Sec. 402. Refinancing FFEL and Federal Direct 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: The Secretary shall establish a program under which the Secretary, upon the receipt of an application from a qualified borrower, makes a loan under this part, in accordance with the provisions of this section, in order to permit the borrower to obtain the interest rate provided under subsection (c). Upon application of a qualified borrower, the Secretary shall repay a Federal Direct Stafford Loan, a Federal Direct Unsubsidized Stafford Loan, a Federal Direct PLUS Loan, or a Federal Direct Consolidation Loan of the qualified borrower, for which the first disbursement was made, or the application for the consolidation loan was received, before July 1, 2023, with the proceeds of a refinanced Federal Direct Stafford Loan, a Federal Direct Unsubsidized Stafford Loan, a Federal Direct PLUS Loan, or a Federal Direct Consolidation Loan, respectively, issued to the borrower in an amount equal to the sum of the unpaid principal, accrued unpaid interest, and late charges of the original loan.
Upon application of a qualified borrower for any loan that was made, insured, or guaranteed under part B and for which the first disbursement was made, or the application for the consolidation loan was received, before July 1, 2010, the Secretary shall make a loan under this part, in an amount equal to the sum of the unpaid principal, accrued unpaid interest, and late charges of the original loan to the borrower in accordance with the following: The Secretary shall pay the proceeds of such loan to the eligible lender of the loan made, insured, or guaranteed under part B, in order to discharge the borrower from any remaining obligation to the lender with respect to the original loan.
A loan made under this section that was originally— a loan originally made, insured, or guaranteed under section 428 shall be a Federal Direct Stafford Loan; a loan originally made, insured, or guaranteed under section 428B shall be a Federal Direct PLUS Loan; a loan originally made, insured, or guaranteed under section 428H shall be a Federal Direct Unsubsidized Stafford Loan; and a loan originally made, insured, or guaranteed under section 428C shall be a Federal Direct Consolidation Loan.
The interest rate for each loan made by the Secretary under this paragraph shall be the rate provided under subsection (c). The interest rate for the refinanced Federal Direct Stafford Loans, Federal Direct Unsubsidized Stafford Loans, Federal Direct PLUS Loans, and Federal Direct Consolidation Loans, shall be a rate equal to— in any case where the original loan was a loan under section 428, 428B, 428H, a Federal Direct Stafford loan, a Federal Direct Unsubsidized Stafford Loan, or a Federal Direct PLUS Loan, a rate equal to the interest rate determined under section 455(b)(9)(A) for the date on which the refinanced loan is made; and in any case where the original loan was a loan under section 428C or a Federal Direct Consolidation Loan, a rate calculated in accordance with paragraph
(2). In order to determine the interest rate for any refinanced Federal Direct Consolidation Loan under paragraph (1)(B) , the Secretary shall— determine each of the component loans that were originally consolidated in the loan under section 428C or the Federal Direct Consolidation Loan, and calculate the proportion of the unpaid principal balance of the loan under section 428C or the Federal Direct Consolidation Loan that each component loan represents; use the proportions determined in accordance with clause
(i)and the interest rate applicable for each component loan, as determined under subparagraph (B), to calculate the weighted average of the interest rates on the loans consolidated into the loan under section 428C or the Federal Direct Consolidation Loan; and make the applicable interest rate for the refinanced Federal Direct Consolidation Loan the lesser of— the weighted average calculated under clause
(ii); or 5.0 percent. The interest rates for the component loans of a loan made under section 428C or a Federal Direct Consolidation Loan shall be the following: The interest rate for any loan under section 428, 428B, 428H, Federal Direct Stafford Loan, Federal Direct Unsubsidized Stafford Loan, or Federal Direct PLUS Loan shall be a rate equal to the lesser of— the interest rate determined under section 455(b)(9)(A) for the date on which the component loan is made; or the original interest rate of the component loan. The interest rate for any component loan that is a loan under section 428C or a Federal Direct Consolidation Loan shall be the lesser of— the weighted average of the interest rates that would apply under this subparagraph for each loan comprising the component consolidation loan; or 5 percent. The interest rate for any eligible loan that is a component of a loan made under section 428C or a Federal Direct Consolidation Loan and is not described in clauses
(i)or
(ii)shall be the lesser of— the interest rate on the original component loan; or 5 percent. The applicable rate of interest determined under paragraph
(1)for a refinanced loan under this section shall be fixed for the period of the loan. With respect to a refinanced loan under this section, interest shall only accrue on the percentage of such refinanced loan that is equal to— the amount of the unpaid principal of the original loan, or in the case of a refinanced Federal Direct Consolidation Loan, the sum of the unpaid principal of all the component loans, comprising the refinanced loan; divided by the total amount of such refinanced loan. A loan that is refinanced under this section shall have the same terms and conditions as the original loan, except as otherwise provided in this section. Refinancing a loan under this section shall not result in the extension of the duration of the repayment period of the loan, and the borrower shall retain the same repayment term that was in effect on the original loan. Nothing in this paragraph shall be construed to prevent a borrower from electing a different repayment plan at any time in accordance with section 455(d)(4). For purposes of this section, the term qualified borrower means a borrower— of a loan under this part or part B for which the first disbursement was made, or the application for a consolidation loan was received, before July 1, 2023; and who has one or more loans described in paragraph
(1)or
(2)of subsection
(b)with an interest rate that exceeds 5 percent. The Secretary, in coordination with the Director of the Bureau of Consumer Financial Protection, shall undertake a campaign to alert borrowers of loans that are eligible for refinancing under this section that the borrowers are eligible to apply for such refinancing. The campaign shall include the following activities: Developing consumer information materials about the availability of Federal student loan refinancing. Requiring servicers of loans under this part or part B to provide such consumer information to borrowers in a manner determined appropriate by the Secretary, in consultation with the Director of the Bureau of Consumer Financial Protection. .
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Sec. 402
Refinancing FFEL and Federal Direct Loans
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