Sec. 201. Ending interest capitalization for Federal Direct Loans
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Section 455 ( 20 U.S.C. 1087e ) is amended— in subsection (b)— in the subsection heading, by inserting and Practices after Rate ; and by adding at the end the following: Beginning on the effective date of the Affordable Loans for Any Student Act, interest on a loan made under this part shall accrue and only be added to the balance of interest due on the loan, and shall not ever be capitalized. Beginning on the effective date of the Affordable Loans for Any Student Act, interest on loans made under this part for which payments of principal are not required during the in-school and grace periods or for which payments are deferred in accordance with sections 427(a)(2)(C) and 428(b)(1)(M) shall accrue and be added to the balance of interest due from the borrower when the loan enters repayment, but shall not ever be capitalized.
The Secretary shall adjust any forbearance notice required in accordance with section 428(a)(3)(A)(iii) to reflect the availability of the pause payment process pursuant to section 460B and the treatment of interest under such section. For a borrower of a loan made under this part on or before the effective date of the Affordable Loans for Any Student Act that is in a status, on the day before such effective date, that involves interest capitalization, such loan shall have capitalization pro-rated to the effective date of such Act, but shall not be subject to further capitalization after the effective date of such Act. ; and in subsection (e)(5)— by inserting “(which, beginning after the effective date of the Affordable Loans for Any Student Act, shall not be capitalized)” after accrued interest ; and by striking the second sentence.
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Sec. 201
Ending interest capitalization for Federal Direct Loans
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