Sec. 492. Income-based repayment
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Section 493C of the Higher Education Act of 1965 ( 20 U.S.C. 1098e ) is amended to read as follows: In this section: The term eligible loan means any outstanding loan of a borrower that is made, insured, or guaranteed under part B or part D, except that the term does not include— any such loan that is in default; any PLUS loan made, insured, or guaranteed under section 428, or any Federal Direct PLUS Loan, made to a parent borrower; or any consolidation loan made, insured, or guaranteed under section 428C, or any Federal Direct Consolidation Loan, that repaid a loan described in subparagraph (B).
The term partial financial hardship , when used with respect to a borrower, means that— for such borrower— the annual amount due on the total amount of eligible loans made to a borrower as calculated under the standard repayment plan under section 428(b)(9)(A)(i) or 455(d)(1)(A), based on a 10-year repayment period; exceeds 10 percent of the result obtained by calculating, on an annual basis, the amount by which— the borrower’s, and the borrower’s spouse’s (if applicable), adjusted gross income; exceeds 150 percent of the poverty line; or the borrower is considered 150 days or more days delinquent on one or more eligible loans.
Notwithstanding any other provision of this Act, the Secretary shall carry out a program under which— a borrower of any eligible loan may elect to participate in the income-based repayment plan if the borrower has a partial financial hardship as of the time the borrower makes the election— whether or not the borrower’s loan has been submitted to a guaranty agency for default aversion or had been in default previously; and whether or not the borrower is, at the time of the election, enrolled in another repayment plan, including the income contingent repayment plan, income-sensitive repayment plan, or another repayment plan based on income eligibility (except that in the case of a borrower who is enrolled in the income contingent repayment plan and has a Federal Direct Consolidation Loan that repaid a Federal Direct PLUS Loan, that Federal Direct Consolidation Loan shall not be an eligible loan for purposes of this section); after selection of the income-based repayment plan, and for the remaining period of the borrower's loans unless the borrower elects a different repayment method, the borrower’s aggregate monthly payment for all such loans shall not exceed the result described in subsection (a)(2)(A)(ii), as calculated on an annual basis, divided by 12; the holder of such a loan shall apply the borrower’s monthly payment under this subsection first toward interest due on the loan, next toward any fees due on the loan, and then toward the principal of the loan; any interest due and not paid under paragraph
(3)shall accrue but not be capitalized, except that, in the case of loans under section 428, or Federal Direct Stafford Loans for which interest was subsidized, any interest due and not paid under paragraph
(3)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)(not including any period during which the borrower is in deferment due to an economic hardship described in section 435(o)); and any principal due and not paid under paragraph
(3)shall be deferred; a borrower who elects to participate in an income-based repayment plan under paragraph
(1)and whose eligibility for an income-based repayment plan is verified may participate in the income-based repayment plan during the period of the borrower's loans, even if the borrower no longer has a partial financial hardship; the amount of time the borrower makes monthly payments under paragraph
(2)may exceed 10 years; the Secretary shall repay or cancel any outstanding balance of principal and interest due on all eligible loans to a borrower who— at any time, elected to participate in income-based repayment under paragraph (1); and for a period of time prescribed by the Secretary, not to exceed 20 years, meets 1 or more of the following requirements— has made reduced monthly payments under paragraph (2); has made monthly payments of not less than the monthly amount required under paragraph
(1)of subsection (b), as such subsection was in effect on the day before the date of enactment of the Higher Education Affordability Act ; has made monthly payments of not less than the monthly amount calculated under section 428(b)(9)(A)(i) or 455(d)(1)(A), based on a 10-year repayment period, when the borrower first made the election described in this subsection; has made payments of not less than the payments required under a standard repayment plan under section 428(b)(9)(A)(i) or 455(d)(1)(A) with a repayment period of 10 years; has made payments under an income contingent repayment plan under section 455(d)(1)(D), as in effect on the day before the date that is 1 year after the date of enactment of the Higher Education Affordability Act ; or has been in deferment due to an economic hardship described in section 435(o); a borrower who is repaying an eligible loan pursuant to income-based repayment may elect, at any time, to terminate repayment pursuant to income-based repayment and repay such loan under another repayment plan; and the special allowance payment to a lender calculated under section 438(b)(2)(I), when calculated for a loan in repayment under this section, shall be calculated on the principal balance of the loan and on any accrued interest unpaid by the borrower in accordance with this section. The Secretary shall establish procedures for annually determining the borrower’s monthly payment amount for income-based repayment, including verification of a borrower’s annual income and the annual amount due on the total amount of eligible loans. In the case of a borrower who has selected the income-based repayment plan and who does not submit the borrower's annual income documentation by such date as required under subparagraph (A)— until the borrower submits the required documentation (but in no case for a period greater than 1 year), the borrower's monthly payment amount for an eligible loan shall be the greater of— the monthly payment required under a standard repayment plan under section 428(b)(9)(A)(i) or 455(d)(1)(A) with a repayment period of 10 years for the loan; and the amount described in subsection (a)(2)(A)(ii), as calculated based on the most recent income documentation provided to the Secretary by the borrower; and no monthly payments made before the borrower has submitted the required information shall be included for purposes of loan repayment or cancellation under subsection (b)(8)(B) or the public service loan forgiveness program under section 455(m). In addition to the procedures established in this section, the Secretary shall consider, but is not limited to, the procedures established in accordance with section 455(e)(1) or in connection with income-sensitive repayment schedules under section 428(b)(9)(A)(iii) or 428C(b)(1)(E), as in effect on the day before the date that is 1 year after the date of enactment of the Higher Education Affordability Act . In the case of a married borrower who files a separate Federal income tax return, the Secretary shall calculate the amount of the borrower’s income-based repayment under this section solely on the basis of the borrower's student loan debt and adjusted gross income. The Secretary shall establish procedures for automatically enrolling delinquent borrowers with a partial financial hardship described in subsection (a)(2)(B) into the income-based repayment plan. Such procedures shall include the following requirements: Each entity with a contract to service loans under section 456, and each entity that is a lender of loans made, insured, or guaranteed under part B or any entity that provides student loan servicing for such lender, shall— identify each delinquent borrower of a loan serviced or held by the entity on the date that such borrower qualifies for a partial financial hardship described in subsection (a)(2)(B); and retrieve for such borrower, using the online income verification system established under paragraph (4), the borrower's new monthly payment amount under this section. In any case where an entity described in subparagraph
(A)is unable to obtain information regarding the borrower's new monthly payment amount under this section, the entity shall notify the Secretary and the Secretary shall provide the entity with a determination of the new monthly payment amount for a borrower not later than 7 days after the entity's request. The entity described in subparagraph
(A)shall automatically enroll a borrower identified in such subparagraph into the income-based repayment plan as follows: In the case of a borrower who filed a return under section 6012(a)(1) of the Internal Revenue Code of 1986 for 1 or both of the immediately preceding tax years— if such borrower makes a payment equal to or greater than the new monthly payment amount determined under subparagraph (A)(ii) for the income-based repayment plan, the entity will automatically enroll the borrower in the income-based repayment program, unless the borrower requests otherwise; if such borrower's new monthly payment amount provided under subparagraph (A)(ii) for the income-based repayment plan is determined to be $0, the entity will automatically enroll the borrower in the income-based repayment program, if the borrower provides consent for such enrollment, as determined through either an online agreement or a signed consent form; and if such borrower does not make a payment equal to or greater than the new monthly payment amount determined under subparagraph (A)(ii) for the income-based repayment plan, the entity will not automatically enroll the borrower in the income-based repayment program. In the case of a borrower identified under subparagraph (A)(i) who was not required to file a tax return under section 6012(a)(1) of the Internal Revenue Code of 1986 for the 2 consecutive preceding tax years— the entity will deem the borrower's monthly payment amount for income-based repayment to be $0 until determined otherwise through additional information; and the entity will automatically enroll the borrower in the income-based repayment program if the borrower provides consent for such enrollment, as determined through either an online agreement or a signed consent form. In the case of a borrower identified under paragraph (1)(A) who failed to file a return under section 6012(a)(1) of the Internal Revenue Code of 1986, for the preceding tax year, the entity will carry out the requirements described in paragraph (3)(C), including automatically enrolling the borrower in the income-based repayment program if the borrower provides consent and provides additional information, as described in such paragraph. The entity described in subparagraph
(A)shall provide each borrower identified with a partial financial hardship under subparagraph (A)(i), as part of the borrower's next periodic statement, a personalized statement to the borrower that— informs the borrower— that the borrower will be automatically enrolled into the income-based repayment plan under this section, in accordance with the procedure described in subparagraph
(C)that is applicable to the borrower's case; of the key terms and conditions of such repayment plan; and what the borrower's new monthly payment amount under the income-based repayment plan will be for the next year; notifies the borrower of the automatic enrollment procedures described in subparagraph (C); provides a clear list of dangers associated with continued delinquency and default on eligible loans; informs the borrower that the borrower is eligible for a different monthly payment amount under the standard 10-year plan, and the estimated monthly payment amount under the standard 10-year plan; informs the borrower that paying the minimum monthly payment amount under the income-based repayment plan under this section may lead to negative amortization such that if a borrower’s monthly payment does not fully cover the amount of interest owed, then the principal amount owed may increase over time and cause the borrower's loan balance to increase; and includes any other information determined to be relevant by the Secretary, in consultation with the Director of the Bureau of Consumer Financial Protection. The Secretary, in consultation with the Director of the Bureau of Consumer Financial Protection, shall— develop a standard format for the personalized statement described in paragraph (1)(D); and submit for consumer testing under section 483, such standard format and any consent form or online tool required for consent of borrowers with $0 payment to participate in income-based repayment under paragraph (1)(C)(ii)(II) or (3)(B). In the case of a borrower identified under paragraph (1)(A) who is required to file a return under section 6012(a)(1) of the Internal Revenue Code of 1986 and fails to file such return, the Secretary of the Treasury shall transmit to the Secretary of Education any such tax information of the individual as may be necessary to determine the appropriate monthly payment amount. If such information is unavailable or insufficient, then the monthly payment amount shall be treated as $0 until determined otherwise through additional information. A borrower whose monthly payment amount is treated as $0 due to unavailable or insufficient information, as described in subparagraph (A), shall be automatically enrolled in the income-based repayment plan under this section if the borrower— provides consent for such enrollment, as determined through either an online agreement or a signed consent form; and provides the information needed to determine the appropriate monthly payment amount under the income-based repayment plan. The entity described in paragraph (1)(A) shall communicate to a borrower described in this paragraph of the policy described in subparagraph
(A)and the requirements that the borrower must fulfill, as described in subparagraph (B), in order to enroll in the income-based repayment plan under this section if such borrower's monthly payment amount has been treated as $0 due to unavailable or insufficient information, as determined by the Secretary. Such policy and requirements shall be communicated to the borrower in plain and simple language in the next periodic statement described under paragraph (1)(D). By not later than the date that is 1 year after the date of enactment of the Higher Education Affordability Act , the Secretary, in consultation with the Secretary of the Treasury, shall develop and establish a streamlined online income verification system website that allows each entity with a contract to service loans under section 456, and each entity that is an eligible lender of loans made, insured, or guaranteed under part B or another entity that provides student loan servicing for such lender or loan holder, to access and retrieve the monthly payment amount for the income-based repayment program for a borrower identified under paragraph (1)(A). The website shall provide no additional information relating to a borrower’s financial circumstances beyond that needed to determine a monthly payment amount. The Secretary shall ensure that the online income verification system website established under subparagraph
(A)is secure and that information regarding a borrower is accessible only to the lender of a loan of such borrower or the entity that is servicing a loan of such borrower. The Secretary shall ensure that no entity shall access the online income verification system website for the purposes of collections with respect to loans. Any use of the online income verification system that is not for the purpose described in subparagraph
(A)is prohibited and may be the basis for a claim of a violation of a contract entered into under section 456, or for an action under subsection
(g)or
(h)of section 432, as the case may be. The Secretary shall establish a clear and accessible process for appealing the monthly payment amount determined under the online income verification system website for a borrower identified in paragraph (1)(A) in any case where a borrower believes that the monthly payment amount is based on tax information that is incorrect. If a borrower wins such an appeal, then the Secretary shall— retroactively credit the overpaid amount towards future payments; or apply the overpaid amount towards the principal balance of the borrower's loans, if requested to do so by the borrower. By not later than 1 year after the date of enactment of the Higher Education Affordability Act , the Secretary shall make changes as needed to the common master promissory note developed under section 432(m)(1)(A) and the Free Application for Federal Student Aid described in section 483 to implement the requirements of this section. . The amendment made by subsection
(a)shall take effect on the date that is 1 year after the date of enactment of this Act.
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Sec. 492
Income-based repayment
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