Sec. 4307. Refinancing private student loans
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Part D of title IV of the Higher Education Act of 1965 ( 20 U.S.C. 1087a et seq.) 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 disbursed to the borrower before July 1, 2020; and 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 lender with respect to the original loan.
The Secretary shall require that the qualified borrower undergo loan counseling that provides all of the information and counseling required under clause
(i)and clauses
(iv)through
(xiv)of section 485(b)(1)(A) (as amended by the College Affordability Act ) 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 Unsubsidized Stafford Loan, except as otherwise provided in 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— based on income or debt-to-income ratio that take into consideration providing access to refinancing under this section for borrowers with the greatest financial need; to ensure eligibility only for 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 of a Federal Direct Refinanced Private Loan for a private education loan originally issued for undergraduate postsecondary educational expenses, a rate equal to the rate for Federal Direct Stafford Loans and Federal Direct Unsubsidized Stafford Loans issued to undergraduate students for the 12-month period beginning on July 1, 2019, and ending on June 30, 2020; and in the case of a Federal Direct Refinanced Private Loan for a private education loan originally issued for graduate or professional degree postsecondary educational expenses, a rate equal to the rate for Federal Direct Unsubsidized Stafford Loans issued to graduate or professional students for the 12-month period beginning on July 1, 2019, and ending on June 30, 2020. If a Federal Direct Refinanced Private Loan is for a private education loan originally issued for both undergraduate and graduate or professional postsecondary educational expenses, the interest rate shall be a rate equal to the rate for Federal Direct PLUS Loans for the 12-month period beginning on July 1, 2019, and ending on June 30, 2020. 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. The amount of a Federal Direct Refinanced Private Loan, or a Federal Direct Consolidated Loan to the extent such loan was used to repay a Federal Direct Refinanced Private Loan, shall not be included in calculating a borrower’s annual or aggregate loan limits under section 428 or 428H. A Federal Direct Refinanced Private Loan, or any Federal Direct Consolidation Loan to the extent such loan was used to repay a Federal Direct Refinanced Private Loan, shall not be eligible for any loan repayment or loan forgiveness program under section 428K, 428L, or 460 or for the repayment plan for public service employees under section 455(m). The Secretary, in consultation with the Secretary of the Treasury and the Director of the Bureau of Consumer Financial Protection, shall establish a requirement that private educational lenders report the data described in paragraph
(2)to the Secretary, to Congress, to the Secretary of the Treasury, and to the Director of the Bureau of Consumer Financial Protection, in order to allow for an assessment of the private education loan market. The data that private educational lenders shall report in accordance with paragraph
(1)shall include each of the following about private education loans (as defined in section 140(a) of the Truth in Lending Act ( 15 U.S.C. 1650(a) )): The total amount of private education loan debt the lender holds. The total number of private education loan borrowers the lender serves. The average interest rate on the outstanding private education loan debt held by the lender. The proportion of private education loan borrowers who are in default on a loan held by the lender. The proportion of the outstanding private education loan volume held by the lender that is in default. The proportions of outstanding private education loan borrowers who are 30, 60, and 90 days delinquent. The proportions of outstanding private education loan volume that is 30, 60, and 90 days delinquent. The Secretary, in coordination with the Secretary of the Treasury and the Director of the Bureau of Consumer Financial Protection, shall undertake a campaign to alert borrowers about the availability of private student loan refinancing under this section. .
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