Sec. 2. Small business start-up employee loan deferment and cancellation
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Section 455(f) of the Higher Education Act of 1965 ( 20 U.S.C. 1087e(f) ) is amended— in paragraph (1), by striking A borrower of a loan and inserting Except as provided in paragraph (5), a borrower of a loan ; and by adding at the end the following: A borrower of a loan made under this part shall be eligible for a deferment, during which periodic installments of principal and interest need not be paid, during any period not in excess of 3 years during which the borrower is employed as a founder of a small business start-up (as defined in subsection (r)(3)). .
Section 455 of the Higher Education Act of 1965 ( 20 U.S.C. 1087e ) is amended by adding at the end the following: The Secretary shall cancel $20,000 of the balance of interest and principal due, in accordance with subparagraph (B), on any eligible Federal Direct Loan not in default for a borrower who— has made 24 monthly payments on the eligible Federal Direct Loan after the date of the enactment of this subsection pursuant to any one or a combination of payments under a repayment plan under subsection (d)(1) or (g); has been employed as a founder of a small business start-up in a distressed area during the period in which the borrower makes each of the 24 payments; is employed as a founder of a small business start-up in a distressed area at the time of such cancellation; and is approved for loan cancellation by the young entrepreneurs business center under section 47 of the Small Business Act ( 16 U.S.C. 631 et seq.).
After the conclusion of the employment period described in subparagraph (A), the Secretary shall cancel the obligation to repay $20,000 of the balance of interest and principal due as of the time of such cancellation, on the eligible Federal Direct Loans made to the borrower under this part. A borrower may not receive an aggregate amount of more than $20,000 under this subparagraph. No borrower may, for the same service, receive a reduction of loan obligations under both this paragraph and— paragraph (2); subsection (m); or section 428J, 428K, 428L, or 460.
The Secretary shall cancel $3,000 of the balance of interest and principal due, in accordance with subparagraph (B), on any eligible Federal Direct Loan not in default for a borrower who— has made 12 monthly payments on the eligible Federal Direct Loan after the date of the enactment of this subsection pursuant to any one or a combination of payments under a repayment plan under subsection (d)(1) or (g); has been employed in a small business start-up job during the period in which the borrower makes each of the 12 payments; and is employed in a small business start-up job at the time of such cancellation.
After the conclusion of the employment period described in subparagraph (A), the Secretary shall cancel the obligation to repay $3,000 of the balance of interest and principal due as of the time of such cancellation, on the eligible Federal Direct Loans made to the borrower under this part. A borrower may not receive an aggregate amount of more than $15,000 under this subparagraph. No borrower may, for the same service, receive a reduction of loan obligations under both this paragraph and— paragraph (1); subsection (m); or section 428J, 428K, 428L, or 460.
In this subsection: The term distressed area means an area identified under section 49 of the Small Business Act. The term eligible Federal Direct Loan means a Federal Direct Stafford Loan, Federal Direct PLUS Loan, or Federal Direct Unsubsidized Stafford Loan, or a Federal Direct Consolidation Loan. The term founder shall have the meaning given such term by the Administrator of the Small Business Administration under this paragraph. The term small business start-up means a business that is certified by the young entrepreneurs business center under section 49 of the Small Business Act.
The term small business start-up job means a full-time job as an employee of a small business start-up. .
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