Coronavirus Emergency Student Loan Refinancing Act

II 117TH CONGRESS 1ST SESSION S. 603 To amend the Higher Education Act of 1965 to provide for the refinancing of certain Federal student loans, and for other purposes. IN THE SENATE OF THE UNITED STATES MARCH 4, 2021 Mr. WARNER 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 the refinancing of certain Federal student loans, 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 ‘‘Coronavirus Emer- 4 gency Student Loan Refinancing Act’’. 5 SEC. 2. REFINANCING PROGRAMS. 6 (a) PROGRAM AUTHORITY.—Section 451(a) of the 7 Higher Education Act of 1965 (20 U.S.C. 1087a(a)) is 8 amended— 9 VerDate Sep 11 2014 04:42 Apr 02, 2021 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S603.IS S603 kjohnson on DSK79L0C42PROD with BILLS 2 •S 603 IS (1) by striking ‘‘and (2)’’ and inserting ‘‘(2)’’; 1 and 2 (2) by inserting ‘‘; and (3) to make loans under 3 section 460A’’ after ‘‘section 459A’’. 4 (b) REFINANCING PROGRAM.—Part D of title IV of 5 the Higher Education Act of 1965 (20 U.S.C. 1087a et 6 seq.) is amended by adding at the end the following: 7 ‘‘SEC. 460A. REFINANCING FFEL AND FEDERAL DIRECT 8 LOANS. 9 ‘‘(a) IN GENERAL.—Beginning not later than 30 10 days after the date of enactment of the Coronavirus Emer- 11 gency Student Loan Refinancing Act, the Secretary shall 12 establish a program under which the Secretary, upon the 13 receipt of an application from a qualified borrower, makes 14 a loan under this part, in accordance with the provisions 15 of this section, in order to permit the borrower to obtain 16 the interest rate provided under subsection (c). 17 ‘‘(b) REFINANCING DIRECT LOANS.— 18 ‘‘(1) FEDERAL DIRECT LOANS.—Upon applica- 19 tion of a qualified borrower, the Secretary shall 20 repay a Federal Direct Stafford Loan, a Federal Di- 21 rect Unsubsidized Stafford Loan, a Federal Direct 22 PLUS Loan, or a Federal Direct Consolidation 23 Loan of the qualified borrower, with the proceeds of 24 a refinanced Federal Direct Stafford Loan, a Fed- 25 VerDate Sep 11 2014 04:42 Apr 02, 2021 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S603.IS S603 kjohnson on DSK79L0C42PROD with BILLS 3 •S 603 IS eral Direct Unsubsidized Stafford Loan, a Federal 1 Direct PLUS Loan, or a Federal Direct Consolida- 2 tion Loan, respectively, issued to the borrower in an 3 amount equal to the sum of the unpaid principal, ac- 4 crued unpaid interest, and late charges of the origi- 5 nal loan. 6 ‘‘(2) REFINANCING FFEL PROGRAM LOANS AS 7 REFINANCED FEDERAL DIRECT LOANS.—Upon ap- 8 plication of a qualified borrower for any loan that 9 was made, insured, or guaranteed under part B, the 10 Secretary shall make a loan under this part, in an 11 amount equal to the sum of the unpaid principal, ac- 12 crued unpaid interest, and late charges of the origi- 13 nal loan to the borrower in accordance with the fol- 14 lowing: 15 ‘‘(A) The Secretary shall pay the proceeds 16 of such loan to the eligible lender of the loan 17 made, insured, or guaranteed under part B, in 18 order to discharge the borrower from any re- 19 maining obligation to the lender with respect to 20 the original loan. 21 ‘‘(B) A loan made under this section that 22 was originally a loan made, insured, or guaran- 23 teed— 24 VerDate Sep 11 2014 04:42 Apr 02, 2021 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S603.IS S603 kjohnson on DSK79L0C42PROD with BILLS 4 •S 603 IS ‘‘(i) under section 428 shall be a Fed- 1 eral Direct Stafford Loan; 2 ‘‘(ii) under section 428B shall be a 3 Federal Direct PLUS Loan; 4 ‘‘(iii) under section 428H shall be a 5 Federal Direct Unsubsidized Stafford 6 Loan; and 7 ‘‘(iv) under section 428C shall be a 8 Federal Direct Consolidation Loan. 9 ‘‘(3) APPLICABLE INTEREST RATE.—The inter- 10 est rate for each loan made by the Secretary under 11 this subsection shall be the rate provided under sub- 12 section (c). 13 ‘‘(c) INTEREST RATES.— 14 ‘‘(1) IN GENERAL.—The interest rate for the 15 refinanced Federal Direct Stafford Loans, Federal 16 Direct Unsubsidized Stafford Loans, Federal Direct 17 PLUS Loans, and Federal Direct Consolidation 18 Loans, under this section shall be a rate equal to— 19 ‘‘(A) in any case where the original loan 20 was a loan under section 428 or 428H, a Fed- 21 eral Direct Stafford loan, or a Federal Direct 22 Unsubsidized Stafford Loan, that was issued to 23 an undergraduate student, a rate equal to the 24 VerDate Sep 11 2014 04:42 Apr 02, 2021 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S603.IS S603 kjohnson on DSK79L0C42PROD with BILLS 5 •S 603 IS lowest yield on the 10-year Treasury note in the 1 preceding 6 months plus 2.05 percent; 2 ‘‘(B) in any case where the original loan 3 was a loan under section 428 or 428H, a Fed- 4 eral Direct Stafford Loan, or a Federal Direct 5 Unsubsidized Stafford Loan, that was issued to 6 a graduate or professional student, a rate equal 7 to the lowest yield on the 10-year Treasury note 8 in the preceding 6 months plus 3.6 percent; 9 ‘‘(C) in any case where the original loan 10 was a loan under section 428B or a Federal Di- 11 rect PLUS Loan, a rate equal to the lowest 12 yield on the 10-year Treasury note in the pre- 13 ceding 6 months plus 4.6 percent; and 14 ‘‘(D) in any case where the original loan 15 was a loan under section 428C or a Federal Di- 16 rect Consolidation Loan, a rate calculated in ac- 17 cordance with paragraph (2). 18 ‘‘(2) INTEREST RATES FOR CONSOLIDATION 19 LOANS.— 20 ‘‘(A) METHOD OF CALCULATION.—In 21 order to determine the interest rate for any re- 22 financed Federal Direct Consolidation Loan 23 under paragraph (1)(D) under this section, the 24 Secretary shall— 25 VerDate Sep 11 2014 04:42 Apr 02, 2021 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S603.IS S603 kjohnson on DSK79L0C42PROD with BILLS 6 •S 603 IS ‘‘(i) determine each of the component 1 loans that were originally consolidated in 2 the loan under section 428C or the Federal 3 Direct Consolidation Loan, and calculate 4 the proportion of the unpaid principal bal- 5 ance of the loan under section 428C or the 6 Federal Direct Consolidation Loan that 7 each component loan represents; 8 ‘‘(ii) use the proportions determined 9 in accordance with clause (i) and the inter- 10 est rate applicable for each component 11 loan, as determined under subparagraph 12 (B), to calculate the weighted average of 13 the interest rates on the loans consolidated 14 into the loan under section 428C or the 15 Federal Direct Consolidation Loan; and 16 ‘‘(iii) apply the weighted average cal- 17 culated under clause (ii) as the interest 18 rate for the refinanced Federal Direct Con- 19 solidation Loan. 20 ‘‘(B) INTEREST RATES FOR COMPONENT 21 LOANS.—The interest rates for the component 22 loans of a loan made under section 428C or a 23 Federal Direct Consolidation Loan shall be the 24 following: 25 VerDate Sep 11 2014 04:42 Apr 02, 2021 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S603.IS S603 kjohnson on DSK79L0C42PROD with BILLS 7 •S 603 IS ‘‘(i) The interest rate for any loan 1 under section 428 or 428H, Federal Direct 2 Stafford Loan, or Federal Direct Unsub- 3 sidized Stafford Loan issued to an under- 4 graduate student shall be a rate equal to 5 the lesser of— 6 ‘‘(I) the rate for Federal Direct 7 Stafford Loans and Federal Direct 8 Unsubsidized Stafford Loans issued 9 to undergraduate students for the 12- 10 month period beginning on July 1, 11 2020, and ending on June 30, 2021; 12 or 13 ‘‘(II) the original interest rate of 14 the component loan. 15 ‘‘(ii) The interest rate for any loan 16 under section 428 or 428H, Federal Direct 17 Stafford Loan, or Federal Direct Unsub- 18 sidized Stafford Loan issued to a graduate 19 or professional student shall be a rate 20 equal to the lesser of— 21 ‘‘(I) the rate for Federal Direct 22 Unsubsidized Stafford Loans issued 23 to graduate or professional students 24 for the 12-month period beginning on 25 VerDate Sep 11 2014 04:42 Apr 02, 2021 Jkt 019200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S603.IS S603 kjohnson on DSK79L0C42PROD with BILLS 8 •S 603 IS July 1, 2020, and ending on June 30, 1 2021; or 2 ‘‘(II) the original interest rate of 3 the component loan. 4 ‘‘(iii) The interest rate for any loan 5 under section 428B or Federal Direct 6 PLUS Loan shall be a rate equal to the 7 lesser of— 8 ‘‘(I) the rate for Federal Direct 9 PLUS Loans for the 12-month period 10 beginning on July 1, 2020, and end- 11 ing on June 30, 2021; or 12 ‘‘(II) the original interest rate of 13 the component loan. 14 ‘‘(iv) The interest rate for any compo- 15 nent loan that is a loan under section 16 428C or a Federal Direct Consolidation 17 Loan shall be the weighted average of the 18 interest rates that would apply under this 19 subparagraph for each loan comprising the 20 component consolidation loan. 21 ‘‘(v) The interest rate for any eligible 22 loan that is a component of a loan made 23 under section 428C or a Federal Direct 24 Consolidation Loan and is not described in 25 VerDate Sep 11 2014 04:42 Apr 02, 2021 Jkt 019200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S603.IS S603 kjohnson on DSK79L0C42PROD with BILLS 9 •S 603 IS clauses (i) through (iv) shall be the inter- 1 est rate on the original component loan. 2 ‘‘(3) FIXED RATE.—The applicable rate of in- 3 terest determined under paragraph (1) for a refi- 4 nanced loan under this section shall be fixed for the 5 period of the loan. 6 ‘‘(d) TERMS AND CONDITIONS OF LOANS.— 7 ‘‘(1) IN GENERAL.—A loan that is refinanced 8 under this section shall have the same terms and 9 conditions as the original loan, except as otherwise 10 provided in this section. 11 ‘‘(2) NO AUTOMATIC EXTENSION OF REPAY- 12 MENT PERIOD.—Refinancing a loan under this sec- 13 tion shall not result in the extension of the duration 14 of the repayment period of the loan, and the bor- 15 rower shall retain the same repayment term that 16 was in effect on the original loan. Nothing in this 17 paragraph shall be construed to prevent a borrower 18 from electing a different repayment plan at any time 19 in accordance with section 455(d)(3). 20 ‘‘(e) DEFINITION OF QUALIFIED BORROWER.— 21 ‘‘(1) IN GENERAL.—For purposes of this sec- 22 tion, the term ‘qualified borrower’ means a bor- 23 rower— 24 VerDate Sep 11 2014 04:42 Apr 02, 2021 Jkt 019200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S603.IS S603 kjohnson on DSK79L0C42PROD with BILLS 10 •S 603 IS ‘‘(A) of a loan under this part or part B; 1 and 2 ‘‘(B) who meets the eligibility requirements 3 based on income or debt-to-income ratio estab- 4 lished by the Secretary. 5 ‘‘(2) INCOME REQUIREMENTS.—Not later than 6 30 days after the date of enactment of the 7 Coronavirus Emergency Student Loan Refinancing 8 Act, the Secretary shall establish eligibility require- 9 ments based on income or debt-to-income ratio that 10 take into consideration providing access to refi- 11 nancing under this section for borrowers with the 12 greatest financial need. 13 ‘‘(f) NOTIFICATION TO BORROWERS.—The Secretary, 14 in coordination with the Director of the Bureau of Con- 15 sumer Financial Protection, shall undertake a campaign 16 to alert borrowers of loans that are eligible for refinancing 17 under this section that the borrowers are eligible to apply 18 for such refinancing. The campaign shall include the fol- 19 lowing activities: 20 ‘‘(1) Developing consumer information mate- 21 rials about the availability of Federal student loan 22 refinancing. 23 ‘‘(2) Requiring servicers of loans under this 24 part or part B to provide such consumer information 25 VerDate Sep 11 2014 04:42 Apr 02, 2021 Jkt 019200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S603.IS S603 kjohnson on DSK79L0C42PROD with BILLS 11 •S 603 IS to borrowers in a manner determined appropriate by 1 the Secretary, in consultation with the Director of 2 the Bureau of Consumer Financial Protection.’’. 3 (c) AMENDMENTS TO PUBLIC SERVICE REPAYMENT 4 PLAN PROVISIONS.—Section 455(m) of the Higher Edu- 5 cation Act of 1965 (20 U.S.C. 1087e(m)) is amended— 6 (1) by redesignating paragraphs (3) and (4) as 7 paragraphs (4) and (5), respectively; 8 (2) by inserting after paragraph (2) the fol- 9 lowing: 10 ‘‘(3) SPECIAL RULES FOR SECTION 460A 11 LOANS.— 12 ‘‘(A) REFINANCED FEDERAL DIRECT 13 LOANS.—Notwithstanding paragraph (1), in de- 14 termining the number of monthly payments 15 that meet the requirements of such paragraph 16 for an eligible Federal Direct Loan refinanced 17 under section 460A that was originally a loan 18 under this part, the Secretary shall include all 19 monthly payments made on the original loan 20 that meet the requirements of such paragraph. 21 ‘‘(B) REFINANCED FFEL LOANS.—In the 22 case of an eligible Federal Direct Loan refi- 23 nanced under section 460A that was originally 24 a loan under part B, only monthly payments 25 VerDate Sep 11 2014 04:42 Apr 02, 2021 Jkt 019200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S603.IS S603 kjohnson on DSK79L0C42PROD with BILLS 12 •S 603 IS made after the date on which the loan was refi- 1 nanced may be included for purposes of para- 2 graph (1).’’; and 3 (3) in paragraph (4)(A) (as redesignated by 4 paragraph (1)), by inserting ‘‘(including any Federal 5 Direct Stafford Loan, Federal Direct PLUS Loan, 6 Federal Direct Unsubsidized Stafford Loan, or Fed- 7 eral Direct Consolidation Loan refinanced under sec- 8 tion 460A)’’ before the period at the end. 9 (d) INCOME-BASED REPAYMENT.—Section 493C of 10 the Higher Education Act of 1965 (20 U.S.C. 1098e) is 11 amended by adding at the end the following: 12 ‘‘(f) SPECIAL RULE FOR REFINANCED LOANS.—In 13 calculating the period of time during which a borrower of 14 a loan that is refinanced under section 460A has made 15 monthly payments for purposes of subsection (b)(7), the 16 Secretary shall deem the period to include all monthly pay- 17 ments made for the original loan, and all monthly pay- 18 ments made for the refinanced loan, that otherwise meet 19 the requirements of this section.’’. 20 Æ VerDate Sep 11 2014 04:42 Apr 02, 2021 Jkt 019200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6301 E:\BILLS\S603.IS S603 kjohnson on DSK79L0C42PROD with BILLS