Amends the Higher Education Act of 1965 (HEA) to allow borrowers consolidating student loans to choose: (1) a variable or fixed interest rate; and (2) the loan consolidator.
Provides for the Federal Government's recapture of excess interest charged by lenders, under HEA provisions for special allowances for lenders of student loans.
[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1617 Introduced in House (IH)]
109th CONGRESS
1st Session
H. R. 1617
To allow borrowers consolidating student loans to choose a variable or
fixed interest rate, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
April 13, 2005
Mr. Petri introduced the following bill; which was referred to the
Committee on Education and the Workforce
_______________________________________________________________________
A BILL
To allow borrowers consolidating student loans to choose a variable or
fixed interest rate, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. REFERENCE.
Except as otherwise expressly provided, whenever in this Act an
amendment or repeal is expressed in terms of an amendment to, or repeal
of, a section or other provision, the reference shall be considered to
be made to a section or other provision of the Higher Education Act of
1965 (20 U.S.C. 1001 et seq.).
SEC. 2. CONSOLIDATION LOAN INTEREST RATES.
(a) FFEL Loans.--Paragraph (3) of section 427A(l) (20 U.S.C.
1077a(l)) is amended to read as follows:
``(3) Consolidation loans.--
``(A) Borrower election.--With respect to any
consolidation loan under section 428C for which the
application is received by an eligible lender on or
after July 1, 2006, the applicable rate of interest
shall, at the election of the borrower at the time of
application for the loan, be either at the rate
determined under subparagraph (B) or the rate
determined under subparagraph (C).
``(B) Variable rate.--Except as provided in
subparagraph (D), the rate determined under this
subparagraph shall, during any 12-month period
beginning on July 1 and ending on June 30, be
determined on the preceding June 1 and be equal, for
such 12-month period, to--
``(i) the bond equivalent rate of 91-day
Treasury bills auctioned at the final auction
held prior to such June 1; plus
``(ii) 2.3 percent,
except that such rate shall not exceed 8.25 percent.
``(C) Fixed rate.--Except as provided in
subparagraph (D), the rate determined under this
subparagraph shall be determined on the date on which
the obligation to repay the loan is signed, and be
equal, for the duration of the term of the loan, to--
``(i) the average bond equivalent rate of
the 3-year Treasury note as determined on the
basis of the last publication in May of the
Federal Reserve Statistical Release H-15 (or
its successor) prior to the date on which the
obligation to repay the loan is signed; plus
``(ii) 2.3 percent,
except that such rate shall not exceed 8.25 percent.
``(D) Consolidation of plus loans.--In the case of
any such consolidation loan that is used to repay loans
each of which was made under section 428B or was a
Federal Direct PLUS Loan (or both), the rates
determined under subparagraphs (B) and (C) shall be
determined--
``(i) by substituting `3.1 percent' for
`2.3 percent'; and
``(ii) by substituting `9.0 percent' for
`8.25 percent'.''.
(b) Direct Loans.--Subparagraph (C) of section 455(b)(7) (20 U.S.C.
1087e(b)(7)) is amended to read as follows:
``(C) Consolidation loans.--
``(i) Borrower election.--Notwithstanding
the preceding paragraphs of this subsection,
with respect to any Federal Direct
Consolidation Loan for which the application is
received by an eligible lender on or after July
1, 2006, the applicable rate of interest shall,
at the election of the borrower at the time of
application for the loan, be either at the rate
determined under clause (ii) or the rate
determined under clause (iii).
``(ii) Variable rate.--Except as provided
in clause (iv), the rate determined under this
clause shall, during any 12-month period
beginning on July 1 and ending on June 30, be
determined on the preceding June 1 and, for
such 12-month period, not be more than--
``(I) the bond equivalent rate of
91-day Treasury bills auctioned at the
final auction held prior to such June
1; plus
``(II) 2.3 percent,
except that such rate shall not exceed 8.25
percent.
``(iii) Fixed rate.--Except as provided in
clause (iv), the rate determined under this
clause shall be determined on the date on which
the obligation to repay the loan is signed,
and, for the duration of the term of the loan,
not be more than--
``(I) the average bond equivalent
rate of the 3-year Treasury note as
determined on the basis of the last
publication in May of the Federal
Reserve Statistical Release H-15 (or
its successor) prior to the date on
which the obligation to repay the loan
is signed; plus
``(II) 2.3 percent,
except that such rate shall not exceed 8.25
percent.
``(iv) Consolidation of plus loans.--In the
case of any such Federal Direct Consolidation
Loan that is used to repay loans each of which
was made under section 428B or was a Federal
Direct PLUS Loan, the rates determined under
clauses (ii) and (iii) shall be determined--
``(I) by substituting `3.1 percent'
for `2.3 percent'; and
``(II) by substituting `9.0
percent' for `8.25 percent'.''.
SEC. 3. RECAPTURE OF EXCESS INTEREST.
Section 438(b)(2)(I) (20 U.S.C. 1087-1(b)(2)(I)) is amended by
inserting after clause (vii) the following new clause:
``(viii) Recapture of excess interest.--
``(I) Excess credited.--With
respect to a loan on which the
applicable interest rate is determined
under section 427A(l) and for which the
first disbursement of principal is made
on or after July 1, 2006, if the
applicable interest rate for any 3-
month period exceeds the special
allowance rate applicable to such loan
under this subparagraph for such
period, then an adjustment shall be
made by calculating the excess interest
in the amount computed under subclause
(II) of this clause, and by crediting
the excess interest to the Government
not less often than annually.
``(II) Calculation of excess.--The
amount of any adjustment of interest on
a loan to be made under this subsection
for any quarter shall be equal to--
``(aa) the applicable
interest rate minus the special
allowance rate determined under
this subparagraph; multiplied
by
``(bb) the average daily
principal balance of the loan
(not including unearned
interest added to principal)
during such calendar quarter;
divided by
``(cc) four.''.
SEC. 4. STUDENT LOAN BORROWER CHOICE OF LOAN CONSOLIDATOR.
Section 428C(b)(1)(A) of the Higher Education Act of 1965 (20
U.S.C. 1078-3(b)(1)(A)) is amended by striking ``and (i) the lender
holds'' and all that follows through ``selected for consolidation)''.
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Education and the Workforce.
Referred to the Subcommittee on 21st Century Competitiveness.
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