II 111th CONGRESS 1st Session S. 1541 IN THE SENATE OF THE UNITED STATES July 30, 2009 Mr. Brown introduced the following bill; which was read twice and referred to the Committee on Health, Education, Labor, and Pensions A BILL To amend title IV of the Higher Education Act of 1965 to authorize private education loan refinancing under the Federal student loan program.

1.

Short title; purpose

(a)

Short title

This Act may be cited as the Private Student Loan Debt Swap Act of 2009. (b)

Purpose

It is the purpose of this Act to establish a temporary private student loan debt swap program to assist eligible borrowers in refinancing all or a portion of their private education debt with less costly loans with the same terms and conditions as Federal direct loans.

2.

Private education loan refinancing

Title IV of the Higher Education Act of 1965 (20 U.S.C. 1070 et seq.) is amended by adding at the end the following: J

Private education loan refinancing

499E.

Private education loan refinancing

(a)

In general

(1)

Authority

The Secretary shall carry out a Private Education Loan Debt Swap program in accordance with this section. (2)

Availability of funds

There are hereby made available, in accordance with the provisions of this section, such sums as may be necessary to make loans under this section through refinancing to all individuals eligible to receive private education loan refinancing under this section. (3)

Private education loan

In this section, the term private education loan has the meaning given the term in section 140 of the Truth in Lending Act (15 U.S.C. 1650). (b)

Eligible debt swap loan borrower

An individual shall be eligible to receive private education loan refinancing under this section if the individual— (1)(A)was, at any time after July 1, 1994, eligible to obtain an unsubsidized Federal Stafford Loan under section 428H for a period of undergraduate or graduate enrollment; (B)incurred at least 1 private education loan for such period of enrollment; (C)is not enrolled in an eligible institution on at least a half-time basis; (D)remains indebted on at least 1 private education loan eligible for refinancing under this section and— (i)has never obtained an unsubsidized Federal Stafford Loan under section 428H; or (ii)has borrowed an aggregate amount under the unsubsidized Federal Stafford Loan program under section 428H that is less than the maximum aggregate amount indicated under section 428H(d) for loans first disbursed on or after July 1, 2008; (E)is not in default on a loan made, insured, or guaranteed under this title; (F)has made not less than 2 consecutive payments on the private education loan to be refinanced and is not more than 90 days delinquent on such loan; and (G)has not previously obtained refinancing under this section; or (2)(A)was, at any time after July 1, 2006, eligible to obtain a Federal PLUS Loan under section 428B for a period of graduate or professional enrollment; (B)incurred at least 1 private education loan for such period of enrollment; (C)is not in default on a loan made, insured, or guaranteed under this title; (D)has made not less than 2 consecutive payments on the private education loan to be refinanced and is not more than 90 days delinquent on such loan; (E)does not have an adverse credit history; and (F)has not previously obtained refinancing under this section. (c)

Refinancing under the debt swap loan program

(1)

In general

The Secretary shall refinance or make a payment on a private education loan in accordance with this subsection for an individual who is eligible for private education loan refinancing pursuant to subsection (b). (2)

Types of loans that shall be refinanced

A private education loan is eligible to be refinanced under this subsection if the loan was incurred— (A)after July 1, 1994, and before July 1, 2010; and (B)to pay the cost of attendance for enrollment in an eligible program at an institution of higher education eligible to participate in programs under this title. (3)

Loan limits

The maximum amount of a private education loan that may be refinanced under this subsection is— (A)for an individual described in subsection (b)(1), an amount equal to the sum of unpaid principal, accrued interest, and late charges of all private education loans eligible under paragraph (2) incurred by such individual not to exceed the maximum aggregate amount of unsubsidized Federal Stafford Loans under section 428H(d) for loans first disbursed on or after July 1, 2008, applicable to an undergraduate student under such section if the individual incurred such loan to enroll in an undergraduate program or applicable to a graduate student under such section if the individual incurred such loan to enroll in a graduate program, less any amount previously borrowed by such individual pursuant to section 428 or part D; and (B)for an individual described in subsection (b)(2), an amount equal to the sum of unpaid principal, accrued interest, and late charges of all private education loans eligible under paragraph (2) incurred by such individual, less any amount previously borrowed by such individual pursuant to section 428B for such period of enrollment in a graduate or professional program. (4)

Interest rate

The interest rate for a private education loan refinanced under this subsection shall be— (A)for an individual described in subsection (b)(1), the same interest rate applicable to an unsubsidized Federal Stafford Loan; and (B)for an individual described in subsection (b)(2), the same interest rate applicable to a Federal Direct PLUS loan. (5)

Repayment terms

A private education debt swap loan made under this subsection through refinancing shall have the same repayment terms, conditions, and benefits as Federal Direct Consolidation Loans. (6)

Termination of authority

The authority to refinance private education loans under this subsection expires on July 1, 2011, or the date that is 1 year after certification by the Secretary to Congress that the debt swap loan program pursuant to this section is fully operational, whichever date is later. (7)

Loan application and promissory note

The Secretary shall develop and distribute a standard application and promissory note and loan disclosure form for loans made under this section through refinancing. (8)

Loan disbursement

Proceeds of any loan made under this section shall be paid by the Secretary directly to the holder of the private education loan being refinanced for the purpose of discharging or reducing such private education loan debt on behalf of the borrower, subject to repayment terms under this section. (d)

Public awareness campaign

(1)

In general

The Secretary shall carry out a national awareness campaign on the availability and benefits of refinancing private education loans under this section. (2)

Content of campaign

The campaign described in paragraph (1) shall include— (A)explaining the benefits of borrowing through the Federal student loan programs authorized under this title compared to private loans; and (B)information on all of the repayment options, loan forgiveness opportunities, low-fixed interest rates and other benefits of such Federal student loan programs. (e)

Report to congress

The Secretary shall report to Congress annually on the volume and repayment status of private education loans refinanced under this section.

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