Sec. 428. Closed school and other discharges
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Section 437(c) ( 20 U.S.C. 1087 ) is amended— in paragraph (1), by inserting and the borrower meets the applicable requirements of paragraphs
(6)through (8), after such student’s lender, ; in paragraph (4), by inserting before the period at the end , as in effect on the day before the date of enactment of the ; and PROSPER Act and pursuant to section 461(a) of such Act by adding at the end the following: In order to qualify for the discharge of a loan under this subsection due to the closure of the institution in which the borrower was enrolled, a borrower shall submit to the Secretary a written request and sworn statement— that contains true factual assertions; that is made by the borrower under penalty of perjury, and that may or may not be notarized; under which the borrower (or the student on whose behalf a parent borrowed) states— that the borrower or the student— received, on or after January 1, 1986, the proceeds of a loan made, insured, or guaranteed under this title to attend a program of study at an institution of higher education; did not complete the program of study because the institution closed while the student was enrolled; or the student withdrew from the institution not more than 120 days before the institution closed, or in the case of exceptional circumstances described in subparagraph (B), not more than the period by which such 120-day period is extended under such subparagraph; and attempted but was unable to complete the program of study through a teach-out at another institution or by transferring academic credits or hours earned at the closed institution to another institution; whether the borrower (or the student) has made a claim with respect to the institutions’s closing with any third party, such as the holder of a performance bond or a tuition recovery program, and, if so, the amount of any payment received by the borrower (or the student) or credited to the borrower’s loan obligation; and that the borrower (or the student)— agrees to provide to the Secretary or the holder of the loan upon request other documentation reasonably available to the borrower that demonstrates that the borrower meets the qualifications for discharge under this subsection; and agrees to cooperate with the Secretary in enforcement actions in accordance with subparagraph
(C)and to transfer any right to recovery against a third party to the Secretary in accordance with subparagraph (D). The Secretary may extend the 120-day period described in subparagraph (A)(iii)(I)(bb)(BB) if the Secretary determines that exceptional circumstances related to an institution’s closing justify an extension. For purposes of this subsection, the term exceptional circumstances , when used with respect to an institution that closed, includes the loss of accreditation of institution, the institutions’s discontinuation of the majority of its academic programs, action by the State to revoke the institution’s license to operate or award academic credentials in the State, or a finding by a State or Federal Government agency that the institution violated State or Federal law. In order to obtain a discharge described in subparagraph (A), a borrower shall cooperate with the Secretary in any judicial or administrative proceeding brought by the Secretary to recover amounts discharged or to take other enforcement action with respect to the conduct on which the discharge was based. At the request of the Secretary and upon the Secretary's tendering to the borrower the fees and costs that are customarily provided in litigation to reimburse witnesses, the borrower shall— provide testimony regarding any representation made by the borrower to support a request for discharge; produce any documents reasonably available to the borrower with respect to those representations; and if required by the Secretary, provide a sworn statement regarding those documents and representations. The Secretary shall deny the request for such a discharge or revoke the discharge of a borrower who— fails to provide the testimony, documents, or a sworn statement required under clause (i); or provides testimony, documents, or a sworn statement that does not support the material representations made by the borrower to obtain the discharge. Upon receiving a discharge described in subparagraph
(A)of a loan, the borrower shall be deemed to have assigned to and relinquished in favor of the Secretary any right to a loan refund for such loan (up to the amount discharged) that the borrower (or student) may have by contract or applicable law with respect to the loan or the enrollment agreement for the program for which the loan was received, against the institution, its principals, its affiliates and their successors, its sureties, and any private fund, including the portion of a public fund that represents funds received from a private party. The provisions of this subsection apply notwithstanding any provision of State law that would otherwise restrict transfer of such rights by the borrower (or student), limit, or prevent a transferee from exercising such rights, or establish procedures or a scheme of distribution that would prejudice the Secretary's ability to recover on such rights. Nothing in this subsection shall limit or foreclose the borrower's (or student's) right to pursue legal and equitable relief regarding disputes arising from matters unrelated to the discharged loan. After confirming the date of an institution's closure, the Secretary shall identify any borrower (or student on whose behalf a parent borrowed) who appears to have been enrolled at the institution on the closure date of the institution or to have withdrawn not more than 120 days prior to the closure date (or in the case of exceptional circumstances described in subparagraph (B), not more than the period by which such 120-day period is extended under such subparagraph. In the case of a loan made, insured, or guaranteed under this part, a guaranty agency shall notify the Secretary immediately whenever it becomes aware of reliable information indicating an institution may have closed. If the borrower's current address is known, the Secretary shall mail the borrower a discharge application and an explanation of the qualifications and procedures for obtaining a discharge. The Secretary or the guaranty agency shall promptly suspend any efforts to collect from the borrower on any affected loan. The Secretary may continue to receive borrower payments of the loan for which the discharge application has been filed. If the borrower's current address is unknown, the Secretary shall attempt to locate the borrower and determine the borrower's potential eligibility for a discharge described in subparagraph
(A)by consulting with representatives of the closed institution, the institution's licensing agency, the institution's accrediting agency, and other appropriate parties. If the Secretary learns the new address of a borrower, the Secretary shall mail to the borrower a discharge application and explanation, and shall suspend collection on the loan, as described in subclause (I). If a borrower fails to submit the written request and sworn statement described subparagraph
(A)not later than 60 days after date on which the Secretary mails the discharge application under clause (ii), the Secretary— shall resume collection on the loan and grant forbearance of principal and interest for the period in which collection activity was suspended; and may capitalize any interest accrued and not paid during such period. If the Secretary determines that a borrower who requests a discharge described in subparagraph
(A)meets the qualifications for such a discharge, the Secretary shall— notify the borrower in writing of that determination; and not regard a borrower who has defaulted on a loan that has been so discharged as in default on the loan after such discharge, and such a borrower shall be eligible to receive assistance under this title. If the Secretary determines that a borrower who requests a discharge described in subparagraph
(A)does not meet the qualifications for such a discharge, the Secretary or guaranty agency shall resume collection on the loan and notify the borrower in writing of that determination and the reasons for the determination. In order to qualify for false certification discharge under this subsection, the borrower shall submit to the Secretary, on a form approved by the Secretary, an application for discharge that— does not need not be notarized, but shall be made by the borrower under penalty of perjury; and demonstrates to the satisfaction of the Secretary that the requirements in subparagraphs
(B)through
(G)have been met. If the Secretary determines the application does not meet the requirements of clause (i), the Secretary shall notify the applicant and explain why the application does not meet the requirements. In the case of a borrower requesting a false certification discharge based on not having had a high school diploma and not having met the alternative to graduation from high school eligibility requirements under section 484(d) applicable at the time the loan was originated, and the institution or a third party to which the institution referred the borrower falsified the student’s high school diploma, the borrower shall state in the application that the borrower (or the student on whose behalf a parent borrowed)— reported not having a valid high school diploma or its equivalent at the time the loan was certified; and did not satisfy the alternative to graduation from high school statutory or regulatory eligibility requirements identified on the application form and applicable at the time the institution certified the loan. In the case of a borrower requesting a false certification discharge based on a condition that would disqualify the borrower from employment in the occupation that the program for which the borrower received the loan was intended, the borrower shall state in the application that the borrower (or student on whose behalf the parent borrowed) did not meet State requirements for employment (in the student’s State of residence) in the occupation that the program for which the borrower received the loan was intended because of a physical or mental condition, age, criminal record, or other reason accepted by the Secretary. In the case of a borrower requesting a discharge under this subsection because the institution signed the borrower’s name on the loan application or promissory note without the borrower’s authorization, the borrower shall— state that the borrower did not sign the document in question or authorize the institution to do so; and provide 5 different specimens of the borrower’s signature, 2 of which must be within one year before or after the date of the contested signature. In the case of a borrower requesting a false certification discharge because the institution, without the borrower’s authorization, endorsed the borrower’s loan check or signed the borrower’s authorization for electronic funds transfer, the borrower shall— state that the borrower did not endorse the loan check or sign the authorization for electronic funds transfer or authorize the institution to do so; provide 5 different specimens of the borrower’s signature, 2 of which must be within one year before or after the date of the contested signature; and state that the proceeds of the contested disbursement were not delivered to the borrower or applied to charges owed by the borrower to the institution. In the case of an individual whose eligibility to borrow was falsely certified because the individual was a victim of the crime of identity theft and is requesting a discharge, the individual shall— certify that the individual did not sign the promissory note, or that any other means of identification used to obtain the loan was used without the authorization of the individual claiming relief; certify that the individual did not receive or benefit from the proceeds of the loan with knowledge that the loan had been made without the authorization of the individual; provide a copy of a local, State, or Federal court verdict or judgment that conclusively determines that the individual who is named as the borrower of the loan was the victim of a crime of identity theft; and if the judicial determination of the crime does not expressly state that the loan was obtained as a result of the crime of identity theft, provide— authentic specimens of the signature of the individual, as described in subparagraph (D)(ii), or of other means of identification of the individual, as applicable, corresponding to the means of identification falsely used to obtain the loan; and statement of facts that demonstrate, to the satisfaction of the Secretary, that eligibility for the loan in question was falsely certified as a result of the crime of identity theft committed against that individual. For purposes of this subparagraph: The term identity theft means the unauthorized use of the identifying information of another individual that is punishable under section 1028, 1028A, 1029, or 1030 of title 18, United States Code, or substantially comparable State or local law. The term identifying information includes— name, Social Security number, date of birth, official State or government issued driver’s license or identification number, alien registration number, government passport number, and employer or taxpayer identification number; unique biometric data, such as fingerprints, voiceprint, retina or iris image, or unique physical representation; unique electronic identification number, address, or routing code; or telecommunication identifying information or access device (as defined in 18 U.S.C. 1029(e) ) borrower qualifications for a false certification discharge The borrower shall state whether the borrower has made a claim with respect to the institutions’s false certification or unauthorized payment with any third party, such as the holder of a performance bond or a tuition recovery program, and, if so, the amount of any payment received by the borrower or credited to the borrower’s loan obligation. The borrower shall state that the borrower— agrees to provide to the Secretary upon request other documentation reasonably available to the borrower that demonstrates that the borrower meets the qualifications for discharge under this subsection; and agrees to cooperate with the Secretary in enforcement actions and to transfer any right to recovery against a third party to the Secretary. To receive an unpaid refund discharge of a portion of a loan under this subsection, a borrower shall submit to the holder or guaranty agency a written application— that requests the information required to calculate the amount of the discharge; that the borrower signs for the purpose of swearing to the accuracy of the information; that is made by the borrower under penalty of perjury, and that may or may not be notarized; under which the borrower states— that the borrower— received, on or after January 1, 1986, the proceeds of a loan, in whole or in part, made, insured, or guaranteed under this title to attend an institution of higher education; did not attend, withdrew, or was terminated from the institution within a timeframe that entitled the borrower to a refund; and did not receive the benefit of a refund to which the borrower was entitled either from the institution or from a third party, such as the holder of a performance bond or a tuition recovery program; whether the borrower has any other application for discharge pending for this loan; and that the borrower— agrees to provide to the Secretary upon request other documentation reasonably available to the borrower that demonstrates that the borrower meets the qualifications for discharge under this subsection; and agrees to cooperate with the Secretary in enforcement actions and to transfer any right to recovery against a third party to the Secretary. .
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