Consolidation of private education loans

Section 455(g) of the Higher Education Act of 1965 (20 U.S.C. 1087e(g)) is amended— (1)by striking A borrower and inserting the following:

(1)

In general

A borrower

;

(2)by inserting , and any loan described in paragraph (2), after July 1, 2010; and (3)by adding at the end the following new paragraph:

(2)

Consolidation of private education loans as a Federal Direct Consolidation Loan

(A)

In general

Notwithstanding any other provision of law, a borrower who meets the eligibility criteria described in paragraph (1) and subparagraph (B) of this paragraph shall be eligible to obtain a Federal Direct Consolidation loan under this paragraph that— (i)shall include an eligible private education loan; and (ii)may include a loan described in section 428C(a)(4). (B)

Eligible borrower

A borrower of an eligible private education loan is eligible to obtain a Federal Direct Consolidation Loan under this paragraph if the borrower— (i)is not in default on a loan made, insured, or guaranteed under this title or in default (as such term is defined in section 435(l)) on any eligible private education loan that the borrower is seeking to consolidate under this paragraph, except that a borrower who entered such default at any time during the period beginning on December 1, 2007, through December 31, 2009, due to an economic hardship (as such term is defined in section 435(o)), as determined by the Secretary, shall not be ineligible under this clause; (ii)was— (I)at any time on or after July 1, 1994, and before July 1, 2010, enrolled as an undergraduate, graduate, or professional student who was eligible to borrow a loan under section 428H or a Federal Direct Unsubsidized Stafford Loan; or (II)at any time on or after July 1, 2006, and July 1, 2010, enrolled as a graduate or professional student who was eligible to borrow a loan under section 428B or a Federal Direct PLUS loan; (iii)borrowed at least one eligible private education loan for a period of enrollment described in clause (ii); (iv)is in— (I)repayment status on the eligible private education loan that the borrower is seeking to consolidate under this paragraph; or (II)a grace period preceding repayment on such loan; (v)with respect to Federal Direct PLUS loans, does not have an adverse credit history, as such term is defined by the Secretary by regulation; and (vi)has not previously obtained a Federal Direct Consolidation Loan under this paragraph. (C)

Definition of eligible private education loan

For purposes of this paragraph, the term eligible private education loan means a private education loan (as such term is defined in section 140 of the Truth in Lending Act (15 U.S.C. 1650)) that was disbursed to a borrower on or after July 1, 1994, and before July 1, 2010. (D)

Amount that may be consolidated

The aggregate maximum amount of eligible private education loans that may be consolidated by a borrower under this paragraph is— (i)for loans made to a borrower for a period of enrollment described in subparagraph (B)(ii)(I), an amount equal to the amount of outstanding principal, accrued interest, and related fees and costs (as determined by the Secretary) owed by the borrower on eligible private education loans, except that the outstanding principal on the eligible private education loans shall not exceed— (I)the maximum aggregate amount of loans under section 428H, as of the date of the enactment of the College Debt Swap Act of 2011— (aa)for an undergraduate dependent student, if the borrower was enrolled as an undergraduate dependent student during the period of enrollment; (bb)for an undergraduate independent student, if the borrower was enrolled as an undergraduate independent student during the period of enrollment; or (cc)for a graduate or professional student, if the borrower was enrolled as a graduate or professional student during the period of enrollment;

minus

(II)the aggregate amount of loans under section 428H and Federal Direct Unsubsidized Stafford Loans borrowed by the borrower for such period of enrollment; plus (ii)for loans made to a borrower for a period of enrollment described in subparagraph (B)(ii)(II), an amount equal to— (I)the total outstanding principal, accrued interest, and related fees and costs (as determined by the Secretary) owed by the borrower on eligible private education loans; minus (II)the aggregate amount of loans under section 428B and Federal Direct PLUS loans borrowed by the borrower for such period of enrollment. (E)

Interest rate

Notwithstanding subsection (b), a Federal Direct Consolidation loan made under this paragraph shall bear interest at an annual rate on the unpaid principal balance of the loan that is the weighted average, rounded to the nearest higher one-eighth of 1 percent, of— (i)for loans consolidated under this paragraph that were made to a borrower for a period described in subparagraph (B)(ii)(I), the interest rate for a Federal Direct Unsubsidized Stafford Loan for which the first disbursement is made on the day before the date of enactment of the College Debt Swap Act of 2011; and (ii)for loans consolidated under this paragraph that were made to a borrower for a period described in subparagraph (B)(ii)(II), the interest rate for a Federal Direct PLUS loan for which the first disbursement is made on the day before the date of enactment of the College Debt Swap Act of 2011. (F)

Payment to the holder

(i)

Secretary

For each eligible private education loan that a borrower is consolidating under this paragraph, the Secretary shall make a payment to the holder of such loan in an amount equal to the amount consolidated under this paragraph with respect to such loan. (ii)

Holder

Upon receipt of a payment described in clause (i), a holder shall discharge the liability on the loan consolidated under this paragraph in the amount of such payment. (G)

Outreach activities required

(i)

In general

The Secretary shall conduct outreach activities described in clause (ii) to inform and educate students and their families about the temporary private education loan consolidation program under this paragraph. (ii)

Required components of outreach

The Secretary shall provide for the broad dissemination of information on the program under this paragraph by— (I)operating and maintaining an Internet website through which individuals may obtain information on changes made to the program; (II)developing and disseminating information to alumni of undergraduate, graduate, and professional schools who may be eligible for the program; (III)providing assistance to institutions of higher education to educate graduates on the availability of the program; and (IV)ensuring that all outreach efforts are developed using plain language and are culturally- and language-appropriate. (iii)

Use of other entities

In carrying out this subparagraph, the Secretary may work with other appropriate entities to facilitate the dissemination of information under this subparagraph and provide assistance as described in this subparagraph. (H)

Authorization and appropriation

There are authorized to be appropriated, and there are appropriated, such sums as may be necessary to carry out this paragraph. The amounts made available under this subparagraph shall remain available until June 30, 2012. (I)

Period of authority

The authority to make Federal Direct Consolidation loans under this paragraph shall begin 30 days after the date of the enactment of the College Debt Swap Act of 2011 and shall expire on June 30, 2012.