Student Loan Fairness Act

I 116TH CONGRESS 1ST SESSION H. R. 3257 To increase purchasing power, strengthen economic recovery, and restore fairness in financing higher education in the United States through student loan forgiveness, caps on interest rates on Federal student loans, and refinancing opportunities for private borrowers, and for other pur- poses. IN THE HOUSE OF REPRESENTATIVES JUNE 13, 2019 Ms. BASS (for herself, Ms. NORTON, Mr. BISHOP of Georgia, Mr. CLYBURN, Ms. JOHNSON of Texas, Mr. RUSH, Mr. THOMPSON of Mississippi, Ms. JACKSON LEE, Ms. LEE of California, Mrs. LAWRENCE, Mr. CLAY, Mr. BUTTERFIELD, Mr. CLEAVER, Mr. JOHNSON of Georgia, Ms. FUDGE, Mr. RICHMOND, Mr. PAYNE, Ms. KELLY of Illinois, Ms. ADAMS, Ms. PLASKETT, and Mrs. HAYES) introduced the following bill; which was re- ferred to the Committee on Education and Labor, and in addition to the Committees on Financial Services, and Ways and Means, for a period to be subsequently determined by the Speaker, in each case for consider- ation of such provisions as fall within the jurisdiction of the committee concerned A BILL To increase purchasing power, strengthen economic recovery, and restore fairness in financing higher education in the United States through student loan forgiveness, caps on interest rates on Federal student loans, and refi- nancing opportunities for private borrowers, and for other purposes. VerDate Sep 11 2014 02:23 Jun 18, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6652 E:\BILLS\H3257.IH H3257 kjohnson on DSK79L0C42 with BILLS 2 •HR 3257 IH 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 Fairness 4 Act’’. 5 SEC. 2. FINDINGS. 6 Congress finds the following: 7 (1) A well-educated citizenry is critical to our 8 Nation’s ability to compete in the global economy. 9 (2) The Federal Government has a vested inter- 10 est in ensuring access to higher education. 11 (3) Higher education should be viewed as a 12 public good benefitting our country rather than as a 13 commodity solely benefitting individual students. 14 (4) Total outstanding student loan debt offi- 15 cially surpassed total credit card debt in the United 16 States in 2015, and now exceeds 17 $1,400,000,000,000. 18 (5) Excessive student loan debt is impeding eco- 19 nomic growth in the United States. Faced with ex- 20 cessive repayment burdens, many individuals are un- 21 able to start businesses, invest, or buy homes. Re- 22 lieving student loan debt would give these individuals 23 greater control over their earnings and would in- 24 VerDate Sep 11 2014 02:23 Jun 18, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H3257.IH H3257 kjohnson on DSK79L0C42 with BILLS 3 •HR 3257 IH crease entrepreneurship and demand for goods and 1 services. 2 (6) Because of soaring tuition costs, students 3 often have no choice but to amass significant debt 4 to obtain an education that is widely considered a 5 prerequisite for earning a living wage. 6 (7) Amidst rising tuition rates and stagnant 7 grant funding, many students are forced to supple- 8 ment Federal loans with private loans, which fre- 9 quently feature higher interest rates with fewer con- 10 sumer protections. 11 (8) A borrower who experiences an extended 12 hardship for whatever reason, or a borrower who ex- 13 periences a series of separate hardships over a 14 longer period of time, will often have no choice but 15 to default on his or her private student loans. Op- 16 portunities to put such private loans into forbear- 17 ance are limited. 18 (9) During the period of forbearance on private 19 student loans, interest continues to accrue and is 20 capitalized, and once the borrower comes out of for- 21 bearance, he or she owes significantly more on the 22 principal of the loan than before the hardship period 23 began. 24 VerDate Sep 11 2014 02:23 Jun 18, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H3257.IH H3257 kjohnson on DSK79L0C42 with BILLS 4 •HR 3257 IH SEC. 3. 10/10 LOAN REPAYMENT AND FORGIVENESS. 1 Part G of title IV of the Higher Education Act of 2 1965 is amended by adding at the end the following: 3 ‘‘SEC. 493E. 10/10 LOAN REPAYMENT AND FORGIVENESS. 4 ‘‘(a) 10/10 LOAN REPAYMENT PLAN.— 5 ‘‘(1) 10/10 LOAN REPAYMENT PLAN AUTHOR- 6 IZED.—Notwithstanding any other provision of this 7 Act, the Secretary shall carry out a program (to be 8 known as the ‘10/10 Loan Repayment Plan’) under 9 which— 10 ‘‘(A) a borrower of an eligible loan who is 11 eligible under paragraph (3) may elect to have 12 the borrower’s aggregate monthly payment for 13 all such loans not exceed the monthly payment 14 amount described in paragraph (2); 15 ‘‘(B) any interest due and not paid under 16 a monthly payment under this subsection— 17 ‘‘(i) shall continue to accrue; and 18 ‘‘(ii) shall be capitalized up to an 19 amount equal to 10 percent of the original 20 principal amount of all the eligible loans 21 that the borrower is repaying under this 22 subsection; 23 ‘‘(C) any principal due and not paid under 24 a monthly payment under this subsection shall 25 be deferred, and shall be forgiven in accordance 26 VerDate Sep 11 2014 02:23 Jun 18, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H3257.IH H3257 kjohnson on DSK79L0C42 with BILLS 5 •HR 3257 IH with subsection (b) if the borrower meets the 1 requirements for forgiveness under such sub- 2 section; 3 ‘‘(D) the amount of time the borrower 4 makes monthly payments under this subsection 5 may exceed 10 years; 6 ‘‘(E) a borrower who is repaying an eligi- 7 ble loan pursuant to 10/10 Loan Repayment 8 under this subsection may elect, at any time, to 9 terminate repayment pursuant to 10/10 Loan 10 Repayment and repay such loan under the 11 standard repayment plan, in which case the 12 amount of time the borrower is permitted to 13 repay such loans may exceed 10 years; and 14 ‘‘(F) the special allowance payment to a 15 lender calculated under section 438(b)(2)(I), 16 when calculated for a loan in repayment under 17 this section, shall be calculated on the principal 18 balance of the loan and on any accrued interest 19 unpaid by the borrower in accordance with this 20 section. 21 ‘‘(2) 10/10 LOAN REPAYMENT MONTHLY PAY- 22 MENT FORMULA.—A borrower who has elected to 23 participate in the 10/10 Loan Repayment Plan 24 under this subsection shall, during each month the 25 VerDate Sep 11 2014 02:23 Jun 18, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H3257.IH H3257 kjohnson on DSK79L0C42 with BILLS 6 •HR 3257 IH borrower is participating in such Plan, make a 1 monthly payment in an amount equal to— 2 ‘‘(A) one-twelfth of the amount that is 10 3 percent of the result obtained by calculating, on 4 at least an annual basis, the amount by 5 which— 6 ‘‘(i) the borrower’s, and the bor- 7 rower’s spouse’s (if applicable), adjusted 8 gross income; exceeds 9 ‘‘(ii) 150 percent of the poverty line 10 applicable to the borrower’s family size as 11 determined under section 673(2) of the 12 Community Services Block Grant Act (42 13 U.S.C. 9902(2)), as adjusted by 14 ‘‘(iii) the regional variation in the cost 15 of living (determined by the Secretary, in 16 consultation with the Bureau of Economic 17 Analysis of the Department of Commerce 18 and the Bureau of Labor Statistics of the 19 Department of Labor) for the geographic 20 area in which the borrower resides, so that 21 a borrower residing in a higher cost geo- 22 graphic area will experience a downward 23 trend in such monthly payment amount; or 24 VerDate Sep 11 2014 02:23 Jun 18, 2019 Jkt 089200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H3257.IH H3257 kjohnson on DSK79L0C42 with BILLS 7 •HR 3257 IH ‘‘(B) in the case of a borrower who is in 1 deferment due to an economic hardship de- 2 scribed in section 435(o), $0. 3 ‘‘(3) ELIGIBILITY.—The Secretary shall estab- 4 lish procedures for annually determining the bor- 5 rower’s eligibility for 10/10 Loan Repayment, includ- 6 ing verification of a borrower’s annual adjusted 7 gross income and the annual amount due on the 8 total amount of eligible loans, and such other proce- 9 dures as are necessary to effectively implement 10/ 10 10 Loan Repayment under this subsection. 11 ‘‘(4) SPECIAL RULE FOR MARRIED BORROWERS 12 FILING SEPARATELY.—In the case of a married bor- 13 rower who files a separate Federal income tax re- 14 turn, the Secretary shall calculate the amount of the 15 borrower’s 10/10 Loan Repayment under this sub- 16 section solely on the basis of the borrower’s student 17 loan debt and adjusted gross income, and the re- 18 gional variation in the cost of living described in 19 paragraph (2)(A)(iii). 20 ‘‘(b) 10/10 LOAN FORGIVENESS.— 21 ‘‘(1) IN GENERAL.—The Secretary shall carry 22 out a program (to be known as the ‘10/10 Loan 23 Forgiveness Program’) to forgive a qualified loan 24 amount, in accordance with paragraph (3), on an eli- 25 VerDate Sep 11 2014 02:23 Jun 18, 2019 Jkt 089200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H3257.IH H3257 kjohnson on DSK79L0C42 with BILLS 8 •HR 3257 IH gible loan for a borrower who, after the date that is 1 10 years prior to the date of enactment of the Stu- 2 dent Loan Fairness Act, has made 120 monthly pay- 3 ments on the eligible loan pursuant to any one or a 4 combination of the following: 5 ‘‘(A) Monthly payment under the 10/10 6 Loan Repayment Plan under subsection (a). 7 ‘‘(B) Monthly payment under any other re- 8 payment plan authorized under part B or D of 9 an amount that, for a given month, is not less 10 than the monthly payment amount calculated 11 under subsection (a) that the borrower would 12 have owed in the year in which such payment 13 was made, based on the borrower’s adjusted 14 gross income and eligible loan balance for such 15 year. 16 ‘‘(C) For any month after such date dur- 17 ing which the borrower is in deferment due to 18 an economic hardship described in section 19 435(o), monthly payment of $0. 20 ‘‘(2) METHOD OF LOAN FORGIVENESS.—To 21 provide loan forgiveness under paragraph (1), the 22 Secretary is authorized to carry out a program— 23 ‘‘(A) through the holder of the loan, to as- 24 sume the obligation to repay a qualified loan 25 VerDate Sep 11 2014 02:23 Jun 18, 2019 Jkt 089200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H3257.IH H3257 kjohnson on DSK79L0C42 with BILLS 9 •HR 3257 IH amount for a loan made, insured, or guaranteed 1 under part B of this title; and 2 ‘‘(B) to cancel a qualified loan amount for 3 a loan made under part D of this title. 4 ‘‘(3) QUALIFIED LOAN AMOUNT.—After the 5 borrower has made 120 monthly payments described 6 in paragraph (1), the Secretary shall forgive— 7 ‘‘(A) with respect to new borrowers on or 8 after the date of enactment of the Student 9 Loan Fairness Act, the sum of— 10 ‘‘(i) the balance of principal and fees 11 due on the borrower’s eligible loans as of 12 the time of such forgiveness, not to exceed 13 $45,520; and 14 ‘‘(ii) the amount of interest that has 15 accrued on the balance described in clause 16 (i) as of the time of such forgiveness; or 17 ‘‘(B) with respect to any other eligible bor- 18 rower, the balance of principal, interest, and 19 fees due on the borrower’s eligible loans as of 20 the time of such forgiveness. 21 ‘‘(4) EXCLUSION FROM TAXABLE INCOME.— 22 The amount of a borrower’s eligible loans forgiven 23 under this section shall not be included in the gross 24 VerDate Sep 11 2014 02:23 Jun 18, 2019 Jkt 089200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H3257.IH H3257 kjohnson on DSK79L0C42 with BILLS 10 •HR 3257 IH income of the borrower for purposes of the Internal 1 Revenue Code of 1986. 2 ‘‘(c) SUPPORTING DOCUMENTATION REQUIRED.—A 3 borrower who has elected to participate in the 10/10 Loan 4 Repayment Plan under subsection (a), or who is request- 5 ing forgiveness under the 10/10 Loan Forgiveness Pro- 6 gram under subsection (b), shall provide to the Secretary 7 such information and documentation as the Secretary de- 8 termines, by regulation, to be necessary to verify the bor- 9 rower’s adjusted gross income and payment amounts 10 made on eligible loans of the borrower for the purposes 11 of such Plan or Program. 12 ‘‘(d) DEFINITION OF ELIGIBLE LOAN.—In this sec- 13 tion the term ‘eligible loan’ means any loan made, insured, 14 or guaranteed under part B or D.’’. 15 SEC. 4. CAPPING INTEREST RATES FOR ALL FEDERAL DI- 16 RECT LOANS. 17 Section 455(b) of the Higher Education Act of 1965 18 (20 U.S.C. 1087e(b)) is amended— 19 (1) by redesignating paragraphs (9) and (10) 20 as paragraphs (10) and (11), respectively; and 21 (2) by inserting after paragraph (8) the fol- 22 lowing: 23 ‘‘(8) RATE OF INTEREST FOR ALL NEW FED- 24 ERAL DIRECT LOANS.—Notwithstanding any other 25 VerDate Sep 11 2014 02:23 Jun 18, 2019 Jkt 089200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H3257.IH H3257 kjohnson on DSK79L0C42 with BILLS 11 •HR 3257 IH provision of this Act, with respect to a loan under 1 this part for which the first disbursement of prin- 2 cipal is made (or in the case of a Federal Direct 3 Consolidation Loan, for which the application is re- 4 ceived) on or after October 1, 2020, or the date of 5 enactment of the Student Loan Fairness Act, which- 6 ever is later, the applicable rate of interest shall not 7 exceed 3.4 percent.’’. 8 SEC. 5. 10/10 LOAN REPAYMENT PLAN AS PLAN SELECTED 9 BY THE SECRETARY. 10 (a) FFEL LOANS.— 11 (1) IN GENERAL.—Section 428(b)(9) of the 12 Higher Education Act of 1965 (20 U.S.C. 13 1078(b)(9)) is amended— 14 (A) in subparagraph (A)— 15 (i) by striking ‘‘and’’ at the end of 16 clause (iv); 17 (ii) in clause (v), by striking the pe- 18 riod at the end and inserting ‘‘; and’’; and 19 (iii) by adding at the end the fol- 20 lowing new clause: 21 ‘‘(vi) beginning October 1, 2020, a 22 10/10 Loan Repayment Plan, with varying 23 annual repayment amounts based on the 24 VerDate Sep 11 2014 02:23 Jun 18, 2019 Jkt 089200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H3257.IH H3257 kjohnson on DSK79L0C42 with BILLS 12 •HR 3257 IH discretionary income of the borrower, in 1 accordance with section 493E.’’; and 2 (B) in subparagraph (B), by striking 3 ‘‘(A)(i)’’ and inserting ‘‘(A)(vi)’’. 4 (2) EFFECTIVE DATE.—The amendment made 5 by paragraph (1)(B) shall be effective beginning Oc- 6 tober 1, 2020. 7 (b) DIRECT LOANS.— 8 (1) IN GENERAL.—Section 455(d) of the High- 9 er Education Act of 1965 (20 U.S.C. 1087e(d)) is 10 amended— 11 (A) in paragraph (1)— 12 (i) by striking ‘‘and’’ at the end of 13 subparagraph (D); 14 (ii) in subparagraph (E), by striking 15 the period at the end and inserting ‘‘; 16 and’’; and 17 ( [Text truncated for display. 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