[Congressional Bills 114th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4652 Introduced in House (IH)]

<DOC>






114th CONGRESS
  2d Session
                                H. R. 4652

To amend the Higher Education Act of 1965 to codify the Revised Pay As 
            You Earn Repayment plan, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                           February 29, 2016

  Mr. Takai (for himself, Ms. Judy Chu of California, Mr. Honda, Ms. 
Norton, Mr. Brady of Pennsylvania, Ms. Clarke of New York, Mr. Brendan 
F. Boyle of Pennsylvania, Ms. Moore, Mr. Pallone, Ms. Lee, Mr. Ted Lieu 
  of California, Mrs. Watson Coleman, Mr. Nolan, Ms. Schakowsky, Mr. 
 Rangel, and Ms. Jackson Lee) introduced the following bill; which was 
   referred to the Committee on Education and the Workforce, and in 
    addition to the Committee on Ways and Means, 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 amend the Higher Education Act of 1965 to codify the Revised Pay As 
            You Earn Repayment plan, 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 ``Clarity in Lending for Education and 
Repayment Act'' or the ``CLEAR Act''.

SEC. 2. STREAMLINING REPAYMENT PLANS FOR NEW BORROWERS.

    Section 455 of the Higher Education Act of 1965 (20 U.S.C. 1087e) 
is amended by striking subsection (d) and inserting the following:
    ``(d) Repayment Plans.--
            ``(1) Design and selection for borrowers before july 1, 
        2016.--With respect to a borrower of a loan made under this 
        part before July 1, 2016, and consistent with criteria 
        established by the Secretary, the Secretary shall offer such 
        borrower a variety of plans for repayment of such loan, 
        including principal and interest on the loan. The borrower 
        shall be entitled to accelerate, without penalty, repayment on 
        the borrower's loans under this part. The borrower may choose--
                    ``(A) a standard repayment plan, consistent with 
                subsection (a)(1) of this section and with section 
                428(b)(9)(A)(i);
                    ``(B) a graduated repayment plan, consistent with 
                section 428(b)(9)(A)(ii);
                    ``(C) an extended repayment plan, consistent with 
                section 428(b)(9)(A)(iv), except that the borrower 
                shall annually repay a minimum amount determined by the 
                Secretary in accordance with section 428(b)(1)(L);
                    ``(D) an income contingent repayment plan, with 
                varying annual repayment amounts based on the income of 
                the borrower, paid over an extended period of time 
                prescribed by the Secretary, not to exceed 25 years, 
                except that the plan described in this subparagraph 
                shall not be available to the borrower of a Federal 
                Direct PLUS loan made on behalf of a dependent student; 
                and
                    ``(E) an income-based repayment plan that enables 
                borrowers who have a partial financial hardship to make 
                a lower monthly payment in accordance with section 
                493C, except that the plan described in this 
                subparagraph shall not be available to the borrower of 
                a Federal Direct PLUS Loan made on behalf of a 
                dependent student or a Federal Direct Consolidation 
                Loan, if the proceeds of such loan were used to 
                discharge the liability on such Federal Direct PLUS 
                Loan or a loan under section 428B made on behalf of a 
                dependent student.
            ``(2) Design and selection for new borrowers on or after 
        july 1, 2016.--The Secretary shall offer a borrower of a loan 
        made under this part on or after July 1, 2016, the following 
        plans for repayment of such loan, including principal and 
        interest on the loan. The borrower shall be entitled to 
        accelerate, without penalty, repayment on the borrower's loans 
        under this part. The borrower may choose--
                    ``(A) a standard repayment plan, consistent with 
                subsection (a)(1) of this section and with section 
                428(b)(9)(A)(i); or
                    ``(B) a revised pay-as-you-earn repayment plan, 
                consistent with section 461, except the plan described 
                in this subparagraph shall not be available to a 
                borrower of a Federal Direct PLUS Loan made on behalf 
                of a dependent student, a Federal Direct Consolidation 
                Loan, if the proceeds of such loan were used to 
                discharge the liability on such Federal Direct PLUS 
                Loan or a loan under section 428B made on behalf of a 
                dependent student.
            ``(3) Borrower non-selection.--If a borrower of a loan made 
        under this part does not select a repayment plan described in 
        paragraph (1) or (2), the Secretary may provide the borrower 
        with a repayment plan described in subparagraph (A), (B), or 
        (C) of paragraph (1) for borrowers before July 1, 2016, or a 
        repayment plan described in paragraph (2)(A) for new borrowers 
        on or after July 1, 2016.
            ``(4) Changes in selections.--The borrower of a loan made 
        under this part may change the borrower's selection of a 
        repayment plan under paragraph (1) or (2), or the Secretary's 
        selection of a plan for the borrower under paragraph (3), as 
        the case may be, under such terms and conditions as may be 
        established by the Secretary.
            ``(5) Alternative repayment plans.--The Secretary may 
        provide, on a case by case basis, an alternative repayment plan 
        to a borrower of a loan made under this part on or after July 
        1, 2016, who demonstrates to the satisfaction of the Secretary 
        that the terms and conditions of the repayment plans available 
        under paragraph (2) are not adequate to accommodate the 
        borrower's exceptional circumstances. Upon request, the 
        Secretary shall make available for such borrowers repayment 
        plans described in subparagraphs (B) and (C) of paragraph (1). 
        In designing such alternative repayment plans, the Secretary 
        shall ensure that such plans do not exceed the cost to the 
        Federal Government, as determined on the basis of the present 
        value of future payments by such borrowers, of loans made using 
        the plans available under paragraph (2).
            ``(6) Repayment after default.--For any borrower who has 
        defaulted on a loan made under this part, the Secretary--
                    ``(A) may require the borrower to pay all 
                reasonable collection costs associated with such loan; 
                and
                    ``(B) if such loan was made--
                            ``(i) to any borrower who, before July 1, 
                        2016, had an outstanding balance on a student 
                        loan made, insured, or guaranteed under this 
                        part or part B, may require the borrower to 
                        repay the loan pursuant to an income contingent 
                        repayment plan, as described in paragraph 
                        (1)(D), or an income-based repayment plan, as 
                        described in paragraph (1)(E); or
                            ``(ii) to a new borrower (as defined in 
                        section 493E(a)(5)), may provide the borrower 
                        the option to enroll in the repayment plan 
                        described in paragraph (2)(B).
            ``(7) Applicability provision.--
                    ``(A) In general.--Except as provided in paragraph 
                (5) and subparagraph (B), the repayment plans under 
                subparagraphs (B), (C), (D), and (E) of paragraph (1) 
                are not available for a borrower who received the 
                borrower's first disbursement of a Federal Direct Loan 
                on or after July 1, 2016.
                    ``(B) Exception.--The repayment plans available to 
                a borrower of a Federal Direct PLUS Loan made on behalf 
                of a dependent student or a Federal Direct 
                Consolidation Loan whose proceeds were used to 
                discharge the liability of a Federal Direct PLUS Loan 
                made on behalf of a dependent student or a loan under 
                section 428B made on behalf of a dependent student on 
                or after July 1, 2016, shall be those described under 
                subparagraphs (A), (B), and (C) of paragraph (1).''.

SEC. 3. REPAYE.

    Part D of title IV of the Higher Education Act of 1965 (20 U.S.C. 
1087a et seq.) is amended by adding at the end the following:

``SEC. 461. REPAYE.

    ``(a) Definitions.--
            ``(1) Covered federal direct loan.--The term `covered 
        Federal Direct Loan' means a Federal Direct Stafford Loan, a 
        Federal Direct Unsubsidized Stafford Loan, a Federal Direct 
        Consolidation Loan (other than an excepted consolidation loan), 
        or a Federal Direct PLUS Loan (other than an excepted plus 
        loan) made under this part.
            ``(2) New borrower.--The term `new borrower' means a 
        borrower who--
                    ``(A) as of July 1, 2016, has no outstanding 
                balance on a student loan made, insured, or guaranteed 
                under part B or D; or
                    ``(B) has no outstanding balance on a student loan 
                made, insured, or guaranteed under part B or D on the 
                date the borrower receives a loan made under part D on 
                or after July 1, 2016.
            ``(3) Excepted plus loan; excepted consolidation loan.--The 
        terms `excepted plus loan' and `excepted consolidation loan' 
        have the meanings given such terms in section 493C.
            ``(4) Income-driven calculation.--
                    ``(A) In general.--The term `income-driven 
                calculation'--
                            ``(i) when used with respect to an 
                        unmarried borrower 10 percent of the result 
                        obtained by calculating, on at least an annual 
                        basis, the amount by which--
                                    ``(I) the borrower's adjusted gross 
                                income, as defined by the Secretary; 
                                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)); and
                            ``(ii) subject to subparagraph (B), when 
                        used with respect to a married borrower--
                                    ``(I) the difference between the 
                                borrower's and borrower's spouse's 
                                adjusted gross income, as defined by 
                                the Secretary; 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) Exception for certain married borrowers.--The 
                income-driven calculation under subparagraph (A)(i) 
                shall apply to a married borrower who certifies, on a 
                form approved by the Secretary that the borrower is--
                            ``(i) separated from the borrower's spouse; 
                        or
                            ``(ii) unable to reasonably access the 
                        income information of the borrower's spouse.
    ``(b) Revised Pay As You Earn Repayment Plan Authorized.--
Notwithstanding any other provision of this Act, the Secretary shall 
carry out a program for new borrowers that meets the following 
requirements:
            ``(1) Monthly payment amount.--Except as otherwise provided 
        in this subsection, a new borrower of any covered Federal 
        Direct Loan may elect to have the borrower's aggregate monthly 
        payment for all such loans not to exceed the result of the 
        income-driven calculation divided by 12.
            ``(2) Adjusted monthly payment amount.--The Secretary 
        adjusts the aggregate monthly payment under paragraph (1), if--
                    ``(A) in addition to covered Federal Direct Loans, 
                the borrower has an outstanding loan made under part B 
                (other than an excepted PLUS Loan or an excepted 
                consolidation loan), in which case the Secretary 
                determines the borrower's adjusted monthly payment by 
                multiplying the aggregate monthly payment by the 
                percentage of the total outstanding principal amount of 
                the borrower's covered Federal Direct Loans;
                    ``(B) the borrower and borrower's spouse have 
                covered Federal Direct Loans and outstanding loans 
                under part B (other than an excepted PLUS Loan or an 
                excepted consolidation loan), in which case the 
                Secretary determines--
                            ``(i) each borrower's percentage of the 
                        couple's total outstanding amount of principal 
                        on such loans;
                            ``(ii) the adjusted monthly payment for 
                        each borrower by multiplying the borrower's 
                        aggregate monthly payment by the percentage 
                        determined under clause (i) applicable to the 
                        borrower; and
                            ``(iii) if the borrower's loans are held by 
                        multiple holders, the borrower's adjusted 
                        monthly payment for covered Federal Direct 
                        Loans by multiplying the adjusted monthly 
                        payment determined under clause (ii) by the 
                        percentage of the total outstanding principal 
                        amount of the borrower's covered Federal Direct 
                        Loans;
                    ``(C) the calculated monthly payment amount under 
                paragraph (1) or this paragraph is less than $5.00, in 
                which case the borrower's monthly payment is $0.00; or
                    ``(D) the calculated monthly payment amount under 
                paragraph (1) or this paragraph or is equal to or 
                greater than $5.00 but less than $10.00, in which case 
                the borrower's monthly payment is $10.00.
            ``(3) Accrued interest.--
                    ``(A) In general.--If the borrower's monthly 
                payment amount under paragraph (1) or (2) is not 
                sufficient to pay the accrued interest on the 
                borrower's loan--
                            ``(i) for a Federal Direct Stafford Loan or 
                        the portion of a Federal Direct Consolidation 
                        Loan attributable to a Federal Direct Stafford 
                        Loan--
                                    ``(I) the Secretary does not charge 
                                the borrower the remaining accrued 
                                interest for a period not to exceed 3 
                                consecutive years beginning at the 
                                start of repayment period on such loan 
                                under this repayment plan; and
                                    ``(II) after the three-year period, 
                                the Secretary charges the borrower 50 
                                percent of the remaining accrued 
                                interest on such loan or such portion 
                                of a Federal Direct Consolidation Loan; 
                                and
                            ``(ii) for a Federal Direct Unsubsidized 
                        Stafford Loan, a Federal Direct PLUS Loan made 
                        to a graduate or professional student, or the 
                        portion of a Federal Direct Consolidation Loan 
                        attributable to a Federal Direct Unsubsidized 
                        Stafford Loan, or for a Federal Direct 
                        Subsidized Loan or the portion of a Federal 
                        Direct Consolidation Loan attributable to a 
                        Federal Direct Stafford Loan for which the 
                        borrower has become responsible for accruing 
                        interest in accordance with section 455(q)(2), 
                        the Secretary charges the borrower 50 percent 
                        of the remaining accrued interest.
                    ``(B) Three-year period defined.--The three-year 
                period described in subparagraph (A)(i) does not 
                include any period during which the borrower receives 
                an economic hardship deferment.
                    ``(C) Capitalization of accrued interest.--
                            ``(i) Timing.--Accrued interest is 
                        capitalized at the time a borrower leaves the 
                        program under this section.
                            ``(ii) Capitalization.--
                                    ``(I) Limitation.--The amount of 
                                accrued interest capitalized under 
                                clause (i)(I) is limited to 10 percent 
                                of the original principal balance at 
                                the time the borrower entered repayment 
                                under the plan under this section.
                                    ``(II) Participation.--After the 
                                amount of accrued interest reaches the 
                                limit described in subclause (I), 
                                interest continues to accrue, but is 
                                not capitalized while the borrower 
                                participates in the plan under this 
                                section.
            ``(4) Postponement of principal payment.--If the borrower's 
        monthly payment amount is not sufficient to pay any of the 
        principal due, the payment of that principal is postponed until 
        the borrower leaves the plan under this section.
            ``(5) Selection of different repayment plan.--A borrower 
        who no longer wishes to repay under the plan under this section 
        may change to a standard repayment plan in accordance with 
        section 455(d)(3).
            ``(6) Payment application and prepayment.--
                    ``(A) In general.--The Secretary applies any 
                payment made under the program under this section in 
                the following order:
                            ``(i) Accrued interest.
                            ``(ii) Collection costs.
                            ``(iii) Late charges.
                            ``(iv) Loan principal.
                    ``(B) Prepayment authorized.--The borrower may 
                prepay all or part of a loan at any time without 
                penalty, as authorized under section 455(d)(1).
                    ``(C) Application of prepayment.--If the prepayment 
                amount equals or exceeds--
                            ``(i) a monthly payment amount of $10.00 or 
                        more under the repayment schedule established 
                        for the loan, the Secretary applies the 
                        prepayment consistent with the requirements of 
                        section 455(d)(1); or
                            ``(ii) a monthly payment amount of $0.00 
                        under the repayment schedule established for 
                        the loan, the Secretary applies the prepayment 
                        consistent with the requirements of 
                        subparagraph (A).
            ``(7) Eligibility documentation, verification, and 
        notifications.--
                    ``(A) Documentation.--
                            ``(i) AGI.--The Secretary requires the 
                        borrower to provide documentation, acceptable 
                        to the Secretary, of the borrower's adjusted 
                        gross income.
                            ``(ii) Other documentation.--If the 
                        borrower's adjusted gross income is not 
                        available, or if the Secretary believes that 
                        the borrower's reported adjusted gross income 
                        does not reasonably reflect the borrower's 
                        current income, the borrower must provide other 
                        documentation to verify income.
                            ``(iii) Family size.--Unless otherwise 
                        directed by the Secretary, the borrower must 
                        annually certify the borrower's family size. If 
                        the borrower fails to certify family size, the 
                        Secretary assumes a family size of one for the 
                        applicable year.
                    ``(B) Notifications.--
                            ``(i) In general.--Each year that the 
                        borrower participates in the program under this 
                        section, the Secretary sends the borrower a 
                        written notification that provides the borrower 
                        with--
                                    ``(I) the borrower's monthly 
                                payment amount, as calculated under 
                                paragraph (1) or (2), and the time 
                                period during which such monthly 
                                payment amount will apply (annual 
                                payment period);
                                    ``(II) information about the 
                                requirement for the borrower to 
                                annually provide the information 
                                described in subparagraph (A), and an 
                                explanation that the borrower will be 
                                notified in advance of the date by 
                                which the Secretary must receive this 
                                information;
                                    ``(III) an explanation of the 
                                consequences, as described under 
                                subparagraph (E), if the borrower does 
                                not provide the required information; 
                                and
                                    ``(IV) information about the 
                                borrower's option to request, at any 
                                time during the borrower's annual 
                                payment period, that the Secretary 
                                recalculate the borrower's monthly 
                                payment amount if the borrower's 
                                financial circumstances have changed 
                                and the income amount that was used to 
                                calculate the borrower's current 
                                monthly payment no longer reflects the 
                                borrower's current income.
                            ``(ii) Recalculation.--If the Secretary 
                        recalculates the borrower's monthly payment 
                        amount based on the borrower's request, the 
                        Secretary sends the borrower a written 
                        notification that includes the information 
                        described in this subparagraph.
                    ``(C) Subsequent years.--
                            ``(i) In general.--For each year following 
                        the first year in which a borrower 
                        participating in the plan under this section, 
                        the Secretary notifies the borrower in writing 
                        of the requirements of subparagraph (A) not 
                        later than 60 days and not earlier than 90 days 
                        prior to the date specified in clause (ii)(I).
                            ``(ii) Contents.--The notification under 
                        clause (i) shall provide the borrower with--
                                    ``(I) the date, no earlier than 35 
                                days before the end of the borrower's 
                                annual payment period, by which the 
                                Secretary must receive all of the 
                                documentation described in subparagraph 
                                (A) (annual deadline); and
                                    ``(II) the consequences if the 
                                Secretary does not receive the 
                                information within 10 days following 
                                the annual deadline specified in the 
                                notice, as described under subparagraph 
                                (E).
                    ``(D) No documentation provided.--If a borrower who 
                is currently repaying under the standard repayment plan 
                elects the plan under this section but does not provide 
                the documentation described in subparagraph (A), the 
                borrower remains on such standard repayment plan.
                    ``(E) Alternate repayment plan.--
                            ``(i) In general.--If a borrower who is 
                        currently repaying under the plan under this 
                        section elects to participate in such program 
                        for a subsequent year but the Secretary does 
                        not receive the documentation described in 
                        subparagraph (A) not later than 10 days after 
                        the specified annual deadline, the Secretary 
                        removes the borrower from the plan and places 
                        the borrower on an alternative repayment plan 
                        under which the borrower's required monthly 
                        payment is the amount necessary to repay the 
                        borrower's eligible loans in full within the 
                        earlier of--
                                    ``(I) 10 years from the date the 
                                borrower begins repayment under the 
                                alternative repayment plan; or
                                    ``(II) the ending date of the 20-
                                year period as described in paragraph 
                                (8)(A)(i)(II).
                            ``(ii) Notification.--If the Secretary 
                        places the borrower on an alternative repayment 
                        plan in accordance with clause (i), the 
                        Secretary sends the borrower a written 
                        notification informing the borrower that--
                                    ``(I) the borrower has been placed 
                                on an alternative repayment plan;
                                    ``(II) the borrower's monthly 
                                payment amount has been recalculated 
                                under clause (i); and
                                    ``(III) the borrower may change to 
                                the standard repayment plan in 
                                accordance with section 455(d)(3).
                            ``(iii) Return to program.--A borrower who 
                        has been removed from the plan under this 
                        section or changes to the standard repayment 
                        plan may return to the plan under this section 
                        if the borrower provides the documentation 
                        under subparagraph (A), necessary for the 
                        Secretary to calculate the borrower's current 
                        monthly payment amount and the monthly amount 
                        the borrower would have been required to pay 
                        under the plan during the period when the 
                        borrower was on the alternative repayment plan 
                        or the standard repayment plan.
                            ``(iv) Adjustment of monthly payment 
                        amount.--If the Secretary determines that the 
                        total amount of the payments the borrower was 
                        required to make while on the alternative 
                        repayment plan or the standard repayment plan 
                        are less than the total amount the borrower 
                        would have been required to make under the 
                        program during that period, the Secretary will 
                        adjust the borrower's monthly payment amount to 
                        ensure that the difference between the two 
                        amounts is paid in full by the end of the 20-
                        year period described in paragraph 
                        (8)(A)(i)(II).
                            ``(v) Application of loan forgiveness.--If 
                        the borrower returns to the plan under this 
                        section, any payments that the borrower made 
                        under the alternative repayment plan after the 
                        borrower was removed from the plan shall count 
                        towards forgiveness under the plan under this 
                        section.
                            ``(vi) PSLF.--Payments made under the 
                        alternative repayment plan described in clause 
                        (i) will not count towards public service loan 
                        forgiveness under section 455(m).
                            ``(vii) Exception.--The Secretary does not 
                        take the action described in clause (i) if the 
                        Secretary receives the documentation described 
                        in subparagraph (A) more than 10 days after the 
                        specified annual deadline, but is able to 
                        determine the borrower's new monthly payment 
                        amount before the end of the borrower's current 
                        annual payment period.
                            ``(viii) Monthly payment amount.--If the 
                        Secretary receives the documentation described 
                        in subparagraph (A) within 10 days of the 
                        specified annual deadline--
                                    ``(I) the Secretary promptly 
                                determines the borrower's new scheduled 
                                monthly payment amount and maintains 
                                the borrower's current scheduled 
                                monthly payment amount until the new 
                                scheduled monthly payment amount is 
                                determined;
                                    ``(II) if the new monthly payment 
                                amount is less than the borrower's 
                                previously calculated plan monthly 
                                payment amount, and the borrower made 
                                payments at the previously calculated 
                                amount after the end of the most recent 
                                annual payment period--
                                            ``(aa) the Secretary makes 
                                        the appropriate adjustment to 
                                        the borrower's account; and
                                            ``(bb) unless the borrower 
                                        requests otherwise, the 
                                        Secretary applies the excess 
                                        payment amounts made after the 
                                        end of the most recent annual 
                                        payment period in accordance 
                                        with the requirements of 
                                        paragraph (6)(A);
                                    ``(III) if the new monthly payment 
                                amount is equal to or greater than the 
                                borrower's previously calculated 
                                monthly payment amount, and the 
                                borrower made payments at the 
                                previously calculated payment amount 
                                after the end of the most recent annual 
                                payment period, the Secretary does not 
                                make any adjustment to the borrower's 
                                account;
                                    ``(IV) any payments that the 
                                borrower continued to make at the 
                                previously calculated payment amount 
                                after the end of the prior annual 
                                payment period and before the new 
                                monthly payment amount is calculated 
                                are considered to be qualifying 
                                payments for purposes of public service 
                                loan forgiveness under section 455(m), 
                                provided that the payments otherwise 
                                meet the requirements described in such 
                                section 455(m); and
                                    ``(V) the new annual payment period 
                                begins on the day after the end of the 
                                most recent annual payment period.
            ``(8) Loan forgiveness.--
                    ``(A) In general.--
                            ``(i) Cancellation.--The Secretary cancels 
                        any remaining outstanding balance of principal 
                        and accrued interest on a borrower's covered 
                        Federal Direct Loans that are being repaid 
                        under the plan under this section after--
                                    ``(I) the borrower has made the 
                                equivalent of 240 qualifying monthly 
                                payments as defined in subparagraph 
                                (B); and
                                    ``(II) 20 years have elapsed, 
                                beginning on the date determined in 
                                accordance with subparagraph (C).
                            ``(ii) Determination.--The Secretary 
                        determines when a borrower has met the loan 
                        forgiveness requirements under clause (i) and 
                        does not require the borrower to submit a 
                        request for loan forgiveness.
                    ``(B) Qualifying monthly payment defined.--
                            ``(i) In general.--For purposes of this 
                        paragraph, a qualifying monthly payment is--
                                    ``(I) a monthly payment under the 
                                plan under this section, including a 
                                monthly payment amount of $0.00, as 
                                provided under paragraph (2)(C);
                                    ``(II) a monthly payment made under 
                                the standard repayment plan under 
                                section 455(d)(2)(A); or
                                    ``(III) a month during which the 
                                borrower was not required to make a 
                                payment due to receiving an economic 
                                hardship deferment on the borrower's 
                                covered Federal Direct Loans.
                            ``(ii) Defaulted loans excluded.--Any 
                        payments made on a defaulted loan are not 
                        qualifying monthly payments and are not counted 
                        toward the 20-year forgiveness period.
                    ``(C) Determination of beginning date.--For a 
                borrower who qualifies for the program under this 
                section, the beginning date for the 20-year repayment 
                period is--
                            ``(i) for a borrower who has a Federal 
                        Direct Consolidation Loan, the date the 
                        borrower made a qualifying monthly payment on 
                        the consolidation loan, before the date the 
                        borrower qualified for the program plan under 
                        this section;
                            ``(ii) for a borrower who has one or more 
                        other covered Federal Direct Loans, the date 
                        the borrower made a qualifying monthly payment 
                        on that loan, before the date the borrower 
                        qualified for the plan under this section;
                            ``(iii) for a borrower who did not make a 
                        qualifying monthly payment under clause (i) or 
                        (ii), the date the borrower made a payment on 
                        the borrower's covered Federal Direct Loans 
                        under the plan under this section;
                            ``(iv) if the borrower consolidates the 
                        borrower's loans under this title, the date the 
                        borrower made a qualifying monthly payment on 
                        the Federal Direct Consolidation Loan; or
                            ``(v) if the borrower did not make a 
                        qualifying monthly payment on the loan under 
                        clauses (i) through (iv), the date the borrower 
                        made a payment on the loan under the plan under 
                        this section.
                    ``(D) Notification.--
                            ``(i) Prior to loan cancellation.--Not 
                        later than 6 months prior to the anticipated 
                        date that the borrower will meet the 
                        forgiveness requirements, the Secretary sends 
                        the borrower a written notice that includes--
                                    ``(I) an explanation that the 
                                borrower is approaching the date that 
                                the borrower is expected to meet the 
                                requirements to receive loan 
                                forgiveness;
                                    ``(II) a reminder that the borrower 
                                must continue to make the borrower's 
                                scheduled monthly payments; and
                                    ``(III) general information on the 
                                current treatment of the forgiveness 
                                amount for tax purposes, and 
                                instructions for the borrower to 
                                contact the Internal Revenue Service 
                                for more information.
                            ``(ii) After loan cancellation.--After 
                        determining that a borrower has satisfied the 
                        loan forgiveness requirements, the Secretary--
                                    ``(I) notifies the borrower that 
                                the borrower's obligation on the loans 
                                is satisfied;
                                    ``(II) provides the borrower with 
                                the information described in clause 
                                (i)(III); and
                                    ``(III) returns to the sender any 
                                payment received on a loan after loan 
                                forgiveness has been granted.''.

SEC. 4. DISCLOSURES.

    Section 455(p) of the Higher Education Act of 1965 (20 U.S.C. 
1087e(p)) is amended--
            (1) by striking ``Each institution'' and inserting the 
        following:
            ``(1) In general.--Each institution''; and
            ``(2) Consultation.--The Secretary shall regularly consult 
        with current and prospective college students, family members 
        of such students, institutions of higher education, and other 
        experts to improve the usefulness and relevance of the 
        disclosures described in paragraph (1).''.

SEC. 5. EXCLUSION OF CERTAIN STUDENT LOAN DISCHARGE BY REASON OF DEATH 
              OR DISABILITY.

    (a) In General.--Section 108(f)(1) of the Internal Revenue Code of 
1986 is amended--
            (1) by striking the period at the end and inserting ``, 
        or'',
            (2) by striking ``if such discharge was pursuant to a 
        provision'' and inserting the following: ``if such discharge 
        was pursuant to--
                    ``(A) a provision'', and
            (3) by adding at the end the following:
                    ``(B) section 437(a) of the Higher Education Act of 
                1965.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to discharges of indebtedness after the date of the enactment of 
this Act.
                                 <all>