LOAN Act of 2019

I 116TH CONGRESS 1ST SESSION H. R. 4603 To amend the Higher Education Act of 1965 to provide for Federal student loan reform. IN THE HOUSE OF REPRESENTATIVES OCTOBER 4, 2019 Mr. CARBAJAL (for himself and Ms. JACKSON LEE) introduced the following bill; which was referred to the Committee on Education and Labor, and in addition to the Committee on Ways and Means, for a period to be sub- sequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned A BILL To amend the Higher Education Act of 1965 to provide for Federal student loan reform. 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 ‘‘Leveraging Opportuni- 4 ties for Americans Now Act of 2019’’ or the ‘‘LOAN Act 5 of 2019’’. 6 VerDate Sep 11 2014 23:35 Oct 07, 2019 Jkt 099200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H4603.IH H4603 kjohnson on DSK79L0C42 with BILLS 2 •HR 4603 IH SEC. 2. ELIMINATION OF INTEREST AND REPLACEMENT 1 WITH FINANCING FEES. 2 Section 455 of the Higher Education Act of 1965 (20 3 U.S.C. 1087e) is amended by adding at the end the fol- 4 lowing: 5 ‘‘(r) ELIMINATION OF INTEREST AND REPLACEMENT 6 WITH FINANCING FEES.— 7 ‘‘(1) IN GENERAL.— 8 ‘‘(A) IN GENERAL.—Except as provided 9 under subparagraph (B), beginning on July 1, 10 2021, the Secretary shall make loans under this 11 part in accordance with this subsection. 12 ‘‘(B) EXCEPTION.—Beginning on July 1, 13 2021, the Secretary shall make loans under this 14 part in accordance with the provisions of this 15 part other than this subsection to a borrower 16 who— 17 ‘‘(i) was enrolled in an institution of 18 higher education on June 30, 2021; and 19 ‘‘(ii) elects to borrow a loan under 20 this part in accordance with the provisions 21 of this part other than this subsection. 22 ‘‘(2) ELIMINATION OF INTEREST.—For loans 23 made under this part in accordance with this sub- 24 section for which the first disbursement is made on 25 VerDate Sep 11 2014 23:35 Oct 07, 2019 Jkt 099200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H4603.IH H4603 kjohnson on DSK79L0C42 with BILLS 3 •HR 4603 IH or after July 1, 2021, the applicable rate of interest 1 shall be equal to 0 percent. 2 ‘‘(3) FINANCING FEES.— 3 ‘‘(A) IN GENERAL.—Beginning on July 1, 4 2021, the Secretary shall charge the borrower 5 of a loan made under this part in accordance 6 with this subsection a financing fee determined 7 in accordance with this paragraph and issued 8 on the date the loan is dispersed. 9 ‘‘(B) DETERMINATION OF FEE.—The fi- 10 nancing fee for a borrower of a loan made 11 under this part— 12 ‘‘(i) that is used for enrollment in an 13 undergraduate course of study (except a 14 Federal Direct PLUS Loan made on be- 15 half of a dependent student), shall be equal 16 to, from the principal amount of the loan, 17 25 percent of the amount of such loan; 18 ‘‘(ii) that is used for enrollment in a 19 course of study necessary for enrollment in 20 a program leading to a degree or certifi- 21 cate, shall be equal to, from the principal 22 amount of the loan, 25 percent of the 23 amount of such loan; 24 VerDate Sep 11 2014 23:35 Oct 07, 2019 Jkt 099200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H4603.IH H4603 kjohnson on DSK79L0C42 with BILLS 4 •HR 4603 IH ‘‘(iii) that is used for enrollment in a 1 program that is necessary for a profes- 2 sional credential or certification from a 3 State that is required for employment as a 4 teacher in an elementary or secondary 5 school in that State, shall be equal to, 6 from the principal amount of the loan, 25 7 percent of the amount of such loan; and 8 ‘‘(iv) that is a Federal Direct PLUS 9 Loan made on behalf of a dependent stu- 10 dent or used for enrollment in a graduate 11 or professional course of study, shall be 12 equal to, from the principal amount of the 13 loan, 38 percent of the amount of such 14 loan. 15 ‘‘(C) REDUCTION DUE TO PREPAYMENT.— 16 ‘‘(i) IN GENERAL.—In order to pro- 17 vide an incentive to borrowers to pay the 18 balance of a loan made under this part 19 earlier than required under the applicable 20 repayment plan, the Secretary may credit 21 or refund any such borrowers for an 22 amount of the financing fee charged under 23 this subsection. 24 ‘‘(ii) REGULATIONS.— 25 VerDate Sep 11 2014 23:35 Oct 07, 2019 Jkt 099200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H4603.IH H4603 kjohnson on DSK79L0C42 with BILLS 5 •HR 4603 IH ‘‘(I) IN GENERAL.—Not later 1 than 9 months after the date of enact- 2 ment of the LOAN Act of 2019, the 3 Secretary shall promulgate regulations 4 establishing the methodology for cred- 5 iting or refunding a financing fee 6 charged under this subsection pursu- 7 ant to clause (i). Such credit or re- 8 fund shall not reduce the financing 9 fee by more than— 10 ‘‘(aa) with respect to a bor- 11 rower whose income, as deter- 12 mined under subclause (II), was 13 not more than $45,000 in the 14 taxable year in which the bor- 15 rower paid an amount from the 16 balance of a loan made under 17 this part earlier than required 18 under the applicable repayment 19 plan, 15 percentage points of 20 such amount; 21 ‘‘(bb) with respect to a bor- 22 rower whose income, as deter- 23 mined under subclause (II), was 24 more than $45,000 but not more 25 VerDate Sep 11 2014 23:35 Oct 07, 2019 Jkt 099200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H4603.IH H4603 kjohnson on DSK79L0C42 with BILLS 6 •HR 4603 IH than $95,000 in the taxable year 1 in which the borrower paid an 2 amount from the balance of a 3 loan made under this part earlier 4 than required under the applica- 5 ble repayment plan, 10 percent- 6 age points of such amount; and 7 ‘‘(cc) with respect to a bor- 8 rower whose income, as deter- 9 mined under subclause (II), was 10 more than $95,000 in the taxable 11 year in which the borrower paid 12 an amount from the balance of a 13 loan made under this part earlier 14 than required under the applica- 15 ble repayment plan, 5 percentage 16 points of such amount. 17 ‘‘(II) INCOME DETERMINA- 18 TION.—For purposes of subclause (I), 19 a borrower’s income is equal to the 20 amount of the gross income of the 21 borrower for the taxable year that ex- 22 ceeds $10,000 (adjusted each year to 23 reflect changes in the Consumer Price 24 Index for All Urban Consumers pub- 25 VerDate Sep 11 2014 23:35 Oct 07, 2019 Jkt 099200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H4603.IH H4603 kjohnson on DSK79L0C42 with BILLS 7 •HR 4603 IH lished by the Bureau of Labor Statis- 1 tics for the Department of Labor for 2 the most recent 12-month period for 3 which such data are available). 4 ‘‘(D) METHODOLOGY OF PAYMENT.—The 5 Secretary shall establish an amortization sched- 6 ule for the repayment of financing fees charged 7 under this subsection. 8 ‘‘(4) RULEMAKING FOR CONSOLIDATION.—Not 9 later than 18 months after the date of enactment of 10 the LOAN Act of 2019, the Secretary shall promul- 11 gate rules regarding Federal Direct Consolidation 12 Loans made under this part in accordance with this 13 subsection, including a rule that the financing fee 14 for such a Federal Direct Consolidation Loan deter- 15 mined in accordance with this subsection shall not 16 exceed the sum of the financing fees applicable to 17 the consolidated loans.’’. 18 SEC. 3. INCOME DEPENDENT EDUCATION ASSISTANCE RE- 19 PAYMENT PLAN. 20 Part D of title IV of the Higher Education Act of 21 1965 (20 U.S.C. 1087a et seq.) is amended by adding at 22 the end the following: 23 VerDate Sep 11 2014 23:35 Oct 07, 2019 Jkt 099200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H4603.IH H4603 kjohnson on DSK79L0C42 with BILLS 8 •HR 4603 IH ‘‘SEC. 460A. INCOME DEPENDENT EDUCATION ASSISTANCE 1 REPAYMENT PLAN. 2 ‘‘(a) IN GENERAL.— 3 ‘‘(1) APPLICABILITY.—Notwithstanding any 4 other provision of this Act, with respect to any loan 5 made under this part after the date of enactment of 6 the LOAN Act of 2019, the repayment plan options 7 are only a 10-year fixed repayment plan and the re- 8 payment plan under this section. If the borrower of 9 the loan does not select a repayment plan, the repay- 10 ment of such loan shall be made in accordance with 11 this section. A borrower of a loan made under this 12 part after the date of enactment of the LOAN Act 13 of 2019 may affirmatively select the repayment plan 14 under this section. 15 ‘‘(2) REGULATIONS.—Not later than 18 months 16 after the date of enactment of the LOAN Act of 17 2019, the Secretary shall promulgate rules— 18 ‘‘(A) outlining how the Department will 19 implement the income dependent education as- 20 sistance repayment plan requirements for bor- 21 rowers under this section; and 22 ‘‘(B) regarding monthly repayment proc- 23 esses for borrowers of loans made under this 24 part before the date of enactment of the LOAN 25 Act of 2019. 26 VerDate Sep 11 2014 23:35 Oct 07, 2019 Jkt 099200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H4603.IH H4603 kjohnson on DSK79L0C42 with BILLS 9 •HR 4603 IH ‘‘(3) RULE OF CONSTRUCTION.—Nothing in 1 this section shall be construed to eliminate or other- 2 wise affect the loan forgiveness or loan cancellation 3 options available under this part to a borrower. 4 ‘‘(b) DUTIES OF THE SECRETARY OF THE TREAS- 5 URY.— 6 ‘‘(1) IN GENERAL.—The Secretary of the 7 Treasury shall, with respect to each individual for 8 whom a loan made under this part after the date of 9 enactment of the LOAN Act of 2019 is in repay- 10 ment status, transmit to the Secretary of Edu- 11 cation— 12 ‘‘(A) in the case of such an individual who 13 files an income tax return for such taxable year, 14 such tax information as is necessary to deter- 15 mine the individual’s repayment obligation and 16 financing fee adjustments, as determined by the 17 Secretary under this part; and 18 ‘‘(B) in the case of any such individual 19 who does not file a return for such taxable year, 20 any available tax information of the individual 21 as may be necessary to determine such obliga- 22 tion and whether such individual is delinquent 23 under the terms of such loan for not so filing. 24 VerDate Sep 11 2014 23:35 Oct 07, 2019 Jkt 099200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H4603.IH H4603 kjohnson on DSK79L0C42 with BILLS 10 •HR 4603 IH ‘‘(2) ADDITIONAL PROGRAM REQUIREMENTS.— 1 The Secretary of the Treasury shall establish such 2 other policies, procedures, and guidance as may be 3 necessary to carry out the purposes of this section, 4 including measures to prevent underreporting and 5 evasion of repayment or filing. 6 ‘‘(c) DUTIES OF THE SECRETARY OF EDUCATION.— 7 ‘‘(1) IN GENERAL.—The Secretary shall carry 8 out, as part of the loan repayment plan established 9 under this section, the following activities: 10 ‘‘(A) CALCULATION OF ANNUAL REPAY- 11 MENT AMOUNTS.—The Secretary shall calculate 12 the annual repayment amount under this sec- 13 tion for borrowers with one or more loans made 14 under this part after the date of enactment of 15 the LOAN Act of 2019 in repayment status for 16 one or more months in the taxable year for 17 which the amount is determined regardless of 18 which repayment plan the borrower is in, in- 19 cluding the repayment obligations of such bor- 20 rowers in accordance with subsection (d)(3). 21 ‘‘(B) COMMUNICATION WITH THE SEC- 22 RETARY OF THE TREASURY.—The Secretary 23 shall transmit to the Secretary of the Treasury 24 such information as is necessary for the Sec- 25 VerDate Sep 11 2014 23:35 Oct 07, 2019 Jkt 099200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H4603.IH H4603 kjohnson on DSK79L0C42 with BILLS 11 •HR 4603 IH retary of the Treasury to carry out subsection 1 (d)(3). 2 ‘‘(C) ANNUAL STATEMENTS.—Upon calcu- 3 lating the annual repayment amounts under 4 subparagraph (A) for a taxable year, the Sec- 5 retary shall provide a statement, on an annual 6 basis, to each borrower with a loan made under 7 this part after the date of enactment of the 8 LOAN Act of 2019 regardless of which repay- 9 ment plan the borrower is in, which lists the 10 following: 11 ‘‘(i) Total payments made on the bor- 12 rower’s annual repayment amount for such 13 taxable year. 14 ‘‘(ii) The borrower’s annual repay- 15 ment amount for such taxable year. 16 ‘‘(iii) The outstanding balances on all 17 the loans made to the borrower under this 18 part after the date of enactment of the 19 LOAN Act of 2019 and any other out- 20 standing balances on loans of the borrower 21 that were made, insured, or guaranteed 22 under this title. 23 VerDate Sep 11 2014 23:35 Oct 07, 2019 Jkt 099200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H4603.IH H4603 kjohnson on DSK79L0C42 with BILLS 12 •HR 4603 IH ‘‘(iv) A description of how the bor- 1 rower’s annual repayment amount was cal- 2 culated. 3 ‘‘(D) PAYMENTS ON A BORROWER’S BE- 4 HALF.—The Secretary shall— 5 ‘‘(i) provide a mechanism for other in- 6 dividuals or entities to make payments on 7 the annual repayment amount of a bor- 8 rower for a taxable year; and 9 ‘‘(ii) notify the borrower that any pay- 10 ments made under clause (i) for the tax- 11 able year that exceed the annual repay- 12 ment amount for the year shall not be re- 13 funded to the borrower. 14 ‘‘(E) APPEALS PROCESS.— 15 ‘‘(i) IN GENERAL.—The Secretary 16 shall make available a process through 17 which a borrower can appeal the calcula- 18 tion of the borrower’s annual repayment 19 amount, including a worksheet that en- 20 ables a borrower to calculate the bor- 21 rower’s annual repayment amount. 22 ‘‘(ii) GOOD STANDING.—A borrower 23 who makes an appeal under clause (i) with 24 respect to a loan shall be considered in 25 VerDate Sep 11 2014 23:35 Oct 07, 2019 Jkt 099200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\H4603.IH H4603 kjohnson on DSK79L0C42 with BILLS 13 •HR 4603 IH good standing on such loan during the du- 1 ration of the appeal. 2 ‘‘(iii) REGULATIONS.—The Secretary 3 shall issue regulations outlining such proc- 4 ess not later than 18 months after the date 5 of enactment of the LOAN Act of 2019. 6 ‘‘(F) DELINQUENT FOR FAILURE TO FILE 7 A RETURN.— 8 ‘‘(i) IN GENERAL.—In a case in which 9 the Secretary receives information from 10 the Secretary of the Treasury under sub- 11 section (b) that a borrower with a loan 12 made under this part after the date of en- 13 actment of the LOAN Act of 2019 in re- 14 payment status in the repayment plan 15 under this section, has failed to file a re- 16 turn under section 6012(a)(1) of the Inter- 17 nal Revenue Code of 1986 and such bor- 18 rower was required to file such a return, 19 the Secretary shall— 20 ‘‘(I) notify the borrower of t [Text truncated for display. 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