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H.R. 6197 (114th): Supporting America’s Young Entrepreneurs Act of 2016

The text of the bill below is as of Sep 28, 2016 (Introduced).


I

114th CONGRESS

2d Session

H. R. 6197

IN THE HOUSE OF REPRESENTATIVES

September 28, 2016

introduced the following bill; which was referred to the Committee on Education and the Workforce, and in addition to the Committees on Financial Services, Ways and Means, and Small Business, 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 amend the Higher Education Act of 1965 to provide loan deferment and loan cancellation for founders and employees of small business start-ups, and for other purposes.

1.

Short title

This Act may be cited as the Supporting America’s Young Entrepreneurs Act of 2016.

2.

Small business start-up employee loan deferment and cancellation

(a)

Deferment

Section 455(f) of the Higher Education Act of 1965 (20 U.S.C. 1087e(f)) is amended—

(1)

in paragraph (1), by striking A borrower of a loan and inserting Except as provided in paragraph (5), a borrower of a loan; and

(2)

by adding at the end the following:

(5)

No interest deferment eligibility for founders of small business start-ups

A borrower of a loan made under this part shall be eligible for a deferment, during which periodic installments of principal and interest need not be paid, during any period not in excess of 3 years during which the borrower is employed as a founder of a small business start-up (as defined in subsection (r)(3)).

.

(b)

Loan cancellation

Section 455 of the Higher Education Act of 1965 (20 U.S.C. 1087e) is amended by adding at the end the following:

(r)

Loan cancellation for certain small business start-Up employees

(1)

Founder of a small business start-up in a distressed area

(A)

In general

The Secretary shall cancel $20,000 of the balance of interest and principal due, in accordance with subparagraph (B), on any eligible Federal Direct Loan not in default for a borrower who—

(i)

has made 24 monthly payments on the eligible Federal Direct Loan after the date of the enactment of this subsection pursuant to any one or a combination of payments under a repayment plan under subsection (d)(1) or (g);

(ii)

has been employed as a founder of a small business start-up in a distressed area during the period in which the borrower makes each of the 24 payments;

(iii)

is employed as a founder of a small business start-up in a distressed area at the time of such cancellation; and

(iv)

is approved for loan cancellation by the young entrepreneurs business center under section 47 of the Small Business Act (16 U.S.C. 631 et seq.).

(B)

Loan cancellation amount

(i)

In general

After the conclusion of the employment period described in subparagraph (A), the Secretary shall cancel the obligation to repay $20,000 of the balance of interest and principal due as of the time of such cancellation, on the eligible Federal Direct Loans made to the borrower under this part.

(ii)

Limitation

A borrower may not receive an aggregate amount of more than $20,000 under this subparagraph.

(C)

Ineligibility for double benefits

No borrower may, for the same service, receive a reduction of loan obligations under both this paragraph and—

(i)

paragraph (2);

(ii)

subsection (m); or

(iii)

section 428J, 428K, 428L, or 460.

(2)

Employee of a small business start-up

(A)

In general

The Secretary shall cancel $3,000 of the balance of interest and principal due, in accordance with subparagraph (B), on any eligible Federal Direct Loan not in default for a borrower who—

(i)

has made 12 monthly payments on the eligible Federal Direct Loan after the date of the enactment of this subsection pursuant to any one or a combination of payments under a repayment plan under subsection (d)(1) or (g);

(ii)

has been employed in a small business start-up job during the period in which the borrower makes each of the 12 payments; and

(iii)

is employed in a small business start-up job at the time of such cancellation.

(B)

Loan cancellation amount

(i)

In general

After the conclusion of the employment period described in subparagraph (A), the Secretary shall cancel the obligation to repay $3,000 of the balance of interest and principal due as of the time of such cancellation, on the eligible Federal Direct Loans made to the borrower under this part.

(ii)

Limitation

A borrower may not receive an aggregate amount of more than $15,000 under this subparagraph.

(C)

Ineligibility for double benefits

No borrower may, for the same service, receive a reduction of loan obligations under both this paragraph and—

(i)

paragraph (1);

(ii)

subsection (m); or

(iii)

section 428J, 428K, 428L, or 460.

(3)

Definitions

In this subsection:

(A)

Distressed area

The term distressed area means an area identified under section 47 of the Small Business Act (16 U.S.C. 631 et seq.).

(B)

Eligible Federal Direct Loan

The term eligible Federal Direct Loan means a Federal Direct Stafford Loan, Federal Direct PLUS Loan, or Federal Direct Unsubsidized Stafford Loan, or a Federal Direct Consolidation Loan.

(C)

Founder

The term founder shall have the meaning given such term by the Administrator of the Small Business Administration under this paragraph.

(D)

Small business start-up

The term small business start-up means a business that is certified by the young entrepreneurs business center under section 47 of the Small Business Act (16 U.S.C. 631 et seq.).

(E)

Small business start-up job

The term small business start-up job means a full-time job as an employee of a small business start-up.

.

3.

Loan refinancing

(a)

In general

Part D of title IV of the Higher Education Act of 1965 is amended by adding at the end the following:

460.

Federal Direct Refinanced Private Loan program

(a)

Definitions

In this section:

(1)

Eligible private education loan

The term eligible private education loan means a private education loan, as defined in section 140(a) of the Truth in Lending Act (15 U.S.C. 1650(a)), that was for the borrower’s own postsecondary educational expenses for an eligible program at an institution of higher education participating in the loan program under this part, as of the date that the loan was disbursed.

(2)

Federal Direct Refinanced Private Loan

The term Federal Direct Refinanced Private Loan means a loan issued under subsection (b)(1).

(3)

Private educational lender

The term private educational lender has the meaning given the term in section 140(a) of the Truth in Lending Act (15 U.S.C. 1650(a)).

(4)

Qualified borrower

The term qualified borrower means an individual who—

(A)

has an eligible private education loan;

(B)

has been current on payments on the eligible private education loan for the 6 months prior to the date of the qualified borrower's application for refinancing under this section, and is in good standing on the loan at the time of such application;

(C)

is not in default on the eligible private education loan or on any loan made, insured, or guaranteed under this part or part B or E; and

(D)

meets the eligibility requirements described in subsection (b)(2).

(b)

Program authorized

(1)

In general

The Secretary, in consultation with the Secretary of the Treasury, shall carry out a program under which the Secretary, upon application by a qualified borrower who has an eligible private education loan, shall issue such borrower a loan under this part in accordance with the following:

(A)

The loan issued under this program shall be in an amount equal to the sum of the unpaid principal, accrued unpaid interest, and late charges of the private education loan.

(B)

The Secretary shall pay the proceeds of the loan issued under this program to the private educational lender of the private education loan, in order to discharge the qualified borrower from any remaining obligation to the private educational lender with respect to the original private education loan.

(C)

The Secretary shall require that the qualified borrower undergo loan counseling that provides all of the information and counseling required under clauses (i) through (viii) of section 485(b)(1)(A) before the loan is refinanced in accordance with this section, and before the proceeds of such loan are paid to the private educational lender.

(D)

The Secretary shall issue the loan as a Federal Direct Refinanced Private Loan, which shall have the same terms, conditions, and benefits as a Federal Direct Subsidized Loan, except as otherwise provided in this section.

(2)

Borrower eligibility

Not later than 180 days after the date of the enactment of this section, the Secretary, in consultation with the Secretary of the Treasury and the Director of the Bureau of Consumer Financial Protection, shall establish eligibility requirements—

(A)

to ensure eligibility only for qualified borrowers in good standing;

(B)

to minimize inequities between Federal Direct Refinanced Private Loans and other Federal student loans;

(C)

to preclude windfall profits for private educational lenders; and

(D)

to ensure full access to the program authorized in this subsection for borrowers with private loans who otherwise meet the criteria established in accordance with subparagraphs (A) and (B).

(c)

Interest rate

(1)

In general

The interest rate for a Federal Direct Refinanced Private Loan is, in the case a private education loan originally issued for undergraduate, graduate, or professional degree postsecondary educational expenses, a rate equal to the rate for Federal Direct Subsidized Stafford Loans issued to undergraduate students for the 12-month period beginning on July 1, 2016, and ending on June 30, 2017.

(2)

Fixed Rate

The applicable rate of interest determined under this subsection for a Federal Direct Refinanced Private Loan shall be fixed for the period of the loan.

(d)

Treatment of loans

Nothing in this section shall affect the ability of a borrower to qualify for loan repayment under a repayment plan under subsection (d)(1) or (g) of section 455.

.

(b)

Notice of potential eligibility

Section 128(e) of the Truth in Lending Act (15 U.S.C. 1638(e)) is amended by adding at the end the following new paragraph:

(12)

Notice required along with billing statements

Along with each billing statement sent to the borrower, the private educational lender shall include a statement informing the borrower that the borrower may be eligible for the Federal Direct Refinanced Private Loan program established under section 460 of the Higher Education Act of 1965.

.

4.

Young entrepreneurs business center

The Small Business Act (15 U.S.C. 631 et seq.) is amended—

(1)

by redesignating section 47 as section 48; and

(2)

by inserting after section 46 the following:

47.

Young entrepreneurs business center

(a)

Establishment

There is established within the Administration a young entrepreneurs business center that shall, for purposes of loan cancellation for start-up employees established under subsection (r) of section 455 of the Higher Education Act of 1965 (20 U.S.C. 1087e)—

(1)

certify small business start-ups under subsection (b);

(2)

identify distressed areas under subsection (c); and

(3)

approve loan cancellation for founders of small business start-ups in distressed areas under subsection (d).

(b)

Certification

(1)

Application

To be certified by the young entrepreneurs business center, a small business start-up shall submit an application to the Administrator that includes—

(A)

a 5-year business plan for such small business start-up; and

(B)

the number of employees the small business start-up intends to employ on a yearly basis.

(2)

Requirements

The young entrepreneurs business center may not certify a small business start-up unless such small business start-up, on the date the application is submitted under paragraph (1)—

(A)

has a founder who is a recent graduate of a 4-year institution of higher education;

(B)

is a start-up for which at least 50 percent of the employees of the start-up are recent graduates of such an institution.

(c)

Distressed area

(1)

In general

Not less than once every 3 years after the date of the enactment of this section, the young entrepreneurs business center shall identify and make publically available on the website of the Administration a list of distressed areas.

(2)

Requirements

A distressed area identified under paragraph (1) shall be a county or equivalent division of local government of a State in which the small business concern is located that—

(A)

has, for the most recent 24-month period for which statistics are available—

(i)

a per capita income of 80 percent or less of the national average; or

(ii)

an unemployment rate that is 1 percent greater than the national average; and

(B)

the young entrepreneurs business center determines would economically benefit from having small business start-ups established in such area.

(d)

Loan cancellation for founders of a small business start-Up in a distressed area

For purposes of loan cancellation under subsection (r)(1) of section 455 of the Higher Education Act of 1965 (20 U.S.C. 1087e) the young entrepreneurs business center shall approve a founder of a small business start-up in a distressed area if such founder—

(1)

established a small business start-up that—

(A)

on the date such small business start-up was established, was located in a distressed area identified by the young entrepreneurs business center under subsection (c) not more than 3 years before such date of establishment;

(B)

was certified under subsection (b); and

(C)

on the date of approval under this subsection, has been operating continuously for not less than 5 years; and

(2)

was employed as a founder of a small business start-up in a distressed area during the period in which such founder made the 24 payments described in subsection (r)(1)(A) of such section 455.

(e)

Definitions

In this section:

(1)

Institution of higher education

The term institution of higher education has the meaning given such term in section 102 of the Higher Education Act (20 U.S.C. 1002).

(2)

Small business start-up

The term small business start-up means a small business concern that—

(A)

is not yet in existence; or

(B)

has been in existence for not more than 3 years.

.

5.

Treatment of loan cancellation

(a)

In general

Section 108(f) of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph:

(5)

Cancellation of certain Federal student loans

In the case of an individual, gross income shall not include the discharge (in whole or in part) of any student loan pursuant to the cancellation (in whole or in part) of such loan by the Secretary of Education under subsection (r) of section 455 of the Higher Education Act of 1965 (20 U.S.C. 1087e).

.

(b)

Effective date

The amendment made by this section shall apply to discharges of indebtedness occurring after the date of the enactment of this Act.