Coronavirus Emergency Student Loan Refinancing Act
This bill establishes refinancing programs for federal and private student loans.
Specifically, the bill establishes a program that allows qualified borrowers to refinance their federal student loans down to lower interest rates. Such refinanced interest rates are (1) calculated based on the type of student loan (e.g., Stafford), and (2) fixed for the period of the loan.
In addition, the bill creates the Federal Direct Refinanced Private Loan as a new type of loan. Such loans allow qualified borrowers to refinance their private education loans.
[Congressional Bills 116th Congress]
[From the U.S. Government Publishing Office]
[H.R. 6397 Introduced in House (IH)]
<DOC>
116th CONGRESS
2d Session
H. R. 6397
To amend the Higher Education Act of 1965 to provide for the
refinancing of certain Federal student loans, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
March 26, 2020
Mr. Courtney (for himself, Mr. Blumenauer, Mr. Brown of Maryland, Mr.
Cardenas, Mr. Cicilline, Mr. Cisneros, Mr. DeFazio, Ms. DeLauro, Ms.
DelBene, Mrs. Dingell, Mr. Michael F. Doyle of Pennsylvania, Ms.
Escobar, Mr. Foster, Mrs. Hayes, Mr. Himes, Mr. Kilmer, Mr. Larson of
Connecticut, Ms. Lee of California, Mr. Lynch, Mr. McNerney, Ms.
Norton, Mr. Payne, Mr. Perlmutter, Mr. Peters, Mr. Peterson, Mr.
Phillips, Mr. Rush, Mr. Ryan, Ms. Sanchez, Ms. Schakowsky, Mr. David
Scott of Georgia, Ms. Sewell of Alabama, Ms. Slotkin, Mr. Soto, Mr.
Stanton, Mr. Swalwell of California, Mr. Takano, Mr. Welch, Mr.
Yarmuth, Ms. Bass, and Mr. Crow) introduced the following bill; which
was referred to the Committee on Education and Labor
_______________________________________________________________________
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 Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Coronavirus Emergency Student Loan
Refinancing Act''.
TITLE I--REFINANCING PROGRAMS
SEC. 101. REFINANCING PROGRAMS.
(a) Program Authority.--Section 451(a) of the Higher Education Act
of 1965 (20 U.S.C. 1087a(a)) is amended--
(1) by striking ``and (2)'' and inserting ``(2)''; and
(2) by inserting ``; and (3) to make loans under section
460A and section 460B'' after ``section 459A''.
(b) Refinancing Program.--Part D of title IV of the Higher
Education Act of 1965 (20 U.S.C. 1087a et seq.) is amended by adding at
the end the following:
``SEC. 460A. REFINANCING FFEL AND FEDERAL DIRECT LOANS.
``(a) In General.--Beginning not later than 30 days after the date
of enactment of the Coronavirus Emergency Student Loan Refinancing Act,
the Secretary shall establish a program under which the Secretary, upon
the receipt of an application from a qualified borrower, makes a loan
under this part, in accordance with the provisions of this section, in
order to permit the borrower to obtain the interest rate provided under
subsection (c).
``(b) Refinancing Direct Loans.--
``(1) Federal direct loans.--Upon application of a
qualified borrower, the Secretary shall repay a Federal Direct
Stafford Loan, a Federal Direct Unsubsidized Stafford Loan, a
Federal Direct PLUS Loan, or a Federal Direct Consolidation
Loan of the qualified borrower, for which the first
disbursement was made, or the application for the consolidation
loan was received, before July 1, 2020, with the proceeds of a
refinanced Federal Direct Stafford Loan, a Federal Direct
Unsubsidized Stafford Loan, a Federal Direct PLUS Loan, or a
Federal Direct Consolidation Loan, respectively, issued to the
borrower in an amount equal to the sum of the unpaid principal,
accrued unpaid interest, and late charges of the original loan.
``(2) Refinancing ffel program loans as refinanced federal
direct loans.--Upon application of a qualified borrower for any
loan that was made, insured, or guaranteed under part B and for
which the first disbursement was made, or the application for
the consolidation loan was received, before July 1, 2010, the
Secretary shall make a loan under this part, in an amount equal
to the sum of the unpaid principal, accrued unpaid interest,
and late charges of the original loan to the borrower in
accordance with the following:
``(A) The Secretary shall pay the proceeds of such
loan to the eligible lender of the loan made, insured,
or guaranteed under part B, in order to discharge the
borrower from any remaining obligation to the lender
with respect to the original loan.
``(B) A loan made under this section that was
originally a loan made, insured, or guaranteed--
``(i) under section 428 shall be a Federal
Direct Stafford Loan;
``(ii) under section 428B shall be a
Federal Direct PLUS Loan;
``(iii) under section 428H shall be a
Federal Direct Unsubsidized Stafford Loan; and
``(iv) under section 428C shall be a
Federal Direct Consolidation Loan.
``(C) The interest rate for each loan made by the
Secretary under this paragraph shall be the rate
provided under subsection (c).
``(c) Interest Rates.--
``(1) In general.--The interest rate for the refinanced
Federal Direct Stafford Loans, Federal Direct Unsubsidized
Stafford Loans, Federal Direct PLUS Loans, and Federal Direct
Consolidation Loans, shall be a rate equal to--
``(A) in any case where the original loan was a
loan under section 428 or 428H, a Federal Direct
Stafford loan, or a Federal Direct Unsubsidized
Stafford Loan, that was issued to an undergraduate
student, a rate equal to the lowest yield on the 10-
year Treasury note in the preceding 6 months plus 2.05
percent;
``(B) in any case where the original loan was a
loan under section 428 or 428H, a Federal Direct
Stafford Loan, or a Federal Direct Unsubsidized
Stafford Loan, that was issued to a graduate or
professional student, a rate equal to the lowest yield
on the 10-year Treasury note in the preceding 6 months
plus 3.6 percent;
``(C) in any case where the original loan was a
loan under section 428B or a Federal Direct PLUS Loan,
a rate equal to the lowest yield on the 10-year
Treasury note in the preceding 6 months plus 4.6
percent; and
``(D) in any case where the original loan was a
loan under section 428C or a Federal Direct
Consolidation Loan, a rate calculated in accordance
with paragraph (2).
``(2) Interest rates for consolidation loans.--
``(A) Method of calculation.--In order to determine
the interest rate for any refinanced Federal Direct
Consolidation Loan under paragraph (1)(D), the
Secretary shall--
``(i) determine each of the component loans
that were originally consolidated in the loan
under section 428C or the Federal Direct
Consolidation Loan, and calculate the
proportion of the unpaid principal balance of
the loan under section 428C or the Federal
Direct Consolidation Loan that each component
loan represents;
``(ii) use the proportions determined in
accordance with clause (i) and the interest
rate applicable for each component loan, as
determined under subparagraph (B), to calculate
the weighted average of the interest rates on
the loans consolidated into the loan under
section 428C or the Federal Direct
Consolidation Loan; and
``(iii) apply the weighted average
calculated under clause (ii) as the interest
rate for the refinanced Federal Direct
Consolidation Loan.
``(B) Interest rates for component loans.--The
interest rates for the component loans of a loan made
under section 428C or a Federal Direct Consolidation
Loan shall be the following:
``(i) The interest rate for any loan under
section 428 or 428H, Federal Direct Stafford
Loan, or Federal Direct Unsubsidized Stafford
Loan issued to an undergraduate student shall
be a rate equal to the lesser of--
``(I) the rate for Federal Direct
Stafford Loans and Federal Direct
Unsubsidized Stafford Loans issued to
undergraduate students for the 12-month
period beginning on July 1, 2020, and
ending on June 30, 2021; or
``(II) the original interest rate
of the component loan.
``(ii) The interest rate for any loan under
section 428 or 428H, Federal Direct Stafford
Loan, or Federal Direct Unsubsidized Stafford
Loan issued to a graduate or professional
student shall be a rate equal to the lesser
of--
``(I) the rate for Federal Direct
Unsubsidized Stafford Loans issued to
graduate or professional students for
the 12-month period beginning on July
1, 2020, and ending on June 30, 2021;
or
``(II) the original interest rate
of the component loan.
``(iii) The interest rate for any loan
under section 428B or Federal Direct PLUS Loan
shall be a rate equal to the lesser of--
``(I) the rate for Federal Direct
PLUS Loans for the 12-month period
beginning on July 1, 2020, and ending
on June 30, 2021; or
``(II) the original interest rate
of the component loan.
``(iv) The interest rate for any component
loan that is a loan under section 428C or a
Federal Direct Consolidation Loan shall be the
weighted average of the interest rates that
would apply under this subparagraph for each
loan comprising the component consolidation
loan.
``(v) The interest rate for any eligible
loan that is a component of a loan made under
section 428C or a Federal Direct Consolidation
Loan and is not described in clauses (i)
through (iv) shall be the interest rate on the
original component loan.
``(3) Fixed rate.--The applicable rate of interest
determined under paragraph (1) for a refinanced loan under this
section shall be fixed for the period of the loan.
``(d) Terms and Conditions of Loans.--
``(1) In general.--A loan that is refinanced under this
section shall have the same terms and conditions as the
original loan, except as otherwise provided in this section.
``(2) No automatic extension of repayment period.--
Refinancing a loan under this section shall not result in the
extension of the duration of the repayment period of the loan,
and the borrower shall retain the same repayment term that was
in effect on the original loan. Nothing in this paragraph shall
be construed to prevent a borrower from electing a different
repayment plan at any time in accordance with section
455(d)(3).
``(e) Definition of Qualified Borrower.--
``(1) In general.--For purposes of this section, the term
`qualified borrower' means a borrower--
``(A) of a loan under this part or part B for which
the first disbursement was made, or the application for
a consolidation loan was received, before July 1, 2020;
and
``(B) who meets the eligibility requirements based
on income or debt-to-income ratio established by the
Secretary.
``(2) Income requirements.--Not later than 30 days after
the date of enactment of the Coronavirus Emergency Student Loan
Refinancing Act, the Secretary shall establish eligibility
requirements based on income or debt-to-income ratio that take
into consideration providing access to refinancing under this
section for borrowers with the greatest financial need.
``(f) Notification to Borrowers.--The Secretary, in coordination
with the Director of the Bureau of Consumer Financial Protection, shall
undertake a campaign to alert borrowers of loans that are eligible for
refinancing under this section that the borrowers are eligible to apply
for such refinancing. The campaign shall include the following
activities:
``(1) Developing consumer information materials about the
availability of Federal student loan refinancing.
``(2) Requiring servicers of loans under this part or part
B to provide such consumer information to borrowers in a manner
determined appropriate by the Secretary, in consultation with
the Director of the Bureau of Consumer Financial Protection.
``SEC. 460B. FEDERAL DIRECT REFINANCED PRIVATE LOAN PROGRAM.
``(a) Definitions.--In this section:
``(1) Eligible private education loan.--The term `eligible
private education loan' means a private education loan, as
defined in section 140(a) of the Truth in Lending Act (15
U.S.C. 1650(a)), that--
``(A) was disbursed to the borrower before July 1,
2020; and
``(B) was for the borrower's own postsecondary
educational expenses for an eligible program at an
institution of higher education participating in the
loan program under this part, as of the date that the
loan was disbursed.
``(2) Federal direct refinanced private loan.--The term
`Federal Direct Refinanced Private Loan' means a loan issued
under subsection (b)(1).
``(3) Private educational lender.--The term `private
educational lender' has the meaning given the term in section
140(a) of the Truth in Lending Act (15 U.S.C. 1650(a)).
``(4) Qualified borrower.--The term `qualified borrower'
means an individual who--
``(A) has an eligible private education loan;
``(B) has been current on payments on the eligible
private education loan for the 6 months prior to the
date of the qualified borrower's application for
refinancing under this section, and is in good standing
on the loan at the time of such application;
``(C) is not in default on the eligible private
education loan or on any loan made, insured, or
guaranteed under this part or part B or E; and
``(D) meets the eligibility requirements described
in subsection (b)(2).
``(b) Program Authorized.--
``(1) In general.--The Secretary, in consultation with the
Secretary of the Treasury, shall carry out a program under
which the Secretary, upon application by a qualified borrower
who has an eligible private education loan, shall issue such
borrower a loan under this part in accordance with the
following:
``(A) The loan issued under this program shall be
in an amount equal to the sum of the unpaid principal,
accrued unpaid interest, and late charges of the
private education loan.
``(B) The Secretary shall pay the proceeds of the
loan issued under this program to the private
educational lender of the private education loan, in
order to discharge the qualified borrower from any
remaining obligation to the lender with respect to the
original loan.
``(C) The Secretary shall require that the
qualified borrower undergo loan counseling that
provides all of the information and counseling required
under clauses (i) through (viii) of section
485(b)(1)(A) before the loan is refinanced in
accordance with this section, and before the proceeds
of such loan are paid to the private educational
lender.
``(D) The Secretary shall issue the loan as a
Federal Direct Refinanced Private Loan, which shall
have the same terms, conditions, and benefits as a
Federal Direct Unsubsidized Stafford Loan, except as
otherwise provided in this section.
``(2) Borrower eligibility.--Not later than 30 days after
the date of enactment of the Coronavirus Emergency Student Loan
Refinancing Act, the Secretary, in consultation with the
Secretary of the Treasury and the Director of the Bureau of
Consumer Financial Protection, shall establish eligibility
requirements--
``(A) based on income or debt-to-income ratio that
take into consideration providing access to refinancing
under this section for borrowers with the greatest
financial need;
``(B) to ensure eligibility only for borrowers in
good standing;
``(C) to minimize inequities between Federal Direct
Refinanced Private Loans and other Federal student
loans;
``(D) to preclude windfall profits for private
educational lenders; and
``(E) to ensure full access to the program
authorized in this subsection for borrowers with
private loans who otherwise meet the criteria
established in accordance with subparagraphs (A) and
(B).
``(c) Interest Rate.--
``(1) In general.--The interest rate for a Federal Direct
Refinanced Private Loan is--
``(A) in the case of a Federal Direct Refinanced
Private Loan for a private education loan originally
issued for undergraduate postsecondary educational
expenses, a rate equal to the lowest yield on the 10-
year Treasury note in the preceding 6 months plus 2.05
percent; and
``(B) in the case of a Federal Direct Refinanced
Private Loan for a private education loan originally
issued for graduate or professional degree
postsecondary educational expenses, a rate equal to the
lowest yield on the 10-year Treasury note in the
preceding 6 months plus 3.6 percent.
``(2) Combined undergraduate and graduate study loans.--If
a Federal Direct Refinanced Private Loan is for a private
education loan originally issued for both undergraduate and
graduate or professional postsecondary educational expenses,
the interest rate shall be a lowest yield on the 10-year
Treasury note in the preceding 6 months plus 4.6 percent.
``(3) Fixed rate.--The applicable rate of interest
determined under this subsection for a Federal Direct
Refinanced Private Loan shall be fixed for the period of the
loan.
``(d) No Inclusion in Aggregate Limits.--The amount of a Federal
Direct Refinanced Private Loan, or a Federal Direct Consolidated Loan
to the extent such loan was used to repay a Federal Direct Refinanced
Private Loan, shall not be included in calculating a borrower's annual
or aggregate loan limits under section 428 or 428H.
``(e) No Eligibility for Service-Related Repayment.--
Notwithstanding sections 428K(a)(2)(A), 428L(b)(2), 455(m)(3)(A), and
460(b), a Federal Direct Refinanced Private Loan, or any Federal Direct
Consolidation Loan to the extent such loan was used to repay a Federal
Direct Refinanced Private Loan, shall not be eligible for any loan
repayment or loan forgiveness program under section 428K, 428L, or 460
or for the repayment plan for public service employees under section
455(m).
``(f) Notification to Borrowers.--The Secretary, in coordination
with the Secretary of the Treasury and the Director of the Bureau of
Consumer Financial Protection, shall undertake a campaign to alert
borrowers about the availability of private student loan refinancing
under this section.''.
(c) Amendments to Public Service Repayment Plan Provisions.--
Section 455(m) of the Higher Education Act of 1965 (20 U.S.C. 1087e(m))
is amended--
(1) by redesignating paragraphs (3) and (4) as paragraphs
(4) and (5), respectively;
(2) by inserting after paragraph (2) the following:
``(3) Special rules for section 460a loans.--
``(A) Refinanced federal direct loans.--
Notwithstanding paragraph (1), in determining the
number of monthly payments that meet the requirements
of such paragraph for an eligible Federal Direct Loan
refinanced under section 460A that was originally a
loan under this part, the Secretary shall include all
monthly payments made on the original loan that meet
the requirements of such paragraph.
``(B) Refinanced ffel loans.--In the case of an
eligible Federal Direct Loan refinanced under section
460A that was originally a loan under part B, only
monthly payments made after the date on which the loan
was refinanced may be included for purposes of
paragraph (1).''; and
(3) in paragraph (4)(A) (as redesignated by paragraph (1)),
by inserting ``(including any Federal Direct Stafford Loan,
Federal Direct PLUS Loan, Federal Direct Unsubsidized Stafford
Loan, or Federal Direct Consolidation Loan refinanced under
section 460A)'' before the period at the end.
(d) Income-Based Repayment.--Section 493C of the Higher Education
Act of 1965 (20 U.S.C. 1098e) is amended by adding at the end the
following:
``(f) Special Rule for Refinanced Loans.--
``(1) Refinanced federal direct and ffel loans.--In
calculating the period of time during which a borrower of a
loan that is refinanced under section 460A has made monthly
payments for purposes of subsection (b)(7), the Secretary shall
deem the period to include all monthly payments made for the
original loan, and all monthly payments made for the refinanced
loan, that otherwise meet the requirements of this section.
``(2) Federal direct refinanced private loans.--In
calculating the period of time during which a borrower of a
Federal Direct Refinanced Private Loan under section 460B has
made monthly payments for purposes of subsection (b)(7), the
Secretary shall include only payments--
``(A) that are made after the date of the issuance
of the Federal Direct Refinanced Private Loan; and
``(B) that otherwise meet the requirements of this
section.''.
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Education and Labor.
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