[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4170 Introduced in House (IH)]

112th CONGRESS
  2d Session
                                H. R. 4170

To increase purchasing power, strengthen economic recovery, and restore 
  fairness in financing higher education in the United States through 
  student loan forgiveness, caps on interest rates on Federal student 
  loans, and refinancing opportunities for private borrowers, and for 
                            other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             March 8, 2012

    Mr. Clarke of Michigan introduced the following bill; which was 
   referred to the Committee on Education and the Workforce, and in 
addition to the Committees on Foreign Affairs and Armed Services, 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 increase purchasing power, strengthen economic recovery, and restore 
  fairness in financing higher education in the United States through 
  student loan forgiveness, caps on interest rates on Federal student 
  loans, and refinancing opportunities for private borrowers, and for 
                            other purposes.

    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 ``Student Loan Forgiveness Act of 
2012''.

SEC. 2. FINDINGS.

    Congress finds the following:
            (1) A well-educated citizenry is critical to our Nation's 
        ability to compete in the global economy.
            (2) The Federal Government has a vested interest in 
        ensuring access to higher education.
            (3) Higher education should be viewed as a public good 
        benefitting our country rather than as a commodity solely 
        benefitting individual students.
            (4) Total outstanding student loan debt officially 
        surpassed total credit card debt in the United States in 2010, 
        and is on track to exceed $1,000,000,000,000 during 2012.
            (5) Excessive student loan debt is impeding economic growth 
        in the United States. Faced with excessive repayment burdens, 
        many individuals are unable to start businesses, invest, or buy 
        homes. Relieving student loan debt would give these individuals 
        greater control over their earnings and would increase 
        entrepreneurship and demand for goods and services.
            (6) Because of soaring tuition costs, students often have 
        no choice but to amass significant debt to obtain an education 
        that is widely considered a prerequisite for earning a living 
        wage.
            (7) Amidst rising tuition rates and stagnant grant funding, 
        many students are forced to supplement Federal loans with 
        private loans, which frequently feature higher interest rates 
        with fewer consumer protections.
            (8) A borrower who experiences an extended hardship for 
        whatever reason, or a borrower who experiences a series of 
        separate hardships over a longer period of time, will often 
        have no choice but to default on his or her private student 
        loans. Opportunities to put such private loans into forbearance 
        are limited.
            (9) During the period of forbearance on private student 
        loans, interest continues to accrue and is capitalized, and 
        once the borrower comes out of forbearance, he or she owes 
        significantly more on the principal of the loan than before the 
        hardship period began.

SEC. 3. 10/10 LOAN REPAYMENT AND FORGIVENESS.

    Part G of title IV of the Higher Education Act of 1965 is amended 
by adding at the end the following:

``SEC. 493E. 10/10 LOAN REPAYMENT AND FORGIVENESS.

    ``(a) 10/10 Loan Repayment Plan.--
            ``(1) 10/10 loan repayment plan authorized.--
        Notwithstanding any other provision of this Act, the Secretary 
        shall carry out a program (to be known as the `10/10 Loan 
        Repayment Plan') under which--
                    ``(A) a borrower of an eligible loan who is 
                eligible under paragraph (3) may elect to have the 
                borrower's aggregate monthly payment for all such loans 
                not exceed the monthly payment amount described in 
                paragraph (2);
                    ``(B) the holder of such an eligible loan shall 
                apply the borrower's monthly payment under this 
                subsection first toward interest due on the loan, next 
                toward any fees due on the loan, and then toward the 
                principal of the loan;
                    ``(C) any interest due and not paid under 
                subparagraph (B) shall continue to accrue but shall not 
                be capitalized, and--
                            ``(i) shall not be capitalized if the 
                        borrower ends the election to make 10/10 Loan 
                        Repayment under this subsection; or
                            ``(ii) shall be forgiven in accordance with 
                        subsection (b) if the borrower meets the 
                        requirements for forgiveness under such 
                        subsection;
                    ``(D) any principal due and not paid under 
                subparagraph (B) shall be deferred, and shall be 
                forgiven in accordance with subsection (b) if the 
                borrower meets the requirements for forgiveness under 
                such subsection;
                    ``(E) the amount of time the borrower makes monthly 
                payments under this subsection may exceed 10 years;
                    ``(F) a borrower who is repaying an eligible loan 
                pursuant to 10/10 Loan Repayment under this subsection 
                may elect, at any time, to terminate repayment pursuant 
                to 10/10 Loan Repayment and repay such loan under the 
                standard repayment plan, in which case the amount of 
                time the borrower is permitted to repay such loans may 
                exceed 10 years; and
                    ``(G) the special allowance payment to a lender 
                calculated under section 438(b)(2)(I), when calculated 
                for a loan in repayment under this section, shall be 
                calculated on the principal balance of the loan and on 
                any accrued interest unpaid by the borrower in 
                accordance with this section.
            ``(2) 10/10 loan repayment monthly payment formula.--A 
        borrower who has elected to participate in the 10/10 Loan 
        Repayment Plan under this subsection shall, during each month 
        the borrower is participating in such Plan, make a monthly 
        payment in an amount equal to--
                    ``(A) one-twelfth of the amount that is 10 percent 
                of the result obtained by calculating, on at least an 
                annual basis, the amount by which--
                            ``(i) the borrower's, and the borrower's 
                        spouse's (if applicable), adjusted gross 
                        income; exceeds
                            ``(ii) 150 percent of the poverty line 
                        applicable to the borrower's family size as 
                        determined under section 673(2) of the 
                        Community Services Block Grant Act (42 U.S.C. 
                        9902(2));
                    ``(B) in the case of a borrower who is in deferment 
                due to an economic hardship described in section 
                435(o), $0; or
                    ``(C) in the case of a borrower for whom the 
                payment calculated under subparagraph (A) is $0, but 
                who is not in deferment due to an economic hardship 
                described in section 435(o), an amount determined by 
                the Secretary, on a case-by-case basis and not less 
                than annually, based on criteria established by the 
                Secretary that shall take into consideration--
                            ``(i) the specific financial and other 
                        relevant circumstances of a borrower, and the 
                        borrower's spouse (if applicable), including 
                        income, assets, total amount of eligible loans, 
                        other debt, family size, employment status, and 
                        the period of time the borrower has been 
                        subject to this subparagraph;
                            ``(ii) the need to prevent abuse of the 
                        relief provided under the 10/10 Loan Repayment 
                        Plan under this subsection and the 10/10 
                        Forgiveness Program under subsection (b); and
                            ``(iii) any other factors the Secretary 
                        considers to be appropriate to such 
                        determination.
            ``(3) Eligibility.--
                    ``(A) Eligibility determinations.--The Secretary 
                shall establish procedures for annually determining the 
                borrower's eligibility for 10/10 Loan Repayment, 
                including verification of a borrower's annual adjusted 
                gross income and the annual amount due on the total 
                amount of eligible loans, and such other procedures as 
                are necessary to effectively implement 10/10 Loan 
                Repayment under this subsection. The Secretary shall 
                consider, but is not limited to, the procedures 
                established in accordance with section 455(e)(1) or in 
                connection with income sensitive repayment schedules 
                under section 428(b)(9)(A)(iii) or 428C(b)(1)(E).
                    ``(B) Auto-debit requirement.--To be eligible to 
                participate in the 10/10 Loan Repayment Plan under this 
                subsection, a borrower shall agree to have all eligible 
                loan payments that are made on or after the date that 
                the borrower elects to participate in such repayment 
                plan automatically electronically debited from a bank 
                account.
            ``(4) Special rule for married borrowers filing 
        separately.--In the case of a married borrower who files a 
        separate Federal income tax return, the Secretary shall 
        calculate the amount of the borrower's 10/10 Loan Repayment 
        under this subsection solely on the basis of the borrower's 
        student loan debt and adjusted gross income.
    ``(b) 10/10 Loan Forgiveness.--
            ``(1) In general.--The Secretary shall carry out a program 
        (to be known as the `10/10 Loan Forgiveness Program') to 
        forgive a qualified loan amount, in accordance with paragraph 
        (3), on an eligible loan for a borrower who, after the date 
        that is 10 years prior to the date of enactment of the Student 
        Loan Forgiveness Act of 2012, has made 120 monthly payments on 
        the eligible loan pursuant to any one or a combination of the 
        following:
                    ``(A) Monthly payment under the 10/10 Loan 
                Repayment Plan under subsection (a).
                    ``(B) Monthly payment under any other repayment 
                plan authorized under part B or D of an amount that, 
                for a given month, is not less than the monthly payment 
                amount calculated under subsection (a) that the 
                borrower would have owed in the year in which such 
                payment was made, based on the borrower's adjusted 
                gross income and eligible loan balance for such year.
                    ``(C) For any month after such date during which 
                the borrower is in deferment due to an economic 
                hardship described in section 435(o), monthly payment 
                of $0.
            ``(2) Method of loan forgiveness.--To provide loan 
        forgiveness under paragraph (1), the Secretary is authorized to 
        carry out a program--
                    ``(A) through the holder of the loan, to assume the 
                obligation to repay a qualified loan amount for a loan 
                made, insured, or guaranteed under part B of this 
                title; and
                    ``(B) to cancel a qualified loan amount for a loan 
                made under part D of this title.
            ``(3) Qualified loan amount.--After the borrower has made 
        120 monthly payments described in paragraph (1), the Secretary 
        shall forgive--
                    ``(A) with respect to new borrowers on or after the 
                date of enactment of the Student Loan Forgiveness Act 
                of 2012, the sum of--
                            ``(i) the balance of principal and fees due 
                        on the borrower's eligible loans as of the time 
                        of such forgiveness, not to exceed $45,520; and
                            ``(ii) the amount of interest that has 
                        accrued on the balance described in clause (i) 
                        as of the time of such forgiveness; or
                    ``(B) with respect to any other eligible borrower, 
                the balance of principal, interest, and fees due on the 
                borrower's eligible loans as of the time of such 
                forgiveness.
            ``(4) Exclusion from taxable income.--The amount of a 
        borrower's eligible loans forgiven under this section shall not 
        be included in gross income of the borrower for purposes of the 
        Internal Revenue Code of 1986.
    ``(c) Supporting Documentation Required.--A borrower who has 
elected to participate in the 10/10 Loan Repayment Plan under 
subsection (a), or who is requesting forgiveness under the 10/10 Loan 
Forgiveness Program under subsection (b), shall provide to the 
Secretary such information and documentation as the Secretary 
determines, by regulation, to be necessary to verify the borrower's 
adjusted gross income and payment amounts made on eligible loans of the 
borrower for the purposes of such Plan or Program.
    ``(d) Definition of Eligible Loan.--In this section the term 
`eligible loan' means any loan made, insured, or guaranteed under part 
B or D (including loans described in clauses (i) through (iii) of 
section 428L(b)(2)(B) and loans under paragraph (2) of section 
455(g)).''.

SEC. 4. CAPPING INTEREST RATES FOR ALL FEDERAL DIRECT LOANS.

    Section 455(b) of the Higher Education Act of 1965 (20 U.S.C. 
1087e(b)) is amended--
            (1) by redesignating paragraphs (8) and (9) as paragraphs 
        (9) and (10), respectively; and
            (2) by inserting after paragraph (7) the following:
            ``(8) Rate of interest for all new federal direct loans.--
        Notwithstanding any other provision of this Act, with respect 
        to a loan under this part for which the first disbursement of 
        principal is made (or in the case of a Federal Direct 
        Consolidation Loan, for which the application is received) on 
        or after July 1, 2012, or the date of enactment of the Student 
        Loan Forgiveness Act of 2012, whichever is later, the 
        applicable rate of interest shall not exceed 3.4 percent.''.

SEC. 5. IMPROVING AND EXPANDING PUBLIC SERVICE LOAN FORGIVENESS.

    Section 455(m) of the Higher Education Act of 1965 (20 U.S.C. 
1087e(m)) is amended--
            (1) in paragraph (1), by striking ``120'' and inserting 
        ``60'' each place it appears; and
            (2) in paragraph (3)(B)--
                    (A) in clause (i), by striking ``or'' after the 
                semicolon;
                    (B) in clause (ii), by striking the period and 
                inserting ``; or''; and
                    (C) by adding at the end the following:
                            ``(iii) a full-time job as a primary care 
                        physician in an area or population designated 
                        as a Medically Underserved Area or Population 
                        by the Health Resource and Services 
                        Administration.''.

SEC. 6. REFINANCING PRIVATE EDUCATION LOANS FOR CERTAIN BORROWERS.

    (a) Consolidation for Certain Borrowers.--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 for certain borrowers.--
                    ``(A) In general.--Notwithstanding any other 
                provision of law, a borrower who meets the eligibility 
                criteria described in subparagraph (B) 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) was eligible to borrow a loan under 
                        section 428H, a Federal Direct Unsubsidized 
                        Stafford Loan, a loan under section 428B, or a 
                        Federal Direct PLUS loan for a period of 
                        enrollment at an institution of higher 
                        education, or, with respect to a borrower who 
                        was enrolled at an institution of higher 
                        education on less than a half-time basis, would 
                        have been eligible to borrow such a loan for 
                        such period of enrollment if the borrower had 
                        been enrolled on at least a half-time basis;
                            ``(ii) borrowed at least one eligible 
                        private education loan for a period of 
                        enrollment described in clause (i); and
                            ``(iii) has an average adjusted gross 
                        income (based on the borrower's adjusted gross 
                        income from the 3 most recent calendar years 
                        before application for consolidation under this 
                        section) that is equal to or less than the 
                        borrower's total education debt (determined by 
                        calculating the sum of the borrower's loans 
                        described in section 428C(a)(4) and eligible 
                        private education loans) at the time of such 
                        application.
                    ``(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)) made on 
                or before the date of enactment of the Student Loan 
                Forgiveness Act of 2012, including the amount of 
                outstanding principal, accrued interest, and related 
                fees and costs (as determined by the Secretary) owed by 
                a borrower on such a loan.
                    ``(D) 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.
                    ``(E) Terms and rate of interest.--A Federal Direct 
                Consolidation Loan made under this paragraph shall have 
                the same terms and conditions as a Federal Direct 
                Consolidation loan under paragraph (1), except that the 
                applicable rate of interest for a Federal Direct 
                Consolidation loan made under this paragraph shall not 
                exceed 3.4 percent.
                    ``(F) Notification of eligible borrowers.--The 
                Secretary shall take such steps as may be necessary to 
                notify eligible borrowers of the availability of 
                consolidation under this paragraph no later than 60 
                days after the date of enactment of the Student Loan 
                Forgiveness Act of 2012, including notifying such 
                borrowers of the deadline to apply for such a loan 
                under subparagraph (G).
                    ``(G) Application deadline for loans under this 
                paragraph.--A borrower may apply for loans under this 
                paragraph during the 1-year period beginning on the 
                date of enactment of the Student Loan Forgiveness Act 
                of 2012. The Secretary shall not make a Federal Direct 
                Consolidation Loan under this paragraph to any borrower 
                who has not submitted an application for such a loan to 
                the Secretary before the end of such period.
                    ``(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.''.
    (b) Conforming Amendment.--Section 428C(a)(3)(B)(i)(V) of the 
Higher Education Act of 1965 (20 U.S.C. 1078-3(a)(3)(B)(i)(V)) is 
amended--
            (1) by striking ``or'' at the end of item (bb);
            (2) by striking the period at the end of item (cc) and 
        inserting ``; or''; and
            (3) by adding at the end the following:
                                            ``(dd) for the purpose of 
                                        consolidating an eligible 
                                        private education loan under 
                                        section 455(g)(2), whether such 
                                        loan is consolidated alone, 
                                        with other eligible private 
                                        education loans, or with loans 
                                        described in paragraph (4).''.

SEC. 7. OFFSET.

    Funds appropriated or otherwise made available for a fiscal year to 
carry out this Act and the amendments made by this Act shall be made 
available from the funds available for Overseas Contingency Operations.
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