Student Loan Debt Relief Act of 2019

II 116TH CONGRESS 1ST SESSION S. 2235 To discharge the qualified loan amounts of each individual, and for other purposes. IN THE SENATE OF THE UNITED STATES JULY 23, 2019 Ms. WARREN introduced the following bill; which was read twice and referred to the Committee on Finance A BILL To discharge the qualified loan amounts of each individual, 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 Debt 4 Relief Act of 2019’’. 5 SEC. 2. TABLE OF CONTENTS. 6 The table of contents for this Act is as follows: 7 Sec. 1. Short title. Sec. 2. Table of contents. TITLE I—LOAN DISCHARGE AND FORBEARANCE Sec. 101. Loan discharge. Sec. 102. Automatic administrative forbearance; halting of wage garnishment. VerDate Sep 11 2014 02:35 Aug 01, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6211 E:\BILLS\S2235.IS S2235 kjohnson on DSK79L0C42 with BILLS 2 •S 2235 IS Sec. 103. Staying and prohibition on commencement of actions for collection. Sec. 104. Ineligibility for Treasury Offset. TITLE II—REFINANCING PROGRAMS Sec. 201. Refinancing programs. TITLE III—DISCHARGEABILITY OF STUDENT LOANS IN BANKRUPTCY Sec. 301. Dischargeability of student loans in bankruptcy. TITLE IV—GENERAL PROVISIONS Sec. 401. Report on progress of implementation. Sec. 402. Notification to borrowers. Sec. 403. Inapplicability of title IV negotiated rulemaking and master calendar exception. Sec. 404. Definitions. TITLE I—LOAN DISCHARGE AND 1 FORBEARANCE 2 SEC. 101. LOAN DISCHARGE. 3 (a) IN GENERAL.—Subject to subsection (f), not later 4 than the date that is 12 months after the date of enact- 5 ment of this Act, the Secretary of Education shall dis- 6 charge the qualified loan amount of each individual, with- 7 out regard to the repayment status of the loan or whether 8 the loan is in default. 9 (b) QUALIFIED LOAN AMOUNT.— 10 (1) IN GENERAL.—The qualified loan amount 11 of an individual is an amount equal to the lesser 12 of— 13 (A) $50,000; and 14 (B) the aggregate loan obligation on the el- 15 igible Federal loans of the taxpayer that is out- 16 standing on the date of enactment of this Act 17 VerDate Sep 11 2014 02:35 Aug 01, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S2235.IS S2235 kjohnson on DSK79L0C42 with BILLS 3 •S 2235 IS or, in the case of such loans issued under sec- 1 tion 460B of the Higher Education Act of 2 1965, as added by title II of this Act, on the 3 date on which such loans are issued under such 4 section 460B. 5 (2) LIMITATION BASED ON ADJUSTED GROSS 6 INCOME.—The amount discharged under subsection 7 (a) with respect to an individual shall be reduced 8 (but not below zero) by $1 for each $3 (or fraction 9 thereof) by which the taxpayer’s adjusted gross in- 10 come exceeds $100,000 (twice such amount in the 11 case of a joint return) for the most recent taxable 12 year ending before the date of the enactment of this 13 Act. 14 (c) METHOD OF LOAN DISCHARGE.— 15 (1) IN GENERAL.—To provide the loan dis- 16 charge required under subsection (a), the Secretary 17 is authorized to carry out a program— 18 (A) through the holder of the loan, to as- 19 sume the obligation to repay the qualified loan 20 amount for a loan made, insured, or guaranteed 21 under part B of title IV of the Higher Edu- 22 cation Act of 1965 (20 U.S.C. 1071 et seq.); 23 (B) to cancel the qualified loan amount for 24 a loan made under part D of title IV of the 25 VerDate Sep 11 2014 02:35 Aug 01, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S2235.IS S2235 kjohnson on DSK79L0C42 with BILLS 4 •S 2235 IS Higher Education Act of 1965 (20 U.S.C. 1 1087a et seq.), or assigned, referred, or trans- 2 ferred to, or purchased by, the Secretary under 3 such title IV (20 U.S.C. 1070 et seq.), includ- 4 ing a Federal Direct Stafford Loan issued 5 under section 460B of the Higher Education 6 Act of 1965, as added by title II of this Act; 7 and 8 (C) through the institution of higher edu- 9 cation that made the loan from its student loan 10 fund established under part E of such title (20 11 U.S.C. 1087aa et seq.), to assume the obliga- 12 tion to repay the qualified loan amount for such 13 loan. 14 (2) ORDER OF LOAN DISCHARGE.—With re- 15 spect to an individual with at least 2 eligible Federal 16 loans, the Secretary shall discharge the loans of the 17 individual as follows (except as otherwise indicated 18 by the individual): 19 (A) In the case in which the individual has 20 loans with different rates of interest, the loans 21 should be discharged in descending order by 22 rate of interest. 23 (B) In the case in which the individual has 24 loans with the same rates of interest, the loans 25 VerDate Sep 11 2014 02:35 Aug 01, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S2235.IS S2235 kjohnson on DSK79L0C42 with BILLS 5 •S 2235 IS should be discharged in descending order by 1 amount of outstanding principal. 2 (d) EXCLUSION FROM TAXABLE INCOME.—For pur- 3 poses of the Internal Revenue Code of 1986, in the case 4 of an individual, gross income does not include any 5 amount which (but for this subsection) would be includible 6 in gross income by reason of the discharge (in whole or 7 in part) of any loan if such discharge was pursuant to 8 this title. 9 (e) TAXPAYER INFORMATION.— 10 (1) IN GENERAL.—The Secretary of the Treas- 11 ury may, upon written request from the Secretary of 12 Education, disclose to officers and employees of the 13 Department of Education return information with 14 respect to a taxpayer who has received eligible Fed- 15 eral loans that are outstanding on the date described 16 in subsection (b)(1)(B). Such return information 17 shall be limited to— 18 (A) taxpayer identity information with re- 19 spect to such taxpayer; 20 (B) the filing status of such taxpayer; and 21 (C) the adjusted gross income of such tax- 22 payer. 23 (2) RESTRICTION ON USE OF DISCLOSED IN- 24 FORMATION.—Return information disclosed under 25 VerDate Sep 11 2014 02:35 Aug 01, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S2235.IS S2235 kjohnson on DSK79L0C42 with BILLS 6 •S 2235 IS paragraph (1) may be used by officers and employ- 1 ees of the Department of Education only for the 2 purposes of, and to the extent necessary in, estab- 3 lishing the appropriate qualified loan amount of a 4 taxpayer. 5 (f) LONG-TERM SETTLE AND COMPROMISE DIS- 6 CHARGE AUTHORITY.—Not later than the date that is 24 7 months after the date of enactment of this Act, the Sec- 8 retary of Education may use the authority under sections 9 432(a)(6) and 468(2) of the Higher Education Act of 10 1965 (20 U.S.C. 1082(a)(6); 1087hh(2)) to discharge 11 loans under this section beyond the period described in 12 subsection (a) for— 13 (1) an individual who, through an appeals proc- 14 ess established by the Secretary, successfully appeals 15 a loan discharge determination by the Secretary 16 under this section; 17 (2) an individual who, due to special cir- 18 cumstances, misses a deadline established by the 19 Secretary in the administration of loan discharges 20 under this section; or 21 (3) an individual (or a group of individuals) 22 who the Secretary determines should have received a 23 loan discharge or a discharge amount that is dif- 24 ferent from the amount of loan discharge received 25 VerDate Sep 11 2014 02:35 Aug 01, 2019 Jkt 089200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S2235.IS S2235 kjohnson on DSK79L0C42 with BILLS 7 •S 2235 IS under this section, except that a loan discharge 1 amount received under this subsection may not ex- 2 ceed the qualified loan amount determined for the 3 individual (or the group of individuals) under sub- 4 section (b). 5 (g) PRIVATE STUDENT LOAN DISCHARGE.—Not 6 later than the date that is 3 months after the date of en- 7 actment of this Act, the Secretary of Education, in coordi- 8 nation with the Secretary of the Treasury and the Director 9 of the Bureau of Consumer Financial Protection, shall un- 10 dertake a campaign to alert borrowers of private education 11 loans— 12 (1) that such borrowers may be eligible to refi- 13 nance such private loans as Federal Direct Stafford 14 Loans under section 460B of the Higher Education 15 Act of 1965, as added by title II of this Act; and 16 (2) such Federal Direct Stafford Loans may be 17 eligible for loan discharge under this section. 18 (h) CREDIT REPORTING.—In the case of a borrower 19 of an eligible Federal loan that was in default prior to 20 being discharged under this section and on which, as a 21 result of such loan discharge, there is no outstanding bal- 22 ance of principal or interest, the Secretary, guaranty agen- 23 cy or other holder of the loan shall request any consumer 24 reporting agency to which the Secretary, guaranty agency 25 VerDate Sep 11 2014 02:35 Aug 01, 2019 Jkt 089200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S2235.IS S2235 kjohnson on DSK79L0C42 with BILLS 8 •S 2235 IS or holder, as applicable, reported the default of the loan, 1 to remove the record of the default from the borrower’s 2 credit history. 3 (i) MEMBERS OF CONGRESS.—In this section, the 4 terms ‘‘individual’’ and ‘‘taxpayer’’ do not include a Mem- 5 ber of Congress. 6 SEC. 102. AUTOMATIC ADMINISTRATIVE FORBEARANCE; 7 HALTING OF WAGE GARNISHMENT. 8 During the period beginning on the date of enactment 9 of this Act and ending on the date that is 12 months after 10 such date of enactment, the Secretary of Education— 11 (1) shall place each borrower of an eligible Fed- 12 eral loan with an outstanding balance, without any 13 further action required by the borrower (except that 14 the borrower may opt-out of this section), on an ad- 15 ministrative forbearance during which periodic in- 16 stallments of principal need not be paid, and interest 17 shall not accrue, on such loan; and 18 (2) may not issue an order for wage garnish- 19 ment or withholding under section 488A of the 20 Higher Education Act of 1965 (20 U.S.C. 1095a) or 21 section 3720D of title 31, United States Code, ini- 22 tiate proceedings to collect debt through deductions 23 from pay under such section 488A or 3720D, or en- 24 force or otherwise require compliance with a wage 25 VerDate Sep 11 2014 02:35 Aug 01, 2019 Jkt 089200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S2235.IS S2235 kjohnson on DSK79L0C42 with BILLS 9 •S 2235 IS garnishment or withholding order issued under such 1 section 488A or 3720D before the date of enactment 2 of this Act (which shall include staying any related 3 proceedings). 4 SEC. 103. STAYING AND PROHIBITION ON COMMENCEMENT 5 OF ACTIONS FOR COLLECTION. 6 Until 12 months after the date of enactment of this 7 Act, no eligible Federal loan may be referred to the Attor- 8 ney General for any action seeking collection of any 9 amount owed on that loan and any action pending as of 10 the date of enactment of this Act shall be stayed. 11 SEC. 104. INELIGIBILITY FOR TREASURY OFFSET. 12 Until 12 months after the date of enactment of this 13 Act, no claim pertaining to an eligible Federal loan may 14 be certified under section 3716(c)(1) of title 31, United 15 States Code. 16 TITLE II—REFINANCING 17 PROGRAMS 18 SEC. 201. REFINANCING PROGRAMS. 19 (a) PROGRAM AUTHORITY.—Section 451(a) of the 20 Higher Education Act of 1965 (20 U.S.C. 1087a(a)) is 21 amended— 22 (1) by striking ‘‘and (2)’’ and inserting ‘‘(2)’’; 23 and 24 VerDate Sep 11 2014 02:35 Aug 01, 2019 Jkt 089200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S2235.IS S2235 kjohnson on DSK79L0C42 with BILLS 10 •S 2235 IS (2) by inserting ‘‘; and (3) to make loans under 1 section 460A and section 460B’’ after ‘‘section 2 459A’’. 3 (b) REFINANCING PROGRAM.—Part D of title IV of 4 the Higher Education Act of 1965 (20 U.S.C. 1087a et 5 seq.) is amended by adding at the end the following: 6 ‘‘SEC. 460A. REFINANCING FFEL AND FEDERAL DIRECT 7 LOANS. 8 ‘‘(a) IN GENERAL.—Beginning not later than 12 9 months after the date of enactment of the Student Loan 10 Debt Relief Act of 2019, the Secretary shall establish a 11 program under which the Secretary automatically refi- 12 nances loans made under this part in accordance with the 13 provisions of this section, in order to lower the rate of 14 interest on such loans. 15 ‘‘(b) REFINANCING DIRECT LOANS.— 16 ‘‘(1) FEDERAL DIRECT LOANS.—With respect 17 to each Federal Direct Stafford Loan, Federal Di- 18 rect Unsubsidized Stafford Loan, Federal Direct 19 PLUS Loan, and Federal Direct Consolidation 20 Loan, for which the first disbursement was made to 21 a borrower, or the application for the consolidation 22 loan was received from a borrower, on or before the 23 date of enactment of the Student Loan Debt Relief 24 Act of 2019, the Secretary shall, without any further 25 VerDate Sep 11 2014 02:35 Aug 01, 2019 Jkt 089200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S2235.IS S2235 kjohnson on DSK79L0C42 with BILLS 11 •S 2235 IS action by the borrower (other than under subpara- 1 graph (C))— 2 ‘‘(A) discharge the liability on such Fed- 3 eral Direct Stafford Loan, Federal Direct Un- 4 subsidized Stafford Loan, Federal Direct PLUS 5 Loan, or Federal Direct Consolidation Loan; 6 ‘‘(B) issue to the borrower a new Federal 7 Direct Stafford Loan, Federal Direct Unsub- 8 sidized Stafford Loan, Federal Direct PLUS 9 Loan, or Federal Direct Consolidation Loan, re- 10 spectively— 11 ‘‘(i) in an amount equal to the sum of 12 the unpaid principal, accrued unpaid inter- 13 est, and late charges of the loan for which 14 the liability is being discharged under sub- 15 paragraph (A); and 16 ‘‘(ii) which has the same terms and 17 conditions as the original loan, except that 18 the rate of interest shall be determined 19 under subsection (c); and 20 ‘‘(C) provide the borrower an opportunity 21 to opt-out of the refinancing under this para- 22 graph. 23 ‘‘(2) REFINANCING FFEL PROGRAM LOANS AS 24 REFINANCED FEDERAL DIRECT LOANS.— 25 VerDate Sep 11 2014 02:35 Aug 01, 2019 Jkt 089200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S2235.IS S2235 kjohnson on DSK79L0C42 with BILLS 12 •S 2235 IS ‘‘(A) IN GENERAL.—With respect to each 1 loan that was made, insured, or guaranteed 2 under part B and for which the first disburse- 3 ment was made to a borrower, or the applica- 4 tion for the consolidation loan was received 5 from a borrower, before July 1, 2010, the Sec- 6 retary shall, without any further action by the 7 borrower (other than to provide the borrower an 8 opportunity to opt-out of the refinancing under 9 this paragraph), issue to the borrower a loan 10 made under this part— 11 ‘‘(i) in an amount equal to the sum of 1 [Text truncated for display. 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