Sec. 3. Loan refinancing
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Part D of title IV of the Higher Education Act of 1965 is amended by adding at the end the following: In this section: The term eligible private education loan means a private education loan, as defined in section 140(a) of the Truth in Lending Act ( 15 U.S.C. 1650(a) ), that was for the borrower’s own postsecondary educational expenses for an eligible program at an institution of higher education participating in the loan program under this part, as of the date that the loan was disbursed.
The term Federal Direct Refinanced Private Loan means a loan issued under subsection (b)(1). The term private educational lender has the meaning given the term in section 140(a) of the Truth in Lending Act ( 15 U.S.C. 1650(a) ). The term qualified borrower means an individual who— has an eligible private education loan; has been current on payments on the eligible private education loan for the 6 months prior to the date of the qualified borrower's application for refinancing under this section, and is in good standing on the loan at the time of such application; is not in default on the eligible private education loan or on any loan made, insured, or guaranteed under this part or part B or E; and meets the eligibility requirements described in subsection (b)(2).
The Secretary, in consultation with the Secretary of the Treasury, shall carry out a program under which the Secretary, upon application by a qualified borrower who has an eligible private education loan, shall issue such borrower a loan under this part in accordance with the following: The loan issued under this program shall be in an amount equal to the sum of the unpaid principal, accrued unpaid interest, and late charges of the private education loan. The Secretary shall pay the proceeds of the loan issued under this program to the private educational lender of the private education loan, in order to discharge the qualified borrower from any remaining obligation to the private educational lender with respect to the original private education loan.
The Secretary shall require that the qualified borrower undergo loan counseling that provides all of the information and counseling required under clauses
(i)through
(viii)of section 485(b)(1)(A) before the loan is refinanced in accordance with this section, and before the proceeds of such loan are paid to the private educational lender. The Secretary shall issue the loan as a Federal Direct Refinanced Private Loan, which shall have the same terms, conditions, and benefits as a Federal Direct Subsidized Loan, except as otherwise provided in this section. Not later than 180 days after the date of the enactment of this section, the Secretary, in consultation with the Secretary of the Treasury and the Director of the Bureau of Consumer Financial Protection, shall establish eligibility requirements— to ensure eligibility only for qualified borrowers in good standing; to minimize inequities between Federal Direct Refinanced Private Loans and other Federal student loans; to preclude windfall profits for private educational lenders; and to ensure full access to the program authorized in this subsection for borrowers with private loans who otherwise meet the criteria established in accordance with subparagraphs
(A)and (B). The interest rate for a Federal Direct Refinanced Private Loan is, in the case a private education loan originally issued for undergraduate, graduate, or professional degree posts econdary educational expenses, a rate equal to the rate for Federal Direct Subsidized Stafford Loans issued to undergraduate students for the 12-month period beginning on July 1, 2016, and ending on June 30, 2017. The applicable rate of interest determined under this subsection for a Federal Direct Refinanced Private Loan shall be fixed for the period of the loan. Nothing in this section shall affect the ability of a borrower to qualify for loan repayment under a repayment plan under subsection (d)(1) or
(g)of section 455. . Section 128(e) of the Truth in Lending Act ( 15 U.S.C. 1638(e) ) is amended by adding at the end the following new paragraph: Along with each billing statement sent to the borrower, the private educational lender shall include a statement informing the borrower that the borrower may be eligible for the Federal Direct Refinanced Private Loan program established under section 460 of the Higher Education Act of 1965. .
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