Notification and automatic enrollment procedures for borrowers who are delinquent on loans and for borrowers who are rehabilitating defaulted loans

(a)

Amendments

(1)

Notification and automatic enrollment procedures

Section 455(d) of the Higher Education Act of 1965 (20 U.S.C. 1087e(d)) is amended by adding at the end the following:

(6)

Notification and automatic enrollment procedures for borrowers who are delinquent on loans

(A)

Authority to obtain income information

The Secretary shall establish and implement, with respect to any borrower described in subparagraph (B), procedures to—(i)use return information of the borrower (and the borrower's spouse, if applicable) disclosed under section 6103(l)(13) of the Internal Revenue Code of 1986, pursuant to approval provided under section 494, to determine the income and family size of the borrower (and the borrower's spouse, if applicable) without further action by the borrower; (ii)allow the borrower (or the spouse of the borrower), at any time, to opt out of disclosure under such section 6103(l)(13) and instead provide such information as the Secretary may require to determine the income and family size of the borrower (and the borrower's spouse, if applicable); and(iii)provide the borrower with an opportunity to update the return information so disclosed before the determination of the income and family size of the borrower for purposes of this paragraph.(B)

Borrower notification

With respect to each borrower of a covered loan who is at least 31 days delinquent on such loan and who has not been subject to the procedures under this paragraph for such loan in the preceding 120 days, the Secretary shall, as soon as practicable after such 31-day delinquency, provide to the borrower the following:(i)Notification that the borrower is at least 31 days delinquent on at least 1 covered loan, and a description of all delinquent covered loans, nondelinquent covered loans, and noncovered loans of the borrower.(ii)A brief description of the repayment plans for which the borrower is eligible and the covered loans and noncovered loans of the borrower that may be eligible for such plans, based on information available to the Secretary.(iii)Clear and simple instructions on how to select the repayment plans.(iv)In the case of a borrower of a loan under section 428B, or a Federal Direct PLUS Loan, that is made, insured, or guaranteed on behalf of a dependent student, an explanation that the borrower may qualify for an income-driven repayment plan if the borrower consolidates such loan into a Federal Direct Consolidation Loan, and the amount of the monthly payment of such consolidation loan if the borrower does so consolidate.(v)The amount of monthly payments for the covered and noncovered loans under the repayment plans for which the borrower is eligible, based on information available to the Secretary, including, if the income information of the borrower is available to the Secretary under subparagraph (A)—(I)the amount of the monthly payment under each income-driven repayment plan for which the borrower is eligible for the borrower's covered and noncovered loans, based on such income information; and(II)the income, family size, tax filing status, and tax year information on which each monthly payment is based.(vi)An explanation that in the case of a borrower for whom adjusted gross income is unavailable—(I)if the borrower selects to repay the covered loans of such borrower pursuant to an income-driven repayment plan that defines discretionary income in such a manner that an individual not required under section 6012(a)(1) of the Internal Revenue Code of 1986 to file a return with respect to income taxes imposed by subtitle A of such Code may have a calculated monthly payment greater than $0, the borrower will be required to provide the Secretary with other documentation of income satisfactory to the Secretary, which documentation the Secretary may use to determine an appropriate repayment schedule; and(II)if the borrower selects to repay such loans pursuant to an income-driven repayment plan that is not described in subclause (I), the borrower will not be required to provide the Secretary with such other documentation of income, and the borrower will have a calculated monthly payment of $0.(vii)An explanation that the Secretary shall take the actions under subparagraph (C) with respect to such borrower, if—(I)the borrower is 75 days delinquent on one or more covered loans and has not selected a new repayment plan for the covered loans of the borrower; and(II)in the case of such a borrower whose repayment plan for the covered loans of the borrower is not an income-driven repayment plan, the monthly payments under such repayment plan are higher than such monthly payments would be under an income-driven repayment plan for such loans. (viii)Instructions on updating the information of the borrower obtained under subparagraph (A).(C)

Secretary’s initial selection of plan

With respect to each borrower described in subparagraph (B) who has a repayment plan for the covered loans of the borrower that meets the requirements of clause (vi)(II) of subparagraph (B) and has not selected a new repayment plan for such loans in accordance with the notice received under such subparagraph, and who is at least 75 days delinquent on such a loan, the Secretary shall, as soon as practicable—(i)in a case in which any of the borrower's covered loans are eligible for an income-driven repayment plan—(I)(aa)provide the borrower with the income-driven repayment plan that requires the lowest monthly payment amount for each covered loan of the borrower, compared to any other such plan for which the borrower is eligible; or(bb)if more than one income-driven repayment plan would offer the borrower the same lowest monthly payment amount, provide the borrower with the income-driven repayment plan that has the most favorable terms for the borrower;(II)if the plan selected under subclause (I) is not the income-driven repayment plan that would have the lowest monthly payment amount if the borrower were eligible for such plan for the borrower’s covered loans and noncovered loans, notify the borrower of the actions, if any, the borrower may take to become eligible for such income-driven repayment plan; and(III)authorize the borrower to change the Secretary’s selection of a plan under this clause to any plan described in paragraph (1) for which the borrower is eligible; and(ii)in a case in which none of the borrower’s covered loans are eligible for an income-driven repayment plan, notify the borrower of the actions, if any, the borrower may take for such loans to become eligible for such a plan.(D)

Secretary's additional selection of plan

(i)

In general

With respect to each borrower of a covered loan who selects a new repayment plan in accordance with the notice received under subparagraph (B) and who continues to be delinquent on such loan for a period described in clause (ii), the Secretary shall, as soon as practicable after such period, carry out the procedures described in clauses (i) and (ii) of subparagraph (C) for the covered loans of the borrower, if such procedures would result in lower monthly repayment amounts on such loan.(ii)

Description of period

The duration of the period described in clause (i) shall be the amount of time that the Secretary determines is sufficient to indicate that the borrower may benefit from repaying such loan under a new repayment plan, but in no case shall such period be less than 60 days.(7)

Notification and automatic enrollment procedures for borrowers who are rehabilitating defaulted loans

(A)

Authority to obtain income information

The Secretary shall establish and implement, with respect to any borrower who is rehabilitating a covered loan pursuant to section 428F(a), procedures to—(i)use return information of the borrower (and the borrower's spouse, if applicable) disclosed section 6103(l)(13) of the Internal Revenue Code of 1986, pursuant to approval provided under section 494, to obtain such information as is reasonably necessary regarding the income and family size of the borrower (and the borrower's spouse, if applicable); (ii)allow the borrower (or the spouse of the borrower), at any time, to opt out of disclosure under such section 6103(l)(13) and instead provide such information as the Secretary may require to obtain such information; and (iii)provide the borrower with an opportunity to update the return information so disclosed before the determination of income and family size of the borrower (and the borrower's spouse, if applicable) for purposes of this paragraph.(B)

Borrower notification

Not later than 30 days after a borrower makes the 6th payment required for the loan rehabilitation described in subparagraph (A), the Secretary shall notify the borrower of the process under subparagraph (C) with respect to such loan.(C)

Secretary’s selection of plan

With respect to each borrower who has made the 9th payment required for the loan rehabilitation described in subparagraph (A), the Secretary shall, as soon as practicable after such payment—(i)in a case in which any of the borrower's covered loans, without regard to whether the loan has been so rehabilitated, is eligible for an income-driven repayment plan—(I)(aa)provide the borrower with the income-driven repayment plan that requires the lowest monthly payment amount for each covered loan of the borrower, compared to any other such plan for which the borrower is eligible; or(bb)if more than one income-driven repayment plan would offer the borrower the same lowest monthly payment amount, provide the borrower with the income-driven repayment plan that has the most favorable terms for the borrower; and(II)if the plan selected under subclause (I) is not the income-driven repayment plan that would have the lowest monthly payment amount if the borrower were eligible for such plan for the borrower’s covered loans and noncovered loans, notify the borrower of the actions, if any, the borrower may take to become eligible for such income-driven repayment plan; and(ii)in a case in which none of the borrower’s covered loans are eligible for an income-driven repayment plan, notify the borrower of the actions, if any, the borrower may take for such a loan to become eligible for such a plan.

(2)

Definitions

Section 455(d) of the Higher Education Act of 1965 (20 U.S.C. 1087e(d)), as amended by paragraph (1), is further amended by adding at the end the following:

(8)

Definitions

In this subsection:(A)

Covered loan

The term covered loan means—(i)a loan made under this part;(ii)a loan purchased under section 459A; or(iii)a loan that has been assigned to the Secretary under section 428(c)(8).(B)

Income-driven repayment plan

The term income-driven repayment plan means a plan described in subparagraph (D) or (E) of paragraph (1).(C)

Noncovered loan

The term noncovered loan means a loan made, insured, or guaranteed under this title that is not a covered loan.

(3)

Automatic recertification

(A)

Borrower for whom adjusted gross income is unavailable

Section 455(e)(8)(A) of the Higher Education Act of 1965 (20 U.S.C. 1087e(e)(8)(A)) is amended—(i)by striking and at the end of clause (ii);(ii)by redesignating clause (iii) as clause (iv);(iii)in clause (iv) (as so redesignated), by striking the period at the end and inserting ; and; and (iv)by inserting after clause (ii), the following:

(iii)in the case of a borrower who has selected to repay a covered loan (as defined in subsection (d)(8)) pursuant to an income contingent repayment plan that defines discretionary income in such a manner that the borrower would have a calculated monthly payment equal to $0, not require the borrower to provide the Secretary the information described in clause (i) or (ii), and ensure that the borrower will have a calculated monthly payment of $0; and

(B)

Inclusion of covered loans

Section 455(e)(8)(B) of the Higher Education Act of 1965 (20 U.S.C. 1087e(e)(8)(B)) is amended by striking a loan made under this part and inserting a covered loan (as defined in subsection (d)(8)). (4)

Changing plans

Section 493C(b)(8) of the Higher Education Act of 1965 (20 U.S.C. 1098e(b)(8)) is amended to read as follows:

(8)a borrower who is repaying a loan made, insured, or guaranteed under part B or D pursuant to income-based repayment may elect, at any time, to terminate repayment pursuant to income-based repayment and repay such loan under any repayment plan for which the loan is eligible in accordance with the requirements of part B or part D, respectively; and

(5)

Procedure and requirement for requesting tax return information from the IRS

Section 494(a) of the Higher Education Act of 1965 (20 U.S.C. 1098h(a)) is amended—(A)in paragraph (2)—(i)in subparagraph (A), in the matter preceding clause (i), by striking a loan under part D and inserting a covered loan (as defined in section 455(d)(8)); and(ii)in subparagraph (B), by striking a loan under part D and inserting a covered loan (as defined in section 455(d)(8)); and(B)by adding at the end the following:

(4)

Loan delinquency and rehabilitation

(A)

Borrowers delinquent on loans

In the case of an individual who is a borrower of a covered loan and who is at least 31 days delinquent on such loan, the Secretary, with respect to such individual and any spouse of such individual, shall—(i)provide to such individuals the notification described in paragraph (1)(A)(i); and(ii)require, as a condition of eligibility for the notification and automatic enrollment procedures for borrowers who are delinquent on loans under section 455(d)(6), that such individuals—(I)affirmatively approve the disclosure described in paragraph (1)(A)(i) and agree that such approval shall serve as an ongoing approval of such disclosure until the date on which the individual elects to opt out of such disclosure under section 455(d)(6)(A)(ii); or (II)provide such information as the Secretary may require to carry out the procedures under section 455(d)(6) with respect to such individual.(B)

Loan rehabilitation

In the case of any written or electronic application by an individual for the rehabilitation of a covered loan pursuant to section 428F(a), the Secretary, with respect to such individual and any spouse of such individual, shall—(i)provide to such individuals the notification described in paragraph (1)(A)(i); and(ii)require, as a condition of eligibility for loan rehabilitation pursuant to section 428F(a), that such individuals—(I)affirmatively approve the disclosure described in paragraph (1)(A)(i) and agree that such approval shall serve as an ongoing approval of such disclosure until the date on which the individual elects to opt out of such disclosure under section 455(d)(7)(A)(ii); or (II)provide such information as the Secretary may require to carry out the procedures under section 455(d)(7) with respect to such individual.(C)

Covered loan defined

In this paragraph, the term covered loan has the meaning given the term in section 455(d)(8).

(b)

Secure disclosure of tax-Return information

(1)

In general

Section 6103(l)(13) of the Internal Revenue Code of 1986 is amended by redesignating subparagraphs (D), (E), and (F) as paragraphs (E), (F), and (G), respectively, and by inserting after subparagraph (C) the following new subparagraph:

(D)

Notification and automatic enrollment for certain borrowers

The Secretary shall, upon written request from the Secretary of Education, disclose to any authorized person, only for the purpose of (and to the extent necessary in) carrying out paragraphs (6) and (7) of section 455(d) of the Higher Education Act of 1965, return information described in clauses (i) through (vi) of subparagraph (A) from returns of an individual certified by the Secretary of Education as having provided approval under section 494(a)(4) of such Act (as in effect on the date of enactment of this paragraph) for such disclosure.

(2)

Conforming amendments

(A)Section 6103(l)(13)(A) of the Internal Revenue Code of 1986 is amended by striking loans under part D of such title and inserting covered loans (as defined in section 455(d)(8) of such Act).(B)Section 6103(l)(13)(E)(i) of the Internal Revenue Code of 1986 (as redesignated by paragraph (1)) is amended by striking and (C) and inserting (C), and (D).(C)Subparagraphs (F) and (G) of section 6103(l)(13) of the Internal Revenue Code of 1986 (as redesignated by paragraph (1)) are each amended by striking or (C) and inserting (C), or (D). (c)

Effective date; application

(1)

Automatic enrollment

The amendments made by paragraphs (1), (2), (3), and (5) of subsection (a) shall—(A)apply to all borrowers of covered loans (as defined in section 455(d)(8) of the Higher Education Act of 1965, as added by subsection (a)); and(B)take effect on July 1, 2026, and shall apply with respect to award year 2026–2027 and each subsequent award year, as determined under the Higher Education Act of 1965.(2)

Changing plans

The amendment made by subsection (a)(4) shall take effect on the date of enactment of this Act. (3)

Disclosure

The amendments made by subsection (b) shall apply to disclosures after the date of enactment of this Act.