Establishment of the Income Dependent Education Assistance Loan Program and the IDEA Loan Repayment Program

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

Income Dependent Education Assistance Loans

IDEA Loans

499A.

Program authority and agreements

(a)

Program authority

(1)

In general

There are hereby made available, in accordance with the provisions of this part, such sums as may be necessary to make loans to all eligible students in attendance at participating institutions of higher education selected by the Secretary, to enable such students to pursue their courses of study at such institutions during the period beginning July 1, 2014. Loans made under this part shall be made by participating institutions, or consortia thereof, that have agreements with the Secretary to originate loans, or by alternative originators designated by the Secretary to make loans for students in attendance at participating institutions. (2)

Designation

The program established under this subpart shall be referred to as the Income Dependent Education Assistance Loan Program, or the IDEA Loan Program. (b)

Funds for the origination of IDEA Loans

The Secretary shall provide funds for student loans under this part in the same manner as the Secretary provides funds for the origination of Federal Direct Student Loans under part D in accordance with section 452. The requirements, rights, and limitations under section 452 with respect to the Secretary and institutions for funds provided for loans under part D shall apply with respect to the Secretary and institutions for funds provided for loans under this part, except that funds under this part shall not be provided for parent loans. (c)

Selection of institutions for participation and origination, and agreements with institutions

(1)

Selection of institutions for participation and origination

The Secretary shall enter into agreements with institutions of higher education to participate in the IDEA Loan Program under this part and agreements with institutions of higher education, or consortia thereof, to originate loans in such program for academic years beginning on or after July 1, 2014. The provisions of section 453 shall apply with respect to agreements under this section. The Secretary shall provide alternative origination services for loans under this part, as appropriate, in a manner consistent with the provisions of sections 453 and 456 related to alternative origination services for loans under part D. (2)

Participation and origination agreements with institutions

An agreement with any institution of higher education for participation in the IDEA Loan Program under this part, and an agreement with any institution of higher education, or consortia thereof, to originate loans in such program, shall have the same terms as the terms required under section 454 for agreements with an institution for participation or origination, respectively, in the student loan program under part D, except that agreements for participation or origination under this part shall not apply to parent loans. (3)

Withdrawal and Termination Procedures

The Secretary shall establish procedures by which institutions or consortia may withdraw or be terminated from the program under this part.

499B.

Terms and conditions of IDEA Loans

(a)

Parallel terms, conditions, benefits, and amounts

Unless otherwise specified in this part, Income Dependent Education Assistance Loans (hereinafter referred to as IDEA Loans) made to borrowers under this part shall have the same terms, conditions, and benefits, and be available in the same amounts, as Federal Direct Unsubsidized Stafford Loans made to borrowers under part D, and first disbursed on the day before the date of enactment of the Earnings Contingent Education Loans Act of 2012. (b)

Eligible borrowers

(1)

In general

In addition to the requirements of section 484, to be eligible to receive a loan (other than an IDEA Consolidation Loan) under this part, a borrower— (A)shall be an individual who, on the date of application for such loan, has no outstanding balance of principal or interest owing on any loan made, insured, or guaranteed under part B or D (other than an excepted PLUS loan or an excepted consolidation loan (as such terms are defined in section 493C(a))); or (B)in the case of an individual with an outstanding balance of principal or interest owing on any loan described in subparagraph (A), shall consolidate all such existing loans into an IDEA Consolidation Loan under section 499C. (2)

Only student borrowers eligible

For purposes of this part, the term borrower shall not include a parent borrower. (c)

Annual and Aggregate Limits

(1)

In general

Subject to paragraph (2), the maximum annual amount of IDEA Loans in any academic year (as defined in section 481(a)(2)) or its equivalent, and the maximum aggregate amount of IDEA Loans that a student may borrow, shall be the maximum annual amounts and maximum aggregate amounts, respectively, of Federal Direct Unsubsidized Stafford Loans under part D that such student would have been eligible to borrow in the absence of section 455(a)(4), as added by Earnings Contingent Education Loans Act of 2012. (2)

Graduate and professional students

In the case of a graduate or professional student who would have been eligible to borrow a Federal Direct PLUS Loan under part D in the absence of section 455(a)(4), as added by Earnings Contingent Education Loans Act of 2012, the maximum annual amounts and maximum aggregate amounts, respectively, of IDEA Loans that the student may borrow as determined under paragraph (1) for any academic year (as defined in section 481(a)(2)) or its equivalent, may be increased to an amount equal to the maximum annual amounts and maximum aggregate amounts, respectively, of Federal Direct PLUS Loans that such student would have been eligible to borrow in the absence of such section 455(a)(4). (d)

Loan Fee

The Secretary shall charge the borrower of a loan (other than an IDEA Consolidation Loan) made under this part an origination fee. Such fee shall be the sum of— (1)for the portion of the principal amount of the loan that is equal to (or less than) the maximum annual amount a student may borrow under subsection (c)(1), 1.0 percent of such portion of the principal amount of the loan; plus (2)for the portion of the principal amount of the loan that exceeds the maximum annual amount a student may borrow under subsection (c)(1), as authorized by subsection (c)(2), 4.0 percent of such portion of the principal amount of the loan. (e)

Interest rates

(1)

In general

Except as provided in paragraph (2), for IDEA Loans for which the first disbursement is made on or after July 1, 2014, the applicable rate of interest 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 to— (A)the bond equivalent rate of 10-year Treasury bills auctioned at the final auction held prior to such June 1; plus (B)3.0 percent. (2)

Certain graduate and professional students

Notwithstanding paragraph (1), with respect to graduate or professional students who have increased maximum annual and aggregate loan limits under subsection (c)(2), for IDEA Loans for which the first disbursement is made on or after July 1, 2014, the applicable rate of interest shall be the weighted average of— (A)the rate determined under paragraph (1) for the portion of the principal amount of the loan that is equal to (or less than) the maximum annual amount a student may borrow under subsection (c)(1); and (B)the rate determined under paragraph (1), except that 4.1 percent shall be substituted for 3.0 percent in such determination, for the portion of the principal amount of the loan that exceeds the maximum annual amount a student may borrow under subsection (c)(1), as authorized by subsection (c)(2). (3)

Consultation

The Secretary shall determine the applicable rate of interest under paragraph (1) after consultation with the Secretary of the Treasury and shall publish such rate in the Federal Register as soon as practicable after the date of determination. (4)

Application of interest rate during the life of the loan

(A)

Fixed rate until cap

The applicable rate of interest determined under paragraph (1) or (2) for an IDEA Loan shall be fixed for the life of the loan, except that interest shall cease to accrue when the total amount of interest (both paid and unpaid) that has accrued during the borrower’s grace and repayment periods equals 50 percent of the total amount of the loan (equal to the sum of the unpaid principal, interest, penalties, and fees due on the loan) as of first day of the borrower’s grace period. (B)

In-school deferment period

Interest shall accrue and be capitalized or paid by the borrower (but periodic installments of principal need not be paid) during the in-school deferment period with respect to an IDEA Loan. For the purposes of this part, the in-school deferment period with respect to an IDEA Loan is the first period during which the borrower is pursuing at least one-half the normal full-time academic workload (as determined by the institution) in the course of study for which the borrower received such loan and ending on the first day of the first month that begins after the borrower ceases to carry at least one-half the normal full-time academic workload (as determined by the institution) in the course of study. (C)

Grace and repayment periods

Interest that accrues during the borrower’s grace period (for the purposes of this title, defined as the period between the borrower’s in-school deferment period and the borrower’s repayment period) and during the borrower’s repayment period shall not be capitalized. (f)

Armed Forces Student Loan Interest Payment Program

Using funds received by transfer to the Secretary under section 2174 of title 10, United States Code, for the payment of interest on a loan made under this part to a member of the Armed Forces, the Secretary shall pay the interest on the loan as due for a period not in excess of 36 consecutive months. The Secretary may not pay interest on such a loan out of any funds other than funds that have been so transferred. (g)

No Accrual of Interest for Active Duty Service Members

(1)

In general

Notwithstanding any other provision of this part and in accordance with paragraphs (2) and (4), interest shall not accrue for an eligible military borrower on a loan made under this part for which the first disbursement is made on or after July 1, 2014. (2)

IDEA Consolidation loans

In the case of any IDEA Consolidation loan made under this part that is disbursed on or after July 1, 2014, interest shall not accrue pursuant to this subsection only on such portion of such loan as was used to repay a loan made under part D for which the first disbursement is made on or after October 1, 2008. (3)

Eligible military borrower

In this subsection, the term eligible military borrower means an individual who— (A)(i)is serving on active duty during a war or other military operation or national emergency; or (ii)is performing qualifying National Guard duty during a war or other military operation or national emergency; and (B)is serving in an area of hostilities in which service qualifies for special pay under section 310 of title 37, United States Code. (4)

Limitation

An individual who qualifies as an eligible military borrower under this subsection may receive the benefit of this subsection for not more than 60 months. (h)

Loan cancellation and discharge

The Secretary shall discharge a borrower's liability on a loan made under this part in accordance with subsections (a) and (c) of section 437. (i)

No public service loan forgiveness

A loan made under this part shall not be eligible for the public service loan forgiveness program under section 455(m).

499C.

IDEA Consolidation Loans

(a)

IDEA Consolidation Loans

(1)

In general

Except as provided in this section, an IDEA Consolidation Loan under this section shall have the same terms, conditions, and benefits, as IDEA Loans under this part. (2)

Borrower and loan eligibility

To be eligible to receive an IDEA Consolidation Loan under this section, a borrower— (A)shall— (i)meet the criteria described in section 428C(a)(3)(A); and (ii)in the case of a borrower described in section 499B(b)(1)(B), agree to consolidate into an IDEA Consolidation Loan all loans made to the borrower that are described in subparagraphs (A) and (C) of section 428C(a)(4) (other than an excepted PLUS loan or an excepted consolidation loan (as such terms are defined in section 493C(a))); (B)may consolidate the loans described in subparagraphs (B), (D), and (E) of section 428C(a)(4) into such IDEA Consolidation Loan; and (C)may not consolidate an IDEA Loan under section 499B into such IDEA Consolidation Loan. (3)

Requirements for the Secretary

In making IDEA Consolidation Loans under this section, the Secretary— (A)shall ensure that— (i)each IDEA Consolidation Loan will be made, notwithstanding any other provision of this title limiting the annual or aggregate principal amount for all loans made to the borrower, in an amount which is equal to the sum of the unpaid principal, interest, penalties, and fees of all loans received by the borrower which are selected by the borrower for consolidation under this section; and (ii)the proceeds of each IDEA Consolidation Loan will be paid by the Secretary to the holder or holders of the loans being consolidated to discharge the liability on such loans; (B)shall not discriminate against any borrower seeking such an IDEA Consolidation Loan— (i)based on the number or type of loans the borrower seeks to consolidate; (ii)based on the interest rate to be charged to the borrower with respect to the consolidation loan; or (iii)based on the type or category of institution of higher education that the borrower attends or attended; and (C)shall disclose to a prospective borrower, in simple and understandable terms, at the time the Secretary provides an application for an IDEA Consolidation Loan— (i)whether consolidation would result in a loss of loan benefits under part B or part D, including loan forgiveness, cancellation, and deferment; (ii)with respect to Federal Perkins Loans under part E— (I)that if a borrower includes a Federal Perkins Loan under part E in the consolidation loan, the borrower will lose all interest-free periods that would have been available for the Federal Perkins Loan, including— (aa)the periods during which no interest accrues on such loan while the borrower is enrolled in school at least half-time; (bb)the grace period under section 464(c)(1)(A); and (cc)the periods during which the borrower’s student loan repayments are deferred under section 464(c)(2); (II)that if a borrower includes a Federal Perkins Loan in the consolidation loan, the borrower will no longer be eligible for cancellation of part or all of the Federal Perkins Loan under section 465(a); and (III)the occupations listed in section 465 that qualify for Federal Perkins Loan cancellation under section 465(a); (iii)the options of the borrower to prepay the IDEA Consolidation Loan; (iv)the consequences of default on the IDEA Consolidation Loan; and (v)that by applying for an IDEA Consolidation Loan, the borrower is not obligated to agree to take the consolidation loan. (b)

Interest rate

(1)

In general

Notwithstanding section 499B(e), an IDEA Consolidation Loan for which the application is received on or after July 1, 2014, shall bear interest at an annual rate on the unpaid principal balance of the loan that is equal to the weighted average of the interest rates on the loans consolidated, rounded to the nearest higher one-eighth of one percent. Interest that accrues on such an IDEA Consolidation Loan shall not be capitalized. (2)

Application of interest rate during the life of the loan

The applicable rate of interest determined under paragraph (1) shall be fixed for the life of the IDEA Consolidation Loan, except that interest shall cease to accrue when the total amount of interest (both paid and unpaid) that has accrued on such Loan equals 50 percent of the total amount of the loans consolidated (as calculated on the date such Consolidation Loan is made, and equal to the sum of the unpaid principal, interest, penalties, and fees of all loans received by the borrower which are selected by the borrower for consolidation under this section).

IDEA Loan Repayment Program

Establishment of the IDEA Loan Repayment Program

499D.

Duties of the Secretary of the Treasury

(a)

In general

The Secretary of the Treasury, in consultation with the Secretary of Education, shall establish a program (hereinafter referred to as the IDEA Loan Repayment Program) that provides for— (1)repaying loans under this part through wage withholding and quarterly estimated payments as provided in subsection (b); and (2)transmitting to the Secretary of Education— (A)an account of the amounts collected under subsection (b) with respect to each individual for whom a loan made under this part is in repayment status; and (B)such tax return information of each such individual as is necessary to determine the individual’s income-based repayment obligation as provided in subsection (c). (b)

Wage withholding and estimated payments

(1)

In general

The Secretary of the Treasury shall, under rules similar to the rules of chapter 24 of the Internal Revenue Code of 1986, provide for every employer making payment of wages to deduct and withhold upon such wages amounts determined in accordance with tables or computational procedures prescribed by the Secretary with respect to an employee for whom a loan made under this part is in repayment status and, if applicable under this section, with respect to an employee whose spouse has a loan made under this part in repayment status. (2)

Withholding requirements

The tables, procedures, and guidance prescribed under paragraph (1) shall provide— (A)procedures and forms for an employee to indicate— (i)whether the employee (and, in the case of a married individual, whether the employee’s spouse) has a loan made under this part that is in repayment status; (ii)in the case of a married individual, whether the employee anticipates filing jointly (and accompanying guidance explaining that if filing status for the taxable year is uncertain the employee should indicate filing jointly to avoid underwithholding); (iii)whether the exemption amount to which the employee is entitled under this section should be taken into account in determining withholding (and accompanying guidance explaining that, in order to avoid underwithholding, the employee should only take into account the exemption in the case of the employee’s primary employer, unless total wages from more than one place of employment will not exceed the exemption amount); (iv)in the case of a married individual, whether the exemption amount to which the employee’s spouse is entitled under this section should be taken into account in determining withholding from the wages of the employee (and accompanying guidance explaining that, in order to avoid underwithholding, the employee should only take into account such exemption if such spouse is not employed, or if the total wages from the employee’s job and the spouse’s employment will not exceed the exemption amount); (v)the number of dependents of the employee with respect to whom the employee is entitled to a deduction under section 151(c) of the Internal Revenue Code of 1986, and, if a different number, in the case of a married employee, the number of dependents of the employee’s spouse with respect to whom such spouse is entitled to such deduction; and (vi)an election to have additional amounts withheld; and (B)for withholding with respect to any employee in an amount equal to the sum of— (i)in the case of an employee who has a loan made under this part in repayment status, the percentage of so much of the employee’s wages that would count towards the employee’s income-based repayment obligation provided in subsection (c) as exceeds any exemption amount taken into account with respect to the employee under subparagraph (A)(iii) (prorated to the payroll period), plus (ii)in the case of an employee who indicates that the employee’s spouse has a loan made under this part in repayment status, the percentage of so much of the employee’s wages that would count towards the employee’s spouse’s income-based repayment obligation (as provided in subsection (c)) as exceeds any exemption amount taken into account with respect to the employee’s spouse under subparagraph (A)(iv) (prorated to the payroll period). (3)

Quarterly estimated tax payments

In the case of taxpayers who make quarterly estimated tax return payments under section 6654 of the Internal Revenue Code of 1986 and who have a loan made under this part in repayment status, the Secretary shall provide similar tables and procedures for making repayments of loans made under this part concurrently with such quarterly payments. (4)

Collection and payment

The amounts required to be deducted and withheld under paragraph (1), and amounts required to be paid under paragraph (3), shall be collected by the Secretary of the Treasury and shall be paid into the general fund of the Treasury of the United States. (c)

Determination of income-Based repayment obligation

(1)

In general

As soon as practicable after an individual for whom a loan made under this part is in repayment status during the taxable year files an income tax return for such taxable year, the Secretary of the Treasury shall transmit to the Secretary of Education such tax information as is necessary to determine— (A)the amount deducted and withheld under subsection (b)(1), and the amount paid under subsection (b)(3), for the taxable year with respect to such individual, and (B)the income-based repayment obligation for the taxable year for such individual. (2)

Income-based repayment obligation

For purposes of this section: (A)

In general

The income-based repayment obligation with respect to an individual for any taxable year is an amount equal to 15 percent of the excess of— (i)the sum of— (I)the wages, salaries, tips, and other employee compensation of the taxpayer, but only if such amounts are includible in gross income for the taxable year (determined without regard to section 911, 931, 933), (II)the amount of the taxpayer’s net earnings from self-employment for the taxable year (within the meaning of section 1402(a)), determined with regard to the deduction allowed to the taxpayer by section 164(f), plus (III)any other amount included in total income of the taxpayer for the taxable year but not described in subclause (I) or (II), over (ii)the sum of— (I)the exemption amount with respect to such individual, plus (II)the lesser of the amount determined with respect to the taxpayer under subclauses (II) and (III) of clause (i), or $3,000. (B)

Special rules for married individuals

(i)

Each spouse with loan

Except as provided in clause (ii), in the case of a joint return of two individuals who each have a loan made under this part in repayment status, the income-based repayment obligation with respect to each spouse shall be an amount determined under subparagraph (A) by apportioning ½ of the total income on such return to each spouse. (ii)

Special rule for first year of marriage

In the case of the first taxable year for which any two individuals make a joint return, the income-based repayment obligation with respect to such an individual shall be an amount equal to the lesser of— (I)the amount determined with respect to such individual under this paragraph (determined without regard to this clause), or (II)the amount determined with respect to such individual under this paragraph (determined by allocating to each spouse the amounts described in subclause (I) and (II) of subparagraph (A)(i) in proportion to the amounts attributable to each spouse, by allocating ½ of the amount described in subparagraph (A)(i)(III) to each spouse, and without regard to clause (i)). (3)

Exemption amount

For purposes of this section: (A)

In general

Except as provided in subparagraph (B), the exemption amount with respect to an individual shall be an amount equal to 150 percent of the poverty line for the individual’s household size (as determined under section 673(2) of the Community Services Block Grant Act (42 U.S.C. 9902(2))) for the calendar year in which the taxable year ends. (B)

Special rule for married individuals who both have loans made under this part

If for any taxable year an individual is married, files a joint return, and has a spouse with a loan made under this part in repayment status, then the exemption amount with respect to such individual shall be an amount equal to the sum of— (i)150 percent of the poverty line for a household size of one (as determined under section 673(2) of the Community Services Block Grant Act (42 U.S.C. 9902(2))) for the calendar year in which the taxable year ends, and (ii)½ of the excess of— (I)150 percent of the poverty line for the individual’s household size minus 1 (as determined under section 673(2) of the Community Services Block Grant Act (42 U.S.C. 9902(2))) for the calendar year in which the taxable year ends, over (II)the amount determined under clause (i). (C)

Household size

For purposes of this paragraph, an individual’s household size shall be determined by reference to the individual, the number of dependents of the taxpayer with respect to whom the taxpayer is entitled to a deduction under section 151(c) of the Internal Revenue Code of 1986, and, if married and filing jointly, such individual’s spouse. (4)

Individuals not filing a return

(A)

Individuals not required to file

The income-based repayment obligation with respect to an individual not required to file a return under section 6012(a)(1) of the Internal Revenue Code of 1986 shall be treated as zero. (B)

Failure to file

In the case of an individual who has a loan made under this part in repayment status and fails to file a return under section 6012(a)(1), the Secretary of the Treasury shall transmit to the Secretary of Education any such tax information of the individual as may be necessary to determine whether such individual is in default under the terms of such loan. (5)

Subsequent transmission of employer information reporting

As soon as practicable after receiving from an employer information reporting with respect to withholding under subsection (b)(1) of an individual for whom an loan made under this part is in repayment status, the Secretary of the Treasury shall transmit to the Secretary of Education such information as may be useful in verifying the information with respect to withholding transmitted under paragraph (1). (d)

Additional program requirements

The Secretary of the Treasury shall establish such other policies, procedures, and guidance as may be necessary to carry out the purposes of this section, including measures to prevent underwithholding, under-reporting, and evasion of repayment or filing. Amounts shall be deducted and withheld under this section as the Secretary determines to be most appropriate to carry out the purposes of the IDEA Loan Repayment Program and to reflect, as accurately as is practicable, an individual’s income-based repayment obligation.

499E.

Duties of the Secretary of Education

The Secretary shall carry out the following activities as part of the IDEA Loan Repayment Program established under this chapter: (1)

Calculation of annual repayment amounts

The Secretary shall calculate the annual repayment amounts under 499F(b) for borrowers with 1 or more loans made under this part in repayment status, including the income-based repayment obligations of such borrowers in accordance with section 499D(c)(2). (2)

Communication with the Secretary of the Treasury

The Secretary shall transmit to the Secretary of the Treasury such information as is necessary for the Secretary of the Treasury to carry out section 499D. (3)

Annual statements

Upon calculating the annual repayment amounts under paragraph (1) for a taxable year, the Secretary shall provide a statement, on an annual basis, to each borrower with a loan made under this part, which lists the following: (A)Total payments made on the borrower’s annual repayment amount for such taxable year. (B)The borrower’s annual repayment amount for such taxable year. (C)In the case of a borrower who, according to section 499F(f), has underpaid such annual repayment amount, the amount of such underpayment and the process for paying such underpayment under section 499F(f)(2). (D)In the case of a borrower with an overpayment on such annual repayment amount, the amount of such overpayment and the process for requesting a refund of such amount under section 499F(g), if applicable. (E)The outstanding balances on all the loans made to the borrower under this part. (F)A description of how the borrower’s annual repayment amount was calculated under paragraph (1) or (2) of section 499F(b). (4)

Direct payment

The Secretary shall enable a borrower to make direct payments on the borrower’s annual repayment amount for the taxable year to the Secretary throughout the year, including by providing a process for the borrower to make such payments automatically, on a periodic basis, and in an amount specified by the borrower. (5)

Payments on a taxpayer’s behalf

The Secretary shall— (A)provide a mechanism for other individuals or entities to make payments on the annual repayment amount of a borrower for a taxable year; and (B)notify the borrower that any payments made under subparagraph (A) for the taxable year that exceed the annual repayment amount for the year shall not be refunded to the borrower. (6)

Calculating interest accrued

The Secretary shall calculate the interest accrued for the taxable year as if the borrower’s payments under wage withholding or quarterly estimated payments under section 499D(b) for the taxable year were made in 12 equal increments throughout the year. (7)

Managing loans

The Secretary shall provide, through the Internet, a tool that has an interface that is consistent for all borrowers with a loan under this part, which enables each such borrower to— (A)view the outstanding balances on the borrower’s loans made under this part; (B)make a direct payment on the borrower’s annual repayment amount or indicate that any overpayment should be refunded or applied to such loans as a prepayment amount; (C)view prior annual statements for such loans provided under paragraph (3); (D)view a history of payments made on such loans (including the method and source of each payment, such as tax withholding, estimated taxes, direct payment, or payments made on the borrower’s behalf); (E)view the borrower’s annual repayment amount for that year, the amount already paid on such annual repayment amount, and any amount owed by the borrower or due to be refunded to the borrower; (F)view the borrower’s loans made under this part that have been paid off; and (G)enable the borrower to initiate an appeal process under paragraph (8). (8)

Appeals process

The Secretary shall make available a process through which a borrower can appeal the calculation of the borrower’s annual repayment amount, including a worksheet that enables a borrower to calculate the borrower’s annual repayment amount. (9)

Default for failure to file a return

In a case in which the Secretary receives information from the Secretary of the Treasury under section 499D(c)(4) that a borrower with a loan made under this part in repayment status has failed to file a return under section 6012(a)(1) of the Internal Revenue Code of 1986 and such borrower was required to file such a return, the Secretary shall— (A)notify the borrower of the borrower’s failure to file such a return; and (B)if the borrower fails to file such a return within 90 days of receipt of the notice described in subparagraph (A), consider the borrower’s loans made under this part in repayment status to be in default. (10)

National Directory of New Hires

The Secretary shall send notices to borrowers under paragraph (5) of section 435(i) of the Social Security Act (42 U.S.C. 653(i)), as added by section 5 of the Earnings Contingent Education Loans Act of 2012.

Borrower repayment of IDEA Loans and IDEA Consolidation Loans

499F.

Borrower repayment

(a)

Repayment period

The repayment period of a loan made under this part shall— (1)begin on the first day of the first taxable year that begins after the borrower’s in-school deferment period, or in the case of an IDEA Consolidation Loan, on the first day of the first taxable year that begins after such Consolidation Loan is disbursed; and (2)continue until the loan is paid in full, except that the Secretary may grant a borrower forbearance of the borrower’s annual repayment amount for administrative or technical reasons, or as a result of unusual circumstances that disrupt a borrower’s ability to make timely payments on a loan made under this part. (b)

Annual repayment amount

The annual repayment amount under this part for a taxable year for a borrower with 1 or more loans made under this part in repayment status shall be equal to the lesser of— (1)the income-based repayment obligation for such borrower for such year, as calculated under section 499E(1); or (2)an amount equal to the sum of the outstanding balances (equal to the sum of the unpaid principal, interest, penalties, and fees) that the borrower owes on such loans. (c)

Methods of repayment

In repaying an annual repayment amount owed by a borrower for a taxable year, a borrower— (1)shall, with respect to any wages earned by the borrower that are subject to Federal income tax withholding, have amounts withheld upon such wages under section 499D(b)(2); and (2)may— (A)in the case of a borrower who makes quarterly estimated tax return payments under section 6654 of the Internal Revenue Code of 1986 for the year, pay such annual repayment amount concurrently with such quarterly payments under section 499D(b)(3); (B)make direct payments under section 499E(4) on such amount to the Secretary throughout the year; or (C)have other individuals or entities make payments under section 499E(5) on the borrower’s annual repayment amount for the year. (d)

Order of crediting

Payments on loans made under this part shall be applied, without regard to the method of such payments, first toward penalties due on the loans, next toward any fees due on the loans, then toward any interest due on the loans, and finally toward the principal due on the loan with the highest applicable rate of interest among such loans. (e)

Prepayment authorized

A borrower shall have the right to prepay all or part of such loan, at any time and without penalty. Any such prepayment amount will be applied to loans made under this part in the same order as described in subsection (d). (f)

Underpayments

(1)

Penalties for underpayments

(A)

In general

Subject to subparagraph (C), if, as of the last day of a taxable year, a borrower has not paid at least 90 percent of the borrower’s annual repayment amount for such year, the borrower shall be charged a penalty in an amount equal to 10 percent of the difference between— (i)an amount equal to 90 percent of the borrower’s annual repayment amount for such year; and (ii)the amount paid on such annual repayment amount as of such day. (B)

Increase of annual repayment amount

A borrower’s annual repayment amount calculated under subsection (b) for such year shall be increased by the amount of such penalty, but such penalty shall not be treated as a principal or interest amount for a loan made under this part. (C)

Exception

A borrower who has paid 100 percent of the borrower’s annual repayment amount for the taxable year preceding the taxable year described in subparagraph (A) shall not be subject to the penalty under this paragraph for the taxable year described in subparagraph (A). (2)

Reconciling underpayments

(A)

In general

If, as of the last day of a taxable year, the sum of the payments made on a borrower’s annual repayment amount for such year is less than the total amount of the borrower’s annual repayment amount for such year, the borrower shall— (i)within the 30-day period beginning on the date of receipt by the borrower of the borrower’s annual statement described in section 499E(3) for such year, pay to the Secretary an amount equal to the difference between such amounts; or (ii)if a borrower fails to pay the amount owed by the borrower as calculated under clause (i) within the 30-day period, be charged a penalty equal to 2 percent of such amount for each month (prorated based on the percentage of a month such penalty is charged) that such amount is owed or until the borrower defaults on the loan for which such amount is owed, whichever occurs first. (B)

Default

A loan for which an amount is owed under subparagraph (A) and that is not paid within 360 days after the date of receipt by the borrower of the borrower’s annual statement described in subparagraph (A) shall be considered to be default. (g)

Overpayments

If, as of the last day of a taxable year, the sum of the payments made on a borrower’s annual repayment amount for such year is greater than the total amount of the borrower’s annual repayment amount for such year, the Secretary shall— (1)refund the overpayment amount, if the borrower notifies the Secretary, within the 90-day period beginning on the date of receipt of the borrower’s annual statement described in section 499E(3) for such year and in a manner prescribed by the Secretary, that the borrower desires to have the overpayment amount refunded; or (2)if a borrower fails to notify the Secretary of the borrower’s desire for a refund of such amount within such 90-day period, apply such amount as a prepayment to the borrower’s loans made under this part in the same manner as a prepayment authorized under subsection (e).