[Congressional Bills 113th Congress]
[From the U.S. Government Publishing Office]
[S. 2612 Introduced in Senate (IS)]
113th CONGRESS
2d Session
S. 2612
To simplify and improve the Federal student loan program through
income-contingent repayment to provide stronger protections for
borrowers, encourage responsible borrowing, and save money for
taxpayers.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
July 16, 2014
Mr. Warner (for himself and Mr. Rubio) introduced the following bill;
which was read twice and referred to the Committee on Finance
_______________________________________________________________________
A BILL
To simplify and improve the Federal student loan program through
income-contingent repayment to provide stronger protections for
borrowers, encourage responsible borrowing, and save money for
taxpayers.
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 ``Dynamic Repayment Act of 2014''.
SEC. 2. TERMINATION OF AUTHORITY TO MAKE FEDERAL DIRECT STAFFORD LOANS,
FEDERAL DIRECT UNSUBSIDIZED STAFFORD LOANS, AND FEDERAL
DIRECT PLUS LOANS TO STUDENTS UNDER THE WILLIAM D. FORD
FEDERAL DIRECT LOAN PROGRAM.
Section 455(a) of the Higher Education Act of 1965 (20 U.S.C.
1087e(a)) is amended by adding at the end the following:
``(4) Termination of authority to make federal direct
stafford loans, federal direct unsubsidized stafford loans, and
federal direct plus loans to students under this part.--
``(A) In general.--Notwithstanding any provision of
this part or part B, for any period of instruction
beginning on or after July 1, 2015--
``(i) a student shall not be eligible to
receive a Federal Direct Stafford Loan under
this part; and
``(ii) a student shall not be eligible to
receive a Federal Direct Unsubsidized Stafford
Loan or Federal Direct PLUS Loan under this
part, except as provided in subparagraph (B).
``(B) Exceptions.--Subparagraph (A)(ii) shall not
be applicable with respect to the following:
``(i) Existing student borrowers.--A
student who, as of July 1, 2015, has an
outstanding balance of principal or interest
owing on any loan made, insured, or guaranteed
under part B or this part may continue to be
eligible to borrow a loan under this part,
except for a Federal Direct Stafford Loan, in
accordance with subparagraph (C) until June 30,
2019.
``(ii) Parent plus loans.--An excepted PLUS
loan or excepted consolidation loan (as such
terms are defined in section 493C(a)) under
this part that is made to a parent on behalf of
an undergraduate dependent student.
``(iii) Federal direct consolidation
loans.--A Federal Direct Consolidation Loan
under this part.
``(C) Maximum annual amounts of federal direct
unsubsidized stafford loans.--The maximum annual amount
of Federal Direct Unsubsidized Stafford Loans a student
described in subparagraph (B)(i) may borrow in an
academic year (as defined in section 481(a)(2)) or its
equivalent shall be the maximum annual amount for such
student determined under section 428H, plus an amount
equal to the amount of Federal Direct Stafford Loans
the student would have received in the absence of
subparagraph (A)(i).''.
SEC. 3. ESTABLISHMENT OF THE INCOME DEPENDENT EDUCATION ASSISTANCE LOAN
PROGRAM AND THE IDEA LOAN REPAYMENT PROGRAM.
Title IV of the Higher Education Act of 1965 (20 U.S.C. 1070 et
seq.) is amended by adding at the end the following:
``PART J--INCOME DEPENDENT EDUCATION ASSISTANCE LOANS
``Subpart 1--IDEA Loans
``SEC. 499A. PROGRAM AUTHORITY AND AGREEMENTS.
``(a) Program Authority.--
``(1) In general.--There are authorized to be appropriated,
in accordance with the provisions of this part, such sums as
may be necessary to make loans to all eligible students in
attendance at participating institutions of higher education
selected by the Secretary, to enable such students to pursue
their courses of study at such institutions beginning July 1,
2015. Loans made under this part shall be made by participating
institutions, or consortia thereof, that have agreements with
the Secretary to originate loans, or by alternative originators
designated by the Secretary to make loans for students in
attendance at participating institutions.
``(2) Designation.--The program established under this
subpart shall be referred to as the `Income Dependent Education
Assistance Loan Program', or the `IDEA Loan Program'.
``(b) Funds for the Origination of IDEA Loans.--The Secretary shall
provide funds for student loans under this part in the same manner as
the Secretary provided funds for the origination of Federal Direct
Student Loans under part D in accordance with section 452 on the day
before the date of enactment of the Dynamic Repayment Act of 2014. The
requirements, rights, and limitations with respect to the Secretary and
institutions for funds provided for loans under part D on the day
before the date of enactment of the Dynamic Repayment Act of 2014 shall
apply with respect to the Secretary and institutions for funds provided
for loans under this part, except that funds under this part shall not
be provided for parent loans.
``(c) Selection of Institutions for Participation and Origination,
and Agreements With Institutions.--
``(1) Selection of institutions for participation and
origination.--The Secretary shall enter into agreements with
institutions of higher education to participate in the IDEA
Loan Program under this part and agreements with institutions
of higher education, or consortia thereof, to originate loans
in such program for academic years beginning on or after July
1, 2015. The provisions of section 453 as in effect on the day
before the date of enactment of the Dynamic Repayment Act of
2014 shall apply with respect to agreements under this section.
The Secretary shall provide alternative origination services
for loans under this part, as appropriate, in a manner
consistent with the provisions of sections 453 and 456 as in
effect on the day before the date of enactment of the Dynamic
Repayment Act of 2014 related to alternative origination
services for loans under part D.
``(2) Participation and origination agreements with
institutions.--An agreement with any institution of higher
education for participation in the IDEA Loan Program under this
part, and an agreement with any institution of higher
education, or consortia thereof, to originate loans in such
program, shall have the same terms as the terms required under
section 454 as in effect on the day before the date of
enactment of the Dynamic Repayment Act of 2014 for agreements
with an institution for participation or origination,
respectively, in the student loan program under part D, except
that agreements for participation or origination under this
part shall not apply to parent loans.
``(3) Withdrawal and termination procedures.--The Secretary
shall establish procedures by which institutions or consortia
may withdraw or be terminated from the program under this part.
``SEC. 499B. TERMS AND CONDITIONS OF IDEA LOANS.
``(a) Parallel Terms, Conditions, Benefits, and Amounts.--Unless
otherwise specified in this part, Income Dependent Education Assistance
Loans (referred to in this part as `IDEA Loans') made to borrowers
under this part shall have the same terms, conditions, and benefits,
and be available in the same amounts, as Federal Direct Unsubsidized
Stafford Loans made to borrowers under part D, and first disbursed on
the day before the date of enactment of the Dynamic Repayment Act of
2014.
``(b) Eligible Borrowers.--
``(1) In general.--In addition to the requirements of
section 484, to be eligible to receive a loan (other than an
IDEA Consolidation Loan) under this part, a borrower--
``(A) shall be an individual who, on the date of
application for such loan, has no outstanding balance
of principal or interest owing on any loan made,
insured, or guaranteed under part B or D (other than an
excepted PLUS loan or an excepted consolidation loan
(as such terms are defined in section 493C(a))); or
``(B) in the case of an individual with an
outstanding balance of principal or interest owing on
any loan described in subparagraph (A), shall
consolidate all such existing loans into an IDEA
Consolidation Loan under section 499C.
``(2) Only student borrowers eligible.--For purposes of
this part, the term `borrower' shall not include a parent
borrower.
``(c) Annual and Aggregate Limits.--
``(1) In general.--Subject to paragraph (2), the maximum
annual amount of IDEA Loans in any academic year (as defined in
section 481(a)(2)) or its equivalent, and the maximum aggregate
amount of IDEA Loans that a student may borrow, shall be the
maximum annual amounts and maximum aggregate amounts,
respectively, of Federal Direct Unsubsidized Stafford Loans
under part D that such student would have been eligible to
borrow in the absence of section 455(a)(4), as added by the
Dynamic Repayment Act of 2014.
``(2) Graduate and professional students eligible for plus
loans.--In the case of a graduate or professional student who
would have been eligible to borrow a Federal Direct PLUS Loan
under part D in the absence of section 455(a)(4), as added by
the Dynamic Repayment Act of 2014, the maximum annual amounts
and maximum aggregate amounts, respectively, of IDEA Loans that
such a student may borrow as determined under paragraph (1) for
any academic year (as defined in section 481(a)(2)) or its
equivalent, may be increased to an amount equal to the maximum
annual amounts and maximum aggregate amounts, respectively, of
Federal Direct PLUS Loans that such student would have been
eligible to borrow in the absence of such section 455(a)(4).
``(d) Loan Fee.--The Secretary shall charge the borrower of a loan
(other than an IDEA Consolidation Loan) made under this part an
origination fee. Such fee shall be the sum of--
``(1) for the portion of the principal amount of the loan
that is equal to (or less than) the maximum annual amount a
student may borrow under subsection (c)(1), 1.0 percent of such
portion of the principal amount of the loan; plus
``(2) for the portion of the principal amount of the loan
that exceeds the maximum annual amount a student may borrow
under subsection (c)(1), as authorized by subsection (c)(2),
4.0 percent of such portion of the principal amount of the
loan.
``(e) Interest Rates.--
``(1) Undergraduate students.--With respect to IDEA Loans
made to undergraduate students for which the first disbursement
is made on or after July 1, 2015, the applicable rate of
interest 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 to the lesser of--
``(A) a rate equal to the high yield of the 10-year
Treasury note auctioned at the final auction held prior
to such June 1, plus 2.05 percent; or
``(B) 8.25 percent.
``(2) Graduate and professional students.--With respect to
IDEA Loans made to graduate or professional students for which
the first disbursement is made on or after July 1, 2015, the
applicable rate of interest 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 to the lesser of--
``(A) the rate determined under paragraph (1)(A),
except that `3.6 percent' shall be substituted for
`2.05 percent' in such determination; or
``(B) 9.25 percent.
``(3) Consultation.--The Secretary shall determine the
applicable rate of interest under paragraphs (1) and (2) after
consultation with the Secretary of the Treasury and shall
publish such rate in the Federal Register as soon as
practicable after the date of determination.
``(4) Application of interest rate during the life of the
loan.--
``(A) In-school deferment period.--Interest shall
accrue and be capitalized or paid by the borrower (but
periodic installments of principal need not be paid)
during the in-school deferment period with respect to
an IDEA Loan. For the purposes of this part, the in-
school deferment period with respect to an IDEA Loan is
the first period during which the borrower is pursuing
at least one-half the normal full-time academic
workload (as determined by the institution) in the
course of study for which the borrower received such
loan and ending on the first day of the first month
that begins after the borrower ceases to carry at least
one-half the normal full-time academic workload (as
determined by the institution) in the course of study.
``(B) Grace and repayment periods.--Interest that
accrues during the borrower's grace period (for the
purposes of this title, defined as the period between
the borrower's in-school deferment period and the
borrower's repayment period) and during the borrower's
repayment period shall not be capitalized.
``(f) Armed Forces Student Loan Interest Payment Program.--Using
funds received by transfer to the Secretary under section 2174(f)(2) of
title 10, United States Code, the Secretary shall pay the interest on a
loan made under this part to a member of the Armed Forces as due for a
period not in excess of 36 consecutive months. The Secretary may not
pay interest on such a loan out of any funds other than funds that have
been so transferred.
``(g) No Accrual of Interest for Active Duty Service Members.--
``(1) In general.--Notwithstanding any other provision of
this part and in accordance with paragraphs (2) and (4),
interest shall not accrue for an eligible military borrower on
a loan made under this part for which the first disbursement is
made on or after July 1, 2015.
``(2) IDEA consolidation loans.--In the case of any IDEA
Consolidation loan made under this part that is disbursed on or
after July 1, 2015, interest shall not accrue pursuant to this
subsection only on such portion of such loan as was used to
repay a loan made under part D for which the first disbursement
is made on or after October 1, 2008.
``(3) Eligible military borrower.--In this subsection, the
term `eligible military borrower' means an individual who--
``(A)(i) is serving on active duty during a war or
other military operation or national emergency; or
``(ii) is performing qualifying National Guard duty
during a war or other military operation or national
emergency; and
``(B) is serving in an area of hostilities in which
service qualifies for special pay under section 310 of
title 37, United States Code.
``(4) Limitation.--An individual who qualifies as an
eligible military borrower under this subsection may receive
the benefit of this subsection for not more than 60 months.
``(h) Loan Cancellation and Discharge.--The Secretary shall
discharge a borrower's liability on a loan made under this part in
accordance with subsections (a) and (c) of section 437.
``(i) Loan Forgiveness.--A loan made under this part shall be
eligible for loan forgiveness under the following conditions:
``(1) After 20 years of payments pursuant to section 499F
for borrowers who begin repayment with an outstanding balance
of principal and interest that is less than the maximum
aggregate amount of IDEA Loans that an undergraduate student
may borrow as provided under subsection (c).
``(2) After 30 years of payments pursuant to section 499F
for borrowers who begin repayment with an outstanding balance
of principal and interest that is equal to or greater than the
maximum aggregate amount of IDEA Loans that an undergraduate
student may borrow as provided under subsection (c).
``SEC. 499C. IDEA CONSOLIDATION LOANS.
``(a) IDEA Consolidation Loans.--
``(1) In general.--Except as otherwise provided in this
section, an IDEA Consolidation Loan under this section shall
have the same terms, conditions, and benefits as IDEA Loans
made under this part.
``(2) Borrower and loan eligibility.--To be eligible to
receive an IDEA Consolidation Loan under this section, a
borrower--
``(A) shall--
``(i) meet the criteria described in
section 428C(a)(3)(A); and
``(ii) in the case of a borrower described
in section 499B(b)(1)(B), agree to consolidate
into an IDEA Consolidation Loan all loans made
to the borrower that are described in
subparagraphs (A) and (C) of section 428C(a)(4)
(other than an excepted PLUS loan or an
excepted consolidation loan (as such terms are
defined in section 493C(a)));
``(B) may consolidate the loans described in
subparagraphs (B), (D), and (E) of section 428C(a)(4)
into such IDEA Consolidation Loan; and
``(C) may not consolidate an IDEA Loan made under
section 499B into such IDEA Consolidation Loan.
``(3) Requirements for the secretary.--In making IDEA
Consolidation Loans under this section, the Secretary--
``(A) shall ensure that--
``(i) each IDEA Consolidation Loan will be
made, notwithstanding any other provision of
this title limiting the annual or aggregate
principal amount for all loans made to the
borrower, in an amount that is equal to the sum
of the unpaid principal, interest, penalties,
and fees of all loans received by the borrower
which are selected by the borrower for
consolidation under this section; and
``(ii) the proceeds of each IDEA
Consolidation Loan will be paid by the
Secretary to the holder or holders of the loans
being consolidated to discharge the liability
on such loans;
``(B) shall not discriminate against any borrower
seeking such an IDEA Consolidation Loan--
``(i) based on the number or type of loans
the borrower seeks to consolidate;
``(ii) based on the interest rate to be
charged to the borrower with respect to the
consolidation loan; or
``(iii) based on the type or category of
institution of higher education that the
borrower attends or attended; and
``(C) shall disclose to a prospective borrower, in
simple and understandable terms, at the time the
Secretary provides an application for an IDEA
Consolidation Loan--
``(i) whether consolidation would result in
a loss of loan benefits under part B or part D,
including loan forgiveness, cancellation, and
deferment;
``(ii) with respect to Federal Perkins
Loans under part E--
``(I) that if a borrower includes a
Federal Perkins Loan under part E in
the consolidation loan, the borrower
will lose all interest-free periods
that would have been available for the
Federal Perkins Loan, including--
``(aa) the periods during
which no interest accrues on
such loan while the borrower is
enrolled in school at least
half-time;
``(bb) the grace period
under section 464(c)(1)(A); and
``(cc) the periods during
which the borrower's student
loan repayments are deferred
under section 464(c)(2);
``(II) that if a borrower includes
a Federal Perkins Loan in the
consolidation loan, the borrower will
no longer be eligible for cancellation
of part or all of the Federal Perkins
Loan under section 465(a); and
``(III) the occupations listed in
section 465 that qualify for Federal
Perkins Loan cancellation under section
465(a);
``(iii) the options of the borrower to
prepay the IDEA Consolidation Loan;
``(iv) the consequences of default on the
IDEA Consolidation Loan; and
``(v) that by applying for an IDEA
Consolidation Loan, the borrower is not
obligated to agree to take the consolidation
loan.
``(b) Interest Rate.--Notwithstanding section 499B(e), an IDEA
Consolidation Loan for which the application is received on or after
July 1, 2015, shall bear interest at an annual rate on the unpaid
principal balance of the loan that is equal to the weighted average of
the interest rates on the loans consolidated, rounded to the nearest
higher one-eighth of one percent. Interest that accrues on such an IDEA
Consolidation Loan shall not be capitalized.
``Subpart 2--IDEA Loan Repayment Program
``CHAPTER 1--ESTABLISHMENT OF THE IDEA LOAN REPAYMENT PROGRAM
``SEC. 499D. DUTIES OF THE SECRETARY OF THE TREASURY.
``(a) In General.--As part of the IDEA Loan Repayment Program
established under this subpart, the Secretary of the Treasury shall,
with respect to each individual for whom a loan made under this part is
in repayment status during a taxable year, transmit to the Secretary of
Education--
``(1) in the case of such an individual who files an income
tax return for such taxable year, such tax information as is
necessary to determine the individual's income-based repayment
obligation under section 499E; and
``(2) in the case of any such individual who does not file
a return for such taxable year, any available tax information
of the individual as may be necessary to determine such
obligation and whether such individual is in default under the
terms of such loan for not so filing.
``(b) Additional Program Requirements.--The Secretary of the
Treasury shall establish such other policies, procedures, and guidance
as may be necessary to carry out the purposes of this subpart,
including measures to prevent underreporting and evasion of repayment
or filing.
``SEC. 499E. DUTIES OF THE SECRETARY OF EDUCATION.
``(a) In General.--The Secretary shall carry out, as part of the
IDEA Loan Repayment Program established under this subpart, the
following activities:
``(1) Calculation of annual repayment amounts.--The
Secretary shall calculate the annual repayment amount under
this subpart for borrowers with 1 or more loans made under this
part in repayment status, including the income-based repayment
obligations of such borrowers in accordance with section
499F(i).
``(2) Communication with the secretary of the treasury.--
The Secretary shall transmit to the Secretary of the Treasury
such information as is necessary for the Secretary of the
Treasury to carry out section 499F(i).
``(3) Annual statements.--Upon calculating the annual
repayment amounts under paragraph (1) for a taxable year, the
Secretary shall provide a statement, on an annual basis, to
each borrower with a loan made under this part, which lists the
following:
``(A) Total payments made on the borrower's annual
repayment amount for such taxable year.
``(B) The borrower's annual repayment amount for
such taxable year.
``(C) In the case of a borrower who, according to
section 499F(f), has underpaid such annual repayment
amount, the amount of such underpayment and the process
for paying such underpayment under section 499F(f)(2).
``(D) In the case of a borrower with an overpayment
on such annual repayment amount, the amount of such
overpayment and the process for requesting a refund of
such amount under section 499F(g), if applicable.
``(E) The outstanding balances on all the loans
made to the borrower under this part.
``(F) A description of how the borrower's annual
repayment amount was calculated under paragraph (1) or
(2) of section 499F(b).
``(4) Direct payment.--The Secretary shall enable a
borrower to make direct payments on the borrower's annual
repayment amount for the taxable year to the Secretary
throughout the year.
``(5) Payments on a borrower's behalf.--The Secretary
shall--
``(A) provide a mechanism for other individuals or
entities to make payments on the annual repayment
amount of a borrower for a taxable year; and
``(B) notify the borrower that any payments made
under subparagraph (A) for the taxable year that exceed
the annual repayment amount for the year shall not be
refunded to the borrower.
``(6) Calculating interest accrued.--The Secretary shall
calculate the interest accrued for the taxable year as if the
borrower's payments under wage withholding under paragraph (10)
for the taxable year were made in 12 equal increments
throughout the year.
``(7) Appeals process.--The Secretary shall make available
a process through which a borrower can appeal the calculation
of the borrower's annual repayment amount, including a
worksheet that enables a borrower to calculate the borrower's
annual repayment amount.
``(8) Default for failure to file a return.--In a case in
which the Secretary receives information from the Secretary of
the Treasury under section 499D that a borrower with a loan
made under this part in repayment status has failed to file a
return under section 6012(a)(1) of the Internal Revenue Code of
1986 and such borrower was required to file such a return, the
Secretary shall--
``(A) notify the borrower of the borrower's failure
to file such a return; and
``(B) if the borrower fails to file such a return
within 90 days of receipt of the notice described in
subparagraph (A), consider the borrower's loans made
under this part in repayment status to be in default.
``(9) Withholding opt-out.--The Secretary shall establish a
process through which a borrower can indicate that the borrower
would like to opt-out of the withholding process under
subsection (b) and, in lieu of such process, make payments on a
monthly basis, as described in subsection (c).
``(10) Employer withholding.--The Secretary shall establish
a process that meets the requirements of subsection (b) under
which employers making payment of wages deduct and withhold
upon such wages amounts determined in accordance with
subsection (b)(3) with respect to an employee--
``(A) who has a loan made under this part that is
in repayment status;
``(B) who has not opted out of the withholding
process under this paragraph; and
``(C) who is not in a forbearance period under
section 499F(a)(2)(C).
``(11) Monthly payments process.--The Secretary shall
establish a monthly payments process described in subsection
(c).
``(b) Requirements for Employer Withholding.--
``(1) Withholding orders.--In carrying out the employer
withholding process under subsection (a)(10), the Secretary
shall carry out the following:
``(A) New employment.--Upon determining, using the
information provided under section 453(j)(12) of the
Social Security Act (42 U.S.C. 653(j)(12)), that a
borrower who meets the requirements of subparagraphs
(A) through (C) of subsection (a)(10) obtains new
employment, issue a withholding order to the borrower's
employer directing the employer to withhold and
transmit the amounts described in paragraph (3) to the
Secretary.
``(B) Other purposes.--Upon notification by a
borrower that the borrower no longer wishes to opt out
of the withholding process under subsection (a)(10) or
that a borrower who has been in forbearance under
section 499F(a)(2)(C), voluntarily ends or no longer
qualifies for such forbearance, or upon determining
that a borrower has entered repayment status on 1 or
more loans made under this part (and the borrower had
no loans made under this part already in repayment
status), using the information provided under section
453(j)(12) of the Social Security Act (42 U.S.C.
653(j)(12)), issue a withholding order to all of the
borrower's employers directing such employers to
withhold and transmit the amounts described in
paragraph (3) to the Secretary.
``(C) Stop withholding order.--Upon determining
that a borrower is eligible for a forbearance under
section 499F(a)(2)(C), that the borrower has opted out
of the withholding process under subsection (a)(10), or
that a borrower has repaid the borrower's loans made
under this part, using the information provided under
paragraph 12 of section 453(j)(12) of the Social
Security Act (42 U.S.C. 653(j)(12)), issue a
withholding order to the borrower's employers directing
such employers to cease withholding under this
paragraph.
``(D) Transfer of payments.--Outline clearly the
process through which employers shall transfer money
withheld under this subsection to the Secretary.
``(E) Electronic transmission.--
``(i) In general.--Make available
electronic means of transmitting and processing
both withholding orders and payments from
employers, including a means to correct under-
and overpayments to the extent feasible, with
the goal of streamlining the processing of such
orders and payments and minimizing impacts on
employers.
``(ii) No requirement to use electronic
transmission.--Nothing in this part shall be
construed to require an employer, in carrying
out a withholding order under this section, to
use the electronic process described in clause
(i).
``(2) Employer remittance.--
``(A) In general.--In the case where an employer
has received a withholding order under subparagraph (A)
or (B) of paragraph (1) or the employee has indicated
under paragraph (4)(A) that the employee has a loan
that meets the requirements of subparagraphs (A)
through (C) of subsection (a)(10), and the employer has
not subsequently received an order to stop withholding
under paragraph (1)(C) for such employee, the employer
shall withhold and transmit the amounts described in
paragraph (3) to the Secretary as directed under
paragraph (1)(D) and shall be liable for, and the
Secretary, as appropriate, may sue the employer in a
State or Federal court of competent jurisdiction to
recover any amount that such employer fails to withhold
from wages with respect to an employee after being
directed to do so for such employee, plus attorneys'
fees, costs, and, in the court's discretion, punitive
damages. Such employer shall not be required to vary
the normal pay and disbursement cycles in order to
comply with this subparagraph.
``(B) Timing.--An employer transmitting to the
Secretary withholding payments under this subsection
shall transmit such payments on a periodic basis, as
determined by the employer but not less frequently than
quarterly.
``(3) Withholding amount.--The amount withheld by an
employer for each pay period with respect to any employee for
whom the employer is withholding under this subsection shall be
an amount equal to the sum of--
``(A) the amount that results from the employer
withholding--
``(i) 10 percent of the employee's wages
for such pay period that will count towards the
employee's annual repayment amount under
section 499F(b) that is in excess of the
employee's exemption amount for such pay period
(as determined by dividing the employee's
exemption amount under section 499F(i)(3) by
the number of pay periods for the taxable
year); or
``(ii) in a case in which an employee
requests that such exemption amount not be
taken into account, 10 percent of the
employee's wages for such pay period that will
count towards the employee's annual repayment
amount under section 499F(b); and
``(B) any additional amounts the employee wishes to
have withheld in accordance with paragraph (4)(C).
``(4) Withholding preferences.--The Secretary shall provide
forms and procedures to allow an employee to indicate to the
employee's employer--
``(A) that the employee has a loan that meets the
requirements of subparagraphs (A) through (C) of
subsection (a)(10) and therefore the employer shall
withhold payments under this subsection;
``(B) that the employer shall not take into account
the exemption amount to which the employee is eligible
under this part in determining the employee's
withholding amount because the exemption amount has
already been taken into account with respect to such
employee; and
``(C) an election by the employee to have amounts
withheld in addition to the employee's withholding
amount as calculated under paragraph (3).
``(5) Employee protection.--An employer may not discharge
from employment, refuse to employ, or take disciplinary action
against an individual subject to wage withholding in accordance
with this section by reason of the fact that the individual's
wages have been subject to withholding under this section, nor
may an employer require that an individual opt-out under
subsection (a)(9) and such individual may sue in a State or
Federal court of competent jurisdiction any employer who takes
such action. The court shall award attorneys' fees to a
prevailing employee and, in its discretion, may order
reinstatement of the individual, award punitive damages and
back pay to the employee, or order such other remedy as may be
reasonably necessary.
``(6) Garnishment.--For purposes of title III of the
Consumer Credit Protection Act (15 U.S.C. 1671 et seq.),
amounts withheld under this subsection shall--
``(A) not be considered a garnishment; and
``(B) be considered to be amounts required by law
to be withheld.
``(c) Monthly Payments Process.--
``(1) In general.--The Secretary shall establish a process
under which a borrower may make monthly payments towards the
borrower's annual repayment amount, at any time in the taxable
year, because the borrower--
``(A) has opted-out of withholding under subsection
(a)(10); or
``(B) expects to have income that is not subject to
the withholding process described in subsection (b).
``(2) Information required.--The procedure for initiating
the monthly payments process under paragraph (1) shall include
the following:
``(A) Income estimate.--A requirement for a
borrower to provide an estimate of the borrower's
income for the taxable year that will count towards the
borrower's income-based repayment obligation,
excluding, in the case of a borrower subject to the
withholding process, any income subject to the
withholding process.
``(B) Amortization schedule.--In the case of a
borrower who has opted out of the withholding process,
the ability for the borrower to indicate that the
borrower would like the borrower's monthly payments set
such that the borrower's outstanding loans made under
this part would be repaid within a specified number of
years.
``(3) Monthly payments amounts.--The Secretary shall set
the borrower's monthly payment amount to the greater of--
``(A) the difference between the borrower's annual
repayment amount that would result given the income
estimate provided by the borrower under paragraph
(2)(A) and the payments the borrower has already made
in the year towards such amount (excluding, for
borrowers who have not opted-out of withholding,
payments through the withholding process), divided by
the remaining months in the taxable year; or
``(B) for a borrower who indicates a time frame
under paragraph (2)(B), the monthly payment amount that
would result in the borrower's currently outstanding
loans made under this part being repaid within the
number of years specified by the borrower.
``(4) Automatic continuation.--The monthly payments process
shall continue until--
``(A) the borrower elects to stop such payments; or
``(B) the borrower's loans made under this part are
repaid.
``(5) Updating payment amounts.--
``(A) Secretary.--The Secretary shall automatically
recalculate a borrower's monthly payment amount at the
beginning of a new taxable year using the most recent
income estimate provided under paragraph (2)(A) by the
borrower.
``(B) Borrower.--The borrower may update the
borrower's income estimate under paragraph (2)(A) at
any time.
``CHAPTER 2--BORROWER REPAYMENT OF IDEA LOANS AND IDEA CONSOLIDATION
LOANS
``SEC. 499F. BORROWER REPAYMENT.
``(a) Repayment Period.--The repayment period of a loan made under
this part shall--
``(1) begin on the first day of the first taxable year that
begins after the borrower's in-school deferment period, or in
the case of an IDEA Consolidation Loan, on the first day of the
first taxable year that begins after such Consolidation Loan is
disbursed; and
``(2) continue until the loan is paid in full, except that
the Secretary may grant a borrower forbearance of the
borrower's annual repayment amount--
``(A) for a period not to exceed 60 days, due to
administrative or technical reasons;
``(B) for a period not to exceed 3 months, due to
unusual circumstances that disrupt the borrower's
ability to make timely payments on the loan; or
``(C) renewable at 12-month intervals for a period
not to exceed 3 years, due to documented extreme
economic hardship on the part of a borrower.
``(b) Annual Repayment Amount.--The annual repayment amount under
this part for a taxable year for a borrower with 1 or more loans made
under this part in repayment status shall be equal to the lesser of--
``(1) the income-based repayment obligation for such
borrower for such year, as calculated under section 499E(a)(1);
or
``(2) an amount equal to the sum of the outstanding
balances (equal to the sum of the unpaid principal, interest,
penalties, and fees) that the borrower owes on such loans.
``(c) Methods of Repayment.--A borrower who expects to have an
annual repayment amount for the taxable year that is greater than the
amount specified in subsection (f)(1)(D) shall make payments through
the following methods:
``(1) With respect to any wages earned by the borrower that
are subject to Federal income tax withholding, the withholding
process described in section 499E(a)(10).
``(2) The monthly payments process described in section
499E(c), to meet the portion of the borrower's obligation that
is not paid through withholding, or, in the case of a borrower
who opts out of the withholding process, to meet the borrower's
entire obligation.
``(3) The direct payments process under section 499E(a)(4).
``(4) The process described in section 499E(a)(5) that
allows other individuals or entities to make payments on the
borrower's annual repayment amount for the year.
``(d) Order of Crediting.--Payments on loans made under this part
shall be applied, without regard to the method of such payments, first
toward penalties due on the loans, next toward any fees due on the
loans, then toward any interest due on the loans, and finally toward
the principal due on the loan with the highest applicable rate of
interest among such loans.
``(e) Prepayment Authorized.--A borrower shall have the right to
prepay all or part of such loan, at any time and without penalty. Any
such prepayment amount will be applied to loans made under this part in
the same order as described in subsection (d).
``(f) Underpayments.--
``(1) Penalties for underpayments.--
``(A) In general.--Subject to subparagraph (C), if,
as of the last day of a taxable year, a borrower has
not paid at least 90 percent of the borrower's annual
repayment amount for such year, the borrower shall be
charged a penalty in an amount equal to 10 percent of
the difference between--
``(i) an amount equal to 90 percent of the
borrower's annual repayment amount for such
year; and
``(ii) the amount paid on such annual
repayment amount as of such day.
``(B) Increase of annual repayment amount.--A
borrower's annual repayment amount calculated under
subsection (b) for such year shall be increased by the
amount of such penalty, but such penalty shall not be
treated as a principal or interest amount for a loan
made under this part.
``(C) Exception for meeting the obligation for the
previous year.--A borrower who has paid 100 percent of
the borrower's annual repayment amount for the taxable
year preceding the taxable year described in
subparagraph (A) shall not be subject to the penalty
under this paragraph for the taxable year described in
subparagraph (A).
``(D) De minimus exception.--A borrower whose
annual repayment amount is less than $300 shall not be
subject to the penalty under this paragraph for the
taxable year described in subparagraph (A).
``(2) Reconciling underpayments.--
``(A) In general.--If, as of the last day of a
taxable year, the sum of the payments made on a
borrower's annual repayment amount for such year is
less than the total amount of the borrower's annual
repayment amount for such year, the borrower--
``(i) in the case of the first year that
the borrower has a difference between such
amounts--
``(I) may request, in such manner
as the Secretary shall require, that
the Secretary reduce the borrower's
annual repayment amount for such year
to the sum of--
``(aa) the payments made,
as of such day, on the
borrower's annual repayment
amount for such year; and
``(bb) any penalties
calculated under paragraph (1)
resulting from such
underpayment; and
``(II) if the borrower qualifies
for the reduction requested under
subclause (I), shall pay the sum
calculated under such subclause at such
time and in such manner as required by
the Secretary;
``(ii) if the borrower does not qualify for
a reduction under clause (i) or does not
request such a reduction, shall pay to the
Secretary an amount equal to the difference
between such amounts within the 30-day period
beginning on the date of receipt by the
borrower of the borrower's annual statement
described in section 499E(a)(3) for such year;
or
``(iii) if the borrower fails to pay the
amount owed by the borrower as calculated under
clause (ii) within the 30-day period, shall be
charged a penalty equal to 2 percent of such
amount for each month (prorated based on the
percentage of a month such penalty is charged)
that such amount is owed or until the borrower
defaults on the loan for which such amount is
owed, whichever occurs first.
``(B) Default.--A loan for which an amount is owed
under subparagraph (A) and that is not paid within 270
days after the date of receipt by the borrower of the
borrower's annual statement described in section
499E(a)(3) shall be considered to be in default.
``(g) Overpayments.--If, as of the last day of a taxable year, the
sum of the payments made on a borrower's annual repayment amount for
such year is greater than the total amount of the borrower's annual
repayment amount for such year, the Secretary shall--
``(1) refund the overpayment amount, if the borrower
notifies the Secretary, within the 90-day period beginning on
the date of receipt of the borrower's annual statement
described in section 499E(a)(3) for such year and in a manner
prescribed by the Secretary, that the borrower desires to have
the overpayment amount refunded; or
``(2) if a borrower fails to notify the Secretary of the
borrower's desire for a refund of such amount within such 90-
day period, apply such amount as a prepayment to the borrower's
loans made under this part in the same manner as a prepayment
authorized under subsection (e).
``(h) Employer Failure To Withhold Payments.--In the case of a
borrower whose employer fails to withhold amounts under section 499E(b)
upon any wages earned by the borrower that are subject to Federal
income tax withholding and with respect to which the borrower made an
election to have amounts withheld under such section, the Secretary
shall--
``(1) reduce the borrower's annual repayment to an amount
equal to the borrower's annual repayment amount had wages from
such employer been excluded when calculating the borrower's
annual repayment amount; and
``(2) reduce any penalties for underpayments calculated
under subsection (f)(1) and refund any overpayments on such
annual repayment amount, accordingly.
``(i) Determination of Income-Based Repayment Obligation.--
``(1) In general.--The income-based repayment obligation
with respect to an individual for any taxable year is an amount
equal to 10 percent of the excess of--
``(A) the sum of--
``(i) the wages, salaries, tips, and other
employee compensation of the individual, but
only if such amounts are includible in gross
income for the taxable year (determined without
regard to sections 911, 931, and 933 of the
Internal Revenue Code of 1986) and are readily
attributable to the individual, plus
``(ii) any other amount included in total
income of the taxpayer for the taxable year but
not described in clause (i), except that such
amount shall be divided by 2 in the case of an
individual who is married and filing a joint
tax return, over
``(B) the sum of--
``(i) the exemption amount with respect to
such individual, plus
``(ii) the lesser of the amount determined
with respect to the taxpayer under subparagraph
(A)(ii), or $3,000.
``(2) Exclusion of certain amounts paid on behalf of
individual.--Any amount paid on the borrower's behalf under
section 499E(a)(5) shall not be taken into account in
determining such borrower's income-based repayment obligation.
``(3) Exemption amount.--For purposes of this subpart, the
exemption amount with respect to an individual shall be $10,000
(adjusted each year to reflect changes in the Consumer Price
Index for All Urban Consumers published by the Bureau of Labor
Statistics of the Department of Labor for the most recent 12-
month period for which such data are available).
``(4) Individuals not filing a return.--The income-based
repayment obligation with respect to an individual not required
to file a return under section 6012(a)(1) of the Internal
Revenue Code of 1986 shall be treated as zero.''.
SEC. 4. CONFORMING CHANGES TO THE HIGHER EDUCATION ACT OF 1965.
(a) Loan Forgiveness and Cancellation for Teachers.--
(1) Loan forgiveness for teachers.--Section 428J of the
Higher Education Act of 1965 (20 U.S.C. 1078-10) is amended--
(A) in subsection (b), by inserting ``or for an
IDEA loan made under part J,'' after ``or 428H,''; and
(B) in subsection (c)--
(i) in paragraph (1), by inserting ``or an
IDEA loan made under part J'' after ``or
428H''; and
(ii) in paragraph (2)--
(I) by striking ``A loan'' and
inserting the following:
``(A) Loans made under section 428c.--A loan''; and
(II) by adding at the end the
following:
``(B) IDEA consolidation loan.--A loan amount for
an IDEA Consolidation Loan may be a qualified loan
amount for purposes of this subsection only to the
extent that such loan amount was used to repay a
Federal Direct Stafford Loan, a Federal Direct
Consolidation Loan, a Federal Direct Unsubsidized
Stafford Loan, or a loan made under section 428, 428C,
or 428H.''.
(2) Loan cancellation for teachers.--Section 460 of the
Higher Education Act of 1965 (20 U.S.C. 1087j) is amended--
(A) in subsection (b), in the matter preceding
paragraph (1), by inserting ``or for an IDEA loan made
under part J'' after ``under this part''; 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 an IDEA loan made under part
J''; and
(ii) in paragraph (2)--
(I) by striking ``A loan'' and
inserting the following:
``(A) Federal direct consolidation loan.--A loan'';
and
(II) by adding at the end the
following new subparagraph:
``(B) IDEA consolidation loan.--A loan amount for
an IDEA Consolidation Loan may be a qualified loan
amount for purposes of this subsection only to the
extent that such loan amount was used to repay a
Federal Direct Stafford Loan, a Federal Direct
Consolidation Loan, a Federal Direct Unsubsidized
Stafford Loan, or a loan made under section 428, 428C,
or 428H.''.
(b) Loan Forgiveness for Service in Areas of National Need.--
Section 428K(a)(2) of the Higher Education Act of 1965 (20 U.S.C. 1078-
11(a)(2)) is amended--
(1) in subparagraph (A), by striking ``and'' after the
semicolon;
(2) in subparagraph (B), by striking the period at the end
and inserting ``; and''; and
(3) by adding at the end the following:
``(C) to cancel a qualified loan amount for a loan
made under part J.''.
(c) Loan Repayment for Civil Legal Assistance Attorneys.--Section
428L(b)(2)(A) of the Higher Education Act of 1965 (20 U.S.C. 1078-
12(b)(2)(A)) is amended--
(1) in clause (i), by striking ``or part E'' and inserting
``, part E, or part J''; and
(2) in clause (ii)--
(A) in the matter preceding subclause (I), by
striking ``or 455(g)'' and inserting ``, 455(g), or
499C'';
(B) in subclause (II), by striking ``or'' after the
semicolon;
(C) by redesignating subclause (III) as subclause
(IV); and
(D) by inserting after subclause (II) the
following:
``(III) a Federal Direct
Consolidation loan or a loan made under
section 428C, in the case of a loan
made under section 499C; or''.
(d) Master Promissory Note.--Section 432(m)(1)(D) of the Higher
Education Act of 1965 (20 U.S.C. 1082(m)(1)(D)) is amended--
(1) by striking ``this part and part D'' each place it
appears and by inserting ``this part, part D, and part J''; and
(2) by striking ``this part or part D'' each place it
appears and by inserting ``this part, part D, or part J''.
(e) Contracts.--Section 456 of the Higher Education Act of 1965 (20
U.S.C. 1087f) is amended--
(1) in subsection (a)--
(A) in paragraph (2), by striking ``this part''
each place it appears and inserting ``this part or part
J''; and
(B) in paragraph (4), by inserting ``or part J''
after ``this part''; and
(2) in subsection (b)--
(A) in paragraph (1), by inserting ``or the program
under part J'' after ``(or their parents)'';
(B) in paragraph (2), by inserting ``or part J''
after ``this part'';
(C) in paragraph (3), by inserting ``or part J''
after ``this part''; and
(D) in paragraph (4), by inserting ``or the IDEA
Loan Program'' after ``loan program''.
(f) Funds for Administrative Expenses.--Section 458(a)(3) of the
Higher Education Act of 1965 (20 U.S.C. 1087h(a)(3)) is amended--
(1) by striking ``this part and part B'' and inserting
``this part, part B, and part J''; and
(2) by inserting before the period at the end the
following: ``and part J''.
(g) Student Eligibility.--Section 484 of the Higher Education Act
of 1965 (20 U.S.C. 1091) is amended--
(1) in subsection (b)--
(A) in paragraph (3), by striking ``or D'' and
inserting ``, D, or E''; and
(B) in paragraph (4)(B), by striking ``or E'' and
inserting ``E, or J'';
(2) in subsection (d), by striking ``and E'' and inserting
``E, and J'';
(3) in subsection (f), by striking ``or part E'' both
places it appears and inserting ``part E, or part J''; and
(4) in subsection (m), by striking ``and E'' and inserting
``E, and J''.
(h) Institutional and Financial Assistance Information for
Students.--Section 485 of the Higher Education Act of 1965 (20 U.S.C.
1092) is amended--
(1) in subsection (a)--
(A) in paragraph (1)(M), by striking ``and E'' and
inserting ``E, and J''; and
(B) in paragraph (7)(A)(i), by striking ``Loan)''
each place it appears and inserting ``Loan) or part
J'';
(2) in subsection (b)--
(A) in paragraph (1)(A)--
(i) in the matter preceding clause (i), by
inserting ``or made under part J'' after ``part
E''; and
(ii) in clause (vii)--
(I) by inserting ``or an IDEA
Consolidation Loan'' after ``Federal
Direct Consolidation Loan''; and
(II) by striking ``and E'' and
inserting ``E, and J''; and
(B) in paragraph (2)(A), by striking ``or E'' and
inserting ``E, or J''; and
(3) in subsection (l)(1)--
(A) in subparagraph (A), in the matter preceding
clause (i), by inserting ``or made under part J'' after
``student)''; and
(B) in subparagraph (B), by striking ``or D'' and
inserting ``, D, or J''.
SEC. 5. NATIONAL DIRECTORY OF NEW HIRES.
Section 453(j) of the Social Security Act (42 U.S.C. 653(j)) is
amended by adding at the end the following:
``(12) Information comparisons and disclosure to assist
with collection of idea student loans.--
``(A) Furnishing of information by the secretary of
education.--The Secretary of Education shall furnish to
the Secretary, on such periodic basis as determined by
the Secretary of Education in consultation with the
Secretary, information in the custody of the Secretary
of Education for comparison with information in the
National Directory of New Hires, in order to obtain
information in such Directory with respect to persons
who have a loan made under part J of title IV of the
Higher Education Act of 1965 in repayment status.
``(B) Requirement to seek minimum information.--The
Secretary of Education shall seek information pursuant
to this section only to the extent necessary to improve
collection of the debts owed on the loans described in
subparagraph (A).
``(C) Duties of the secretary.--
``(i) Information disclosure.--The
Secretary, in cooperation with the Secretary of
Education, shall compare information in the
National Directory of New Hires with
information provided by the Secretary of
Education with respect to persons described in
subparagraph (A) and shall disclose information
in such Directory regarding such persons to the
Secretary of Education in accordance with this
paragraph, for the purposes specified in this
paragraph.
``(ii) Condition on disclosure.--The
Secretary shall make disclosures in accordance
with clause (i) only to the extent that the
Secretary determines that such disclosures do
not interfere with the effective operation of
the program under this part.
``(D) Prohibition and unauthorized use.--
``(i) In general.--Individual data
collected under this paragraph shall not be
used for any purpose not specifically
authorized by Federal law.
``(ii) Penalties for unauthorized
disclosure of data.--Any individual who
willfully discloses information provided under
this paragraph, in any manner to an entity not
entitled to receive the information, shall be
fined under title 18, United States Code,
imprisoned not more than 5 years, or both.
``(E) Use or disclosure of information by the
secretary of education.--The Secretary of Education may
use or disclose information provided under this
paragraph only for purposes of collecting the debts
owed on the loans described in subparagraph (A).
``(F) Reimbursement of hhs costs.--The Secretary of
Education shall reimburse the Secretary, in accordance
with subsection (k)(3), for the costs incurred by the
Secretary in furnishing the information requested under
this paragraph.
``(G) Compliance with ferpa.--In carrying out this
paragraph, the Secretary and Secretary of Education
shall not share any personally identifiable information
and shall act in accordance with section 444 of the
General Education Provisions Act (20 U.S.C. 1232g,
commonly known as the `Family Educational Rights and
Privacy Act of 1974').''.
SEC. 6. DISCLOSURE OF RETURN INFORMATION FOR PURPOSES OF IDEA LOAN
REPAYMENT PROGRAM.
(a) In General.--Subsection (l) of section 6103 of the Internal
Revenue Code of 1986 is amended by adding at the end the following new
paragraph:
``(23) Disclosure of return information to department of
education for purposes of administering idea loan repayment
program.--
``(A) In general.--The Secretary shall, upon
written request, disclose to the Department of
Education such return information as is necessary for
purposes of carrying out the IDEA Loan Repayment
Program established under subpart 2 of part J of the
Higher Education Act of 1965.
``(B) Restriction on disclosure.--Return
information disclosed under subparagraph (A) may be
used by officers, employees, and contractors of the
Department of Education only for purposes of, and to
the extent necessary in determining income-based
repayment obligations under the IDEA Loan Repayment
Program.''.
(b) Effective Date.--The amendments made by this section shall take
effect on the date of enactment of this Act.
SEC. 7. EXCLUSION FOR LOAN FORGIVENESS OF CERTAIN STUDENT LOANS.
(a) In General.--Paragraph (1) of section 108(f) of the Internal
Revenue Code of 1986 is amended by striking ``any student loan if'' and
all that follows and inserting ``any student loan if--
``(A) such discharge was pursuant to a provision of
such loan under which all or part of the indebtedness
of the individual would be discharged if the individual
worked for a certain period of time in certain
professions for any of a broad class of employers, or
``(B) such discharge was pursuant to section
499B(i) of the Higher Education Act of 1965 (relating
to the cancellation of loan liability).''.
(b) Effective Date.--The amendment made by subsection (a) shall
apply to discharges of indebtedness after the date of enactment of this
Act.
<all>