Bank on Students Emergency Loan Refinancing Act

II 116TH CONGRESS 1ST SESSION S. 768 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 13, 2019 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, 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, Mr. WYDEN, and Mr. HEINRICH) introduced the fol- lowing bill; which was read twice and referred to the Committee on Fi- nance 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 ‘‘Bank on Students 4 Emergency Loan Refinancing Act’’. 5 VerDate Sep 11 2014 00:11 Mar 27, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S768.IS S768 pbinns on DSK79D2C42PROD with BILLS 2 •S 768 IS TITLE I—REFINANCING 1 PROGRAMS 2 SEC. 101. REFINANCING PROGRAMS. 3 (a) PROGRAM AUTHORITY.—Section 451(a) of the 4 Higher Education Act of 1965 (20 U.S.C. 1087a(a)) is 5 amended— 6 (1) by striking ‘‘and (2)’’ and inserting ‘‘(2)’’; 7 and 8 (2) by inserting ‘‘; and (3) to make loans under 9 section 460A and section 460B’’ after ‘‘section 10 459A’’. 11 (b) REFINANCING PROGRAM.—Part D of title IV of 12 the Higher Education Act of 1965 (20 U.S.C. 1087a et 13 seq.) is amended by adding at the end the following: 14 ‘‘SEC. 460A. REFINANCING FFEL AND FEDERAL DIRECT 15 LOANS. 16 ‘‘(a) IN GENERAL.—Beginning not later than 180 17 days after the date of enactment of the Bank on Students 18 Emergency Loan Refinancing Act, the Secretary shall es- 19 tablish a program under which the Secretary, upon the 20 receipt of an application from a qualified borrower, makes 21 a loan under this part, in accordance with the provisions 22 of this section, in order to permit the borrower to obtain 23 the interest rate provided under subsection (c). 24 ‘‘(b) REFINANCING DIRECT LOANS.— 25 VerDate Sep 11 2014 00:11 Mar 27, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S768.IS S768 pbinns on DSK79D2C42PROD with BILLS 3 •S 768 IS ‘‘(1) FEDERAL DIRECT LOANS.—Upon applica- 1 tion of a qualified borrower, the Secretary shall 2 repay a Federal Direct Stafford Loan, a Federal Di- 3 rect Unsubsidized Stafford Loan, a Federal Direct 4 PLUS Loan, or a Federal Direct Consolidation 5 Loan of the qualified borrower, for which the first 6 disbursement was made, or the application for the 7 consolidation loan was received, before July 1, 2019, 8 with the proceeds of a refinanced Federal Direct 9 Stafford Loan, a Federal Direct Unsubsidized Staf- 10 ford Loan, a Federal Direct PLUS Loan, or a Fed- 11 eral Direct Consolidation Loan, respectively, issued 12 to the borrower in an amount equal to the sum of 13 the unpaid principal, accrued unpaid interest, and 14 late charges of the original loan. 15 ‘‘(2) REFINANCING FFEL PROGRAM LOANS AS 16 REFINANCED FEDERAL DIRECT LOANS.—Upon ap- 17 plication of a qualified borrower for any loan that 18 was made, insured, or guaranteed under part B and 19 for which the first disbursement was made, or the 20 application for the consolidation loan was received, 21 before July 1, 2010, the Secretary shall make a loan 22 under this part, in an amount equal to the sum of 23 the unpaid principal, accrued unpaid interest, and 24 VerDate Sep 11 2014 00:11 Mar 27, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S768.IS S768 pbinns on DSK79D2C42PROD with BILLS 4 •S 768 IS late charges of the original loan to the borrower in 1 accordance with the following: 2 ‘‘(A) The Secretary shall pay the proceeds 3 of such loan to the eligible lender of the loan 4 made, insured, or guaranteed under part B, in 5 order to discharge the borrower from any re- 6 maining obligation to the lender with respect to 7 the original loan. 8 ‘‘(B) A loan made under this section that 9 was originally a loan made, insured, or guaran- 10 teed— 11 ‘‘(i) under section 428 shall be a Fed- 12 eral Direct Stafford Loan; 13 ‘‘(ii) under section 428B shall be a 14 Federal Direct PLUS Loan; 15 ‘‘(iii) under section 428H shall be a 16 Federal Direct Unsubsidized Stafford 17 Loan; and 18 ‘‘(iv) under section 428C shall be a 19 Federal Direct Consolidation Loan. 20 ‘‘(C) The interest rate for each loan made 21 by the Secretary under this paragraph shall be 22 the rate provided under subsection (c). 23 ‘‘(c) INTEREST RATES.— 24 VerDate Sep 11 2014 00:11 Mar 27, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S768.IS S768 pbinns on DSK79D2C42PROD with BILLS 5 •S 768 IS ‘‘(1) IN GENERAL.—The interest rate for the 1 refinanced Federal Direct Stafford Loans, Federal 2 Direct Unsubsidized Stafford Loans, Federal Direct 3 PLUS Loans, and Federal Direct Consolidation 4 Loans, shall be a rate equal to— 5 ‘‘(A) in any case where the original loan 6 was a loan under section 428 or 428H, a Fed- 7 eral Direct Stafford loan, or a Federal Direct 8 Unsubsidized Stafford Loan, that was issued to 9 an undergraduate student, a rate equal to the 10 rate for Federal Direct Stafford Loans and 11 Federal Direct Unsubsidized Stafford Loans 12 issued to undergraduate students for the 12- 13 month period beginning on July 1, 2016, and 14 ending on June 30, 2017; 15 ‘‘(B) in any case where the original loan 16 was a loan under section 428 or 428H, a Fed- 17 eral Direct Stafford Loan, or a Federal Direct 18 Unsubsidized Stafford Loan, that was issued to 19 a graduate or professional student, a rate equal 20 to the rate for Federal Direct Unsubsidized 21 Stafford Loans issued to graduate or profes- 22 sional students for the 12-month period begin- 23 ning on July 1, 2016, and ending on June 30, 24 2017; 25 VerDate Sep 11 2014 00:11 Mar 27, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S768.IS S768 pbinns on DSK79D2C42PROD with BILLS 6 •S 768 IS ‘‘(C) in any case where the original loan 1 was a loan under section 428B or a Federal Di- 2 rect PLUS Loan, a rate equal to the rate for 3 Federal Direct PLUS Loans for the 12-month 4 period beginning on July 1, 2016, and ending 5 on June 30, 2017; and 6 ‘‘(D) in any case where the original loan 7 was a loan under section 428C or a Federal Di- 8 rect Consolidation Loan, a rate calculated in ac- 9 cordance with paragraph (2). 10 ‘‘(2) INTEREST RATES FOR CONSOLIDATION 11 LOANS.— 12 ‘‘(A) METHOD OF CALCULATION.—In 13 order to determine the interest rate for any re- 14 financed Federal Direct Consolidation Loan 15 under paragraph (1)(D), the Secretary shall— 16 ‘‘(i) determine each of the component 17 loans that were originally consolidated in 18 the loan under section 428C or the Federal 19 Direct Consolidation Loan, and calculate 20 the proportion of the unpaid principal bal- 21 ance of the loan under section 428C or the 22 Federal Direct Consolidation Loan that 23 each component loan represents; 24 VerDate Sep 11 2014 00:11 Mar 27, 2019 Jkt 089200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S768.IS S768 pbinns on DSK79D2C42PROD with BILLS 7 •S 768 IS ‘‘(ii) use the proportions determined 1 in accordance with clause (i) and the inter- 2 est rate applicable for each component 3 loan, as determined under subparagraph 4 (B), to calculate the weighted average of 5 the interest rates on the loans consolidated 6 into the loan under section 428C or the 7 Federal Direct Consolidation Loan; and 8 ‘‘(iii) apply the weighted average cal- 9 culated under clause (ii) as the interest 10 rate for the refinanced Federal Direct Con- 11 solidation Loan. 12 ‘‘(B) INTEREST RATES FOR COMPONENT 13 LOANS.—The interest rates for the component 14 loans of a loan made under section 428C or a 15 Federal Direct Consolidation Loan shall be the 16 following: 17 ‘‘(i) The interest rate for any loan 18 under section 428 or 428H, Federal Direct 19 Stafford Loan, or Federal Direct Unsub- 20 sidized Stafford Loan issued to an under- 21 graduate student shall be a rate equal to 22 the lesser of— 23 ‘‘(I) the rate for Federal Direct 24 Stafford Loans and Federal Direct 25 VerDate Sep 11 2014 00:11 Mar 27, 2019 Jkt 089200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S768.IS S768 pbinns on DSK79D2C42PROD with BILLS 8 •S 768 IS Unsubsidized Stafford Loans issued 1 to undergraduate students for the 12- 2 month period beginning on July 1, 3 2016, and ending on June 30, 2017; 4 or 5 ‘‘(II) the original interest rate of 6 the component loan. 7 ‘‘(ii) The interest rate for any loan 8 under section 428 or 428H, Federal Direct 9 Stafford Loan, or Federal Direct Unsub- 10 sidized Stafford Loan issued to a graduate 11 or professional student shall be a rate 12 equal to the lesser of— 13 ‘‘(I) the rate for Federal Direct 14 Unsubsidized Stafford Loans issued 15 to graduate or professional students 16 for the 12-month period beginning on 17 July 1, 2016, and ending on June 30, 18 2017; or 19 ‘‘(II) the original interest rate of 20 the component loan. 21 ‘‘(iii) The interest rate for any loan 22 under section 428B or Federal Direct 23 PLUS Loan shall be a rate equal to the 24 lesser of— 25 VerDate Sep 11 2014 00:11 Mar 27, 2019 Jkt 089200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S768.IS S768 pbinns on DSK79D2C42PROD with BILLS 9 •S 768 IS ‘‘(I) the rate for Federal Direct 1 PLUS Loans for the 12-month period 2 beginning on July 1, 2016, and end- 3 ing on June 30, 2017; or 4 ‘‘(II) the original interest rate of 5 the component loan. 6 ‘‘(iv) The interest rate for any compo- 7 nent loan that is a loan under section 8 428C or a Federal Direct Consolidation 9 Loan shall be the weighted average of the 10 interest rates that would apply under this 11 subparagraph for each loan comprising the 12 component consolidation loan. 13 ‘‘(v) The interest rate for any eligible 14 loan that is a component of a loan made 15 under section 428C or a Federal Direct 16 Consolidation Loan and is not described in 17 clauses (i) through (iv) shall be the inter- 18 est rate on the original component loan. 19 ‘‘(3) FIXED RATE.—The applicable rate of in- 20 terest determined under paragraph (1) for a refi- 21 nanced loan under this section shall be fixed for the 22 period of the loan. 23 ‘‘(d) TERMS AND CONDITIONS OF LOANS.— 24 VerDate Sep 11 2014 00:11 Mar 27, 2019 Jkt 089200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S768.IS S768 pbinns on DSK79D2C42PROD with BILLS 10 •S 768 IS ‘‘(1) IN GENERAL.—A loan that is refinanced 1 under this section shall have the same terms and 2 conditions as the original loan, except as otherwise 3 provided in this section. 4 ‘‘(2) NO AUTOMATIC EXTENSION OF REPAY- 5 MENT PERIOD.—Refinancing a loan under this sec- 6 tion shall not result in the extension of the duration 7 of the repayment period of the loan, and the bor- 8 rower shall retain the same repayment term that 9 was in effect on the original loan. Nothing in this 10 paragraph shall be construed to prevent a borrower 11 from electing a different repayment plan at any time 12 in accordance with section 455(d)(3). 13 ‘‘(e) DEFINITION OF QUALIFIED BORROWER.— 14 ‘‘(1) IN GENERAL.—For purposes of this sec- 15 tion, the term ‘qualified borrower’ means a bor- 16 rower— 17 ‘‘(A) of a loan under this part or part B 18 for which the first disbursement was made, or 19 the application for a consolidation loan was re- 20 ceived, before July 1, 2019; and 21 ‘‘(B) who meets the eligibility requirements 22 based on income or debt-to-income ratio estab- 23 lished by the Secretary. 24 VerDate Sep 11 2014 00:11 Mar 27, 2019 Jkt 089200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S768.IS S768 pbinns on DSK79D2C42PROD with BILLS 11 •S 768 IS ‘‘(2) INCOME REQUIREMENTS.—Not later than 1 180 days after the date of enactment of the Bank 2 on Students Emergency Loan Refinancing Act, the 3 Secretary shall establish eligibility requirements 4 based on income or debt-to-income ratio that take 5 into consideration providing access to refinancing 6 under this section for borrowers with the greatest fi- 7 nancial need. 8 ‘‘(f) NOTIFICATION TO BORROWERS.—The Secretary, 9 in coordination with the Director of the Bureau of Con- 10 sumer Financial Protection, shall undertake a campaign 11 to alert borrowers of loans that are eligible for refinancing 12 under this section that the borrowers are eligible to apply 13 for such refinancing. The campaign shall include the fol- 14 lowing activities: 15 ‘‘(1) Developing consumer information mate- 16 rials about the availability of Federal student loan 17 refinancing. 18 ‘‘(2) Requiring servicers of loans under this 19 part or part B to provide such consumer information 20 to borrowers in a manner determined appropriate by 21 the Secretary, in consultation with the Director of 22 the Bureau of Consumer Financial Protection. 23 VerDate Sep 11 2014 00:11 Mar 27, 2019 Jkt 089200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S768.IS S768 pbinns on DSK79D2C42PROD with BILLS 12 •S 768 IS ‘‘SEC. 460B. FEDERAL DIRECT REFINANCED PRIVATE LOAN 1 PROGRAM. 2 ‘‘(a) DEFINITIONS.—In this section: 3 ‘‘(1) ELIGIBLE PRIVATE EDUCATION LOAN.— 4 The term ‘eligible private education loan’ means a 5 private education loan, as defined in section 140(a) 6 of the Truth in Lending Act (15 U.S.C. 1650(a)), 7 that— 8 ‘‘(A) was disbursed to the borrower before 9 July 1, 2019; and 10 ‘‘(B) was for the borrower’s own postsec- 11 ondary educational expenses for an eligible pro- 12 gram at an institution of higher education par- 13 ticipating in the loan program under this part, 14 as of the date that the loan was disbursed. 15 ‘‘(2) FEDERAL DIRECT REFINANCED PRIVATE 16 LOAN.—The term ‘Federal Direct Refinanced Pri- 17 vate Loan’ means a loan issued under subsection 18 (b)(1). 19 ‘‘(3) PRIVATE EDUCATIONAL LENDER.—The 20 term ‘private educational lender’ has the meaning 21 given the term in section 140(a) of the Truth in 22 Lending Act (15 U.S.C. 1650(a)). 23 ‘‘(4) QUALIFIED BORROWER.—The term ‘quali- 24 fied borrower’ means an individual who— 25 ‘‘(A) has an eligible private education loan; 26 VerDate Sep 11 2014 00:11 Mar 27, 2019 Jkt 089200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\S768.IS S768 pbinns on DSK79D2C42PROD with BILLS 13 •S 768 IS ‘‘(B) has been current on payments on the 1 eligible private education loan for the 6 month [Text truncated for display. 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