Sec. 4. Risk-sharing payments
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Section 454 of the Higher Education Act of 1964 ( 20 U.S.C. 1087d ) is amended— in subsection (a)— in paragraph (5), by striking and after the semicolon; in paragraph (6), by striking the period at the end and inserting ; and ; and by adding at the end the following: provide that the institution accepts the institutional risk-sharing requirements under subsection (d), if applicable. ; and by adding at the end the following: Beginning with fiscal year 2027 and each succeeding fiscal year, each institution of higher education participating in the direct student loan program under this part shall remit to the Secretary, at such times as the Secretary may specify, a risk-sharing payment based on the cohort nonrepayment loan balance of the institution, as determined under paragraph (2).
The cohort loan balance of an institution for a fiscal year equals the total principal amount of all loans made under this part to attend such institution for the cohort of borrowers who entered repayment, deferment, or forbearance on such loans in the third preceding fiscal year for which the determination is made. The cohort nonrepayment loan balance of an institution for a fiscal year equals, from the total amount of the loans described in subparagraph (A), the total loan balance of those borrowers who have not made at least a 1 dollar reduction in their principal balance in the 3 consecutive fiscal years since their loans entered repayment, deferment, or forbearance.
The cohort nonrepayment loan balance calculation under clause
(i)shall not take into consideration a borrower who was— in deferment on repayment of a loan described in subparagraph
(A)in the 3 consecutive fiscal years described in clause
(i)due to study in an approved graduate fellowship program or in an approved rehabilitation training program for the disabled; in deferment on repayment of a loan described in subparagraph
(A)in the 3 consecutive fiscal years described in clause
(i)during which time the borrower was in a period of at least half-time enrollment in college or a career school; in deferment on repayment of a loan described in subparagraph
(A)in the 3 consecutive fiscal years described in clause
(i)during which time the borrower was in a period of service qualifying for loan discharge or cancellation under part E; in deferment on repayment of a loan described in subparagraph
(A)in the 3 consecutive fiscal years described in clause
(i)during which time the borrower was on active duty military service during a war, military operation, or national emergency; in mandatory forbearance on repayment of a loan described in subparagraph
(A)for the full fiscal year; or serving as a volunteer under the Peace Corps Act ( 22 U.S.C. 2501 et seq. ) or the Domestic Volunteer Service Act of 1973 ( 42 U.S.C. 4950 et seq. ), during the 3 consecutive fiscal years described in clause (i). Except as provided in subclause (II), the risk-sharing payment of an institution for a fiscal year equals 2 percent of the amount determined under clause (ii). The risk-sharing payment of an institution for a fiscal year shall not be more than 2.5 percent of the amount equal to the institution's total annual revenues and investment returns less auxiliary enterprise revenues and hospital revenues, as defined in the IPEDS Finance Survey, for the most recent fiscal year upon which the institution’s audited financial reports are available. The amount under this clause is determined by subtracting the amount determined under subclause
(II)from the cohort nonrepayment loan balance determined under subparagraph (B). The amount under this subclause is determined by multiplying the average national unemployment rate, as defined by the Bureau of Labor Statistics, for the 3 previous fiscal years from the date of the determination by the cohort loan balance determined under subparagraph (A). Beginning with the first fiscal year for which data are available after the date of enactment of the Student Protection and Success Act and each succeeding fiscal year until fiscal year 2027, the Secretary shall notify each institution of higher education participating in the direct student loan program under this part of what the risk-sharing payment based on the cohort nonrepayment loan balance of the institution, as determined under paragraph (2), would be for such institution if such provision were in effect. .
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