Sec. 2. Application of prepayment amounts for FFEL and Direct Loans
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Section 455(d) of the Higher Education Act of 1965 ( 20 U.S.C. 1087e(d) ) is amended by adding at the end the following new paragraph: Notwithstanding any other provision of this subsection or any other provision of law, with respect to loans made to an eligible borrower under this part or part B, which are held by the same holder and which have different applicable rates of interest, the holder of such loans shall, except as otherwise requested by the borrower in writing, apply the borrower’s prepayment amount (within the meaning of section 682.209(b) of title 34, Code of Federal Regulations, or a successor regulation) for one or more of such loans, first toward the outstanding balance of principal due on the loan with the highest applicable rate of interest among such loans.
For purposes of this paragraph, the term eligible borrower means a borrower with no outstanding balance of fees, including collection costs and authorized late charges, due on any loan made under this part or part B. A prepayment amount (as described in subparagraph (A)) made by a borrower who is not an eligible borrower to a holder shall be applied first toward the borrower’s outstanding balance of fees, including collection costs and authorized late charges, due on any loan made under this part or part B held by such holder.
This paragraph shall not apply to an income-based repayment plan under section 493C or an income contingent repayment plan under section 455(d)(1)(D), such as a Pay As You Earn repayment plan. .
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Sec. 2
Application of prepayment amounts for FFEL and Direct Loans
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