109 HR 1617 IH: To allow borrowers consolidating student loans to choose a variable or fixed interest rate, and for other purposes. U.S. House of Representatives 2005-04-13 text/xml EN Pursuant to Title 17 Section 105 of the United States Code, this file is not subject to copyright protection and is in the public domain.
I 109th CONGRESS 1st Session H. R. 1617 IN THE HOUSE OF REPRESENTATIVES April 13, 2005 Mr. Petri introduced the following bill; which was referred to the Committee on Education and the Workforce A BILL To allow borrowers consolidating student loans to choose a variable or fixed interest rate, and for other purposes.
1.
Reference
Except as otherwise expressly provided, whenever in this Act an amendment or repeal is expressed in terms of an amendment to, or repeal of, a section or other provision, the reference shall be considered to be made to a section or other provision of the Higher Education Act of 1965 (20 U.S.C. 1001 et seq.).
2.
Consolidation loan interest rates
(a)
FFEL Loans
Paragraph (3) of section 427A(l) (20 U.S.C. 1077a(l)) is amended to read as follows: (3)
Consolidation loans
(A)
Borrower election
With respect to any consolidation loan under section 428C for which the application is received by an eligible lender on or after July 1, 2006, the applicable rate of interest shall, at the election of the borrower at the time of application for the loan, be either at the rate determined under subparagraph (B) or the rate determined under subparagraph (C). (B)
Variable rate
Except as provided in subparagraph (D), the rate determined under this subparagraph shall, during any 12-month period beginning on July 1 and ending on June 30, be determined on the preceding June 1 and be equal, for such 12-month period, to— (i) the bond equivalent rate of 91-day Treasury bills auctioned at the final auction held prior to such June 1; plus (ii)2.3 percent, except that such rate shall not exceed 8.25 percent. (C)
Fixed rate
Except as provided in subparagraph (D), the rate determined under this subparagraph shall be determined on the date on which the obligation to repay the loan is signed, and be equal, for the duration of the term of the loan, to— (i)the average bond equivalent rate of the 3-year Treasury note as determined on the basis of the last publication in May of the Federal Reserve Statistical Release H–15 (or its successor) prior to the date on which the obligation to repay the loan is signed; plus (ii)2.3 percent, except that such rate shall not exceed 8.25 percent. (D)
Consolidation of PLUS loans
In the case of any such consolidation loan that is used to repay loans each of which was made under section 428B or was a Federal Direct PLUS Loan (or both), the rates determined under subparagraphs (B) and (C) shall be determined— (i)by substituting 3.1 percent for 2.3 percent; and (ii)by substituting 9.0 percent for 8.25 percent.. (b)
Direct Loans
Subparagraph (C) of section 455(b)(7) (20 U.S.C. 1087e(b)(7)) is amended to read as follows: (C)
Consolidation loans
(i)
Borrower election
Notwithstanding the preceding paragraphs of this subsection, with respect to any Federal Direct Consolidation Loan for which the application is received by an eligible lender on or after July 1, 2006, the applicable rate of interest shall, at the election of the borrower at the time of application for the loan, be either at the rate determined under clause (ii) or the rate determined under clause (iii). (ii)
Variable rate
Except as provided in clause (iv), the rate determined under this clause shall, during any 12-month period beginning on July 1 and ending on June 30, be determined on the preceding June 1 and, for such 12-month period, not be more than— (I) the bond equivalent rate of 91-day Treasury bills auctioned at the final auction held prior to such June 1; plus (II)2.3 percent, except that such rate shall not exceed 8.25 percent. (iii)
Fixed rate
Except as provided in clause (iv), the rate determined under this clause shall be determined on the date on which the obligation to repay the loan is signed, and, for the duration of the term of the loan, not be more than— (I)the average bond equivalent rate of the 3-year Treasury note as determined on the basis of the last publication in May of the Federal Reserve Statistical Release H–15 (or its successor) prior to the date on which the obligation to repay the loan is signed; plus (II)2.3 percent, except that such rate shall not exceed 8.25 percent. (iv)
Consolidation of PLUS loans
In the case of any such Federal Direct Consolidation Loan that is used to repay loans each of which was made under section 428B or was a Federal Direct PLUS Loan, the rates determined under clauses (ii) and (iii) shall be determined— (I)by substituting 3.1 percent for 2.3 percent; and (II)by substituting 9.0 percent for 8.25 percent..
3.
Recapture of excess interest
Section 438(b)(2)(I) (20 U.S.C. 1087–1(b)(2)(I)) is amended by inserting after clause (vii) the following new clause: (viii)
Recapture of excess interest
(I)
Excess credited
With respect to a loan on which the applicable interest rate is determined under section 427A(l) and for which the first disbursement of principal is made on or after July 1, 2006, if the applicable interest rate for any 3-month period exceeds the special allowance rate applicable to such loan under this subparagraph for such period, then an adjustment shall be made by calculating the excess interest in the amount computed under subclause (II) of this clause, and by crediting the excess interest to the Government not less often than annually. (II)
Calculation of excess
The amount of any adjustment of interest on a loan to be made under this subsection for any quarter shall be equal to— (aa)the applicable interest rate minus the special allowance rate determined under this subparagraph; multiplied by (bb)the average daily principal balance of the loan (not including unearned interest added to principal) during such calendar quarter; divided by (cc)four..
4.
Student loan borrower choice of loan consolidator
Section 428C(b)(1)(A) of the Higher Education Act of 1965 (20 U.S.C. 1078–3(b)(1)(A)) is amended by striking and (i) the lender holds and all that follows through selected for consolidation).