Sec. 102. Program for the loan modification of eligible Federal Direct loans, and refinancing of other Federal 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: The Secretary shall establish and implement, with respect to each borrower of an eligible Federal direct loan, procedures to— modify, without any action from the borrower, the terms of such loan so that beginning on July 1, 2026, no interest shall accrue on such loan; and allow the borrower, at any time, to opt out of the loan modification under paragraph

(1)for such loan. The Secretary shall establish and implement, with respect to each borrower of an eligible non-Federal direct loan, procedures to— refinance such loan in accordance with procedures listed in paragraph (2); and allow the borrower, at any time, to opt out of the loan refinancing under subparagraph

(A)for such loan. In refinancing an eligible non-Federal direct loan with respect to a borrower of such loan, the Secretary shall carry out the following: The Secretary shall make a Federal Direct Consolidation Loan under this subsection, in an amount equal to the sum of the unpaid principal, accrued unpaid interest, and late charges of the eligible non-Federal direct loan. The Secretary shall pay the proceeds of such Federal Direct Consolidation Loan to the holder of the eligible non-Federal direct loan, in order to discharge the borrower from any remaining obligation with respect to such eligible non-Federal direct loan. A Federal Direct Consolidation Loan made under this subsection shall have the same terms and conditions as a Federal Direct Consolidation Loan that was not made under this subsection, except— notwithstanding any other provision of this title, a borrower of a Federal Direct Consolidation Loan made under this subsection may repay such loan under any repayment plan or program described in section 455(d)(1); that the Secretary may adjust such terms and conditions as necessary to enable the borrower to access loan forgiveness or other benefits available to the borrower under the loan before refinancing under this subsection, in any case where such benefits are more generous than provided under a Federal Direct Consolidation Loan under this subsection; and as otherwise provided in this subsection. Notwithstanding section 455(c), the Secretary may not charge a borrower of a loan made under this subsection an origination fee for such loan. No interest shall accrue on a loan that is made under this subsection. A loan made under this subsection shall not result in the extension of the duration of the repayment period of the original 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)(3). Nothing in this section shall be construed to prevent a borrower of a Federal student loan described in subparagraph

(B)or

(C)of subsection (d)(2) from consolidating such loans with other loans eligible for consolidation under this section, or to require such a borrower to consolidate such loans with other Federal student loans into a single consolidation loan under this section. Not later than 1 year after the date of the enactment of the Student Loan Interest Elimination Act , and on an annual basis thereafter, the Secretary shall submit a report to the authorizing committees that includes— the total number of borrowers whose loans have been modified or refinanced under this section during the preceding year; and the number of such borrowers who are delinquent in making payments on such a loan. In this section: The term eligible Federal direct loan means— a loan made under this part, and first disbursed before July 1, 2026; a loan made, insured, or guaranteed under part B, and which is held by the Secretary; a loan made under part E, and which is held by the Secretary; or a loan made under subpart 1 of part A of title VII of the Public Health Service Act ( 42 U.S.C. 292 et seq. ), and which is held by the Secretary. The term eligible non-Federal direct loan means a loan— made, insured, or guaranteed under part B, and which is not held by the Secretary; made under part E, and which is not held by the Secretary; or made under— subpart I of part A of title VII of the Public Health Service Act ( 42 U.S.C. 292 et seq. ), and which is not held by the Secretary; subpart II of part A of title VII of the Public Health Service Act ( 42 U.S.C. 292q et seq. ), and in the case of a loan made under section 723 of such Act ( 42 U.S.C. 292s ), only if the borrower of the loan has completed the full period of service, practice, or training that was imposed as a condition on receipt of such loan; or part E of title VIII of the Public Health Service Act ( 42 U.S.C. 297a et seq. ), and in the case of a loan made under section 846A of such Act ( 42 U.S.C. 297n–1 ), only if the borrower has completed the 4 years of full-time employment as a faculty member at a school of nursing as described in subsection (c)(3) of such section 846A. The term original loan , used with respect to a Federal Direct Consolidation Loan made under subsection (b), means a loan for which a borrower's liability is discharged by such Federal Direct Consolidation Loan. . Section 455(e) of the Higher Education Act of 1965 ( 20 U.S.C. 1087e(e) ) is amended by adding at the end the following new paragraph: For purposes of paragraph (7), the period of time during which a borrower of a Federal Direct Consolidation Loan made under section 460A(b) has made monthly payments shall be calculated in the manner described in section 493C(f). . Section 455(q)(1) of the Higher Education Act of 1965 ( 20 U.S.C. 1087e(q)(1) ) is amended by adding at the end the following: For purposes of subparagraph (E), the period of time during which a borrower of a Federal Direct Consolidation Loan made under section 460A(b) has made monthly payments shall be calculated in the manner described in section 493C(f). . Section 493C(a)(2)(B) of the Higher Education Act of 1965 ( 20 U.S.C. 1098e(a)(2)(B) ) is amended by inserting a Federal Direct Consolidation Loan under section 460A, and does not include after does not include . Section 493C of the Higher Education Act of 1965 ( 20 U.S.C. 1098e ) is amended by adding at the end the following: In calculating the period of time during which a borrower of a Federal Direct Consolidation Loan that is made under section 460A(b) has made monthly payments for the purposes of subsection (b)(7), the Secretary shall— review the borrower’s payment history to identify each component loan of such Federal Direct Consolidation Loan; for each such component loan— calculate the weighted factor of the component loan, which shall be the factor that represents the portion of such Federal Direct Consolidation Loan that is attributable to such component loan; and determine the number of qualifying monthly payments made on such component loan before consolidation; calculate the number of qualifying monthly payments determined under subparagraph (B)(ii) with respect to a component loan that shall be deemed as qualifying monthly payments made on the Federal Direct Consolidation Loan by multiplying— the weighted factor of such component loan as determined under subparagraph (B)(i); by the number of qualifying monthly payments made on such component loan as determined under subparagraph (B)(ii); and calculate and inform the borrower of the total number of qualifying monthly payments with respect to the component loans of the Federal Direct Consolidation Loan that shall be deemed as qualifying monthly payments made on the refinanced Federal Consolidation Loan, by— adding together the result of each calculation made under subparagraph

(C)with respect to each such component loan; and rounding the number determined under clause

(i)to the nearest whole number. In this subsection, the term component loan , used with respect to a Federal Direct Consolidation Loan, means a loan for which the liability was discharged by the proceeds of such Federal Direct Consolidation Loan. . The Higher Education Act of 1965 ( 20 U.S.C. 1001 et seq. ) is amended— in section 455(d)(1), by striking shall offer a borrower of a loan and inserting shall offer a borrower of a Federal Direct Consolidation Loan under section 460A (with respect to the Federal Direct Consolidation Loan under such section only, and without regard to when other loans may have been received), and shall offer a borrower of a loan ; in section 455(d)(7)— in the matter preceding subparagraph (A), by striking Beginning and inserting Subject to subparagraph (F), beginning ; in subparagraph (C), by striking A borrower is required and inserting Subject to subparagraph (F), a borrower is required ; in subparagraph (E)(ii)(II), by inserting (excluding such loans under section 460A) after a Federal Direct Consolidation Loan ; and by adding at the end the following: Notwithstanding any other provision of this title, including this subsection, a borrower of a Federal Direct Consolidation Loan under section 460A shall be eligible to repay the Federal Direct Consolidation Loan under such section only under any repayment plan or program described under paragraph (1), without regard to when other loans may have been received. ; and in section 428C(a)(3)(B)(i)(V) ( 20 U.S.C. 1078–3(3)(B)(i)(V) )— by striking the period at the end of item

(cc)and inserting a semicolon; by striking the period at the end of item

(dd)and inserting ; or ; and by adding at the end the following: for the purpose of obtaining a Federal Direct Consolidation Loan under section 460A(b). .

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