[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2465 Introduced in House (IH)]







110th CONGRESS
  1st Session
                                H. R. 2465

 To allow for the consolidation of Federal student loans into a single 
            direct income-contingent loan repayment program.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                              May 23, 2007

  Mr. Petri introduced the following bill; which was referred to the 
 Committee on Education and Labor, and in addition to the Committee on 
   Ways and Means, for a period to be subsequently determined by the 
  Speaker, in each case for consideration of such provisions as fall 
           within the jurisdiction of the committee concerned

_______________________________________________________________________

                                 A BILL


 
 To allow for the consolidation of Federal student loans into a single 
            direct income-contingent loan repayment program.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Income-Dependent Education 
Assistance Act of 2007''.

 TITLE I--SYSTEM FOR MAKING INCOME-DEPENDENT EDUCATION ASSISTANCE LOANS

SEC. 101. PROGRAM AUTHORITY.

    (a) In General.--The Secretary of the Education shall, in 
accordance with the provisions of this title, establish a program to 
provide the borrowers of Federal student loans with the option of 
converting their loans to income contingent repayment by providing 
direct loans for the discharge of such loans. Such income contingent 
repayment loans are hereinafter in this title referred to as ``direct 
IDEA loans''.
    (b) Duration of Program Authority.--
            (1) Duration.--The authority to conduct the program 
        authorized by subsection (a) is effective on July 1, 2008, and 
        expires on July 1, 2014.
            (2) Authority to prepare for program.--Notwithstanding 
        paragraph (1), the Secretary may, before July 1, 2008--
                    (A) prescribe regulations to carry out this title; 
                and
                    (B) expend funds appropriated pursuant to this 
                title to carry out activities necessary to the 
                implementation of the programs authorized by subsection 
                (a).
            (3) Lapse of authority not to affect obligations.--The 
        expiration of authority under paragraph (1) shall not affect 
        the obligations of any party to any insurance or loan agreement 
        under this title entered into before such expiration.

SEC. 102. LOAN AMOUNTS, TERMS, AND CONDITIONS.

    (a) Parallel Terms, Conditions, and Benefits.--Unless otherwise 
specified in this title or section 6307 of the Internal Revenue Code of 
1986, loans made to borrowers under this title shall have the same 
terms, conditions, and benefits, as loans made to borrowers under 
section 428 of the Higher Education Act of 1965.
    (b) Form of Note: Collection by IRS.--The Secretary shall, by 
regulation, prescribe the form of the note or other evidence of 
indebtedness for direct IDEA loans consistent with the requirements of 
this title. Such note or other evidence shall--
            (1) provide that the loan shall be collectible on an income 
        contingent basis in accordance with section 6307 of the 
        Internal Revenue Code of 1986;
            (2) provide that the borrower agrees that--
                    (A) any payment owed with respect to such loan 
                shall be considered as an income tax, and shall be 
                subject to collection by the Internal Revenue Service 
                in the same manner, and subject to the same penalties, 
                as a tax due;
                    (B) the borrower's taxpayer identification number 
                may be used for the purposes of identifying the 
                borrower's IDEA account;
                    (C) the borrower will make payments on such loan 
                using the income tax withholding system and will make 
                appropriate adjustments to his or her withholding or 
                estimated tax payments for such purposes; and
                    (D) if the borrower files for relief under title 
                11, United States Code, the borrower's repayment 
                obligations on the IDEA loan will be treated the same 
                as Federal income tax obligations; and
            (3) contains such additional terms and conditions as the 
        Secretary of the Treasury may prescribe by regulation.
    (c) Notice of Conversion in Federal Student Loan Notes.--The 
Secretary shall, by regulation, require that any note or other evidence 
of indebtedness for any Federal student loan, disbursed on or after 
July 1, 2008, shall--
            (1) provide that, if the borrower defaults on repayment, 
        the loan shall be collectible on an income contingent basis in 
        accordance with section 6307 of the Internal Revenue Code of 
        1986;
            (2) provide that, if the loan is collectible on an income 
        contingent basis, the borrower agrees to the provisions 
        described in subparagraphs (A) through (D) of subsection 
        (b)(2); and
            (3) contains such additional terms and conditions as the 
        Secretary of the Treasury may prescribe by regulation.
    (d) Origination Fees and Insurance Premiums Prohibited.--An 
eligible student shall not be required to pay any origination fee, 
insurance premium, or other fee or charge to obtain a loan under this 
title.

SEC. 103. CONVERSION TO INCOME CONTINGENT REPAYMENT.

    (a) Conversion at the Election of the Borrower.--
            (1) Election.--The borrower of a Federal student loan may 
        elect to convert such loan to, and to consolidate such loan and 
        any other Federal student loans of such borrower that are 
        selected by the borrower for consolidation in, a direct IDEA 
        loan for collection under section 6307 of the Internal Revenue 
        Code of 1986 by filing with the lender and the Secretary a 
        notice in such form and containing such information as the 
        Secretary may require by regulation. Such election shall be 
        made--
                    (A) in the case of Federal student loans that enter 
                repayment on or after July 1, 2008--
                            (i) at any time within 180 days before, and 
                        within one year after, the beginning of the 
                        repayment period of such loan; or
                            (ii) in the case of multiple Federal 
                        student loans selected for consolidation, by 
                        the date by which an election must be made 
                        under clause (i) for the selected loan that is 
                        the last to enter repayment; and
                    (B) in the case of Federal student loans that 
                entered repayment before July 1, 2008, within 180 days 
                after the later of such date or the date of enactment 
                of this Act.
            (2) Discharge of federal student loan.--Upon receipt of a 
        notice of election under paragraph (1) with respect to any 
        loan, and agreement by the borrower to repay the amount of the 
        obligation in a direct IDEA loan, the Secretary shall--
                    (A) in the case of a Federal student loan described 
                in section 104(2)(A), pay to the holder of the loan the 
                principal and accrued interest owing on the loan; and
                    (B) in the case of a Federal student loan described 
                in section 104(2)(B), discharge the obligation of the 
                borrower on such loan.
    (b) Conversion Following Default.--
            (1) Authority to convert.--
                    (A) Conversion by payment to lender.--Upon default 
                by the student borrower on any Federal student loan 
                described in section 104(2)(A), and prior to the 
                commencement of suit or other enforcement proceedings 
                upon security for that loan, the insurance beneficiary 
                shall promptly notify the Secretary, and the Secretary 
                shall if requested (at that time or after further 
                collection efforts) by the beneficiary, or may on the 
                Secretary's own motion, if insurance is still in 
                effect, pay to the beneficiary the amount of the loss 
                sustained by the insured upon that loan as soon as that 
                amount has been determined. Such beneficiary shall be 
                required to meet the standards of due diligence in the 
                collection of the loan and shall be required to submit 
                proof that reasonable attempts were made to locate the 
                borrower (when the location of the borrower is unknown) 
                and proof that contact was made with the borrower (when 
                the location is known). The Secretary shall make the 
                determination required to carry out the provisions of 
                this subparagraph not later than 90 days after the 
                notification by the insurance beneficiary and shall 
                make payment in full on the amount of the beneficiary's 
                loss pending completion of the due diligence 
                investigation.
                    (B) Conversion by cancellation.--Upon default by 
                the student borrower on any Federal student loan 
                described in section 104(2)(B), the Secretary may, 
                within 90 days after such default--
                            (i) determine the amount of the loss on 
                        such loan; and
                            (ii) notify the borrower of the conversion 
                        of the obligation on the loan to the obligation 
                        to repay a direct IDEA loan.
            (2) Amount of the loss.--The ``amount of the loss'' on any 
        loan shall be deemed to be an amount equal to the sum--
                    (A) the unpaid balance of the principal amount and 
                accrued interest, including interest accruing during 
                the period from the date of the default to the date on 
                which payment is authorized by the Secretary under 
                paragraph (1)(A) or notice is sent under paragraph 
                (1)(B), except that such period shall not exceed 180 
                days; and
                    (B) unpaid penalties and costs of collection 
                incurred on the loan prior to the date of the default.
            (3) Effect of payment of loss.--Upon payment of the amount 
        of the loss pursuant to paragraph (1)(A), the United States 
        shall be subrogated for all of the rights of the holder of the 
        obligation upon the Federal student loan and shall be entitled 
        to an assignment of the note or other evidence of the loan.
            (4) Forbearance not precluded.--Nothing in this section or 
        in this title shall be construed to preclude any forbearance 
        for the benefit of the student borrower which may be agreed 
        upon by the parties to a student loan described in section 
        104(2)(A) and approved by the Secretary, or to preclude 
        forbearance by the Secretary in the enforcement of the 
        obligation after conversion under paragraph (1). Any 
        forbearance which is approved by the Secretary under this 
        paragraph with respect to the repayment of a loan, including a 
        forbearance during default, shall not be considered as 
        indicating that a holder of a Federal student loan has failed 
        to exercise reasonable care and due diligence in the collection 
        of the loan.
            (5) Conversion.--Any loan which is repaid or cancelled by 
        the Secretary under paragraph (1) shall, after the date of such 
        repayment or cancellation, be treated as a direct IDEA loan for 
        purposes of collection under section 6307 of the Internal 
        Revenue Code of 1986.
    (c) Notice to Secretary of the Treasury.--The Secretary shall 
notify the Secretary of the Treasury of the loans that are converted to 
direct IDEA loans under this section. Such notice shall contain--
            (1) the name, address, and taxpayer identification number 
        of the borrower;
            (2) the amount owed by the borrower on any loan or loans 
        that are converted under this section to an obligation under a 
        direct IDEA loan;
            (3) such other information as the Secretary and the 
        Secretary of the Treasury may require.

SEC. 104. DEFINITIONS.

    As used in this title:
            (1) Secretary.--The term ``Secretary'' means the Secretary 
        of Education.
            (2) Federal student loans.--The term ``Federal student 
        loans'' means--
                    (A) any loan made under part B of title IV of the 
                Higher Education Act of 1965 (20 U.S.C. 1071 et seq.), 
                other than a loan made under section 428B of such Act 
                to the parent of a dependent student; and
                    (B) any loan made under part D of such title, other 
                than a Federal Direct Plus Loan to the parent of a 
                dependent student.
            (3) Eligible lender.--The term ``eligible lender'' has the 
        meaning provided by section 435(b) of such Act (20 U.S.C. 
        1085(d)).
            (4) Eligible student.--The term ``eligible student'' means 
        any student that is an eligible student under section 484 of 
        such Act (20 U.S.C. 1091).

  TITLE II--COLLECTION OF INCOME-DEPENDENT EDUCATION ASSISTANCE LOANS

SEC. 201. REPAYMENTS USING INCOME TAX COLLECTION SYSTEM.

    (a) In General.--Subchapter A of chapter 64 of the Internal Revenue 
Code of 1986 (relating to collection) is amended by adding at the end 
the following new section:

``SEC. 6307. COLLECTION OF DIRECT INCOME-DEPENDENT EDUCATION ASSISTANCE 
              LOANS.

    ``(a) Repayment Obligation.--
            ``(1) In general.--If an individual is furnished a notice 
        under paragraph (2) for a calendar year that such individual is 
        in repayment status for such year with respect to any direct 
        IDEA loan, such individual shall make a payment under this 
        section for the taxable year beginning in such calendar year.
            ``(2) Notice to borrower.--
                    ``(A) In general.--During January of each calendar 
                year, the Secretary of Education shall furnish to each 
                borrower of a direct IDEA loan a notice as to--
                            ``(i) whether the records of the Secretary 
                        indicate that such borrower is in repayment 
                        status for the taxable year beginning in the 
                        preceding calendar year,
                            ``(ii) the maximum account balance of such 
                        borrower,
                            ``(iii) the current account balance of such 
                        borrower as of the close of the preceding 
                        calendar year, and
                            ``(iv) the procedure for computing the 
                        amount of repayment owing for the taxable year 
                        beginning in the preceding calendar year.
                    ``(B) Form, etc.--The notice under subparagraph 
                (A)--
                            ``(i) shall be in such form as the 
                        Secretary may by regulations prescribe, and
                            ``(ii) shall be treated as furnished if 
                        sent by mail to the individual's last known 
                        address or left at the dwelling or usual place 
                        of business of such individual.
    ``(b) Computation of Annual Repayment Amount.--
            ``(1) In general.--The annual amount payable under this 
        section by the taxpayer for any taxable year shall be the 
        lesser of--
                    ``(A) the product of--
                            ``(i) the base amortization amount, and
                            ``(ii) the progressivity factor for the 
                        taxpayer for such taxable year, or
                    ``(B) 15 percent of the excess of--
                            ``(i) the modified adjusted gross income of 
                        the taxpayer for such taxable year, over
                            ``(ii) the base income amount.
            ``(2) Base amortization amount.--
                    ``(A) In general.--For purposes of this section, 
                the term `base amortization amount' means the amount 
                which, if paid at the close of each year for a period 
                of 12 consecutive years, would fully repay (with 
                interest) at the close of such period the maximum 
                account balance of the borrower.
                    ``(B) Interest.--For purposes of subparagraph (A)--
                            ``(i) Annual rate.--With respect to a 
                        direct IDEA loan that was made on any date by 
                        conversion of a Federal student loan (at the 
                        election of the borrower or at the direction of 
                        the Secretary of Education) under title I of 
                        the Income-Dependent Education Assistance Act 
                        of 2007, the interest rate on such direct IDEA 
                        loan shall be assumed to be equal to the 
                        interest rate applicable to a consolidation 
                        loan made under section 428C of the Higher 
                        Education Act of 1965 (20 U.S.C. 1078-3) on 
                        that same date.
                            ``(ii) Limitation.--The aggregate amount of 
                        interest shall not exceed 110 percent of the 
                        amount determined under subparagraph (A) 
                        without regard to interest.
                    ``(C) Joint returns.--In the case of a joint return 
                where each spouse has an account balance and is in 
                repayment status, the amount determined under 
                subparagraph (A) shall be the sum of the base 
                amortization amounts of each spouse.
            ``(3) Progressivity factor.--
                    ``(A) In general.--For purposes of this section, 
                the progressivity factor with respect to a calendar 
                year shall be determined under the following table on 
                the basis of the ratio of the taxpayer's modified 
                adjusted gross income bears to the median State income 
                of the State in which the taxpayer is resident on the 
                last day of the taxable year ending in or with the 
                calendar year:


 
``Ratio of modified adjusted gross income to median State  Progressivity
                        income is:                           factor is:
------------------------------------------------------------------------
Less than or equal to 0.25...............................        0.5052
Greater than 0.25 and less than or equal to 0.35.........        0.5668
Greater than 0.35 and less than or equal to 0.50.........        0.6283
Greater than 0.50 and less than or equal to 0.65.........        0.6907
Greater than 0.65 and less than or equal to 0.75.........        0.8146
Greater than 0.75 and less than or equal to 1.00.........        0.9073
Greater than 1.00 and less than or equal to 1.25.........        1.0000
Greater than 1.25 and less than or equal to 1.50.........        1.0000
Greater than 1.50 and less than or equal to 1.75.........        1.1520
Greater than 1.75 and less than or equal to 2.00.........        1.2700
Greater than 2.00 and less than or equal to 2.50.........        1.3640
Greater than 2.50 and less than or equal to 3.00.........        1.4850
Greater than 3.00 and less than or equal to 3.50.........        1.6000
Greater than 3.50........................................        2.0000
------------------------------------------------------------------------

                    ``(B) Median state income.--For purposes of 
                subparagraph (A), the median State income shall be the 
                most recent census estimate of the median income of 
                such State released by the Bureau of Census before the 
                beginning of such calendar year.
            ``(4) Modified adjusted gross income.--For purposes of this 
        subsection, the term `modified adjusted gross income' means 
        adjusted gross income for the taxable year--
                    ``(A) determined without regard to--
                            ``(i) sections 135, 911, 931, and 933,
                            ``(ii) the deductions from gross income 
                        allowable under section 62(a) by reason of--
                                    ``(I) paragraph (6) thereof 
                                (relating to profit-sharing, annuities, 
                                and bond-purchase plans of self-
                                employed individuals),
                                    ``(II) paragraph (7) thereof 
                                (relating to retirement savings), and
                                    ``(III) paragraph (17) (relating to 
                                interest on education loans), and
                    ``(B) increased by the amount of interest received 
                or accrued by the taxpayer during the taxable year 
                which is exempt from tax.
            ``(5) Base income amount.--For purposes of this subsection, 
        the term `base income amount' means--
                    ``(A) in the case of a joint return, the sum of the 
                standard deduction applicable to such return and twice 
                the exemption amount for the taxable year, and
                    ``(B) in any other case, the sum of the standard 
                deduction applicable to such individual and the 
                exemption amount for the taxable year.
        For purposes of this paragraph, the term `standard deduction' 
        has the meaning given such term by section 63(c), and the term 
        `exemption amount' has the meaning given such term by section 
        151(d).
    ``(c) Termination of Borrower's Repayment Obligation.--
            ``(1) In general.--All direct IDEA loans of a borrower 
        shall be canceled as of the close of the first taxable year for 
        which the current account balance of such borrower is not 
        greater than zero.
            ``(2) Determination of current account balance.--
                    ``(A) In general.--For purposes of determining the 
                current account balance of the borrower for any taxable 
                year after the 12th taxable year that the borrower is 
                in repayment status under this section, the current 
                account balance shall be the amount which would be such 
                balance if--
                            ``(i) the initial account balance of the 
                        borrower equaled 90 percent of such initial 
                        account balance (determined without regard to 
                        this clause), and
                            ``(ii) clause (ii) of section 102(d)(3)(C) 
                        of the Income-Dependent Education Assistance 
                        Act of 2007 had been applied for all prior 
                        periods of repayment status under this section 
                        by substituting `2 percent' for `3 percent'.
                In the case of any taxable year after the 16th taxable 
                year that the borrower is in repayment status under 
                this section, clause (ii) shall be applied by 
                substituting `1 percent' for `2 percent'.
                    ``(B) Initial account balance.--For purposes of 
                subparagraph (A), the term `initial account balance' 
                means, with respect to any borrower, the sum of the 
                amounts owed by the borrower on any direct IDEA loan, 
                as contained in notices furnished under subsection 
                (a)(2) to the Secretary.
            ``(3) No repayment required after 25 years in repayment 
        status.--The borrower has no repayment obligation under this 
        section any taxable year after the 25th taxable year for which 
        the borrower is in repayment status under this section.
            ``(4) Determination of years in repayment status.--For 
        purposes of paragraphs (2) and (3), the number of taxable years 
        in which a borrower is in repayment status under this section 
        shall be determined without regard to any taxable year before 
        the most recent taxable year in which the borrower received a 
        direct IDEA loan.
            ``(5) Extension of repayment years for medical interns.--
        The number of years specified in paragraphs (2) and (3) shall 
        be increased by 1 year for each calendar year during any 5 
        months of which the individual is an intern in medicine, 
        dentistry, veterinary medicine, or osteopathic medicine.
    ``(d) Definitions.--For purposes of this section--
            ``(1) Maximum account balance.--The term `maximum account 
        balance' means the highest amount (as of the close of any 
        calendar year) of unpaid principal and unpaid accrued interest 
        on all direct IDEA loan obligations of a borrower.
            ``(2) Current account balance.--The term `current account 
        balance' means the amount (as of the close of a calendar year) 
        of unpaid principal and unpaid accrued interest on all IDEA 
        loans of a borrower.
            ``(3) Repayment status.--A borrower is in repayment status 
        for any taxable year unless--
                    ``(A) such borrower was, during at least 7 months 
                of such year, an eligible student, as that term is 
                defined in section 104(4) of the Income-Dependent 
                Education Assistance Act of 2007; or
                    ``(B) such taxable year was the first year in which 
                the borrower was such an eligible student and the 
                borrower was such an eligible student during any of the 
                last 6 months of such taxable year.
            ``(4) Direct idea loan.--The term `direct IDEA loan' has 
        the meaning given such term by title I of the Income-Dependent 
        Education Assistance Act of 2007. Such term includes any loan 
        which is treated as such under section 103 of such title.
    ``(e) Payment of Amount Owing.--Any amount to be collected from an 
individual under this section shall be paid--
            ``(1) not later than the last date (determined without 
        regard to extensions) prescribed for filing his return of tax 
        imposed by chapter 1 for the taxable year ending before the 
        date the notice under subsection (a) is sent, and
            ``(2)(A) if such return is filed not later than such date, 
        with such return, or
            ``(B) in any case not described in subparagraph (A), in 
        such manner as the Secretary may by regulations prescribe.
    ``(f) Failure to Pay Amount Owing.--If an individual fails to pay 
the full amount required to be paid on or before the last date 
described in subsection (e)(1), the Secretary shall assess and collect 
the unpaid amount in the same manner, with the same powers, and subject 
to the same limitations applicable to a tax imposed by subtitle C the 
collection of which would be jeopardized by delay.
    ``(g) Loans of Deceased and Permanently Disabled Borrowers; 
Discharge by Secretary.--
            ``(1) Discharge in the event of death.--If a borrower of a 
        direct IDEA loan dies or becomes permanently and totally 
        disabled (as determined in accordance with regulations of the 
        Secretary), then the Secretary shall discharge the borrower's 
        liability on the loan.
            ``(2) Limitation on discharge.--The discharge of the 
        liability of an individual under this subsection shall not 
        discharge the liability of any spouse with respect to any 
        direct IDEA loan made to such spouse.
    ``(h) Crediting of Collections.--
            ``(1) In general.--For purposes of determining whether 
        there is an underpayment or overpayment of tax imposed by 
        subtitle A for any taxable year by an individual who is 
        required to pay an amount under this section, amounts withheld 
        under chapter 24 and amounts paid under section 6654 shall be 
        treated as payments of the amount required to be paid under 
        this section to the extent thereof.
            ``(2) Crediting of amounts paid on a joint return.--Amounts 
        collected under this section on a joint return from a husband 
        and wife both of whom are in repayment status shall be credited 
        to the accounts of such spouses in the following order:
                    ``(A) First, to repayment of interest added to each 
                account at the end of the preceding calendar year in 
                proportion to the interest so added to the respective 
                accounts of the spouses.
                    ``(B) Then, to repayment of unpaid principal, and 
                unpaid interest accrued before such preceding calendar 
                year, in proportion to the respective maximum account 
                balances of the spouses.
    ``(i) Special Rules.--
            ``(1) Exclusion from income for loans discharged.--No 
        amount shall be includible in gross income by reason of the 
        discharge under this section of any loan.
            ``(2) Computation of alternative annual payment for 
        individuals who have attained age 55.--In the case of an 
        individual who attains age 55 before the close of the calendar 
        year ending in the taxable year, or of an individual filing a 
        joint return whose spouse attains age 55 before the close of 
        such calendar year, the progressivity factor applicable to the 
        base amortization amount of such individual for such taxable 
        year shall not be less than 1.0.
            ``(3) Finality of assessment and collection.--The first 
        sentence of subsection (b) of section 6305 shall apply to 
        assessments and collections under subsection (f) of this 
        section.
            ``(4) Information to be furnished to secretary.--The 
        borrower of any direct IDEA loan shall furnish to the Secretary 
        such information as the Secretary determines to be necessary to 
        carry out this section with respect to such loan.''.
    (b) Application of Estimated Tax.--Subsection (f) of section 6654 
of such Code (relating to failure by individual to pay estimated income 
tax) is amended by striking ``minus'' at the end of paragraph (2) and 
inserting ``plus'', by redesignating paragraph (3) as paragraph (4), 
and by inserting after paragraph (2) the following new paragraph:
            ``(3) the amount required to be repaid under section 6307 
        (relating to collection of income-dependent education 
        assistance loans), minus''.
    (c) Filing Requirement.--Subsection (a) of section 6012 of such 
Code (relating to persons required to make returns of income) is 
amended by inserting after paragraph (9) the following new paragraph:
            ``(10) Every individual required to make a payment for the 
        taxable year under section 6307 (relating to collection of 
        income-dependent education assistance loans).''.
    (d) Clerical Amendment.--The table of sections for subchapter A of 
chapter 64 of such Code is amended by adding at the end the following 
new item:

``Sec. 6307. Collection of direct income-dependent education assistance 
                            loans.''.
                                 <all>