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H.R. 5084: Student Loan Refinancing Act


The text of the bill below is as of Aug 23, 2021 (Introduced).


I

117th CONGRESS

1st Session

H. R. 5084

IN THE HOUSE OF REPRESENTATIVES

August 23, 2021

(for himself and Mr. Brown) introduced the following bill; which was referred to the Committee on Education and Labor

A BILL

To amend the Higher Education Act of 1965 to provide for the refinancing of certain Federal student loans, and for other purposes.

1.

Short title

This Act may be cited as the Student Loan Refinancing Act.

I

Refinancing Programs

101.

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:

460A.

Refinancing FFEL and Federal Direct Loans

(a)

In general

Beginning not later than 30 days after the date of enactment of the Student Loan Refinancing Act, the Secretary shall establish a program under which the Secretary, upon the receipt of an application from a borrower, makes 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)

Refinancing Direct Loans

(1)

Federal Direct Loans

Upon application of a borrower, the Secretary shall repay a Federal Direct Stafford Loan, a Federal Direct Unsubsidized Stafford Loan, a Federal Direct PLUS Loan, or a Federal Direct Consolidation Loan of the borrower, with the proceeds of a refinanced Federal Direct Stafford Loan, a Federal Direct Unsubsidized Stafford Loan, a Federal Direct PLUS Loan, or a Federal Direct Consolidation Loan, respectively, issued to the borrower in an amount equal to the sum of the unpaid principal, accrued unpaid interest, and late charges of the original loan.

(2)

Refinancing FFEL program loans as refinanced Federal Direct Loans

Upon application of a borrower for any loan that was made, insured, or guaranteed under part B, the Secretary shall make a loan under this part, in an amount equal to the sum of the unpaid principal, accrued unpaid interest, and late charges of the original loan to the borrower in accordance with the following:

(A)

The Secretary shall pay the proceeds of such loan to the 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)

A loan made under this section that was originally a loan made, insured, or guaranteed—

(i)

under section 428 shall be a Federal Direct Stafford Loan;

(ii)

under section 428B shall be a Federal Direct PLUS Loan;

(iii)

under section 428H shall be a Federal Direct Unsubsidized Stafford Loan; and

(iv)

under section 428C shall be a Federal Direct Consolidation Loan.

(C)

The interest rate for each loan made by the Secretary under this paragraph shall be the rate provided under subsection (c).

(c)

Interest rates

(1)

In general

The interest rate for the refinanced Federal Direct Stafford Loans, Federal Direct Unsubsidized Stafford Loans, Federal Direct PLUS Loans, and Federal Direct Consolidation Loans, shall be a rate equal to the following:

(A)

Federal Direct Stafford loans

(i)

Rates for undergraduate FDSL

In the case of a refinanced Federal Direct Stafford loan for which the original loan was a loan under section 428 or a Federal Direct Stafford loan that was made to an undergraduate student, the rate of interest on such refinanced Federal Direct Stafford Loan shall be equal to the rate of interest for a Federal Direct Stafford loan made to an undergraduate student for which the first disbursement is made on the date on which the refinanced Federal Direct Stafford Loan is made under this section.

(ii)

Rates for graduate and professional FDSL

In the case of a refinanced Federal Direct Stafford loan for which the original loan was a loan under section 428 or a Federal Direct Stafford loan that was made to a graduate or professional student, the rate of interest on such refinanced Federal Direct Stafford Loan shall be equal to the rate of interest for a Federal Direct Stafford loan made to a graduate or professional student for which the first disbursement is made on the date on which the refinanced Federal Direct Stafford Loan is made under this section.

(B)

Federal Direct Unsubsidized Stafford loans

(i)

Rates for undergraduate FDUSL

In the case of a refinanced Federal Direct Unsubsidized Stafford loan for which the original loan was a loan under section 428H or a Federal Direct Unsubsidized Stafford Loan that was made to an undergraduate student, the rate of interest on such refinanced Federal Direct Unsubsidized Stafford Loan shall be equal to the rate of interest for a Federal Direct Unsubsidized Stafford loan made to an undergraduate student for which the first disbursement is made on the date on which the refinanced Federal Direct Unsubsidized Stafford Loan is made under this section.

(ii)

Rates for graduate and professional FDUSL

In the case of a refinanced Federal Direct Unsubsidized Stafford loan for which the original loan was a loan under section 428H or a Federal Direct Unsubsidized Stafford Loan that was made to an graduate student, the rate of interest on such refinanced Federal Direct Unsubsidized Stafford Loan shall be equal to the rate of interest for a Federal Direct Unsubsidized Stafford loan made to a graduate student for which the first disbursement is made on the date on which the refinanced Federal Direct Unsubsidized Stafford Loan is made under this section.

(C)

Federal Direct PLUS loans

In the case of a refinanced Federal Direct PLUS Loan for which the original loan was a loan under section 428B or a Federal Direct PLUS Loan, the rate of interest on such refinanced Federal Direct PLUS loan shall be equal to the rate of interest for a Federal Direct PLUS loan for which the first disbursement is made on the date on which the refinanced Federal Direct PLUS loan is made under this section.

(D)

Consolidation loans

In the case of a refinanced Federal Direct Consolidation Loan for which the original loan was a loan under section 428C or a Federal Direct Consolidation Loan, the rate of interest of such refinanced Federal Direct Consolidation Loan shall be equal to the lower of a rate calculated in accordance with paragraph (2).

(2)

Interest Rates for Consolidation Loans

(A)

Method of calculation

In order to determine the interest rate for any refinanced Federal Direct Consolidation Loan under paragraph (1)(D), the Secretary shall—

(i)

determine each of the component loans that were originally consolidated in the loan under section 428C or the Federal Direct Consolidation Loan, and calculate the proportion of the unpaid principal balance of the loan under section 428C or the Federal Direct Consolidation Loan that each component loan represents;

(ii)

use the proportions determined in accordance with clause (i) and the interest rate applicable for each component loan, as determined under subparagraph (B), to calculate the weighted average of the interest rates on the loans consolidated into the loan under section 428C or the Federal Direct Consolidation Loan; and

(iii)

apply the weighted average calculated under clause (ii) as the interest rate for the refinanced Federal Direct Consolidation Loan.

(B)

Interest rates for component loans

The interest rates for the component loans of a loan made under section 428C or a Federal Direct Consolidation Loan shall be the following:

(i)

Federal Direct Stafford loans

(I)

Undergraduate FDSL

The interest rate for any component loan that is a loan under section 428 or a Federal Direct Stafford Loan made to an undergraduate student shall be a rate equal to the lesser of—

(aa)

the rate of interest for a refinanced Federal Direct Stafford loan determined under paragraph (1)(A)(i) if such loan were made on the date on which the refinanced Federal Direct Consolidation Loan is made under this section; or

(bb)

the original interest rate of the component loan.

(II)

Graduate or professional FDSL

The interest rate for any component loan that is a loan under section 428 or a Federal Direct Stafford Loan made to a graduate or professional student shall be a rate equal to the lesser of—

(aa)

the rate of interest for a refinanced Federal Direct Stafford loan determined under paragraph (1)(A)(ii) if such loan were made on the date on which the refinanced Federal Direct Consolidation Loan is made under this section; or

(bb)

the original interest rate of the component loan.

(ii)

Federal Direct Unsubsidized Stafford loans

(I)

Undergraduate FDUSL

The interest rate for any component loan that is a loan under section 428H or a Federal Direct Unsubsidized Stafford Loan made to an undergraduate student shall be a rate equal to the lesser of—

(aa)

the rate of interest for a refinanced Federal Direct Unsubsidized Stafford loan determined under paragraph (1)(B)(i) if such loan were made on the date on which the refinanced Federal Direct Consolidation Loan is made under this section; or

(bb)

the original interest rate of the component loan.

(II)

Graduate FDUSL

The interest rate for any component loan that is a loan under section 428H or a Federal Direct Unsubsidized Stafford Loan made to a graduate or professional student shall be a rate equal to the lesser of—

(aa)

the rate of interest for a refinanced Federal Direct Unsubsidized Stafford loan determined under paragraph (1)(B)(ii) if such loan were made on the date on which the refinanced Federal Direct Consolidation Loan is made under this section; or

(bb)

the original interest rate of the component loan.

(iii)

Federal Direct PLUS loans

The interest rate for any component loan that is a loan any loan under section 428B or Federal Direct PLUS Loan shall be a rate equal to the lesser of—

(I)

the rate of interest for a refinanced Federal Direct PLUS loan determined under paragraph (1)(C) if such loan were made on the date on which the refinanced Federal Direct Consolidation Loan is made under this section; or

(II)

the original interest rate of the component loan.

(iv)

Federal Direct Consolidation Loan

The interest rate for any component loan that is a loan under section 428C or a Federal Direct Consolidation Loan shall be the weighted average of the interest rates that would apply under this subparagraph for each loan comprising the component consolidation loan.

(v)

Other loans

The interest rate for any eligible loan that is a component of a loan made under section 428C or a Federal Direct Consolidation Loan and is not described in clauses (i) through (iv) shall be the interest rate on the original component loan.

(3)

Fixed Rate

The applicable rate of interest determined under paragraph (1) for a refinanced loan under this section shall be fixed for the period of the loan.

(d)

Terms and conditions of loans

(1)

In general

Except as otherwise provided in this section, a loan that is refinanced under this section shall have the same terms and conditions as the original loan, including any suspensions of payments or interest accrual under section 3513 of the Coronavirus Aid, Relief, and Economic Security Act (20 U.S.C. 1001 note), or any extensions of such suspensions.

(2)

No automatic extension of repayment period

Refinancing a loan under this section shall not result in the extension of the duration of the repayment period of the loan, and the borrower shall retain the same repayment term that was in effect on the original loan. Nothing in this paragraph shall be construed to prevent a borrower from electing a different repayment plan at any time in accordance with section 455(d)(3).

(3)

Limit on refinancing

A loan made, insured, or guaranteed under this title may not be refinanced under this section more than twice during a 10-year period.

(e)

Notification to borrowers

The Secretary, in coordination with the Director of the Bureau of Consumer Financial Protection, shall undertake a campaign to alert borrowers of loans that are eligible for refinancing under this section that the borrowers are eligible to apply for such refinancing. The campaign shall include the following activities:

(1)

Developing consumer information materials about the availability of Federal student loan refinancing.

(2)

Requiring servicers of loans under this part or part B to provide such consumer information to borrowers in a manner determined appropriate by the Secretary, in consultation with the Director of the Bureau of Consumer Financial Protection.

.

(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 refinanced 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 refinanced under section 460A that was originally a loan under part B, only monthly payments made after the date on which the loan was refinanced may be included for purposes of paragraph (1).

; and

(3)

in paragraph (4)(A) (as redesignated by paragraph (1)), by inserting (including any Federal Direct Stafford Loan, Federal Direct PLUS Loan, Federal Direct Unsubsidized Stafford Loan, or Federal Direct Consolidation Loan refinanced under section 460A) before the period at the end.

(d)

Income-Contingent repayment

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

(9)

Special rule for refinanced loans

In calculating the period of time during which a borrower of a loan that is refinanced under section 460A has made monthly payments for purposes of paragraph (7), the Secretary shall deem the period to include all monthly payments made for the original loan, and all monthly payments made for the refinanced loan, that otherwise meet the requirements of this subsection.

.

(e)

Income-Based repayment

Section 493C of the Higher Education Act of 1965 (20 U.S.C. 1098e) is amended by adding at the end the following:

(f)

Special rule for refinanced loans

In calculating the period of time during which a borrower of a loan that is refinanced under section 460A has made monthly payments for purposes of subsection (b)(7), the Secretary shall deem the period to include all monthly payments made for the original loan, and all monthly payments made for the refinanced loan, that otherwise meet the requirements of this section.

.