I 117TH CONGRESS 1ST SESSION H. R. 1586 To amend the Higher Education Act of 1965 to direct the Secretary of Education to carry out a program under which an institution of higher education may elect to cosign Federal student loans made to students attending the institution, and for other purposes. IN THE HOUSE OF REPRESENTATIVES MARCH 3, 2021 Mr. PERRY (for himself and Mr. SAN NICOLAS) introduced the following bill; which was referred to the Committee on Education and Labor A BILL To amend the Higher Education Act of 1965 to direct the Secretary of Education to carry out a program under which an institution of higher education may elect to cosign Federal student loans made to students attending the institution, and for other purposes. 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 ‘‘Student Loan Reform 4 Act’’. 5 VerDate Sep 11 2014 22:17 Apr 18, 2021 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H1586.IH H1586 kjohnson on DSK79L0C42PROD with BILLS 2 •HR 1586 IH SEC. 2. INSTITUTIONAL COSIGNER PROGRAM. 1 Part D of title IV of the Higher Education Act of 2 1965 (20 U.S.C. 1087a et seq.) is amended by inserting 3 after section 454 the following: 4 ‘‘SEC. 454A. INSTITUTIONAL COSIGNER PROGRAM. 5 ‘‘(a) PROGRAM REQUIRED.—Beginning on July 1, 6 2022, the Secretary shall carry out a program under which 7 an institution of higher education may elect to cosign all 8 eligible direct loans made to students enrolled at the insti- 9 tution for an academic year. 10 ‘‘(b) AGREEMENT WITH SECRETARY.—To be eligible 11 to participate in the program under this section for an 12 academic year, an institution of higher education shall 13 enter into an agreement with the Secretary under which 14 the institution agrees to the following: 15 ‘‘(1) The institution will cosign all new eligible 16 direct loans made to students enrolled at the institu- 17 tion for such academic year. 18 ‘‘(2) With respect to each such loan, the institu- 19 tion will abide by the terms and conditions of co- 20 signer liability described in subsection (d). 21 ‘‘(c) MASTER PROMISSORY NOTE.—As part of the 22 program under this section, the Secretary shall— 23 ‘‘(1) revise the master promissory note applica- 24 ble to each eligible direct loan to include— 25 VerDate Sep 11 2014 22:17 Apr 18, 2021 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H1586.IH H1586 kjohnson on DSK79L0C42PROD with BILLS 3 •HR 1586 IH ‘‘(A) the terms and conditions of cosigner 1 and borrower liability described in subsection 2 (d); 3 ‘‘(B) the interest rate for the loan, as de- 4 termined under subsection (e); and 5 ‘‘(C) a field in which an authorized rep- 6 resentative of an institution participating in the 7 program may cosign the note on behalf of the 8 institution; and 9 ‘‘(2) ensure that each institution participating 10 in the program signs the note applicable to each new 11 eligible direct loan made to a student at the institu- 12 tion for the academic year concerned. 13 ‘‘(d) COSIGNER AND BORROWER LIABILITY.— 14 ‘‘(1) IN GENERAL.—Notwithstanding any other 15 provision of law, an institution of higher education 16 that is a cosigner of an eligible direct loan of a bor- 17 rower shall assume the obligation to repay, in ac- 18 cordance with paragraph (2), the outstanding bal- 19 ance of principal and interest due on the loan if— 20 ‘‘(A) the borrower defaulted on the loan; 21 ‘‘(B) a period of 90 days has elapsed since 22 the date on which the loan entered default; and 23 ‘‘(C) the loan has not been rehabilitated. 24 VerDate Sep 11 2014 22:17 Apr 18, 2021 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H1586.IH H1586 kjohnson on DSK79L0C42PROD with BILLS 4 •HR 1586 IH ‘‘(2) AMOUNT AND SCHEDULE OF REPAY- 1 MENT.—An institution that is obligated to repay an 2 eligible direct loan under paragraph (1) shall make 3 payments on the loan pursuant to a standard repay- 4 ment plan under section 455(d)(1)(A) with a repay- 5 ment period of 10 years. 6 ‘‘(3) TERMINATION OF OBLIGATION.—The obli- 7 gation of an institution to repay an eligible direct 8 loan under paragraph (1) shall terminate on the ear- 9 lier of— 10 ‘‘(A) the date on which the loan is rehabili- 11 tated; or 12 ‘‘(B) the date on which the total out- 13 standing balance of principal and interest due 14 on the loan has been repaid. 15 ‘‘(4) EFFECT ON DEFAULT STATUS OF BOR- 16 ROWER.—A borrower who has defaulted on an eligi- 17 ble direct loan on which an institution is making 18 payments under paragraph (1) shall be considered in 19 default on such loan for purposes of adverse credit 20 reporting and delinquent debt collection procedures 21 under Federal law. 22 ‘‘(5) RECOVERY FROM BORROWER.—Any 23 amounts recovered from the borrower of an eligible 24 direct loan during a period in which an institution 25 VerDate Sep 11 2014 22:17 Apr 18, 2021 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H1586.IH H1586 kjohnson on DSK79L0C42PROD with BILLS 5 •HR 1586 IH is making payments on the loan under paragraph 1 (1) shall be subtracted from the total outstanding 2 balance of principal and interest due on the loan. 3 ‘‘(6) RULE OF CONSTRUCTION.—Nothing in 4 this subsection shall be construed to limit the rem- 5 edies available under this part against the borrower 6 of an eligible Federal student loan. 7 ‘‘(e) REDUCED INTEREST RATE.—Notwithstanding 8 any other provision of law, the interest rate applicable to 9 an eligible direct loan cosigned by an institution partici- 10 pating in the program under this section shall be a rate 11 determined by the Secretary that is— 12 ‘‘(1) lower than the standard rate applicable to 13 the loan under section 455(b); and 14 ‘‘(2) reduced below such standard rate by a per- 15 centage that is proportionate to the reduced risk 16 posed by the loan, as determined by the Secretary. 17 ‘‘(f) LIST OF PARTICIPATING INSTITUTIONS.—On an 18 annual basis, the Secretary shall publish, on a publicly ac- 19 cessible website of the Department of Education, a list 20 that identifies each institution participating in the pro- 21 gram under this section for an academic year. 22 ‘‘(g) ELIGIBLE DIRECT LOAN DEFINED.—In this 23 section, the term ‘eligible direct loan’ means a loan made 24 under this part on or after July 1, 2022.’’. 25 VerDate Sep 11 2014 22:17 Apr 18, 2021 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H1586.IH H1586 kjohnson on DSK79L0C42PROD with BILLS 6 •HR 1586 IH SEC. 3. MODIFICATION OF COHORT DEFAULT RATE 1 THRESHOLD. 2 (a) IN GENERAL.—Section 435(a) of the Higher 3 Education Act of 1965 (20 U.S.C. 1085(a)) is amended— 4 (1) in paragraph (2)— 5 (A) by striking subparagraphs (B) and (C) 6 and inserting the following: 7 ‘‘(B) For purposes of determinations under 8 subparagraph (A), the threshold percentage 9 is— 10 ‘‘(i) 40 percent, in the case of an in- 11 stitution that is participating in the insti- 12 tutional cosigner program under section 13 454A in the year in which the cohort de- 14 fault rate is determined; or 15 ‘‘(ii) 30 percent, in the case of an in- 16 stitution that is not participating in such 17 program in the year in which the cohort 18 default rate is determined.’’; and 19 (B) by redesignating subparagraph (D) as 20 subparagraph (C); 21 (2) in paragraph (3), by striking ‘‘paragraph 22 (2)(B)(iv)’’ and inserting ‘‘paragraph (2)(B)’’; and 23 (3) in paragraph (7), by striking ‘‘paragraph 24 (2)(B)(iv)’’ each place it appears and inserting 25 ‘‘paragraph (2)(B)’’. 26 VerDate Sep 11 2014 22:17 Apr 18, 2021 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H1586.IH H1586 kjohnson on DSK79L0C42PROD with BILLS 7 •HR 1586 IH (b) EFFECTIVE DATE.—The amendments made by 1 subsection (a) shall take effect on July 1, 2022. 2 Æ VerDate Sep 11 2014 22:17 Apr 18, 2021 Jkt 019200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6301 E:\BILLS\H1586.IH H1586 kjohnson on DSK79L0C42PROD with BILLS