[Congressional Bills 115th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1127 Introduced in House (IH)]
<DOC>
115th CONGRESS
1st Session
H. R. 1127
To increase purchasing power, strengthen economic recovery, and restore
fairness in financing higher education in the United States through
student loan forgiveness, caps on interest rates on Federal student
loans, and refinancing opportunities for private borrowers, and for
other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
February 16, 2017
Ms. Bass introduced the following bill; which was referred to the
Committee on Education and the Workforce, and in addition to the
Committees on Financial Services, and Ways and Means, for a period to
be subsequently determined by the Speaker, in each case for
consideration of such provisions as fall within the jurisdiction of the
committee concerned
_______________________________________________________________________
A BILL
To increase purchasing power, strengthen economic recovery, and restore
fairness in financing higher education in the United States through
student loan forgiveness, caps on interest rates on Federal student
loans, and refinancing opportunities for private borrowers, 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 ``Student Loan Fairness Act''.
SEC. 2. FINDINGS.
Congress finds the following:
(1) A well-educated citizenry is critical to our Nation's
ability to compete in the global economy.
(2) The Federal Government has a vested interest in
ensuring access to higher education.
(3) Higher education should be viewed as a public good
benefitting our country rather than as a commodity solely
benefitting individual students.
(4) Recently, total outstanding student loan debt
officially surpassed total credit card debt in the United
States in 2015, and is on track to exceed $1,230,000,000,000.
(5) Excessive student loan debt is impeding economic growth
in the United States. Faced with excessive repayment burdens,
many individuals are unable to start businesses, invest, or buy
homes. Relieving student loan debt would give these individuals
greater control over their earnings and would increase
entrepreneurship and demand for goods and services.
(6) Because of soaring tuition costs, students often have
no choice but to amass significant debt to obtain an education
that is widely considered a prerequisite for earning a living
wage.
(7) Amidst rising tuition rates and stagnant grant funding,
many students are forced to supplement Federal loans with
private loans, which frequently feature higher interest rates
with fewer consumer protections.
(8) A borrower who experiences an extended hardship for
whatever reason, or a borrower who experiences a series of
separate hardships over a longer period of time, will often
have no choice but to default on his or her private student
loans. Opportunities to put such private loans into forbearance
are limited.
(9) During the period of forbearance on private student
loans, interest continues to accrue and is capitalized, and
once the borrower comes out of forbearance, he or she owes
significantly more on the principal of the loan than before the
hardship period began.
SEC. 3. 10/10 LOAN REPAYMENT AND FORGIVENESS.
Part G of title IV of the Higher Education Act of 1965 is amended
by adding at the end the following:
``SEC. 493E. 10/10 LOAN REPAYMENT AND FORGIVENESS.
``(a) 10/10 Loan Repayment Plan.--
``(1) 10/10 loan repayment plan authorized.--
Notwithstanding any other provision of this Act, the Secretary
shall carry out a program (to be known as the `10/10 Loan
Repayment Plan') under which--
``(A) a borrower of an eligible loan who is
eligible under paragraph (3) may elect to have the
borrower's aggregate monthly payment for all such loans
not exceed the monthly payment amount described in
paragraph (2);
``(B) any interest due and not paid under a monthly
payment under this subsection--
``(i) shall continue to accrue; and
``(ii) shall be capitalized up to an amount
equal to 10 percent of the original principal
amount of all the eligible loans that the
borrower is repaying under this subsection;
``(C) any principal due and not paid under a
monthly payment under this subsection shall be
deferred, and shall be forgiven in accordance with
subsection (b) if the borrower meets the requirements
for forgiveness under such subsection;
``(D) the amount of time the borrower makes monthly
payments under this subsection may exceed 10 years;
``(E) a borrower who is repaying an eligible loan
pursuant to 10/10 Loan Repayment under this subsection
may elect, at any time, to terminate repayment pursuant
to 10/10 Loan Repayment and repay such loan under the
standard repayment plan, in which case the amount of
time the borrower is permitted to repay such loans may
exceed 10 years; and
``(F) the special allowance payment to a lender
calculated under section 438(b)(2)(I), when calculated
for a loan in repayment under this section, shall be
calculated on the principal balance of the loan and on
any accrued interest unpaid by the borrower in
accordance with this section.
``(2) 10/10 loan repayment monthly payment formula.--A
borrower who has elected to participate in the 10/10 Loan
Repayment Plan under this subsection shall, during each month
the borrower is participating in such Plan, make a monthly
payment in an amount equal to--
``(A) one-twelfth of the amount that is 10 percent
of the result obtained by calculating, on at least an
annual basis, the amount by which--
``(i) the borrower's, and the borrower's
spouse's (if applicable), adjusted gross
income; exceeds
``(ii) 150 percent of the poverty line
applicable to the borrower's family size as
determined under section 673(2) of the
Community Services Block Grant Act (42 U.S.C.
9902(2)); or
``(B) in the case of a borrower who is in deferment
due to an economic hardship described in section
435(o), $0.
``(3) Eligibility.--The Secretary shall establish
procedures for annually determining the borrower's eligibility
for 10/10 Loan Repayment, including verification of a
borrower's annual adjusted gross income and the annual amount
due on the total amount of eligible loans, and such other
procedures as are necessary to effectively implement 10/10 Loan
Repayment under this subsection.
``(4) Special rule for married borrowers filing
separately.--In the case of a married borrower who files a
separate Federal income tax return, the Secretary shall
calculate the amount of the borrower's 10/10 Loan Repayment
under this subsection solely on the basis of the borrower's
student loan debt and adjusted gross income.
``(b) 10/10 Loan Forgiveness.--
``(1) In general.--The Secretary shall carry out a program
(to be known as the `10/10 Loan Forgiveness Program') to
forgive a qualified loan amount, in accordance with paragraph
(3), on an eligible loan for a borrower who, after the date
that is 10 years prior to the date of enactment of the Student
Loan Fairness Act, has made 120 monthly payments on the
eligible loan pursuant to any one or a combination of the
following:
``(A) Monthly payment under the 10/10 Loan
Repayment Plan under subsection (a).
``(B) Monthly payment under any other repayment
plan authorized under part B or D of an amount that,
for a given month, is not less than the monthly payment
amount calculated under subsection (a) that the
borrower would have owed in the year in which such
payment was made, based on the borrower's adjusted
gross income and eligible loan balance for such year.
``(C) For any month after such date during which
the borrower is in deferment due to an economic
hardship described in section 435(o), monthly payment
of $0.
``(2) Method of loan forgiveness.--To provide loan
forgiveness under paragraph (1), the Secretary is authorized to
carry out a program--
``(A) through the holder of the loan, to assume the
obligation to repay a qualified loan amount for a loan
made, insured, or guaranteed under part B of this
title; and
``(B) to cancel a qualified loan amount for a loan
made under part D of this title.
``(3) Qualified loan amount.--After the borrower has made
120 monthly payments described in paragraph (1), the Secretary
shall forgive--
``(A) with respect to new borrowers on or after the
date of enactment of the Student Loan Fairness Act, the
sum of--
``(i) the balance of principal and fees due
on the borrower's eligible loans as of the time
of such forgiveness, not to exceed $45,520; and
``(ii) the amount of interest that has
accrued on the balance described in clause (i)
as of the time of such forgiveness; or
``(B) with respect to any other eligible borrower,
the balance of principal, interest, and fees due on the
borrower's eligible loans as of the time of such
forgiveness.
``(4) Exclusion from taxable income.--The amount of a
borrower's eligible loans forgiven under this section shall not
be included in the gross income of the borrower for purposes of
the Internal Revenue Code of 1986.
``(c) Supporting Documentation Required.--A borrower who has
elected to participate in the 10/10 Loan Repayment Plan under
subsection (a), or who is requesting forgiveness under the 10/10 Loan
Forgiveness Program under subsection (b), shall provide to the
Secretary such information and documentation as the Secretary
determines, by regulation, to be necessary to verify the borrower's
adjusted gross income and payment amounts made on eligible loans of the
borrower for the purposes of such Plan or Program.
``(d) Definition of Eligible Loan.--In this section the term
`eligible loan' means any loan made, insured, or guaranteed under part
B or D.''.
SEC. 4. CAPPING INTEREST RATES FOR ALL FEDERAL DIRECT LOANS.
Section 455(b) of the Higher Education Act of 1965 (20 U.S.C.
1087e(b)) is amended--
(1) by redesignating paragraphs (9) and (10) as paragraphs
(10) and (11), respectively; and
(2) by inserting after paragraph (8) the following:
``(8) Rate of interest for all new federal direct loans.--
Notwithstanding any other provision of this Act, with respect
to a loan under this part for which the first disbursement of
principal is made (or in the case of a Federal Direct
Consolidation Loan, for which the application is received) on
or after October 1, 2018, or the date of enactment of the
Student Loan Fairness Act, whichever is later, the applicable
rate of interest shall not exceed 3.4 percent.''.
SEC. 5. 10/10 LOAN REPAYMENT PLAN AS PLAN SELECTED BY THE SECRETARY.
(a) FFEL Loans.--
(1) In general.--Section 428(b)(9) of the Higher Education
Act of 1965 (20 U.S.C. 1078(b)(9)) is amended--
(A) in subparagraph (A)--
(i) by striking ``and'' at the end of
clause (iv);
(ii) in clause (v), by striking the period
at the end and inserting ``; and''; and
(iii) by adding at the end the following
new clause:
``(vi) beginning October 1, 2018, a 10/10
Loan Repayment Plan, with varying annual
repayment amounts based on the discretionary
income of the borrower, in accordance with
section 493E.''; and
(B) in subparagraph (B), by striking ``(A)(i)'' and
inserting ``(A)(vi)''.
(2) Effective date.--The amendment made by paragraph (1)(B)
shall be effective beginning October 1, 2018.
(b) Direct Loans.--
(1) In general.--Section 455(d) of the Higher Education Act
of 1965 (20 U.S.C. 1087e(d)) is amended--
(A) in paragraph (1)--
(i) by striking ``and'' at the end of
subparagraph (D);
(ii) in subparagraph (E), by striking the
period at the end and inserting ``; and''; and
(iii) by adding at the end the following
new subparagraph:
``(F) beginning on October 1, 2018, a 10/10 Loan
Repayment Plan, with varying annual repayment amounts
based on the discretionary income of the borrower, in
accordance with section 493E.''; and
(B) in paragraph (2)--
(i) by striking ``may'' and inserting
``shall''; and
(ii) by striking ``(A), (B), or (C)'' and
inserting ``(F)''.
(2) Effective date.--The amendment made by paragraph (1)(B)
shall be effective beginning October 1, 2018.
SEC. 6. IMPROVING AND EXPANDING PUBLIC SERVICE LOAN FORGIVENESS.
Section 455(m) of the Higher Education Act of 1965 (20 U.S.C.
1087e(m)) is amended--
(1) in paragraph (1), by striking ``120'' and inserting
``60'' each place it appears; and
(2) in paragraph (3)(B)--
(A) in clause (i), by striking ``or'' after the
semicolon;
(B) in clause (ii), by striking the period and
inserting ``; or''; and
(C) by adding at the end the following:
``(iii) a full-time job as a primary care
physician in an area or population designated
as a Medically Underserved Area or Population
by the Health Resource and Services
Administration.''.
SEC. 7. REFINANCING PRIVATE EDUCATION LOANS FOR CERTAIN BORROWERS.
(a) Consolidation for Certain Borrowers.--Section 455(g) of the
Higher Education Act of 1965 (20 U.S.C. 1087e(g)) is amended--
(1) by striking ``A borrower'' and inserting the following:
``(1) In general.--A borrower'';
(2) by inserting ``, and any loan described in paragraph
(2)'' after ``July 1, 2010''; and
(3) by adding at the end the following new paragraph:
``(2) Consolidation of private education loans as a federal
direct consolidation loan for certain borrowers.--
``(A) In general.--Notwithstanding any other
provision of law, a borrower who meets the eligibility
criteria described in subparagraph (B) shall be
eligible to obtain a Federal Direct Consolidation loan
under this paragraph that--
``(i) shall include an eligible private
education loan; and
``(ii) may include a loan described in
section 428C(a)(4).
``(B) Eligible borrower.--A borrower of an eligible
private education loan is eligible to obtain a Federal
Direct Consolidation Loan under this paragraph if the
borrower--
``(i) was eligible to borrow a loan under
section 428H, a Federal Direct Unsubsidized
Stafford Loan, a loan under section 428B, or a
Federal Direct PLUS loan for a period of
enrollment at an institution of higher
education, or, with respect to a borrower who
was enrolled at an institution of higher
education on less than a half-time basis, would
have been eligible to borrow such a loan for
such period of enrollment if the borrower had
been enrolled on at least a half-time basis;
``(ii) borrowed at least one eligible
private education loan for a period of
enrollment described in clause (i); and
``(iii) has an average adjusted gross
income (based on the borrower's adjusted gross
income from the 3 most recent calendar years
before application for consolidation under this
section) that is equal to or less than the
borrower's total education debt (determined by
calculating the sum of the borrower's loans
described in section 428C(a)(4) and eligible
private education loans) at the time of such
application.
``(C) Definition of eligible private education
loan.--For purposes of this paragraph, the term
`eligible private education loan' means a private
education loan (as such term is defined in section 140
of the Truth in Lending Act (15 U.S.C. 1650)) made on
or before the date of enactment of the Student Loan
Fairness Act, including the amount of outstanding
principal, accrued interest, and related fees and costs
(as determined by the Secretary) owed by a borrower on
such a loan.
``(D) Purchase of loan.--For each eligible private
education loan that a borrower is consolidating under
this paragraph, the Secretary shall notify the holder
that the Secretary is purchasing the loan, and the
Secretary shall then purchase such loan, as described
under section 140A of the Truth in Lending Act.
``(E) Terms and rate of interest.--A Federal Direct
Consolidation Loan made under this paragraph shall have
the same terms and conditions as a Federal Direct
Consolidation loan under paragraph (1), except that the
applicable rate of interest for a Federal Direct
Consolidation loan made under this paragraph shall not
exceed 3.4 percent.
``(F) Notification of eligible borrowers.--The
Secretary shall take such steps as may be necessary to
notify eligible borrowers of the availability of
consolidation under this paragraph no later than 60
days after the date of enactment of the Student Loan
Fairness Act, including notifying such borrowers of the
deadline to apply for such a loan under subparagraph
(G).
``(G) Application deadline for loans under this
paragraph.--A borrower may apply for loans under this
paragraph during the 1-year period beginning on the
date of enactment of the Student Loan Fairness Act. The
Secretary shall not make a Federal Direct Consolidation
Loan under this paragraph to any borrower who has not
submitted an application for such a loan to the
Secretary before the end of such period.
``(H) Authorization and appropriation.--There are
authorized to be appropriated, and there are
appropriated, such sums as may be necessary to carry
out this paragraph.''.
(b) Sale of Private Education Loans to the Government.--Chapter 2
of the Truth in Lending Act (15 U.S.C. 1631 et seq.) is amended--
(1) by redesignating section 140A as section 140B;
(2) by inserting after section 140 the following:
``Sec. 140A. Sale of private education loans to the Government
``(a) In General.--The Bureau shall issue regulations to require a
private education lender to sell an eligible private education loan to
the Secretary of Education, upon request of the Secretary, for purposes
of consolidating such loan, as described under section 455(g)(2) of the
Higher Education Act of 1965.
``(b) Determination of Price.--The price paid for a private
education loan under subsection (a) shall--
``(1) include the amount of outstanding principal on the
loan, the amount of accrued interest on the loan, and any fees
or other costs owed by the consumer on the loan; and
``(2) be adjusted to account for the time value of such
amount.
``(c) Definitions.--For purposes of this section:
``(1) Eligible private education loan.--The term `eligible
private education loan' means a private education loan, as
defined under section 140(a), made on or before the date of
enactment of the Student Loan Fairness Act.
``(2) Private education lender.--The term `private
education lender' has the meaning given such term under section
140(a).''; and
(3) in the table of contents for such chapter--
(A) by redesignating the item relating to section
140A as item 140B; and
(B) by inserting after the item relating to section
140 the following:
``140A. Sale of private education loans to the Government.''.
(c) Conforming Amendment.--Section 428C(a)(3)(B)(i)(V) of the
Higher Education Act of 1965 (20 U.S.C. 1078-3(a)(3)(B)(i)(V)) is
amended--
(1) by striking ``or'' at the end of item (bb);
(2) by striking the period at the end of item (cc) and
inserting ``; or''; and
(3) by adding at the end the following:
``(dd) for the purpose of
consolidating an eligible
private education loan under
section 455(g)(2), whether such
loan is consolidated alone,
with other eligible private
education loans, or with loans
described in paragraph (4).''.
SEC. 8. INTEREST-FREE DEFERMENT OF UNSUBSIDIZED LOANS DURING PERIODS OF
UNEMPLOYMENT.
(a) FFEL Unsubsidized Loan Deferment.--
(1) Section 428H(e)(2) of the Higher Education Act of 1965
(20 U.S.C. 1078-8(e)(2)) is amended--
(A) in subparagraph (A), by striking ``Interest
on'' and inserting ``Except as provided in subparagraph
(C), interest on''; and
(B) by adding at the end the following:
``(C) Interest on loans made under this section for which
payments are deferred under clause (ii) of section
428(b)(1)(M), for a period of deferment granted to a borrower
on or after the date of enactment of the Student Loan Fairness
Act, shall accrue and be paid by the Secretary during any
period during which loans are so deferred, not in excess of 3
years.''.
(2) Conforming amendment.--Section 428(b)(1)(Y)(iii) of the
Higher Education Act of 1965 (20 U.S.C. 1078(b)(1)(Y)(iii)) is
amended by inserting ``(other than a deferment under clause
(ii) of such subparagraph on or after the date of enactment of
the Student Loan Fairness Act)'' after ``of this paragraph''.
(b) Direct Unsubsidized Loan Deferment.--Section 455(f)(1) of the
Higher Education Act of 1965 (20 U.S.C. 1087e(f)(1)) is amended--
(1) in subparagraph (A)--
(A) by striking ``or'' at the end of clause (i);
and
(B) by adding at the end the following:
``(iii) a Federal Direct Unsubsidized
Stafford Loan, with respect to a period of
deferment described in subparagraph (B) of
paragraph (2) granted to a borrower on or after
the date of enactment of the Student Loan
Fairness Act; or''; and
(2) in subparagraph (B), by inserting ``not described in
subparagraph (A)(iii)'' after ``Unsubsidized Stafford Loan''.
(c) Treatment of Consolidation Loans.--Section 428C(b)(4)(C)(ii) of
the Higher Education Act of 1965 (20 U.S.C. 1078-3(b)(4)(C)(ii)) is
amended--
(1) by striking ``or'' at the end of subclause (II);
(2) by redesignating subclause (III) as subclause (IV);
(3) by inserting after subclause (II) the following:
``(III) by the Secretary, in the
case of a consolidation loan for which
the application is received on or after
the date of enactment of the Student
Loan Fairness Act, except that the
Secretary shall pay such interest only
for a period not in excess of 3 years
for which the borrower would be
eligible for a deferral under clause
(ii) of section 428(b)(1)(M); or''; and
(4) in subclause (IV) (as redesignated by paragraph (2)),
by striking ``(I) or (II)'' and inserting ``(I), (II), or
(III)''.
(d) Income-Based Repayment.--Section 493C(b) of the Higher
Education Act of 1965 (20 U.S.C. 10983(b))--
(1) in paragraph (3)--
(A) in subparagraph (A), by striking ``and'' after
the semicolon;
(B) by redesignating subparagraph (B) as
subparagraph (C);
(C) by inserting after subparagraph (A) the
following:
``(B) shall, on subsidized and unsubsidized loans,
be paid by the Secretary for a period of not more than
3 years during which the borrower is eligible for a
deferment due to unemployment described in section
455(f)(2)(B) (regardless of whether the student is in
such a deferment), except that--
``(i) this subparagraph shall only apply to
periods during which the borrower is eligible
for such a deferment on or after the date of
enactment of the Student Loan Fairness Act; and
``(ii) in the case of a subsidized loan,
such period shall not include any period
described in subparagraph (A) or any period
during which the borrower is in deferment due
to an economic hardship described in section
435(o); and''; and
(D) in subparagraph (C) (as so redesignated by
subparagraph (B))--
(i) in clause (i), by striking
``subparagraph (A)'' and inserting
``subparagraphs (A) and (B)''; and
(ii) in clause (ii), by inserting ``,
subject to subparagraph (B),'' after
``unsubsidized loan''; and
(2) by striking ``and'' at the end of paragraph (8);
(3) by striking the period at the end of paragraph (9) and
inserting ``; and''; and
(4) by adding at the end the following new paragraph:
``(10) the amount of the principal and interest on a
borrower's loans repaid or canceled under paragraph (7) shall
not be included in the gross income of the borrower for
purposes of the Internal Revenue Code of 1986.''.
SEC. 9. EXCLUDING LOANS FORGIVEN UNDER CERTAIN REPAYMENT PROGRAMS FROM
GROSS INCOME.
Section 455(e)(2) of the Higher Education Act of 1965 (20 U.S.C.
1087e(e)(2)) is amended--
(1) in the paragraph heading, by inserting ``and
Forgiveness'' after ``Repayment''; and
(2) by adding at the end the following: ``The amount of the
principal and interest on a borrower's loans forgiven pursuant
to income contingent repayment shall not be included in the
gross income of the borrower for purposes of the Internal
Revenue Code of 1986.''.
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