Sec. 2. Application of prepayment and underpayment 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 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 any outstanding balance of fees, including collection costs and authorized late charges, due on such loans; and then, except as otherwise requested by the borrower in writing, toward the outstanding balance of principal due on the loan with the highest applicable rate of interest among such loans.
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 apply any payment made by the borrower which is less than the amount due at the time of the payment for one or more of such loans— first toward any outstanding balance of fees, including collection costs and authorized late charges, due on such loans; and then, except as otherwise requested by the borrower in writing, toward the balance of the loan with the smallest balance of principal and interest among such loans.
In the case of a loan for which the borrower has elected to participate in an income-based repayment plan under section 493C, subparagraphs
(A)and
(B)shall not apply unless there is no interest due on the loan. . Section 456(a)(2) of such Act ( 20 U.S.C. 1087f(a)(2) ) is amended by striking the period at the end of the first sentence and inserting the following: , including the requirements with respect to the application of prepayment and underpayment amounts under section 455(d)(6). .
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Sec. 2
Application of prepayment and underpayment amounts for FFEL and Direct Loans
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