. Institutions should always consult with legal counsel to ensure all requirements are met. 

With more than five decades of experience focused specifically on the higher education community, ECSI has a proven track record that more than 1,700 institutions rely on. ECSI’s technology and customer service combine to lighten the load of student loan servicing for clients across the globe.

Institutions wishing to hand off this extra step while remaining in full compliance should contact [email protected].