116th CONGRESS 2d Session |
To refinance Federal and private student loans, and for other purposes.
July 1, 2020
Ms. Warren (for herself, Ms. Baldwin, Mr. Bennet, Mr. Blumenthal, Mr. Booker, Mr. Brown, Ms. Cantwell, Mr. Cardin, Mr. Casey, Ms. Cortez Masto, Ms. Duckworth, Mr. Durbin, Mrs. Feinstein, Mrs. Gillibrand, Ms. Harris, Ms. Hassan, Mr. Heinrich, Ms. Hirono, Ms. Klobuchar, Mr. Leahy, Mr. Manchin, Mr. Markey, Mr. Menendez, Mr. Merkley, Mr. Murphy, Mr. Peters, Mr. Reed, Mr. Sanders, Mrs. Shaheen, Ms. Smith, Ms. Stabenow, Mr. Udall, Mr. Van Hollen, Mr. Whitehouse, and Mr. Wyden) introduced the following bill; which was read twice and referred to the Committee on Health, Education, Labor, and Pensions
To refinance Federal and private 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 “Bank on Students Coronavirus Emergency Loan Refinancing Act of 2020”.
(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 and section 460B” 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 Federal Direct Loans and other Federal loans.
“(a) Definitions.—In this section:
“(1) FFEL, PERKINS, OR PHSA STUDENT LOAN.—The term ‘FFEL, Perkins, or PHSA student loan’ means a loan—
“(A) made, insured, or guaranteed under part B and for which the first disbursement was made, or the application for the consolidation loan was received, before July 1, 2010;
“(B) made under part E; or
“(i) subpart II of part A of title VII of the Public Health Service Act (42 U.S.C. 292q et seq.); or
“(ii) part E of title VIII of the Public Health Service Act (42 U.S.C. 297a et seq.).
“(2) QUALIFIED BORROWER.—The term ‘qualified borrower’ means a borrower of a loan under this part, or FFEL, Perkins, or PHSA student loan, for which the first disbursement was made, or the application for a consolidation loan was received, before July 1, 2020.
“(b) In general.—Beginning not later than 90 days after the date of enactment of the Bank on Students Coronavirus Emergency Loan Refinancing Act of 2020, the Secretary shall establish a program under which the Secretary makes a loan under this part, in accordance with the provisions of this section, in order to permit a qualified borrower to obtain the interest rate provided under subsection (d).
“(c) Refinancing Direct Loans.—
“(A) IN GENERAL.—By not later than 120 days after the date of enactment of the Bank on Students Coronavirus Emergency Loan Refinancing Act of 2020, the Secretary shall repay 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 consolidation loan was received, before July 1, 2020, with the proceeds of a refinanced Federal Direct Stafford Loan, a Federal Direct Unsubsidized Stafford Loan, a Federal Direct PLUS Loan, or a Federal Direct Consolidation Loan, respectively, issued to the borrower under this section in an amount equal to the sum of the unpaid principal, accrued unpaid interest, and late charges of the original loan.
“(B) INFORMATION.—The Secretary shall notify each qualified borrower of a loan refinanced under subparagraph (A) regarding the refinancing and the benefits the refinancing provides to the qualified borrower.
“(2) REFINANCING FFEL, PERKINS, OR PHSA STUDENT LOANS AS REFINANCED FEDERAL DIRECT LOANS.—Upon application of a qualified borrower of any FFEL, Perkins, or PHSA student loan, the Secretary shall make 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 to the borrower in accordance with the following:
“(A) The Secretary shall pay the proceeds of such loan to the holder of the FFEL, Perkins, or PHSA student loan, in order to discharge the borrower from any remaining obligation with respect to the original loan.
“(B) Any Federal student loan made under this section that was originally a loan described in subsection (a)(1)(A) and that was made, insured, or guaranteed—
“(i) under section 428 shall be a Federal Direct Stafford Loan;
“(ii) under section 428B shall be a Federal Direct PLUS Loan;
“(iii) under section 428H shall be a Federal Direct Unsubsidized Stafford Loan; and
“(iv) under section 428C shall be a Federal Direct Consolidation Loan.
“(C) Any Federal student loan made under this section that was originally a loan described in subparagraph (B) or (C) of subsection (a)(1) shall be a Federal Direct Consolidation Loan.
“(D) The interest rate for each loan made by the Secretary under this paragraph shall be the rate provided under subsection (d).
“(1) IN GENERAL.—The interest rate for the refinanced 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) in any case where the original loan was a loan under section 428 or 428H, a Federal Direct Stafford loan, or a Federal Direct Unsubsidized Stafford Loan, that was issued to an undergraduate student, a rate equal to the rate for Federal Direct Stafford Loans and Federal Direct Unsubsidized Stafford Loans issued to undergraduate students for the 12-month period beginning on July 1, 2020, and ending on June 30, 2021;
“(B) in any case where the original loan was a loan under section 428 or 428H, a Federal Direct Stafford Loan, or a Federal Direct Unsubsidized Stafford Loan, that was issued to a graduate or professional student, a rate equal to the rate for Federal Direct Unsubsidized Stafford Loans issued to graduate or professional students for the 12-month period beginning on July 1, 2020, and ending on June 30, 2021;
“(C) in any case where the original loan was a loan under section 428B or a Federal Direct PLUS Loan, a rate equal to the rate for Federal Direct PLUS Loans for the 12-month period beginning on July 1, 2020, and ending on June 30, 2021;
“(D) in any case where the original loan was a loan under section 428C or a Federal Direct Consolidation Loan, a rate calculated in accordance with paragraph (2); and
“(E) in any case where the original loan was a Federal student loan described in subparagraph (B) or (C) of subsection (a)(1), the lesser of—
“(i) (I) in any case where the original loan was issued to an undergraduate student, the rate that applies under subparagraph (A); or
“(II) in any case where the original loan was issued to a graduate or professional student, the rate that applies under subparagraph (B); or
“(ii) the original interest rate of the loan.
“(2) INTEREST RATES FOR REFINANCED CONSOLIDATION LOANS.—
“(A) METHOD OF CALCULATION.—In order to determine the interest rate for any refinanced Federal Direct Consolidation Loan under paragraph (1)(D), the Secretary shall—
“(i) determine each of the component loans that were originally consolidated in the loan under section 428C or the Federal Direct Consolidation Loan, and calculate the proportion of the unpaid principal balance of the loan under section 428C or the Federal Direct Consolidation Loan that each component loan represents;
“(ii) use the proportions determined in accordance with clause (i) and the interest rate applicable for each component loan, as determined under subparagraph (B), to calculate the weighted average of the interest rates on the loans consolidated into the loan under section 428C or the Federal Direct Consolidation Loan; and
“(iii) apply the weighted average calculated under clause (ii) as the interest rate for the refinanced Federal Direct Consolidation Loan.
“(B) INTEREST RATES FOR COMPONENT LOANS.—The interest rates for the component loans of a loan made under section 428C or a Federal Direct Consolidation Loan shall be the following:
“(i) The interest rate for any loan under section 428 or 428H, Federal Direct Stafford Loan, or Federal Direct Unsubsidized Stafford Loan, that is issued to an undergraduate student shall be a rate equal to the lesser of—
“(I) the rate for Federal Direct Stafford Loans and Federal Direct Unsubsidized Stafford Loans issued to undergraduate students for the 12-month period beginning on July 1, 2020, and ending on June 30, 2021; or
“(II) the original interest rate of the component loan.
“(ii) The interest rate for any loan under section 428 or 428H, Federal Direct Stafford Loan, or Federal Direct Unsubsidized Stafford Loan, that is issued to a graduate or professional student shall be a rate equal to the lesser of—
“(I) the rate for Federal Direct Unsubsidized Stafford Loans issued to graduate or professional students for the 12-month period beginning on July 1, 2020, and ending on June 30, 2021; or
“(II) the original interest rate of the component loan.
“(iii) The interest rate for any loan under section 428B or Federal Direct PLUS Loan shall be a rate equal to the lesser of—
“(I) the rate for Federal Direct PLUS Loans for the 12-month period beginning on July 1, 2020, and ending on June 30, 2021; or
“(II) the original interest rate of the component loan.
“(iv) The interest rate for any loan under part E of this title, or subpart II of part A of title VII or part E of title VIII of the Public Health Service Act (42 U.S.C. 292q et seq.; 297a et seq.), shall be a rate equal to the lesser of—
“(I) the rate for Federal Direct Stafford Loans and Federal Direct Unsubsidized Stafford Loans issued to graduate students for the 12-month period beginning on July 1, 2020, and ending on June 30, 2021; or
“(II) the original interest rate of the component loan.
“(v) The interest rate for any component loan that is a loan under section 428C or a Federal Direct Consolidation Loan shall be the weighted average of the interest rates that would apply under this subparagraph for each loan comprising the component consolidation loan.
“(3) FIXED RATE.—The applicable rate of interest determined under paragraph (1) for a refinanced loan under this section shall be fixed for the period of the loan.
“(4) RULE OF CONSTRUCTION.—Nothing in this section shall be construed to prevent a borrower of a Federal student loan described in subparagraph (B) or (C) of subsection (a)(1) from consolidating such loans with other loans eligible for consolidation under this section, or to require such a borrower to consolidate such loans with other Federal student loans into a single consolidation loan under this section.
“(e) Terms and conditions of loans.—
“(1) IN GENERAL.—A loan that is refinanced 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.—Refinancing 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) SPECIAL RULE FOR REFINANCED PERKINS AND HEALTH LOANS.—Notwithstanding paragraph (1), in the case of a loan that is refinanced under this section as a Federal Direct Consolidation Loan and that was originally a loan described in subparagraph (B) or (C) of subsection (a)(1)—
“(A) the refinanced Federal Direct Consolidation Loan shall have the same terms and conditions as a Federal Direct Consolidation Loan, except as otherwise provided in this section; and
“(B) the Secretary may adjust such terms and conditions as necessary to enable the borrower to access loan forgiveness or other benefits available to the borrower under the loan before refinancing under this section, in any case where such benefits are more generous than provided under a Federal Direct Consolidation Loan.
“(f) Notification to borrowers.—The Secretary, in coordination with the Director of the Bureau of Consumer Financial Protection, shall undertake a campaign to alert borrowers of FFEL, Perkins, or PHSA student loans that are eligible for refinancing under this section that the borrowers are eligible to apply for such refinancing. The campaign shall include the following activities:
“(1) Developing consumer information materials about the availability of Federal student loan refinancing.
“(2) Requiring servicers of loans under part B to provide such consumer information to borrowers in a manner determined appropriate by the Secretary, in consultation with the Director of the Bureau of Consumer Financial Protection.
“SEC. 460B. Federal Direct Refinanced Private Loan program.
“(a) Definitions.—In this section:
“(1) ELIGIBLE PRIVATE EDUCATION LOAN.—The term ‘eligible private education loan’ means a private education loan, as defined in section 140(a) of the Truth in Lending Act (15 U.S.C. 1650(a)), that—
“(A) was disbursed to the borrower before July 1, 2020; and
“(B) was for the borrower’s own postsecondary educational expenses for an eligible program at an institution of higher education participating in the loan program under this part, as of the date that the loan was disbursed.
“(2) FEDERAL DIRECT REFINANCED PRIVATE LOAN.—The term ‘Federal Direct Refinanced Private Loan’ means a loan issued under subsection (b)(1).
“(3) PRIVATE EDUCATIONAL LENDER.—The term ‘private educational lender’ has the meaning given the term in section 140(a) of the Truth in Lending Act (15 U.S.C. 1650(a)).
“(4) QUALIFIED BORROWER.—The term ‘qualified borrower’ means an individual who has an eligible private education loan.
“(1) IN GENERAL.—The Secretary, in consultation with the Secretary of the Treasury, shall carry out a program under which the Secretary, upon application by a qualified borrower who has an eligible private education loan, shall issue such borrower a loan under this part in accordance with the following:
“(A) The loan issued under this program shall be in an amount equal to the sum of the unpaid principal, accrued unpaid interest, and late charges of the private education loan.
“(B) The Secretary shall pay the proceeds of the loan issued under this program to the private educational lender of the private education loan, in order to discharge the qualified borrower from any remaining obligation to the lender with respect to the original loan.
“(C) The Secretary shall require that the qualified borrower undergo loan counseling that provides all of the information and counseling required under clauses (i) through (viii) of section 485(b)(1)(A) before the loan is refinanced in accordance with this section, and before the proceeds of such loan are paid to the private educational lender.
“(D) The Secretary shall issue the loan as a Federal Direct Refinanced Private Loan, which shall have the same terms, conditions, and benefits as a Federal Direct Unsubsidized Stafford Loan, except as otherwise provided in this section.
“(2) PRIVATE EDUCATIONAL LENDERS.—Not later than 180 days after the date of enactment of the Bank on Students Coronavirus Emergency Loan Refinancing Act of 2020, the Secretary, in consultation with the Secretary of the Treasury and the Director of the Bureau of Consumer Financial Protection, shall establish eligibility requirements to preclude windfall profits for private educational lenders.
“(1) IN GENERAL.—The interest rate for a Federal Direct Refinanced Private Loan is—
“(A) in the case of a Federal Direct Refinanced Private Loan for a private education loan originally issued for undergraduate postsecondary educational expenses, a rate equal to the rate for Federal Direct Stafford Loans and Federal Direct Unsubsidized Stafford Loans issued to undergraduate students for the 12-month period beginning on July 1, 2020, and ending on June 30, 2021; and
“(B) in the case of a Federal Direct Refinanced Private Loan for a private education loan originally issued for graduate or professional degree postsecondary educational expenses, a rate equal to the rate for Federal Direct Unsubsidized Stafford Loans issued to graduate or professional students for the 12-month period beginning on July 1, 2020, and ending on June 30, 2021.
“(2) COMBINED UNDERGRADUATE AND GRADUATE STUDY LOANS.—If a Federal Direct Refinanced Private Loan is for a private education loan originally issued for both undergraduate and graduate or professional postsecondary educational expenses, the interest rate shall be a rate equal to the rate for Federal Direct PLUS Loans for the 12-month period beginning on July 1, 2020, and ending on June 30, 2021.
“(3) FIXED RATE.—The applicable rate of interest determined under this subsection for a Federal Direct Refinanced Private Loan shall be fixed for the period of the loan.
“(d) No inclusion in aggregate limits.—The amount of a Federal Direct Refinanced Private Loan, or a Federal Direct Consolidated Loan to the extent such loan was used to repay a Federal Direct Refinanced Private Loan, shall not be included in calculating a borrower's annual or aggregate loan limits under section 428 or 428H.
“(e) Special rule for eligibility for service-Related repayment.—
“(1) IN GENERAL.—Notwithstanding sections 428K(a)(2), 428L(b)(2), 455(m)(3)(A), and 460(b), a Federal Direct Refinanced Private Loan shall be eligible for any loan repayment or loan forgiveness program under section 428K, 428L, or 460, or for the repayment plan for public service employees under section 455(m), but only with respect to any balance due, payments made, or service completed, after the date on which such Federal Direct Refinanced Private Loan was issued.
“(f) Private educational lender reporting requirement.—
“(1) REPORTING REQUIRED.—Not later than 180 days after the date of enactment of the Bank on Students Coronavirus Emergency Loan Refinancing Act of 2020, the Secretary, in consultation with the Secretary of the Treasury and the Director of the Bureau of Consumer Financial Protection, shall establish a requirement that private educational lenders report the data described in paragraph (2) to the Secretary, to Congress, to the Secretary of the Treasury, and to the Director of the Bureau of Consumer Financial Protection, in order to allow for an assessment of the private education loan market.
“(2) CONTENTS OF REPORTING.—The data that private educational lenders shall report in accordance with paragraph (1) shall include each of the following about private education loans (as defined in section 140(a) of the Truth in Lending Act (15 U.S.C. 1650(a))):
“(A) The total amount of private education loan debt the lender holds.
“(B) The total number of private education loan borrowers the lender serves.
“(C) The average interest rate on the outstanding private education loan debt held by the lender.
“(D) The proportion of private education loan borrowers who are in default on a loan held by the lender.
“(E) The proportion of the outstanding private education loan volume held by the lender that is in default.
“(F) The proportions of outstanding private education loan borrowers who are 30, 60, and 90 days delinquent.
“(G) The proportions of outstanding private education loan volume that is 30, 60, and 90 days delinquent.
“(g) Notification to borrowers.—The Secretary, in coordination with the Secretary of the Treasury and the Director of the Bureau of Consumer Financial Protection, shall undertake a campaign to alert borrowers about the availability of private student loan refinancing under this section.”.
(c) 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:
“(f) Special rule for refinanced loans.—
“(1) REFINANCED FEDERAL DIRECT, FFEL, AND PLUS LOANS.—In calculating the period of time during which a borrower of a loan (with the exception of a Federal Consolidation Loan) that is refinanced 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 refinanced loan, that otherwise meet the requirements of this section.
“(2) REFINANCED FEDERAL DIRECT CONSOLIDATION LOANS.—In calculating the period of time during which a borrower of a Federal Consolidation Loan that is refinanced under section 460A has made monthly payments for the purposes of subsection (b)(7), the Secretary shall—
“(A) review the borrower’s payment history to identify each component loan of such Federal Direct Consolidation Loan;
“(B) for each such component loan—
“(i) calculate the weighted factor of the component loan, which shall be the factor that represents the portion of such Federal Direct Consolidation Loan that is attributable to such component loan; and
“(ii) determine the number of qualifying monthly payments made on such component loan before consolidation;
“(C) calculate the number of qualifying monthly payments determined under subparagraph (B)(ii) with respect to a component loan that shall be deemed as qualifying monthly payments made on the Federal Direct Consolidation Loan by multiplying—
“(i) the weighted factor of such component loan as determined under subparagraph (B)(i); by
“(ii) the number of qualifying monthly payments made on such component loan as determined under subparagraph (B)(ii); and
“(D) calculate and inform the borrower of the total number of qualifying monthly payments with respect to the component loans of the Federal Direct Consolidation Loan that shall be deemed as qualifying monthly payments made on the refinanced Federal Consolidation Loan, by—
“(i) adding together the result of each calculation made under subparagraph (C) with respect to each such component loan; and
“(ii) rounding the number determined under clause (i) to the nearest whole number.
“(3) FEDERAL DIRECT REFINANCED PRIVATE LOANS.—In calculating the period of time during which a borrower of a Federal Direct Refinanced Private Loan under section 460B has made monthly payments for purposes of subsection (b)(7), the Secretary shall include only payments—
“(A) that are made after the date of the issuance of the Federal Direct Refinanced Private Loan; and
“(B) that otherwise meet the requirements of this section.”.
(d) Conforming amendments.—The Higher Education Act of 1965 (20 U.S.C. 1001 et seq.) is amended—
(1) in section 428J(c)(2) (20 U.S.C. 1078–10(c)(2)), by inserting “a Federal Direct Refinanced Private Loan,” after “a Federal Direct Unsubsidized Stafford Loan,”;
(2) in section 455 (20 U.S.C. 1087e)—
(A) in subsection (f)(1)(B), by inserting “a Federal Direct Refinanced Private Loan,” after “a Federal Direct Unsubsidized Stafford Loan,”; and
(B) in subsection (m)(3)(A), by striking “or Federal Direct Unsubsidized Stafford Loan,” and inserting “Federal Direct Unsubsidized Stafford Loan, or Federal Direct Refinanced Private Loan,”; and
(3) in section 460 (20 U.S.C. 1087j)—
(A) in subsection (b), by striking “and Federal Direct Unsubsidized Stafford Loans” and inserting “Federal Direct Unsubsidized Stafford Loans, and Federal Direct Refinanced Private Loans”; and
(i) in paragraph (1), by striking “or a Federal Direct Unsubsidized Stafford Loan” and inserting “, a Federal Direct Unsubsidized Stafford Loan, or a Federal Direct Refinanced Private Loan”; and
(ii) in paragraph (2), by inserting “a Federal Direct Refinanced Private Loan,” after “a Federal Direct Unsubsidized Stafford Loan,”.
(e) Effective date.—The amendments made by this section shall take effect on July 1, 2020.