[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5710 Introduced in House (IH)]
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118th CONGRESS
1st Session
H. R. 5710
To provide for the refinancing and recalculation of certain Federal
student loans, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
September 26, 2023
Mr. Garamendi (for himself and Mr. Fitzpatrick) introduced the
following bill; which was referred to the Committee on Education and
the Workforce
_______________________________________________________________________
A BILL
To provide for the refinancing and recalculation of certain Federal
student loans, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Student Loan Refinancing and
Recalculation Act''.
SEC. 2. REFINANCING PROGRAMS.
(a) Program Authority.--Section 451(a) of the Higher Education Act
of 1965 (20 U.S.C. 1087a(a)) is amended--
(1) by striking ``and (2)'' and inserting ``(2)''; and
(2) by inserting ``; and (3) to make loans under section
460A'' after ``section 459A''.
(b) Refinancing Program.--Part D of title IV of the Higher
Education Act of 1965 (20 U.S.C. 1087a et seq.) is amended by adding at
the end the following:
``SEC. 460A. REFINANCING FFEL AND FEDERAL DIRECT LOANS.
``(a) In General.--Beginning not later than 180 days after the date
of enactment of the Student Loan Refinancing and Recalculation Act, the
Secretary shall establish a program under which the Secretary, upon the
receipt of an application from a qualified borrower, reissues the
borrower's original loan under this part or part B as a loan under this
part, in accordance with the provisions of this section, in order to
permit the borrower to obtain the interest rate provided under
subsection (c).
``(b) Reissuing Loans.--
``(1) Federal direct loans.--Upon application of a
qualified borrower, the Secretary shall reissue 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
reissuance of a loan under this section was received before
July 1, 2024, in an amount equal to the sum of--
``(A) the unpaid principal, accrued unpaid
interest, and late charges of the original loan; and
``(B) the administrative fee under subsection
(d)(3).
``(2) Discharging and reissuing ffel program loans as
refinanced federal direct loans.--Upon application of a
qualified borrower for any loan that was made, insured, or
guaranteed under part B and for which the first disbursement
was made before July 1, 2010, the Secretary shall reissue such
loan as 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 and the administrative fee under
subsection (d)(3), to the borrower in accordance with the
following:
``(A) The Secretary shall pay the proceeds of such
reissued loan to the eligible lender of the loan made,
insured, or guaranteed under part B, in order to
discharge the borrower from any remaining obligation to
the lender with respect to the original loan.
``(B) The Secretary shall reissue--
``(i) a loan originally made, insured, or
guaranteed under section 428 as a Federal
Direct Stafford Loan;
``(ii) a loan originally made, insured, or
guaranteed under section 428B as a Federal
Direct PLUS Loan;
``(iii) a loan originally made, insured, or
guaranteed under section 428H as a Federal
Direct Unsubsidized Stafford Loan; and
``(iv) a loan originally made, insured, or
guaranteed under section 428C as a Federal
Direct Consolidation Loan.
``(C) The interest rate for each loan reissued
under this paragraph shall be the rate provided under
subsection (c).
``(c) Interest Rate.--
``(1) In general.--The interest rate for the reissued
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) the high yield of the 10-year Treasury note
auctioned at the final auction held prior to the first
day of the month in which the application for
reissuance under this section is received, plus
``(B) 1.0 percent.
``(2) Fixed rate.--The applicable rate of interest
determined under paragraph (1) for a reissued loan under this
section shall be fixed for the period of the loan.
``(d) Terms and Conditions of Loans.--
``(1) In general.--A loan that is reissued 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.--
Reissuing 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) Administrative fee.--The Secretary shall charge the
borrower of a loan reissued under this section an
administrative fee of not more than 0.5 percent of the sum of
the unpaid principal, accrued unpaid interest, and late
charges, of the original loan.
``(e) Definition of Qualified Borrower.--
``(1) In general.--The term `qualified borrower' means a
borrower--
``(A) of a loan under this part or part B for which
the first disbursement was made, or the application for
reissuance under this section was received, before July
1, 2024; and
``(B) who meets the eligibility requirements based
on income or debt-to-income ratio established by the
Secretary.
``(2) Income requirements.--Not later than 180 days after
the date of enactment of the Student Loan Refinancing and
Recalculation Act, the Secretary shall establish eligibility
requirements based on income or debt-to-income ratio that take
into consideration providing access to refinancing under this
section for borrowers with the greatest financial need.
``(f) Expiration of Authority.--The Secretary's authority to
reissue loans under this section shall expire on the date that is
determined in accordance with section 4(c) of the Student Loan
Refinancing and Recalculation Act.''.
(c) Amendments to Public Service Repayment Plan Provisions.--
Section 455(m) of the Higher Education Act of 1965 (20 U.S.C. 1087e(m))
is amended--
(1) by redesignating paragraphs (3) and (4) as paragraphs
(4) and (5), respectively;
(2) by inserting after paragraph (2) the following:
``(3) Special rules for section 460a loans.--
``(A) Refinanced federal direct loans.--
Notwithstanding paragraph (1), in determining the
number of monthly payments that meet the requirements
of such paragraph for an eligible Federal Direct Loan
reissued under section 460A that was originally a loan
under this part, the Secretary shall include all
monthly payments made on the original loan that meet
the requirements of such paragraph.
``(B) Refinanced ffel loans.--In the case of an
eligible Federal Direct Loan reissued under section
460A that was originally a loan under part B, only
monthly payments made after the date on which the loan
was reissued may be included for purposes of paragraph
(1).''; and
(3) in paragraph (4)(A) (as redesignated by paragraph (1)
of this subsection), by inserting ``(including any Federal
Direct Stafford Loan, Federal Direct PLUS Loan, Federal Direct
Unsubsidized Stafford Loan, or Federal Direct Consolidation
Loan reissued under section 460A)'' before the period at the
end.
(d) Income-Based Repayment.--Section 493C of the Higher Education
Act of 1965 (20 U.S.C. 1098e) is amended by adding at the end the
following:
``(f) Refinanced Federal Direct and FFEL Loans.--In calculating the
period of time during which a borrower of a loan that is reissued 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 reissued loan, that otherwise meet the requirements of this
section.''.
SEC. 3. INTEREST RATES.
(a) Interest Rates.--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:
``(9) Interest rate provisions for new loans on or after
july 1, 2024.--
``(A) Rates for undergraduate fdsl and fdusl.--
Notwithstanding the preceding paragraphs of this
subsection, for Federal Direct Stafford Loans and
Federal Direct Unsubsidized Stafford Loans issued to
undergraduate students, for which the first
disbursement is made on or after July 1, 2024, the
applicable rate of interest shall, for loans disbursed
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--
``(i) a rate equal to--
``(I) the high yield of the 10-year
Treasury note auctioned at the final
auction held prior to such June 1, plus
``(II) 1 percent; or
``(ii) 8.25 percent.
``(B) Rates for graduate and professional fdusl.--
Notwithstanding the preceding paragraphs of this
subsection, for Federal Direct Unsubsidized Stafford
Loans issued to graduate or professional students, for
which the first disbursement is made on or after July
1, 2024, the applicable rate of interest shall, for
loans disbursed 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--
``(i) a rate equal to--
``(I) the high yield of the 10-year
Treasury note auctioned at the final
auction held prior to such June 1, plus
``(II) 1 percent; or
``(ii) 9.5 percent.
``(C) PLUS loans.--Notwithstanding the preceding
paragraphs of this subsection, for Federal Direct PLUS
Loans, for which the first disbursement is made on or
after July 1, 2024, the applicable rate of interest
shall, for loans disbursed 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--
``(i) a rate equal to--
``(I) the high yield of the 10-year
Treasury note auctioned at the final
auction held prior to such June 1, plus
``(II) 1 percent; or
``(ii) 10.5 percent.
``(D) Consolidation loans.--Notwithstanding the
preceding paragraphs of this subsection, any Federal
Direct Consolidation Loan for which the application is
received on or after July 1, 2024, 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.
``(E) Consultation.--The Secretary shall determine
the applicable rate of interest under this paragraph
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.
``(F) Rate.--The applicable rate of interest
determined under this paragraph for a Federal Direct
Stafford Loan, a Federal Direct Unsubsidized Stafford
Loan, or a Federal Direct PLUS Loan shall be fixed for
the period of the loan.''.
(b) In School Deferment.--Section 455(f) of the Higher Education
Act of 1965 (20 U.S.C. 1087e(f)) is amended--
(1) in paragraph (1), in the matter preceding subparagraph
(A), by striking ``A borrower'' and inserting ``Except as
provided in paragraph (5), a borrower'';
(2) in paragraph (2)(A)--
(A) by striking the matter following clause (ii);
(B) in clause (ii), by striking the comma at the
end and inserting ``; or''; and
(C) by adding at the end the following:
``(iii) is serving in a medical,
veterinary, or dental internship or residency
program;''; and
(3) by adding at the end the following new paragraph:
``(6) Special rule for in school deferment.--
Notwithstanding any other provision of this Act, a borrower
described in paragraph (2)(A) shall be eligible for a
deferment, during which periodic installments of principal need
not be paid, and interest--
``(A) shall not accrue, in the case of a borrower
with an expected family contribution of not more than
$10,000 (computed in accordance with part F of this
title); and
``(B) shall accrue at the rate equal to the high
yield of the 10-year Treasury note applicable to such
loan under subsection (b)(9), in the case of a borrower
of an unsubsidized loan with an expected family
contribution of more than $10,000 (computed in
accordance with part F of this title).''.
(c) Effective Date.--The amendments made by subsections (a) and (b)
shall take effect on July 1, 2024.
SEC. 4. ELIMINATION OF ORIGINATION FEES FOR FEDERAL DIRECT LOANS.
(a) Sense of Congress.--It is the sense of Congress that no
origination fees should be charged on any future Federal Direct Loans.
(b) Repeal of Origination Fees.--Subsection (c) of section 455 of
the Higher Education Act of 1965 (20 U.S.C. 1087e(c)) is repealed.
(c) Effective Date.--The amendment made by subsection (b) shall
apply with respect to loans made under part D of title IV of the Higher
Education Act of 1965 (20 U.S.C. 1087a et seq.) for which the first
disbursement of principal is made, or, in the case of a Federal Direct
Consolidation Loan, the application is received, on the first July 1
after the date of enactment of this Act.
SEC. 5. ELIMINATION OF INTEREST CAPITALIZATION.
(a) Federal Plus Loans.--Section 428B(d)(2) of the Higher Education
Act of 1965 (20 U.S.C. 1078-2(d)(2)) is amended to read as follows:
``(2) No capitalization of interest.--Interest on loans
made under this section for which payments of principal are
deferred pursuant to paragraph (1) shall be paid monthly or
quarterly, if agreed upon by the borrower and the lender and
shall not be capitalized.''.
(b) Federal Consolidation Loans Deferrals.--Section
428C(b)(4)(C)(ii)(III) of the Higher Education Act of 1965 (20 U.S.C.
1078-3(b)(4)(C)(III)) is amended by striking ``or capitalized,''.
(c) Loan Limits for Unsubsidized Stafford Loans.--Section
428H(d)(5) of the Higher Education Act of 1965 (20 U.S.C. 1078-8(d)(5))
is amended by inserting ``before the date of enactment of the Student
Loan Refinancing and Recalculation Act'' after ``Interest
capitalized''.
(d) Unsubsidized Stafford Loans for Middle Income Borrowers.--
Section 428H(e)(2) of the Higher Education Act of 1965 (20 U.S.C. 1078-
8(e)(2)) is amended--
(1) in the header, by striking ``Capitalization'' and
inserting ``No capitalization'';
(2) in subparagraph (A), in the matter before clause (i),
by striking ``, if agreed upon by the borrower and the lender''
and all that follows through clause (ii)(IV) and inserting ``be
paid monthly or quarterly, if agreed upon by the borrower and
the lender and shall not be capitalized.'';
(3) by striking subparagraph (B); and
(4) by redesignating subparagraph (C) as subparagraph (B).
(e) Income Contingent Repayment.--Section 455(e)(5) of the Higher
Education Act of 1965 (20 U.S.C. 1087e(e)(5)) is amended by striking
the last sentence and inserting ``No interest may be capitalized on
such loan on or after the date of the enactment of the Student Loan
Refinancing and Recalculation Act, and the Secretary shall promulgate
regulations with respect to the treatment of accrued interest that is
not capitalized.''.
(f) Effect of Deferment on Principal and Interest.--Section
455(f)(1)(B) of the Higher Education Act of 1965 (20 U.S.C.
1087e(f)(1)(B)) is amended by striking ``capitalized or''.
(g) Income-Based Repayment Program.--Section 493C(b)(3) of the
Higher Education Act of 1965 (20 U.S.C. 1098e(b)(3)) is amended to read
as follows:
``(3) on subsidized loans, any interest due and not paid
under paragraph (2) shall be paid by the Secretary for a period
of not more than 3 years after the date of the borrower's
election under paragraph (1), except that such period shall not
include any period during which the borrower is in deferment
due to an economic hardship described in section 435(o);''.
(h) Notes and Insurance Certificates in Combined Payment Plans.--
Section 485A(f) of the Higher Education Act of 1965 (20 U.S.C.
1092a(f)) is amended by adding at the end the following new paragraph:
``(3) Treatment of Interest.--Not withstanding paragraphs (1) and
(2), beginning on the date of enactment of the Student Loan Refinancing
and Recalculation Act, interest on a loan reissued under subsection (e)
shall not be capitalized, and interest shall only accrue on the
percentage of such reissued loan that is equal to--
``(A) the amount of the outstanding principal on the
original loan on the date it was reissued; divided by
``(B) the total amount of such reissued loan on the date
such loan was reissued.''.
(i) Default Reduction Program.--Section 428F(a)(1)(E) of the Higher
Education Act of 1965 (20 U.S.C. 1078-6(a)(1)(E)) is amended--
(1) in clause (i), by striking ``and'' at the end;
(2) in clause (ii), by striking the period at the end and
inserting a semicolon; and
(3) by adding to the end the following:
``(iii) for a loan assigned on or after the
date of enactment of the Student Loan
Refinancing and Recalculation Act, the interest
outstanding at the time of the assignment of
such loan, and any interest accruing after such
time, shall not be capitalized; and
``(iv) beginning on the date of enactment
of the Student Loan Refinancing and
Recalculation Act, interest shall only accrue
on the percentage of such a loan that is equal
to--
``(I) the amount of the outstanding
principal on the original loan on the
date it was assigned; divided by
``(II) the total amount of such
assigned loan, including interest
outstanding at the time of the
assignment of such loan and the amount
added by the guaranty agency in
accordance with clause (i), on the date
such loan was assigned.''.
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