118 HR 5710 IH: Student Loan Refinancing and Recalculation Act
U.S. House of Representatives
2023-09-26
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I
118th CONGRESS
1st Session
H. R. 5710
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.
1.

Short title
This Act may be cited as the “Student Loan Refinancing and Recalculation Act”.
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:
“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.”.
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.
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.
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.”.