[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5710 Introduced in House (IH)]

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118th CONGRESS
  1st Session
                                H. R. 5710

  To provide for the refinancing and recalculation of certain Federal 
                 student loans, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                           September 26, 2023

    Mr. Garamendi (for himself and Mr. Fitzpatrick) introduced the 
 following bill; which was referred to the Committee on Education and 
                             the Workforce

_______________________________________________________________________

                                 A BILL


 
  To provide for the refinancing and recalculation of certain Federal 
                 student loans, 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 Refinancing and 
Recalculation Act''.

SEC. 2. REFINANCING PROGRAMS.

    (a) Program Authority.--Section 451(a) of the Higher Education Act 
of 1965 (20 U.S.C. 1087a(a)) is amended--
            (1) by striking ``and (2)'' and inserting ``(2)''; and
            (2) by inserting ``; and (3) to make loans under section 
        460A'' after ``section 459A''.
    (b) Refinancing Program.--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. 460A. REFINANCING FFEL AND FEDERAL DIRECT LOANS.

    ``(a) In General.--Beginning not later than 180 days after the date 
of enactment of the Student Loan Refinancing and Recalculation Act, the 
Secretary shall establish a program under which the Secretary, upon the 
receipt of an application from a qualified borrower, reissues the 
borrower's original loan under this part or part B as a loan under this 
part, in accordance with the provisions of this section, in order to 
permit the borrower to obtain the interest rate provided under 
subsection (c).
    ``(b) Reissuing Loans.--
            ``(1) Federal direct loans.--Upon application of a 
        qualified borrower, the Secretary shall reissue a Federal 
        Direct Stafford Loan, a Federal Direct Unsubsidized Stafford 
        Loan, a Federal Direct PLUS Loan, or a Federal Direct 
        Consolidation Loan of the qualified borrower, for which the 
        first disbursement was made, or the application for the 
        reissuance of a loan under this section was received before 
        July 1, 2024, in an amount equal to the sum of--
                    ``(A) the unpaid principal, accrued unpaid 
                interest, and late charges of the original loan; and
                    ``(B) the administrative fee under subsection 
                (d)(3).
            ``(2) Discharging and reissuing ffel program loans as 
        refinanced federal direct loans.--Upon application of a 
        qualified borrower for any loan that was made, insured, or 
        guaranteed under part B and for which the first disbursement 
        was made before July 1, 2010, the Secretary shall reissue such 
        loan as a loan under this part, in an amount equal to the sum 
        of the unpaid principal, accrued unpaid interest, and late 
        charges of the original loan and the administrative fee under 
        subsection (d)(3), to the borrower in accordance with the 
        following:
                    ``(A) The Secretary shall pay the proceeds of such 
                reissued loan to the eligible lender of the loan made, 
                insured, or guaranteed under part B, in order to 
                discharge the borrower from any remaining obligation to 
                the lender with respect to the original loan.
                    ``(B) The Secretary shall reissue--
                            ``(i) a loan originally made, insured, or 
                        guaranteed under section 428 as a Federal 
                        Direct Stafford Loan;
                            ``(ii) a loan originally made, insured, or 
                        guaranteed under section 428B as a Federal 
                        Direct PLUS Loan;
                            ``(iii) a loan originally made, insured, or 
                        guaranteed under section 428H as a Federal 
                        Direct Unsubsidized Stafford Loan; and
                            ``(iv) a loan originally made, insured, or 
                        guaranteed under section 428C as a Federal 
                        Direct Consolidation Loan.
                    ``(C) The interest rate for each loan reissued 
                under this paragraph shall be the rate provided under 
                subsection (c).
    ``(c) Interest Rate.--
            ``(1) In general.--The interest rate for the reissued 
        Federal Direct Stafford Loans, Federal Direct Unsubsidized 
        Stafford Loans, Federal Direct PLUS Loans, and Federal Direct 
        Consolidation Loans, shall be a rate equal to--
                    ``(A) the high yield of the 10-year Treasury note 
                auctioned at the final auction held prior to the first 
                day of the month in which the application for 
                reissuance under this section is received, plus
                    ``(B) 1.0 percent.
            ``(2) Fixed rate.--The applicable rate of interest 
        determined under paragraph (1) for a reissued loan under this 
        section shall be fixed for the period of the loan.
    ``(d) Terms and Conditions of Loans.--
            ``(1) In general.--A loan that is reissued under this 
        section shall have the same terms and conditions as the 
        original loan, except as otherwise provided in this section.
            ``(2) No automatic extension of repayment period.--
        Reissuing a loan under this section shall not result in the 
        extension of the duration of the repayment period of the loan, 
        and the borrower shall retain the same repayment term that was 
        in effect on the original loan. Nothing in this paragraph shall 
        be construed to prevent a borrower from electing a different 
        repayment plan at any time in accordance with section 
        455(d)(3).
            ``(3) Administrative fee.--The Secretary shall charge the 
        borrower of a loan reissued under this section an 
        administrative fee of not more than 0.5 percent of the sum of 
        the unpaid principal, accrued unpaid interest, and late 
        charges, of the original loan.
    ``(e) Definition of Qualified Borrower.--
            ``(1) In general.--The term `qualified borrower' means a 
        borrower--
                    ``(A) of a loan under this part or part B for which 
                the first disbursement was made, or the application for 
                reissuance under this section was received, before July 
                1, 2024; and
                    ``(B) who meets the eligibility requirements based 
                on income or debt-to-income ratio established by the 
                Secretary.
            ``(2) Income requirements.--Not later than 180 days after 
        the date of enactment of the Student Loan Refinancing and 
        Recalculation Act, the Secretary shall establish eligibility 
        requirements based on income or debt-to-income ratio that take 
        into consideration providing access to refinancing under this 
        section for borrowers with the greatest financial need.
    ``(f) Expiration of Authority.--The Secretary's authority to 
reissue loans under this section shall expire on the date that is 
determined in accordance with section 4(c) of the Student Loan 
Refinancing and Recalculation Act.''.
    (c) Amendments to Public Service Repayment Plan Provisions.--
Section 455(m) of the Higher Education Act of 1965 (20 U.S.C. 1087e(m)) 
is amended--
            (1) by redesignating paragraphs (3) and (4) as paragraphs 
        (4) and (5), respectively;
            (2) by inserting after paragraph (2) the following:
            ``(3) Special rules for section 460a loans.--
                    ``(A) Refinanced federal direct loans.--
                Notwithstanding paragraph (1), in determining the 
                number of monthly payments that meet the requirements 
                of such paragraph for an eligible Federal Direct Loan 
                reissued under section 460A that was originally a loan 
                under this part, the Secretary shall include all 
                monthly payments made on the original loan that meet 
                the requirements of such paragraph.
                    ``(B) Refinanced ffel loans.--In the case of an 
                eligible Federal Direct Loan reissued under section 
                460A that was originally a loan under part B, only 
                monthly payments made after the date on which the loan 
                was reissued may be included for purposes of paragraph 
                (1).''; and
            (3) in paragraph (4)(A) (as redesignated by paragraph (1) 
        of this subsection), by inserting ``(including any Federal 
        Direct Stafford Loan, Federal Direct PLUS Loan, Federal Direct 
        Unsubsidized Stafford Loan, or Federal Direct Consolidation 
        Loan reissued under section 460A)'' before the period at the 
        end.
    (d) Income-Based Repayment.--Section 493C of the Higher Education 
Act of 1965 (20 U.S.C. 1098e) is amended by adding at the end the 
following:
    ``(f) Refinanced Federal Direct and FFEL Loans.--In calculating the 
period of time during which a borrower of a loan that is reissued under 
section 460A has made monthly payments for purposes of subsection 
(b)(7), the Secretary shall deem the period to include all monthly 
payments made for the original loan, and all monthly payments made for 
the reissued loan, that otherwise meet the requirements of this 
section.''.

SEC. 3. INTEREST RATES.

    (a) Interest Rates.--Section 455(b) of the Higher Education Act of 
1965 (20 U.S.C. 1087e(b)) is amended--
            (1) by redesignating paragraphs (9) and (10) as paragraphs 
        (10) and (11), respectively; and
            (2) by inserting after paragraph (8) the following:
            ``(9) Interest rate provisions for new loans on or after 
        july 1, 2024.--
                    ``(A) Rates for undergraduate fdsl and fdusl.--
                Notwithstanding the preceding paragraphs of this 
                subsection, for Federal Direct Stafford Loans and 
                Federal Direct Unsubsidized Stafford Loans issued to 
                undergraduate students, for which the first 
                disbursement is made on or after July 1, 2024, the 
                applicable rate of interest shall, for loans disbursed 
                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 the lesser of--
                            ``(i) a rate equal to--
                                    ``(I) the high yield of the 10-year 
                                Treasury note auctioned at the final 
                                auction held prior to such June 1, plus
                                    ``(II) 1 percent; or
                            ``(ii) 8.25 percent.
                    ``(B) Rates for graduate and professional fdusl.--
                Notwithstanding the preceding paragraphs of this 
                subsection, for Federal Direct Unsubsidized Stafford 
                Loans issued to graduate or professional students, for 
                which the first disbursement is made on or after July 
                1, 2024, the applicable rate of interest shall, for 
                loans disbursed 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 the lesser of--
                            ``(i) a rate equal to--
                                    ``(I) the high yield of the 10-year 
                                Treasury note auctioned at the final 
                                auction held prior to such June 1, plus
                                    ``(II) 1 percent; or
                            ``(ii) 9.5 percent.
                    ``(C) PLUS loans.--Notwithstanding the preceding 
                paragraphs of this subsection, for Federal Direct PLUS 
                Loans, for which the first disbursement is made on or 
                after July 1, 2024, the applicable rate of interest 
                shall, for loans disbursed 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 the 
                lesser of--
                            ``(i) a rate equal to--
                                    ``(I) the high yield of the 10-year 
                                Treasury note auctioned at the final 
                                auction held prior to such June 1, plus
                                    ``(II) 1 percent; or
                            ``(ii) 10.5 percent.
                    ``(D) Consolidation loans.--Notwithstanding the 
                preceding paragraphs of this subsection, any Federal 
                Direct Consolidation Loan for which the application is 
                received on or after July 1, 2024, 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.
                    ``(E) Consultation.--The Secretary shall determine 
                the applicable rate of interest under this paragraph 
                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.
                    ``(F) Rate.--The applicable rate of interest 
                determined under this paragraph for a Federal Direct 
                Stafford Loan, a Federal Direct Unsubsidized Stafford 
                Loan, or a Federal Direct PLUS Loan shall be fixed for 
                the period of the loan.''.
    (b) In School Deferment.--Section 455(f) of the Higher Education 
Act of 1965 (20 U.S.C. 1087e(f)) is amended--
            (1) in paragraph (1), in the matter preceding subparagraph 
        (A), by striking ``A borrower'' and inserting ``Except as 
        provided in paragraph (5), a borrower'';
            (2) in paragraph (2)(A)--
                    (A) by striking the matter following clause (ii);
                    (B) in clause (ii), by striking the comma at the 
                end and inserting ``; or''; and
                    (C) by adding at the end the following:
                            ``(iii) is serving in a medical, 
                        veterinary, or dental internship or residency 
                        program;''; and
            (3) by adding at the end the following new paragraph:
            ``(6) Special rule for in school deferment.--
        Notwithstanding any other provision of this Act, a borrower 
        described in paragraph (2)(A) shall be eligible for a 
        deferment, during which periodic installments of principal need 
        not be paid, and interest--
                    ``(A) shall not accrue, in the case of a borrower 
                with an expected family contribution of not more than 
                $10,000 (computed in accordance with part F of this 
                title); and
                    ``(B) shall accrue at the rate equal to the high 
                yield of the 10-year Treasury note applicable to such 
                loan under subsection (b)(9), in the case of a borrower 
                of an unsubsidized loan with an expected family 
                contribution of more than $10,000 (computed in 
                accordance with part F of this title).''.
    (c) Effective Date.--The amendments made by subsections (a) and (b) 
shall take effect on July 1, 2024.

SEC. 4. ELIMINATION OF ORIGINATION FEES FOR FEDERAL DIRECT LOANS.

    (a) Sense of Congress.--It is the sense of Congress that no 
origination fees should be charged on any future Federal Direct Loans.
    (b) Repeal of Origination Fees.--Subsection (c) of section 455 of 
the Higher Education Act of 1965 (20 U.S.C. 1087e(c)) is repealed.
    (c) Effective Date.--The amendment made by subsection (b) shall 
apply with respect to loans made under part D of title IV of the Higher 
Education Act of 1965 (20 U.S.C. 1087a et seq.) for which the first 
disbursement of principal is made, or, in the case of a Federal Direct 
Consolidation Loan, the application is received, on the first July 1 
after the date of enactment of this Act.

SEC. 5. ELIMINATION OF INTEREST CAPITALIZATION.

    (a) Federal Plus Loans.--Section 428B(d)(2) of the Higher Education 
Act of 1965 (20 U.S.C. 1078-2(d)(2)) is amended to read as follows:
            ``(2) No capitalization of interest.--Interest on loans 
        made under this section for which payments of principal are 
        deferred pursuant to paragraph (1) shall be paid monthly or 
        quarterly, if agreed upon by the borrower and the lender and 
        shall not be capitalized.''.
    (b) Federal Consolidation Loans Deferrals.--Section 
428C(b)(4)(C)(ii)(III) of the Higher Education Act of 1965 (20 U.S.C. 
1078-3(b)(4)(C)(III)) is amended by striking ``or capitalized,''.
    (c) Loan Limits for Unsubsidized Stafford Loans.--Section 
428H(d)(5) of the Higher Education Act of 1965 (20 U.S.C. 1078-8(d)(5)) 
is amended by inserting ``before the date of enactment of the Student 
Loan Refinancing and Recalculation Act'' after ``Interest 
capitalized''.
    (d) Unsubsidized Stafford Loans for Middle Income Borrowers.--
Section 428H(e)(2) of the Higher Education Act of 1965 (20 U.S.C. 1078-
8(e)(2)) is amended--
            (1) in the header, by striking ``Capitalization'' and 
        inserting ``No capitalization'';
            (2) in subparagraph (A), in the matter before clause (i), 
        by striking ``, if agreed upon by the borrower and the lender'' 
        and all that follows through clause (ii)(IV) and inserting ``be 
        paid monthly or quarterly, if agreed upon by the borrower and 
        the lender and shall not be capitalized.'';
            (3) by striking subparagraph (B); and
            (4) by redesignating subparagraph (C) as subparagraph (B).
    (e) Income Contingent Repayment.--Section 455(e)(5) of the Higher 
Education Act of 1965 (20 U.S.C. 1087e(e)(5)) is amended by striking 
the last sentence and inserting ``No interest may be capitalized on 
such loan on or after the date of the enactment of the Student Loan 
Refinancing and Recalculation Act, and the Secretary shall promulgate 
regulations with respect to the treatment of accrued interest that is 
not capitalized.''.
    (f) Effect of Deferment on Principal and Interest.--Section 
455(f)(1)(B) of the Higher Education Act of 1965 (20 U.S.C. 
1087e(f)(1)(B)) is amended by striking ``capitalized or''.
    (g) Income-Based Repayment Program.--Section 493C(b)(3) of the 
Higher Education Act of 1965 (20 U.S.C. 1098e(b)(3)) is amended to read 
as follows:
            ``(3) on subsidized loans, any interest due and not paid 
        under paragraph (2) shall be paid by the Secretary for a period 
        of not more than 3 years after the date of the borrower's 
        election under paragraph (1), except that such period shall not 
        include any period during which the borrower is in deferment 
        due to an economic hardship described in section 435(o);''.
    (h) Notes and Insurance Certificates in Combined Payment Plans.--
Section 485A(f) of the Higher Education Act of 1965 (20 U.S.C. 
1092a(f)) is amended by adding at the end the following new paragraph:
    ``(3) Treatment of Interest.--Not withstanding paragraphs (1) and 
(2), beginning on the date of enactment of the Student Loan Refinancing 
and Recalculation Act, interest on a loan reissued under subsection (e) 
shall not be capitalized, and interest shall only accrue on the 
percentage of such reissued loan that is equal to--
            ``(A) the amount of the outstanding principal on the 
        original loan on the date it was reissued; divided by
            ``(B) the total amount of such reissued loan on the date 
        such loan was reissued.''.
    (i) Default Reduction Program.--Section 428F(a)(1)(E) of the Higher 
Education Act of 1965 (20 U.S.C. 1078-6(a)(1)(E)) is amended--
            (1) in clause (i), by striking ``and'' at the end;
            (2) in clause (ii), by striking the period at the end and 
        inserting a semicolon; and
            (3) by adding to the end the following:
                            ``(iii) for a loan assigned on or after the 
                        date of enactment of the Student Loan 
                        Refinancing and Recalculation Act, the interest 
                        outstanding at the time of the assignment of 
                        such loan, and any interest accruing after such 
                        time, shall not be capitalized; and
                            ``(iv) beginning on the date of enactment 
                        of the Student Loan Refinancing and 
                        Recalculation Act, interest shall only accrue 
                        on the percentage of such a loan that is equal 
                        to--
                                    ``(I) the amount of the outstanding 
                                principal on the original loan on the 
                                date it was assigned; divided by
                                    ``(II) the total amount of such 
                                assigned loan, including interest 
                                outstanding at the time of the 
                                assignment of such loan and the amount 
                                added by the guaranty agency in 
                                accordance with clause (i), on the date 
                                such loan was assigned.''.
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