115th CONGRESS 1st Session |
To provide for the refinancing and recalculation of certain Federal student loans, and for other purposes.
October 10, 2017
Mr. Garamendi (for himself, Mr. Fitzpatrick, Ms. Bordallo, Mr. Brendan F. Boyle of Pennsylvania, Mrs. Bustos, Ms. Judy Chu of California, Mr. Doggett, Mr. Gonzalez of Texas, Ms. Kuster of New Hampshire, Mr. Lowenthal, Mr. McNerney, Mr. Meeks, Ms. Roybal-Allard, Mr. Tonko, Mr. Costa, Mr. Nolan, and Ms. Pingree) introduced the following bill; which was referred to the Committee on Education and the Workforce
To provide for the refinancing and recalculation of certain Federal student loans, and for other purposes.
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
This Act may be cited as the “Student Loan Refinancing and Recalculation Act”.
(a) Program authority.—Section 451(a) of the Higher Education Act of 1965 (20 U.S.C. 1087a(a)) is amended—
(1) by striking “and (2)” and inserting “(2)”; and
(2) by inserting “; and (3) to make loans under section 460A” after “section 459A”.
(b) Refinancing Program.—Part D of title IV of the Higher Education Act of 1965 (20 U.S.C. 1087a et seq.) is amended by adding at the end the following:
“SEC. 460A. Refinancing FFEL and Federal Direct Loans.
“(a) In general.—Beginning not later than 180 days after the date of enactment of the Student Loan Refinancing and Recalculation Act, the Secretary shall establish a program under which the Secretary, upon the receipt of an application from a qualified borrower, reissues the borrower's original loan under this part or part B as a loan under this part, in accordance with the provisions of this section, in order to permit the borrower to obtain the interest rate provided under subsection (c).
“(1) FEDERAL DIRECT LOANS.—Upon application of a qualified borrower, the Secretary shall reissue a Federal Direct Stafford Loan, a Federal Direct Unsubsidized Stafford Loan, a Federal Direct PLUS Loan, or a Federal Direct Consolidation Loan of the qualified borrower, for which the first disbursement was made, or the application for the reissuance of a loan under this section was received before July 1, 2017, in an amount equal to the sum of—
“(A) the unpaid principal, accrued unpaid interest, and late charges of the original loan; and
“(B) the administrative fee under subsection (d)(3).
“(2) DISCHARGING AND REISSUING FFEL PROGRAM LOANS AS REFINANCED FEDERAL DIRECT LOANS.—Upon application of a qualified borrower for any loan that was made, insured, or guaranteed under part B and for which the first disbursement was made before July 1, 2010, the Secretary shall reissue such loan as a loan under this part, in an amount equal to the sum of the unpaid principal, accrued unpaid interest, and late charges of the original loan and the administrative fee under subsection (d)(3), to the borrower in accordance with the following:
“(A) The Secretary shall pay the proceeds of such reissued loan to the eligible lender of the loan made, insured, or guaranteed under part B, in order to discharge the borrower from any remaining obligation to the lender with respect to the original loan.
“(B) The Secretary shall reissue—
“(i) a loan originally made, insured, or guaranteed under section 428 as a Federal Direct Stafford Loan;
“(ii) a loan originally made, insured, or guaranteed under section 428B as a Federal Direct PLUS Loan;
“(iii) a loan originally made, insured, or guaranteed under section 428H as a Federal Direct Unsubsidized Stafford Loan; and
“(iv) a loan originally made, insured, or guaranteed under section 428C as a Federal Direct Consolidation Loan.
“(C) The interest rate for each loan reissued under this paragraph shall be the rate provided under subsection (c).
“(1) IN GENERAL.—The interest rate for the reissued Federal Direct Stafford Loans, Federal Direct Unsubsidized Stafford Loans, Federal Direct PLUS Loans, and Federal Direct Consolidation Loans, shall be a rate equal to—
“(A) the high yield of the 10-year Treasury note auctioned at the final auction held prior to the first day of the month in which the application for reissuance under this section is received, plus
“(B) 1.0 percent.
“(2) FIXED RATE.—The applicable rate of interest determined under paragraph (1) for a reissued loan under this section shall be fixed for the period of the loan.
“(d) Terms and conditions of loans.—
“(1) IN GENERAL.—A loan that is reissued under this section shall have the same terms and conditions as the original loan, except as otherwise provided in this section.
“(2) NO AUTOMATIC EXTENSION OF REPAYMENT PERIOD.—Reissuing a loan under this section shall not result in the extension of the duration of the repayment period of the loan, and the borrower shall retain the same repayment term that was in effect on the original loan. Nothing in this paragraph shall be construed to prevent a borrower from electing a different repayment plan at any time in accordance with section 455(d)(3).
“(3) ADMINISTRATIVE FEE.—The Secretary shall charge the borrower of a loan reissued under this section an administrative fee of not more than 0.5 percent of the sum of the unpaid principal, accrued unpaid interest, and late charges, of the original loan.
“(e) Definition of qualified borrower.—
“(1) IN GENERAL.—The term ‘qualified borrower’ means a borrower—
“(A) of a loan under this part or part B for which the first disbursement was made, or the application for reissuance under this section was received, before July 1, 2017; and
“(B) who meets the eligibility requirements based on income or debt-to-income ratio established by the Secretary.
“(2) INCOME REQUIREMENTS.—Not later than 180 days after the date of enactment of the Student Loan Refinancing and Recalculation Act, the Secretary shall establish eligibility requirements based on income or debt-to-income ratio that take into consideration providing access to refinancing under this section for borrowers with the greatest financial need.
“(f) Expiration of authority.—The Secretary’s authority to reissue loans under this section shall expire on the date that is determined in accordance with section 4 of the Fairness in Student Loan Lending Act”..”.
(c) Amendments to public service repayment plan provisions.—Section 455(m) of the Higher Education Act of 1965 (20 U.S.C. 1087e(m)) is amended—
(1) by redesignating paragraphs (3) and (4) as paragraphs (4) and (5), respectively;
(2) by inserting after paragraph (2) the following:
“(3) SPECIAL RULES FOR SECTION 460A LOANS.—
“(A) REFINANCED FEDERAL DIRECT LOANS.—Notwithstanding paragraph (1), in determining the number of monthly payments that meet the requirements of such paragraph for an eligible Federal Direct Loan reissued under section 460A that was originally a loan under this part, the Secretary shall include all monthly payments made on the original loan that meet the requirements of such paragraph.
“(B) REFINANCED FFEL LOANS.—In the case of an eligible Federal Direct Loan reissued under section 460A that was originally a loan under part B, only monthly payments made after the date on which the loan was reissued may be included for purposes of paragraph (1).”; and
(3) in paragraph (4)(A) (as redesignated by paragraph (1) of this subsection), by inserting “(including any Federal Direct Stafford Loan, Federal Direct PLUS Loan, Federal Direct Unsubsidized Stafford Loan, or Federal Direct Consolidation Loan reissued under section 460A)” before the period at the end.
(d) Income-Based repayment.—Section 493C of the Higher Education Act of 1965 (20 U.S.C. 1098e) is amended by adding at the end the following:
“(a) Refinanced Federal Direct and FFEL loans.—In calculating the period of time during which a borrower of a loan that is reissued under section 460A has made monthly payments for purposes of subsection (b)(7), the Secretary shall deem the period to include all monthly payments made for the original loan, and all monthly payments made for the reissued loan, that otherwise meet the requirements of this section.”.
(a) Interest Rates.—Section 455(b) of the Higher Education Act of 1965 (20 U.S.C. 1087e(b)) is amended—
(1) by redesignating paragraph (9) as paragraph (10); and
(2) by inserting after paragraph (8) the following:
“(9) INTEREST RATE PROVISIONS FOR NEW LOANS ON OR AFTER JULY 1, 2017.—
“(A) RATES FOR UNDERGRADUATE FDSL AND FDUSL.—Notwithstanding the preceding paragraphs of this subsection, for Federal Direct Stafford Loans and Federal Direct Unsubsidized Stafford Loans issued to undergraduate students, for which the first disbursement is made on or after July 1, 2017, the applicable rate of interest shall, for loans disbursed during any 12-month period beginning on July 1 and ending on June 30, be determined on the preceding June 1 and be equal to the lesser of—
“(I) the high yield of the 10-year Treasury note auctioned at the final auction held prior to such June 1, plus
“(II) 1 percent; or
“(ii) 8.25 percent.
“(B) RATES FOR GRADUATE AND PROFESSIONAL FDUSL.—Notwithstanding the preceding paragraphs of this subsection, for Federal Direct Unsubsidized Stafford Loans issued to graduate or professional students, for which the first disbursement is made on or after July 1, 2017, the applicable rate of interest shall, for loans disbursed during any 12-month period beginning on July 1 and ending on June 30, be determined on the preceding June 1 and be equal to the lesser of—
“(I) the high yield of the 10-year Treasury note auctioned at the final auction held prior to such June 1, plus
“(II) 1 percent; or
“(ii) 9.5 percent.
“(C) PLUS LOANS.—Notwithstanding the preceding paragraphs of this subsection, for Federal Direct PLUS Loans, for which the first disbursement is made on or after July 1, 2017, the applicable rate of interest shall, for loans disbursed during any 12-month period beginning on July 1 and ending on June 30, be determined on the preceding June 1 and be equal to the lesser of—
“(I) the high yield of the 10-year Treasury note auctioned at the final auction held prior to such June 1, plus
“(II) 1 percent; or
“(ii) 10.5 percent.
“(D) CONSOLIDATION LOANS.—Notwithstanding the preceding paragraphs of this subsection, any Federal Direct Consolidation Loan for which the application is received on or after July 1, 2017, shall bear interest at an annual rate on the unpaid principal balance of the loan that is equal to the weighted average of the interest rates on the loans consolidated, rounded to the nearest higher one-eighth of one percent.
“(E) CONSULTATION.—The Secretary shall determine the applicable rate of interest under this paragraph after consultation with the Secretary of the Treasury and shall publish such rate in the Federal Register as soon as practicable after the date of determination.
“(F) RATE.—The applicable rate of interest determined under this paragraph for a Federal Direct Stafford Loan, a Federal Direct Unsubsidized Stafford Loan, or a Federal Direct PLUS Loan shall be fixed for the period of the loan.”.
(b) In school deferment.—Section 455(f) of the Higher Education Act of 1965 (20 U.S.C. 1087e(f)) is amended—
(1) in paragraph (1), in the matter preceding subparagraph (A), by striking “A borrower” and inserting “Except as provided in paragraph (5), a borrower”;
(A) by striking the matter following clause (ii);
(B) in clause (ii), by striking the comma at the end and inserting “; or”; and
(C) by adding at the end the following:
“(iii) is serving in a medical or dental internship or residency program;”; and
(3) by adding at the end the following new paragraph:
“(5) SPECIAL RULE FOR IN SCHOOL DEFERMENT.—Notwithstanding any other provision of this Act, a borrower described in paragraph (2)(A) shall be eligible for a deferment, during which periodic installments of principal need not be paid, and interest—
“(A) shall not accrue, in the case of a borrower with an expected family contribution of not more than $10,000 (computed in accordance with part F of this title); and
“(B) shall accrue at the rate equal to the high yield of the 10-year Treasury note applicable to such loan under subsection (b)(9), in the case of a borrower of an unsubsidized loan with an expected family contribution of more than $10,000 (computed in accordance with part F of this title).”.
(c) Effective Date.—The amendments made by subsections (a) and (b) shall take effect as if enacted on July 1, 2017.
SEC. 4. Elimination of origination fees for Federal Direct Loans.
(a) Sense of Congress.—It is the sense of Congress that no origination fees should be charged on any future Federal Direct Loans.
(b) Repeal of origination fees.—Subsection (c) of section 455 of the Higher Education Act of 1965 (20 U.S.C. 1087e(c)) is repealed.
(c) Effective date.—The amendment made by subsection (b) shall apply with respect to loans made under part D of title IV of the Higher Education Act of 1965 (20 U.S.C. 1087a et seq.) for which the first disbursement of principal is made, or, in the case of a Federal Direct Consolidation Loan, the application is received, on the first July 1 after the date of enactment of this Act.