Bank on Students Coronavirus Emergency Loan Refinancing Act of 2020
This bill establishes refinancing programs for federal and private student loans. Specifically, it allows certain borrowers to refinance their federal student loans down to lower interest rates, and creates the Federal Direct Refinanced Private Loan to allow certain borrowers to refinance their private student loans.
[Congressional Bills 116th Congress]
[From the U.S. Government Publishing Office]
[S. 4141 Introduced in Senate (IS)]
<DOC>
116th CONGRESS
2d Session
S. 4141
To refinance Federal and private student loans, and for other purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
July 1, 2020
Ms. Warren (for herself, Ms. Baldwin, Mr. Bennet, Mr. Blumenthal, Mr.
Booker, Mr. Brown, Ms. Cantwell, Mr. Cardin, Mr. Casey, Ms. Cortez
Masto, Ms. Duckworth, Mr. Durbin, Mrs. Feinstein, Mrs. Gillibrand, Ms.
Harris, Ms. Hassan, Mr. Heinrich, Ms. Hirono, Ms. Klobuchar, Mr. Leahy,
Mr. Manchin, Mr. Markey, Mr. Menendez, Mr. Merkley, Mr. Murphy, Mr.
Peters, Mr. Reed, Mr. Sanders, Mrs. Shaheen, Ms. Smith, Ms. Stabenow,
Mr. Udall, Mr. Van Hollen, Mr. Whitehouse, and Mr. Wyden) introduced
the following bill; which was read twice and referred to the Committee
on Health, Education, Labor, and Pensions
_______________________________________________________________________
A BILL
To refinance Federal and private 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 ``Bank on Students Coronavirus
Emergency Loan Refinancing Act of 2020''.
SEC. 2. REFINANCING PROGRAM.
(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 FEDERAL DIRECT LOANS AND OTHER FEDERAL LOANS.
``(a) Definitions.--In this section:
``(1) FFEL, perkins, or phsa student loan.--The term `FFEL,
Perkins, or PHSA student loan' means a loan--
``(A) 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;
``(B) made under part E; or
``(C) made under--
``(i) subpart II of part A of title VII of
the Public Health Service Act (42 U.S.C. 292q
et seq.); or
``(ii) part E of title VIII of the Public
Health Service Act (42 U.S.C. 297a et seq.).
``(2) Qualified borrower.--The term `qualified borrower'
means a borrower of a loan under this part, or FFEL, Perkins,
or PHSA student loan, for which the first disbursement was
made, or the application for a consolidation loan was received,
before July 1, 2020.
``(b) In General.--Beginning not later than 90 days after the date
of enactment of the Bank on Students Coronavirus Emergency Loan
Refinancing Act of 2020, the Secretary shall establish a program under
which the Secretary makes a loan under this part, in accordance with
the provisions of this section, in order to permit a qualified borrower
to obtain the interest rate provided under subsection (d).
``(c) Refinancing Direct Loans.--
``(1) Federal direct loans.--
``(A) In general.--By not later than 120 days after
the date of enactment of the Bank on Students
Coronavirus Emergency Loan Refinancing Act of 2020, 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 under this section in an amount equal to the
sum of the unpaid principal, accrued unpaid interest,
and late charges of the original loan.
``(B) Information.--The Secretary shall notify each
qualified borrower of a loan refinanced under
subparagraph (A) regarding the refinancing and the
benefits the refinancing provides to the qualified
borrower.
``(2) Refinancing ffel, perkins, or phsa student loans as
refinanced federal direct loans.--Upon application of a
qualified borrower of any FFEL, Perkins, or PHSA student loan,
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 holder of the FFEL, Perkins, or PHSA
student loan, in order to discharge the borrower from
any remaining obligation with respect to the original
loan.
``(B) Any Federal student loan made under this
section that was originally a loan described in
subsection (a)(1)(A) and that was 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) Any Federal student loan made under this
section that was originally a loan described in
subparagraph (B) or (C) of subsection (a)(1) shall be a
Federal Direct Consolidation Loan.
``(D) The interest rate for each loan made by the
Secretary under this paragraph shall be the rate
provided under subsection (d).
``(d) 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 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;
``(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 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;
``(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 rate for Federal Direct PLUS Loans
for the 12-month period beginning on July 1, 2020, and
ending on June 30, 2021;
``(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); and
``(E) in any case where the original loan was a
Federal student loan described in subparagraph (B) or
(C) of subsection (a)(1), the lesser of--
``(i)(I) in any case where the original
loan was issued to an undergraduate student,
the rate that applies under subparagraph (A);
or
``(II) in any case where the original loan
was issued to a graduate or professional
student, the rate that applies under
subparagraph (B); or
``(ii) the original interest rate of the
loan.
``(2) Interest rates for refinanced 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, that is 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, that is 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 loan under
part E of this title, or subpart II of part A
of title VII or part E of title VIII of the
Public Health Service Act (42 U.S.C. 292q et
seq.; 297a et seq.), 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
graduate 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.
``(v) 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.
``(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.
``(4) Rule of construction.--Nothing in this section shall
be construed to prevent a borrower of a Federal student loan
described in subparagraph (B) or (C) of subsection (a)(1) from
consolidating such loans with other loans eligible for
consolidation under this section, or to require such a borrower
to consolidate such loans with other Federal student loans into
a single consolidation loan under this section.
``(e) 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).
``(3) Special rule for refinanced perkins and health
loans.--Notwithstanding paragraph (1), in the case of a loan
that is refinanced under this section as a Federal Direct
Consolidation Loan and that was originally a loan described in
subparagraph (B) or (C) of subsection (a)(1)--
``(A) the refinanced Federal Direct Consolidation
Loan shall have the same terms and conditions as a
Federal Direct Consolidation Loan, except as otherwise
provided in this section; and
``(B) the Secretary may adjust such terms and
conditions as necessary to enable the borrower to
access loan forgiveness or other benefits available to
the borrower under the loan before refinancing under
this section, in any case where such benefits are more
generous than provided under a Federal Direct
Consolidation Loan.
``(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 FFEL, Perkins, or PHSA
student 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 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 has an eligible private education loan.
``(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) Private educational lenders.--Not later than 180 days
after the date of enactment of the Bank on Students Coronavirus
Emergency Loan Refinancing Act of 2020, the Secretary, in
consultation with the Secretary of the Treasury and the
Director of the Bureau of Consumer Financial Protection, shall
establish eligibility requirements to preclude windfall profits
for private educational lenders.
``(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 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; 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
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.
``(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 rate equal to the rate for Federal
Direct PLUS Loans for the 12-month period beginning on July 1,
2020, and ending on June 30, 2021.
``(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) Special Rule for Eligibility for Service-Related Repayment.--
``(1) In general.--Notwithstanding sections 428K(a)(2),
428L(b)(2), 455(m)(3)(A), and 460(b), a Federal Direct
Refinanced Private Loan shall 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), but only with respect to any balance due,
payments made, or service completed, after the date on which
such Federal Direct Refinanced Private Loan was issued.
``(f) Private Educational Lender Reporting Requirement.--
``(1) Reporting required.--Not later than 180 days after
the date of enactment of the Bank on Students Coronavirus
Emergency Loan Refinancing Act of 2020, the Secretary, in
consultation with the Secretary of the Treasury and the
Director of the Bureau of Consumer Financial Protection, shall
establish a requirement that private educational lenders report
the data described in paragraph (2) to the Secretary, to
Congress, to the Secretary of the Treasury, and to the Director
of the Bureau of Consumer Financial Protection, in order to
allow for an assessment of the private education loan market.
``(2) Contents of reporting.--The data that private
educational lenders shall report in accordance with paragraph
(1) shall include each of the following about private education
loans (as defined in section 140(a) of the Truth in Lending Act
(15 U.S.C. 1650(a))):
``(A) The total amount of private education loan
debt the lender holds.
``(B) The total number of private education loan
borrowers the lender serves.
``(C) The average interest rate on the outstanding
private education loan debt held by the lender.
``(D) The proportion of private education loan
borrowers who are in default on a loan held by the
lender.
``(E) The proportion of the outstanding private
education loan volume held by the lender that is in
default.
``(F) The proportions of outstanding private
education loan borrowers who are 30, 60, and 90 days
delinquent.
``(G) The proportions of outstanding private
education loan volume that is 30, 60, and 90 days
delinquent.
``(g) 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) 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, ffel, and plus loans.--In
calculating the period of time during which a borrower of a
loan (with the exception of a Federal Consolidation 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) Refinanced federal direct consolidation loans.--In
calculating the period of time during which a borrower of a
Federal Consolidation Loan that is refinanced under section
460A has made monthly payments for the purposes of subsection
(b)(7), the Secretary shall--
``(A) review the borrower's payment history to
identify each component loan of such Federal Direct
Consolidation Loan;
``(B) for each such component loan--
``(i) calculate the weighted factor of the
component loan, which shall be the factor that
represents the portion of such Federal Direct
Consolidation Loan that is attributable to such
component loan; and
``(ii) determine the number of qualifying
monthly payments made on such component loan
before consolidation;
``(C) calculate the number of qualifying monthly
payments determined under subparagraph (B)(ii) with
respect to a component loan that shall be deemed as
qualifying monthly payments made on the Federal Direct
Consolidation Loan by multiplying--
``(i) the weighted factor of such component
loan as determined under subparagraph (B)(i);
by
``(ii) the number of qualifying monthly
payments made on such component loan as
determined under subparagraph (B)(ii); and
``(D) calculate and inform the borrower of the
total number of qualifying monthly payments with
respect to the component loans of the Federal Direct
Consolidation Loan that shall be deemed as qualifying
monthly payments made on the refinanced Federal
Consolidation Loan, by--
``(i) adding together the result of each
calculation made under subparagraph (C) with
respect to each such component loan; and
``(ii) rounding the number determined under
clause (i) to the nearest whole number.
``(3) 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.''.
(d) Conforming Amendments.--The Higher Education Act of 1965 (20
U.S.C. 1001 et seq.) is amended--
(1) in section 428J(c)(2) (20 U.S.C. 1078-10(c)(2)), by
inserting ``a Federal Direct Refinanced Private Loan,'' after
``a Federal Direct Unsubsidized Stafford Loan,'';
(2) in section 455 (20 U.S.C. 1087e)--
(A) in subsection (f)(1)(B), by inserting ``a
Federal Direct Refinanced Private Loan,'' after ``a
Federal Direct Unsubsidized Stafford Loan,''; and
(B) in subsection (m)(3)(A), by striking ``or
Federal Direct Unsubsidized Stafford Loan,'' and
inserting ``Federal Direct Unsubsidized Stafford Loan,
or Federal Direct Refinanced Private Loan,''; and
(3) in section 460 (20 U.S.C. 1087j)--
(A) in subsection (b), by striking ``and Federal
Direct Unsubsidized Stafford Loans'' and inserting
``Federal Direct Unsubsidized Stafford Loans, and
Federal Direct Refinanced Private Loans''; and
(B) in subsection (c)--
(i) in paragraph (1), by striking ``or a
Federal Direct Unsubsidized Stafford Loan'' and
inserting ``, a Federal Direct Unsubsidized
Stafford Loan, or a Federal Direct Refinanced
Private Loan''; and
(ii) in paragraph (2), by inserting ``a
Federal Direct Refinanced Private Loan,'' after
``a Federal Direct Unsubsidized Stafford
Loan,''.
(e) Effective Date.--The amendments made by this section shall take
effect on July 1, 2020.
<all>
Introduced in Senate
Read twice and referred to the Committee on Health, Education, Labor, and Pensions.
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