LOAN Act of 2023

II 118TH CONGRESS 1ST SESSION S. 300 To amend the Higher Education Act of 1965 to provide for Federal student loan reform. IN THE SENATE OF THE UNITED STATES FEBRUARY 7, 2023 Mr. RUBIO introduced the following bill; which was read twice and referred to the Committee on Health, Education, Labor, and Pensions A BILL To amend the Higher Education Act of 1965 to provide for Federal student loan reform. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Leveraging Opportuni- 4 ties for Americans Now Act of 2023’’ or the ‘‘LOAN Act 5 of 2023’’. 6 VerDate Sep 11 2014 03:30 Feb 17, 2023 Jkt 047007 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S300.IS S300 pbinns on DSKBC47HB2PROD with BILLS 2 •S 300 IS SEC. 2. ELIMINATION OF INTEREST AND REPLACEMENT 1 WITH FINANCING FEES. 2 Section 455 of the Higher Education Act of 1965 (20 3 U.S.C. 1087e) is amended by adding at the end the fol- 4 lowing: 5 ‘‘(r) ELIMINATION OF INTEREST AND REPLACEMENT 6 WITH FINANCING FEES.— 7 ‘‘(1) IN GENERAL.— 8 ‘‘(A) IN GENERAL.—Except as provided 9 under subparagraph (B), beginning on July 1, 10 2024, the Secretary shall make loans under this 11 part in accordance with this subsection. 12 ‘‘(B) EXCEPTION.—Beginning on July 1, 13 2024, the Secretary shall make loans under this 14 part in accordance with the provisions of this 15 part other than this subsection to a borrower 16 who— 17 ‘‘(i) was enrolled in an institution of 18 higher education on June 30, 2024; and 19 ‘‘(ii) elects to borrow a loan under 20 this part in accordance with the provisions 21 of this part other than this subsection. 22 ‘‘(2) ELIMINATION OF INTEREST.—For loans 23 made under this part in accordance with this sub- 24 section for which the first disbursement is made on 25 VerDate Sep 11 2014 03:30 Feb 17, 2023 Jkt 047007 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S300.IS S300 pbinns on DSKBC47HB2PROD with BILLS 3 •S 300 IS or after July 1, 2024, the applicable rate of interest 1 shall be equal to 0 percent. 2 ‘‘(3) FINANCING FEES.— 3 ‘‘(A) IN GENERAL.—Beginning on July 1, 4 2024, the Secretary shall charge the borrower 5 of a loan made under this part in accordance 6 with this subsection a financing fee determined 7 in accordance with this paragraph and issued 8 on the date the loan is dispersed. 9 ‘‘(B) DETERMINATION OF FEE.—The fi- 10 nancing fee for a borrower of a loan made 11 under this part— 12 ‘‘(i) that is used for enrollment in an 13 undergraduate course of study (except a 14 Federal Direct PLUS Loan made on be- 15 half of a dependent student), shall be equal 16 to, from the principal amount of the loan, 17 20 percent of the amount of such loan; 18 ‘‘(ii) that is used for enrollment in a 19 course of study necessary for enrollment in 20 a program leading to a degree or certifi- 21 cate, shall be equal to, from the principal 22 amount of the loan, 20 percent of the 23 amount of such loan; 24 VerDate Sep 11 2014 03:30 Feb 17, 2023 Jkt 047007 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S300.IS S300 pbinns on DSKBC47HB2PROD with BILLS 4 •S 300 IS ‘‘(iii) that is used for enrollment in a 1 program that is necessary for a profes- 2 sional credential or certification from a 3 State that is required for employment as a 4 teacher in an elementary or secondary 5 school in that State, shall be equal to, 6 from the principal amount of the loan, 20 7 percent of the amount of such loan; and 8 ‘‘(iv) that is a Federal Direct PLUS 9 Loan made on behalf of a dependent stu- 10 dent or used for enrollment in a graduate 11 or professional course of study, shall be 12 equal to, from the principal amount of the 13 loan, 35 percent of the amount of such 14 loan. 15 ‘‘(C) REDUCTION DUE TO PREPAYMENT.— 16 ‘‘(i) IN GENERAL.—In order to pro- 17 vide an incentive to borrowers to pay the 18 balance of a loan made under this part 19 earlier than required under the applicable 20 repayment plan, the Secretary may credit 21 or refund any such borrowers for an 22 amount of the financing fee charged under 23 this subsection. 24 ‘‘(ii) REGULATIONS.— 25 VerDate Sep 11 2014 03:30 Feb 17, 2023 Jkt 047007 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S300.IS S300 pbinns on DSKBC47HB2PROD with BILLS 5 •S 300 IS ‘‘(I) IN GENERAL.—Not later 1 than 9 months after the date of enact- 2 ment of the Leveraging Opportunities 3 for Americans Now Act of 2023, the 4 Secretary shall promulgate regulations 5 establishing the methodology for cred- 6 iting or refunding a financing fee 7 charged under this subsection pursu- 8 ant to clause (i). Such credit or re- 9 fund shall not reduce the financing 10 fee by more than— 11 ‘‘(aa) with respect to a bor- 12 rower whose income, as deter- 13 mined under subclause (II), was 14 not more than $45,000 in the 15 taxable year in which the bor- 16 rower paid an amount from the 17 balance of a loan made under 18 this part earlier than required 19 under the applicable repayment 20 plan, 15 percentage points of 21 such amount; 22 ‘‘(bb) with respect to a bor- 23 rower whose income, as deter- 24 mined under subclause (II), was 25 VerDate Sep 11 2014 03:30 Feb 17, 2023 Jkt 047007 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S300.IS S300 pbinns on DSKBC47HB2PROD with BILLS 6 •S 300 IS more than $45,000 but not more 1 than $95,000 in the taxable year 2 in which the borrower paid an 3 amount from the balance of a 4 loan made under this part earlier 5 than required under the applica- 6 ble repayment plan, 10 percent- 7 age points of such amount; and 8 ‘‘(cc) with respect to a bor- 9 rower whose income, as deter- 10 mined under subclause (II), was 11 more than $95,000 in the taxable 12 year in which the borrower paid 13 an amount from the balance of a 14 loan made under this part earlier 15 than required under the applica- 16 ble repayment plan, 5 percentage 17 points of such amount. 18 ‘‘(II) INCOME DETERMINA- 19 TION.—For purposes of subclause (I), 20 a borrower’s income is equal to the 21 amount by which— 22 ‘‘(aa) the borrower’s, and 23 the borrower’s spouse’s (if appli- 24 VerDate Sep 11 2014 03:30 Feb 17, 2023 Jkt 047007 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S300.IS S300 pbinns on DSKBC47HB2PROD with BILLS 7 •S 300 IS cable), adjusted gross income; ex- 1 ceeds 2 ‘‘(bb) 150 percent of the 3 poverty line applicable to the bor- 4 rower’s family size as determined 5 under section 673(2) of the Com- 6 munity Services Block Grant Act 7 (42 U.S.C. 9902(2)). 8 ‘‘(D) METHODOLOGY OF PAYMENT.—The 9 Secretary shall establish an amortization sched- 10 ule for the repayment of financing fees charged 11 under this subsection. 12 ‘‘(4) RULEMAKING FOR CONSOLIDATION.—Not 13 later than 18 months after the date of enactment of 14 the Leveraging Opportunities for Americans Now 15 Act of 2023, the Secretary shall promulgate rules re- 16 garding Federal Direct Consolidation Loans made 17 under this part in accordance with this subsection, 18 including a rule that the financing fee for such a 19 Federal Direct Consolidation Loan determined in ac- 20 cordance with this subsection shall not exceed the 21 sum of the financing fees applicable to the consoli- 22 dated loans.’’. 23 VerDate Sep 11 2014 03:30 Feb 17, 2023 Jkt 047007 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S300.IS S300 pbinns on DSKBC47HB2PROD with BILLS 8 •S 300 IS SEC. 3. INCOME DEPENDENT EDUCATION ASSISTANCE RE- 1 PAYMENT PLAN. 2 Part D of title IV of the Higher Education Act of 3 1965 (20 U.S.C. 1087a et seq.) is amended by adding at 4 the end the following: 5 ‘‘SEC. 460A. INCOME DEPENDENT EDUCATION ASSISTANCE 6 REPAYMENT PLAN. 7 ‘‘(a) IN GENERAL.— 8 ‘‘(1) APPLICABILITY.—Notwithstanding any 9 other provision of this Act, with respect to any loan 10 made under this part after the date of enactment of 11 the Leveraging Opportunities for Americans Now 12 Act of 2023, the repayment plan options are only a 13 10-year fixed repayment plan and the repayment 14 plan under this section. If the borrower of the loan 15 does not select a repayment plan, the repayment of 16 such loan shall be made in accordance with this sec- 17 tion. A borrower of a loan made under this part 18 after the date of enactment of the Leveraging Op- 19 portunities for Americans Now Act of 2023 may af- 20 firmatively select the repayment plan under this sec- 21 tion. 22 ‘‘(2) REGULATIONS.—Not later than 18 months 23 after the date of enactment of the Leveraging Op- 24 portunities for Americans Now Act of 2023, the Sec- 25 retary shall promulgate rules— 26 VerDate Sep 11 2014 03:30 Feb 17, 2023 Jkt 047007 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S300.IS S300 pbinns on DSKBC47HB2PROD with BILLS 9 •S 300 IS ‘‘(A) outlining how the Department will 1 implement the income dependent education as- 2 sistance repayment plan requirements for bor- 3 rowers under this section; and 4 ‘‘(B) regarding monthly repayment proc- 5 esses for borrowers of loans made under this 6 part before the date of enactment of the 7 Leveraging Opportunities for Americans Now 8 Act of 2023. 9 ‘‘(3) RULE OF CONSTRUCTION.—Nothing in 10 this section shall be construed to eliminate or other- 11 wise affect the loan forgiveness or loan cancellation 12 options available under this part to a borrower. 13 ‘‘(b) DUTIES OF THE SECRETARY OF THE TREAS- 14 URY.— 15 ‘‘(1) IN GENERAL.—The Secretary of the 16 Treasury shall, with respect to each individual for 17 whom a loan made under this part after the date of 18 enactment of the Leveraging Opportunities for 19 Americans Now Act of 2023 is in repayment status, 20 transmit to the Secretary of Education— 21 ‘‘(A) in the case of such an individual who 22 files an income tax return for such taxable year, 23 such tax information as is necessary to deter- 24 mine the individual’s repayment obligation and 25 VerDate Sep 11 2014 03:30 Feb 17, 2023 Jkt 047007 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S300.IS S300 pbinns on DSKBC47HB2PROD with BILLS 10 •S 300 IS financing fee adjustments, as determined by the 1 Secretary under this part; and 2 ‘‘(B) in the case of any such individual 3 who does not file a return for such taxable year, 4 any available tax information of the individual 5 as may be necessary to determine such obliga- 6 tion and whether such individual is delinquent 7 under the terms of such loan for not so filing. 8 ‘‘(2) ADDITIONAL PROGRAM REQUIREMENTS.— 9 The Secretary of the Treasury shall establish such 10 other policies, procedures, and guidance as may be 11 necessary to carry out the purposes of this section, 12 including measures to prevent underreporting and 13 evasion of repayment or filing. 14 ‘‘(c) DUTIES OF THE SECRETARY OF EDUCATION.— 15 ‘‘(1) IN GENERAL.—The Secretary shall carry 16 out, as part of the loan repayment plan established 17 under this section, the following activities: 18 ‘‘(A) CALCULATION OF ANNUAL REPAY- 19 MENT AMOUNTS.—The Secretary shall calculate 20 the annual repayment amount under this sec- 21 tion for borrowers with 1 or more loans made 22 under this part after the date of enactment of 23 the Leveraging Opportunities for Americans 24 Now Act of 2023 in repayment status for one 25 VerDate Sep 11 2014 03:30 Feb 17, 2023 Jkt 047007 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S300.IS S300 pbinns on DSKBC47HB2PROD with BILLS 11 •S 300 IS or more months in the taxable year for which 1 the amount is determined regardless of which 2 repayment plan the borrower is in, including 3 the repayment obligations of such borrowers in 4 accordance with subsection (d)(3). 5 ‘‘(B) COMMUNICATION WITH THE SEC- 6 RETARY OF THE TREASURY.—The Secretary 7 shall transmit to the Secretary of the Treasury 8 such information as is necessary for the Sec- 9 retary of the Treasury to carry out subsection 10 (d)(3). 11 ‘‘(C) ANNUAL STATEMENTS.—Upon calcu- 12 lating the annual repayment amounts under 13 subparagraph (A) for a taxable year, the Sec- 14 retary shall provide a statement, on an annual 15 basis, to each borrower with a loan made under 16 this part after the date of enactment of the 17 Leveraging Opportunities for Americans Now 18 Act of 2023 regardless of which repayment plan 19 the borrower is in, which lists the following: 20 ‘‘(i) Total payments made on the bor- 21 rower’s annual repayment amount for such 22 taxable year. 23 ‘‘(ii) The borrower’s annual repay- 24 ment amount for such taxable year. 25 VerDate Sep 11 2014 03:30 Feb 17, 2023 Jkt 047007 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S300.IS S300 pbinns on DSKBC47HB2PROD with BILLS 12 •S 300 IS ‘‘(iii) The outstanding balances on all 1 the loans made to the borrower under this 2 part after the date of enactment of the 3 Leveraging Opportunities for Americans 4 Now Act of 2023 and any other out- 5 standing balances on loans of the borrower 6 that were made, insured, or guaranteed 7 under this title. 8 ‘‘(iv) A description of how the bor- 9 rower’s annual repayment amount was cal- 10 culated. 11 ‘‘(D) PAYMENTS ON A BORROWER’S BE- 12 HALF.— 13 ‘‘(i) IN GENERAL.—The Secretary 14 shall— 15 ‘‘(I) provide a mechanism for 16 other individuals or entities to make 17 payments on the annual repayment 18 amount of a borrower for a taxable 19 year; and 20 ‘‘(II) notify the borrower that 21 any payments made under subclause 22 (I) for the taxable year that exceed 23 the annual repayment amount for the 24 year shall not be refunded to the bor- 25 VerDate Sep 11 2014 03:30 Feb 17, 2023 Jkt 047007 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\S300.IS S300 pbinns on DSKBC47HB2PROD with BILLS 13 •S 300 IS rower, except as provided through the 1 appeals process described in clause 2 (ii). 3 ‘‘(ii) APPEALS PROCESS.—The Sec- 4 retary shall make available a process 5 through which a borrower can appeal for 6 refund of payments made under clause (i) 7 that exceed the annual repayment amount 8 for the year if such payments were made 9 pursuant to improper wage garnishment. 10 ‘‘(E) APPEALS PROCESS.— 11 ‘‘(i) IN GENERAL.—The Secretary 12 shall make available a process through 13 which a borrower can appeal the calcula- 14 tion of the borrower’s annual repayment 15 amount, including a worksheet that en- 16 ables a borrower to calculate the bor- 17 rower’s annual repayment amount. 18 ‘‘(ii) GOOD STANDING.—A borrower 19 who makes an appeal under clause (i) with 20 respect to a loan shall be considered in 21 good standing on such loan during the du- 22 ration of the appeal. 23 ‘‘(iii) REGULATIONS.—The Secretary 24 shall issue regulations outlining such proc- 25 VerDate Sep 11 2014 03:30 Feb 17, 2023 Jkt 047007 PO 00000 Frm 00013 Fmt 6652 Sfmt 6201 E:\BILLS\S300.IS S300 pbinns on DSKBC47HB2 [Text truncated for display. 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