Temporary student loan debt conversion authority

(a)

Repeal

(1)

In general

Section 459A of the Higher Education Act of 1965 (20 U.S.C. 1087i–1) is repealed. (2)

Conforming amendments

Part D of the Higher Education Act of 1965 (20 U.S.C. 1087a et seq.) is amended— (A)in section 451(a) (20 U.S.C. 1087a), by striking (1) to make loans to all eligible students (and the eligible parents of such 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, 1994; and (2) for purchasing loans under section 459A. and inserting to make loans to all eligible students (and the eligible parents of such 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, 1994.; and (B)in section 459B(a)(2)(B) (20 U.S.C. 1087i–2(a)(2)(B)), by striking purchased by the Secretary pursuant to section 459A and inserting purchased by the Secretary pursuant to section 459A under the terms of that provision in effect on or before June 30, 2010, or converted by the Secretary pursuant to section 459A. (b)

Student loan debt conversion

Part D of title IV of the Higher Education Act of 1965 (20 U.S.C. 1087a et seq.) is amended by inserting after section 459 the following:

459A.

Temporary authority to convert student loan debt

(a)

In general

(1)

Authority

The Secretary shall, at the request of an eligible borrower (as described in subsection (b)), convert an eligible student loan debt (as described in subsection (c)) into a Federal debt by paying the holder of the eligible student loan the outstanding balance of principal and interest on that loan, and the borrower shall enter into an agreement to repay to the Secretary the amount advanced to convert the debt to a Federal debt. (2)

Duration of authority

The Secretary shall convert eligible student loan debt under this section for those eligible borrowers whose applications for conversion are received on or after January 1, 2012 and before October 1, 2012. (3)

Designation of loan

The repayment obligation of the borrower whose eligible student loan debt was repaid by the Secretary and converted to a Federal debt under this section shall be referred to as a FFEL Debt Conversion Loan. (b)

Eligible borrower

A borrower is eligible for a FFEL Debt Conversion Loan if the borrower, in addition to the loans described in subsection (c), has an outstanding loan that was made under this part, or an outstanding loan that was purchased by the Secretary pursuant to section 459A under the terms of that provision in effect on or before June 30, 2010. (c)

Eligible student loan debt

A student loan of an eligible borrower is eligible for payment by a FFEL Debt Conversion Loan if— (1)the loan was made, insured, or guaranteed under part B, and not previously purchased by the Secretary pursuant to section 459A under the terms of that provision in effect on or before June 30, 2010; (2)the loan is not in default; and (3)the loan is not delinquent for 270 days or more. (d)

Terms and conditions of debt conversion loans

(1)

Continuation of terms

A FFEL Debt Conversion Loan shall be repayable by the borrower under the same terms and conditions as were applicable under the promissory note signed by the borrower for the eligible student loan debt being repaid by the Secretary under this section, including such terms as applied when the borrower entered repayment, and the availability of grace periods and deferments. (2)

Aggregate loan limits

Notwithstanding any other provision of this title, a FFEL Debt Conversion Loan shall be included in the calculation of the aggregate loan limit that was applicable to the borrower's eligible student loan for which the FFEL Debt Conversion Loan was obtained. (3)

Other terms

(A)

FFEL terms

Other borrower benefits offered by the originating lender or the holder of the eligible student loan being repaid that are not specified in part B or in the borrower's promissory note for that loan are not available with respect to a FFEL Debt Conversion Loan. (B)

Direct loan terms

Except as provided in paragraph (5), benefits offered only for loans made under this part are not available with respect to a FFEL Debt Conversion Loan. (4)

Fees

(A)

No fees imposed by Secretary

The Secretary shall not charge the borrower any origination or other fee for the making of a FFEL Debt Conversion Loan. (B)

No fees imposed by holder of eligible student loan debt

Notwithstanding any other provision of law, the holder of an eligible student loan shall not charge the Secretary or the borrower any origination or other fee, including any fee for providing the information described in subsection (e), for the conversion of the eligible student loan debt to a FFEL Debt Conversion Loan. (5)

Ffel debt conversion benefits

The Secretary may offer benefits to a borrower of a FFEL Debt Conversion Loan, in an amount that shall not exceed 2 percent of the amount advanced on the FFEL Debt Conversion Loan, which may include payments to borrowers, reductions in the outstanding principal and interest on the FFEL Debt Conversion Loan, or such other benefits as the Secretary may establish. (e)

Information from holders of student loan debt eligible for conversion

A holder of an eligible student loan shall promptly provide the Secretary with the amount outstanding and such other information as may be needed to convert that debt under this section. (f)

Notification

Not later than December 1, 2011, the Secretary shall notify eligible borrowers— (1)of their eligibility to convert an eligible student loan debt under this section; and (2)of the time frame for applying for such conversion.

(c)

Conforming amendments

(1)

Cohort default rate

Section 435(m)(2) of the Higher Education Act of 1965 (20 U.S.C. 1085(m)(2)) is amended by adding at the end the following:

(E)For purposes of this subsection, a borrower who obtains a FFEL Debt Conversion Loan under section 459A shall continue to be considered as having entered repayment on the date the borrower entered repayment on the eligible student loan debt that was repaid by the Secretary and converted to a Federal debt under that section.

(2)

Contracts

Section 456(b) of the Higher Education Act of 1965 (20 U.S.C. 1087f(b)) is amended— (A)in paragraph (2), by inserting , converted, after made; and (B)in paragraph (3), by inserting , converted, after made. (3)

Federal consolidation loans

Section 428C(a)(4)(C) of the Higher Education Act of 1965 (20 U.S.C. 1078–3(a)(4)(C)) is amended by inserting or converted after made. (4)

Income-based repayment

Section 493C of the Higher Education Act of 1965 (20 U.S.C. 1098e) is amended— (A)in subsection (a)(3)(A), by inserting converted, after made,; (B)in subsection (b)(1), by inserting converted, after made,; and (C)in subsection (c), by inserting converted, after made,. (d)

Inapplicability of title IV negotiated rulemaking and master calendar exception

Sections 482(c) and 492 of the Higher Education Act of 1965 (20 U.S.C. 1089(c), 1098a) shall not apply to the amendments made by this section, or to any regulations promulgated under those amendments. (e)

Annual cost estimate

Notwithstanding any other provision of this Act or an amendment made by this Act, the Secretary of Education shall carry out the requirement of section 459A(e)(3) of the Higher Education Act of 1965, as in effect on the day before the date of enactment of this Act, with respect to the annual cost estimates required to be submitted not later than February 15, 2012. (f)

Funds for Federal Pell Grants

The proceeds to the Federal Government from the temporary authority to convert student loan debt provided by the amendments made by this Act shall be used to carry out Federal Pell Grants under section 401 of the Higher Education Act of 1965 (20 U.S.C. 1070a).