[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[S. 4926 Introduced in Senate (IS)]
<DOC>
118th CONGRESS
2d Session
S. 4926
To establish a new Guaranteed Student Loan Program.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
August 1, 2024
Mr. Rounds introduced the following bill; which was read twice and
referred to the Committee on Health, Education, Labor, and Pensions
_______________________________________________________________________
A BILL
To establish a new Guaranteed Student Loan Program.
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 ``Affordable Future Loan Program Act
of 2024''.
SEC. 2. GOVERNMENT GUARANTEED STUDENT LOAN PROGRAM.
At the end of title IV of the Higher Education Act of 1965 (20
U.S.C. 1070 et seq.), add the following:
``PART J--GUARANTEED STUDENT LOAN PROGRAM
``SEC. 499A. STATEMENT OF PURPOSE; NONDISCRIMINATION; APPROPRIATIONS
AUTHORIZED.
``(a) Purpose; Discrimination Prohibited.--
``(1) Purpose.--The purpose of this part is to enable the
Secretary--
``(A) to pay a portion of the interest on loans to
qualified students that are guaranteed under this part;
and
``(B) to guarantee a portion of each loan under
this part.
``(2) Discrimination by creditors prohibited.--No agency,
organization, institution, bank, credit union, corporation, or
other lender who regularly extends, renews, or continues credit
under this part shall exclude from receipt or deny the benefits
of, or discriminate against any borrower or applicant in
obtaining, such credit on the basis of--
``(A) race, national origin, religion, sex, marital
status, age, or disability status;
``(B) the type or category of institution of higher
education that the borrower or applicant attends or
attended;
``(C) the degree or program of study of the
borrower or applicant; or
``(D) the creditworthiness of the borrower or
applicant.
``(b) Authorization of Appropriations.--There are authorized to be
appropriated to carry out this part such sums as may be necessary for
the period of fiscal years 2025 through 2029.
``(c) Designation.--The program established under this part shall
be referred to as the `Affordable Future Loan Program'. Loans made
pursuant to this part shall be known as `Affordable Future loans'.
``SEC. 499A-1. PROGRAM AUTHORITY.
``The Secretary shall implement the Affordable Future Loan Program,
through which the Secretary shall--
``(1) pay an eligible lender 98 percent of the amount of
principal and interest due on each defaulted eligible loan that
is issued under this part by an eligible lender;
``(2) reimburse an eligible lender for amounts of
subsidized interest under this part; and
``(3) ensure that only eligible lenders that issue loans in
accordance with this part receive the guarantee funds described
in paragraph (1) and the reimbursement described in paragraph
(2).
``SEC. 499A-2. ELIGIBLE LENDERS AND ELIGIBLE LOANS.
``(a) Eligible Lender.--For purposes of this part an eligible
lender is an eligible lender as described in subparagraphs (A) through
(D), (I), and (K) of section 435(d)(1), except that references to 'this
part' or references to other sections in part B in such subsection
shall be construed to mean this part rather than part B or any section
of part B.
``(b) Eligible Loan.--
``(1) In general.--An eligible loan is a loan issued under
this part on or after the date of enactment of the Affordable
Future Loan Program Act of 2024 to an undergraduate student who
is otherwise eligible under section 484, who meets the
requirements of paragraph (2), and who is enrolled or will be
enrolled at an eligible institution of higher education, to
enable such student to pursue the student's courses of study at
such institution.
``(2) Federal loans.--A student who desires to apply for a
loan under this part and is otherwise eligible to do so, may
not apply for such loan until the student--
``(A) has applied for, and received a determination
notice about, financial assistance under subpart 1 of
part A and part D for the applicable period of study;
or
``(B) states that the student elects not to apply
for financial assistance under subpart 1 of part A and
part D for the applicable period of study.
``SEC. 499A-3. AGREEMENTS WITH ELIGIBLE LENDERS.
``(a) Participation Agreements.--An agreement with an eligible
lender for participation in the program under this part shall--
``(1) provide that an eligible lender will offer the
maximum amount of eligible loans under this part to any
undergraduate student for attendance at an eligible institution
of higher education;
``(2) provide that the eligible lender accepts
responsibility and financial liability stemming from its
failure to perform its functions pursuant to the agreement;
``(3) provide for the implementation of a quality assurance
system, as established by the Secretary and developed in
consultation with eligible lenders, to ensure that the eligible
lender is complying with program requirements and meeting
program objectives;
``(4) provide that an eligible lender will comply with the
requirements of subsection (c);
``(5) provide that the funds borrowed by a student are
disbursed to the institution by check or other means that is
payable to and requires the endorsement or other certification
by such student, except--
``(A) that nothing in this section shall be
interpreted--
``(i) to allow the Secretary to require
checks to be made copayable to the institution
and the borrower; or
``(ii) to prohibit the disbursement of loan
proceeds by means other than by check; and
``(B) in the case of any student who is studying
outside the United States in a program of study abroad
that is approved for credit by the home institution at
which such student is enrolled, the funds shall, at the
request of the borrower, be delivered directly to the
student and the checks may be endorsed, and fund
transfers authorized, pursuant to an authorized power-
of-attorney;
``(6) provide that funds will be disbursed in a manner that
ensures that any Federal Pell Grant funds, any Federal Direct
Loan funds, and any State or institutional grant or scholarship
funds awarded to the borrower are disbursed prior to
disbursement of any funds from a loan under this part; and
``(7) provide that the funds borrowed by a student are
otherwise disbursed in accordance with section 428G.
``(b) Withdrawal and Termination Procedures.--The Secretary shall
establish procedures by which eligible lenders may withdraw or be
terminated from the program under this part.
``(c) Submission of Statements by Holders on Amount of Payment.--
Each holder of an eligible loan under this part, with respect to which
payments of interest are required to be made by the Secretary, shall
submit to the Secretary, at such time or times and in such manner as
the Secretary may prescribe, statements containing such information as
may be required by or pursuant to regulation for the purpose of
enabling the Secretary to determine the amount of the payment which the
Secretary must make with respect to that loan.
``SEC. 499A-4. PAYMENT OF LOAN GUARANTEE FOR DEFAULTED LOANS.
``(a) Notice to Secretary and Payment of Loss.--Upon default by the
student borrower on any eligible loan under this part, and prior to the
commencement of suit or other enforcement proceedings upon security for
that loan, the insurance beneficiary shall promptly notify the
Secretary, and the Secretary shall if requested (at that time or after
further collection efforts) by the beneficiary, or may on the
Secretary's own motion, if the insurance is still in effect, pay to the
beneficiary 96 percent of the amount of the loss sustained by the
insured upon that loan as soon as that amount has been determined.
``(b) Amount of Loss.--The `amount of the loss' on any loan shall,
for the purposes of this subsection and subsection (e), be deemed to be
an amount equal to the unpaid balance of the principal amount and
accrued interest, including interest accruing from the date of
submission of a valid default claim (as determined by the Secretary) to
the date on which payment is authorized by the Secretary, except that
such amount may be reduced based on default rate in a manner similar to
the reductions described in section 425(b).
``(c) Due Diligence.--Such beneficiary shall be required to meet
the standards of due diligence in the collection of the loan and shall
be required to submit proof that the institution was contacted and
other reasonable attempts were made to locate the borrower (when the
location of the borrower is unknown) and proof that contact was made
with the borrower (when the location is known).
``(d) Timing of Determination.--The Secretary shall make the
determination required to carry out the provisions of this section not
later than 90 days after the notification by the insurance beneficiary
and shall make payment in full on the amount of the beneficiary's loss
pending completion of the due diligence investigation.
``(e) Effect of Payment of Loss.--Upon payment of the amount of the
loss pursuant to subsection (a), the United States shall be subrogated
for all of the rights of the holder of the obligation upon the insured
loan and shall be entitled to an assignment of the note or other
evidence of the insured loan by the insurance beneficiary. The
Secretary may, in attempting to make recovery on such loans, contract
with private business concerns, State student loan insurance agencies,
or State guaranty agencies, for payment for services rendered by such
concerns or agencies in assisting the Secretary in making such
recovery. Any contract under this subsection entered into by the
Secretary shall provide that attempts to make recovery on such loans
shall be fair and reasonable, and do not involve harassment,
intimidation, false or misleading representations, or unnecessary
communications concerning the existence of any such loan to persons
other than the student borrower.
``(f) Forbearance Not Precluded.--Nothing in this section or in
this part shall be construed to preclude any forbearance for the
benefit of the student borrower which may be agreed upon by the parties
to the insured loan and approved by the Secretary, or to preclude
forbearance by the Secretary in the enforcement of the insured
obligation after payment on that insurance. Any forbearance which is
approved by the Secretary under this subsection with respect to the
repayment of a loan, including a forbearance during default, shall not
be considered as indicating that a holder of a federally insured loan
has failed to exercise reasonable care and due diligence in the
collection of the loan.
``(g) Care and Diligence Required of Holders.--Nothing in this
section or in this part shall be construed to excuse the holder of a
federally insured loan from exercising reasonable care and diligence in
the making and collection of loans under the provisions of this part.
If the Secretary, after a reasonable notice and opportunity for hearing
to an eligible lender, finds that it has substantially failed to
exercise such care and diligence or to make the reports and statements
required under section 499A-3(c), the Secretary shall disqualify that
lender for further Federal insurance on loans granted pursuant to this
part until the Secretary is satisfied that its failure has ceased and
finds that there is reasonable assurance that the lender will in the
future exercise necessary care and diligence or comply with such
requirements, as the case may be.
``(h) Reports to Consumer Reporting Agencies and Institutions of
Higher Education.--For the purpose of promoting responsible repayment
of loans under this part, the Secretary and each eligible lender and
subsequent holder shall enter into an agreement with each consumer
reporting agency to exchange information concerning student borrowers
in the same manner as such agreements are made under section 430A.
``SEC. 499A-5. PURCHASE OF LOANS SOLD IN SECONDARY MARKET.
``(a) In General.--Loans under this part may be sold in the
secondary market to another eligible lender.
``(b) Servicing and Liquidation.--When an eligible lender has sold
the guaranteed portion of a loan in the secondary market, the loan
holder must perform all necessary servicing and liquidation actions for
such loan.
``(c) Status Report.--In the event that the Secretary purchases its
guaranteed portion of such a loan from the holder of the loan, the loan
holder shall provide the Secretary with a loan status report within 15
business days of such purchase. This report shall include a status
report on the borrower and plans for any type of loan workout or loan
restructuring. The report shall accompany requested documentation that
the Secretary determines is sufficient to be able to review the loan
holder's administration of the loan. Failure to provide requested
documentation to the Secretary may lead to initiation of an action for
recovery from the loan holder of all or some of the amounts the
Secretary paid to the holder of the loan on a guarantee.
``(d) Further Evaluation.--The Secretary shall evaluate the
eligible lender's continued participation in the secondary market and
may restrict further sale of guaranteed portions into the secondary
market until the Secretary determines that the eligible lender has
provided sufficient documentation for purchases.
``SEC. 499A-6. DEFAULT REDUCTION PROGRAM.
``(a) Other Repayment Incentives.--
``(1) Sale or assignment of loan.--
``(A) In general.--The Secretary, upon securing 9
payments made within 20 days of the due date during 10
consecutive months of amounts owed on a loan for which
the Secretary has made a payment under this section,
shall, if practicable, sell the loan to another
eligible lender.
``(B) Monthly payments.--The Secretary shall not
demand from a borrower as monthly payment amounts
described in subparagraph (A) more than is reasonable
and affordable based on the borrower's total financial
circumstances, except such monthly payment amount shall
not be less than $5.
``(C) Consumer reporting agencies.--Upon the sale
or assignment of the loan, the Secretary shall request
any consumer reporting agency to which the Secretary or
holder, as applicable, reported the default of the
loan, to remove the record of the default from the
borrower's credit history.
``(D) Eligible lender limitation.--A loan shall not
be sold to an eligible lender under subparagraph (A) if
such lender has been found by the Secretary to have
substantially failed to exercise the due diligence
required of lenders under this part.
``(E) Default due to error.--A loan that does not
meet the requirements of subparagraph (A) may also be
eligible for sale or assignment under this paragraph
upon a determination that the loan was in default due
to clerical or data processing error and would not, in
the absence of such error, be in a delinquent status.
``(2) Borrower eligibility.--Any borrower whose loan is
sold under paragraph (1)(A) shall not be precluded by section
484 from receiving additional loans or grants under this title
(for which he or she is otherwise eligible) on the basis of
defaulting on the loan prior to such loan sale.
``(3) Applicability of general loan conditions.--A loan
that is sold under paragraph (1)(A) shall, so long as the
borrower continues to make scheduled repayments thereon, be
subject to the same terms and conditions and qualify for the
same benefits and privileges as other loans made under this
part.
``(4) Limitation.--A borrower may obtain the benefits
available under this subsection with respect to rehabilitating
a loan (whether by loan sale or assignment) not more than 2
times per loan.
``(b) Satisfactory Repayment Arrangements To Renew Eligibility.--
The Secretary shall establish a program which allows a borrower with a
defaulted loan or loans to renew eligibility for all title IV student
financial assistance (regardless of whether the defaulted loan has been
sold to an eligible lender or assigned to the Secretary) upon the
borrower's payment of 6 consecutive monthly payments. The loan holder
shall not demand from a borrower as a monthly payment amount under this
subsection more than is reasonable and affordable based upon the
borrower's total financial circumstances. A borrower may only obtain
the benefit of this subsection with respect to renewed eligibility
once.
``(c) Financial and Economic Literacy.--Each program described in
subsection (b) shall include making available financial and economic
education materials for a borrower who has rehabilitated a loan.
``SEC. 499A-7. TERMS AND CONDITIONS OF LOANS.
``(a) Eligibility; Maximum Aid.--
``(1) Eligibility.--A student's amount of need for a loan
under this part shall be based solely on the student's
estimated cost of attendance and estimated financial
assistance, including other assistance through a Federal Pell
Grant or a Federal Direct Loan under this title or any State or
institutional grant or scholarship funds awarded to the
student. An expected family contribution or student aid index
shall not be considered.
``(2) Maximum aid.--
``(A) In general.--Subject to subparagraph (B), the
maximum dollar amount of financial assistance provided
annually under this part to a student shall not exceed
an amount equal to--
``(i) the cost of attendance for such
student; minus
``(ii) the total amount of--
``(I) other financial assistance
not received under this title (as
defined in section 480(i)); and
``(II) other financial assistance
received under this title, including a
Federal Pell Grant or a Federal Direct
Loan.
``(B) Limitation.--A loan under this part shall not
exceed an amount equal to--
``(i) $19,000 adjusted annually according
to the estimated percentage change in the
Consumer Price Index (as determined by the
Secretary, using the definition in section
478(f)) for the most recent calendar year
ending prior to the beginning of that award
year; minus
``(ii) the amount described in subclause
(II) of subparagraph (A)(ii).
``(b) Interest Rate.--
``(1) Rates for borrowers not in repayment status.--In the
case of a borrower who is not in repayment status, for an
Affordable Future Loan for which the first disbursement is made
on or after July 1, 2025, the applicable rate of interest
shall, 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--
``(A) a rate equal to the high yield of the 10-year
Treasury note auctioned at the final auction held prior
to such June 1 plus 1 percent; or
``(B) 6.28 percent.
``(2) Rates for borrowers in repayment status.--In the case
of a borrower who is in repayment status, for an Affordable
Future Loan for which the first disbursement is made on or
after July 1, 2025, the applicable rate of interest shall,
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--
``(A) a rate equal to the high yield of the 10-year
Treasury note auctioned at the final auction held prior
to such June 1 plus 2 percent; or
``(B) 6.28 percent.
``(3) Publication.--The Secretary shall determine the
applicable rates of interest under this subsection 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, but before June 1
preceding the award year.
``(4) Subsidized interest.--The amount of interest for a
loan under this part shall be paid by the Secretary to the
eligible lender on behalf of the borrower only during the
period of time that the borrower is not in repayment status.
``(5) Not in repayment status.--In this section the term
`not in repayment status' means any period of time described in
subparagraphs (A), (C), or (D) of subsection (e)(2).
``(c) Loan Fee.--Each eligible lender under this part may charge
the borrower an origination fee in an amount not to exceed 1.0 percent
of the principal amount of the loan, to be deducted proportionately
from each installment payment of the proceeds of the loan prior to
payment to the borrower. A lender that charges an origination fee under
this paragraph shall assess the same fee to all student borrowers.
``(d) Repayment Plans.--
``(1) Design and selection.--Consistent with criteria
established by the Secretary, a borrower of a loan made under
this part shall be offered 2 repayment plans for such loan. The
borrower shall be entitled to accelerate, without penalty,
repayment on the borrower's loans under this part. The borrower
may choose--
``(A) a 15-year fixed installment repayment plan;
or
``(B) the income driven repayment plan described in
paragraph (2).
``(2) Income driven repayment plan.--
``(A) In general.--Under the income-driven
repayment plan under this subsection the borrower's
aggregate monthly payment for loans under this part
shall be equal to the income-driven calculation,
divided by 12.
``(B) Discretionary income.--The term
`discretionary income' means the amount by which a
borrower's (and the borrower's spouse, if applicable)
annual adjusted gross income exceeds 150 percent of the
poverty line applicable to the borrower's family size.
``(C) Discretionary income bend point.--The term
`discretionary income bend point' means $25,000,
adjusted annually for inflation as determined by the
Consumer Price Index (as such term is defined in
section 478(f)) for the previous calendar year.
``(D) Income-driven calculation.--
``(i) In general.--The term `income-driven
calculation', when used with respect to a
borrower, means the annual amount due on the
total amount of loans under this part, which
annual amount is equivalent to--
``(I) 10 percent of the borrower's
discretionary income that is less than
the discretionary income bend point,
plus
``(II) 15 percent of the borrower's
discretionary income that is equal to
or greater than the discretionary
income bend point.
``(ii) Annual calculation.--The calculation
under clause (i) shall be determined on an
annual basis for the duration of the repayment
period.
``(3) Selection by lender.--If a borrower of a loan made
under this part does not select a repayment plan described in
paragraph (1), the eligible lender shall provide the borrower
with a repayment plan described in subparagraph (A) of
paragraph (1).
``(4) Changes in selections.--The borrower of a loan made
under this part may change the borrower's selection of a
repayment plan under paragraph (1), or the eligible lender's
selection of the plan for the borrower under paragraph (3), as
the case may be, without penalty or subject to additional fees,
except that such borrower shall remain in a selected repayment
plan for not less than 6 months.
``(5) Alternative repayment plans.--The lender may provide,
on a case by case basis, an alternative repayment plan to a
borrower of a loan made under this part who demonstrates to the
satisfaction of the lender that the terms and conditions of the
repayment plans available under paragraph (1) are not adequate
to accommodate the borrower's exceptional circumstances. In
designing such alternative repayment plans, the lender shall
ensure that such plans do not exceed the cost to the Federal
Government, as determined on the basis of the present value of
future payments by such borrowers, of loans made using the
plans available under paragraph (1).
``(6) Repayment after default.--
``(A) Lender costs.--The eligible lender may
require any borrower who has defaulted on a loan made
under this part to pay all reasonable collection costs
associated with such loan.
``(B) Payment to secretary.--The Secretary may
require any borrower who has defaulted on a loan made
under this part to repay the loan pursuant to the
income driven repayment plan described in paragraph
(1)(B).
``(e) Deferment.--
``(1) In general.--A borrower of a loan made under this
part who meets any of the requirements described in
subparagraphs (A) through (D) of paragraph (2) shall be
eligible for a deferment, during which periodic installments of
principal and interest need not be paid.
``(2) Eligibility.--A borrower of a loan made under this
part shall be eligible for a deferment during any period--
``(A) during which the borrower is carrying at
least a normal full-time work load for the course of
study that the borrower is pursuing, as determined by
the eligible institution (as such term is defined in
section 435(a)) the borrower is attending; or
``(B) for 6 months following the date on which the
borrower ceases to carry the normal full-time work load
as described in subparagraph (A);
``(C) during which the borrower--
``(i) is serving on active duty during a
war or other military operation or national
emergency; or
``(ii) is performing qualifying National
Guard duty during a war or other military
operation or national emergency,
and for the 180-day period following the demobilization
date for the service described in clause (i) or (ii);
or
``(D) during--
``(i) any period in which such borrower is
receiving treatment for cancer; and
``(ii) the 6 months after such period.
``(3) Interest accrual.--During periods described in
subparagraphs (A), (C), and (D) of paragraph (2) interest shall
be subsidized in accordance with subsection (b)(4).
``(f) Loan Application and Promissory Note.--The common financial
reporting form required in section 483(a)(1) shall constitute the
application for loans made under this part. The Secretary shall
develop, print, and distribute to participating eligible lenders a
standard promissory note and loan disclosure form.
``(g) Loan Disbursement.--Loans shall be disbursed in accordance
with section 499A-3.
``(h) Disclosures.--With respect to loans under this part and in
accordance with such regulations as the Secretary shall prescribe, each
eligible lender participating in this part shall comply with each of
the requirements under section 433 that apply to a lender with respect
to a loan under part B.
``(i) Enrollment Period Limitations.--In order to continue to be
eligible for a loan under this part, a borrower shall complete the
program of study not more than 5 years after the date the borrower
first enters the program of study.
``SEC. 499A-8. RELATIONSHIP TO OTHER FEDERAL LOANS.
``(a) In General.--A borrower may borrow loans both under part D
and under this part for the same period of study. If a borrower is
borrowing loans under both part D and this part for the same period of
study, the eligible lender shall ensure that the Secretary has made
determinations about the amount of loans awarded under part D for such
period prior to determining the amount of loans under this part that
the borrower is eligible to borrow, in accordance with section 499A-
2(b).
``(b) Rule of Construction.--Nothing in this Act shall be construed
to require a borrower who borrows loans under this part to also borrow
loans under part D.
``(c) Prohibition on Combining Loans.--The Secretary may not
combine or otherwise consolidate a loan made under this part with a
loan made under part D, unless the borrower of such loans elects to
consolidate such loans.''.
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