Government Guaranteed Student Loan Program

At the end of title IV of the Higher Education Act of 1965 (20 U.S.C. 1070 et seq.), add the following:

Guaranteed Student Loan Program

499A.

Statement of purpose; nondiscrimination; appropriations authorized

(a)

Purpose; discrimination prohibited

(1)

Purpose

The purpose of this part is to enable the Secretary—(A)to pay a portion of the interest on loans to qualified students that are guaranteed under this part; and(B)to guarantee a portion of each loan under this part.(2)

Discrimination by creditors prohibited

No agency, organization, institution, bank, credit union, corporation, or other lender who regularly extends, renews, or continues credit under this part shall exclude from receipt or deny the benefits of, or discriminate against any borrower or applicant in obtaining, such credit on the basis of—(A)race, national origin, religion, sex, marital status, age, or disability status; (B)the type or category of institution of higher education that the borrower or applicant attends or attended;(C)the degree or program of study of the borrower or applicant; or(D)the creditworthiness of the borrower or applicant. (b)

Authorization of appropriations

There are authorized to be appropriated to carry out this part such sums as may be necessary for the period of fiscal years 2025 through 2029.(c)

Designation

The program established under this part shall be referred to as the Affordable Future Loan Program. Loans made pursuant to this part shall be known as Affordable Future loans.

499A-1.

Program authority

The Secretary shall implement the Affordable Future Loan Program, through which the Secretary shall—(1)pay an eligible lender 98 percent of the amount of principal and interest due on each defaulted eligible loan that is issued under this part by an eligible lender; (2)reimburse an eligible lender for amounts of subsidized interest under this part; and (3)ensure that only eligible lenders that issue loans in accordance with this part receive the guarantee funds described in paragraph (1) and the reimbursement described in paragraph (2).

499A-2.

Eligible lenders and eligible loans

(a)

Eligible lender

For purposes of this part an eligible lender is an eligible lender as described in subparagraphs (A) through (D), (I), and (K) of section 435(d)(1), except that references to 'this part' or references to other sections in part B in such subsection shall be construed to mean this part rather than part B or any section of part B. (b)

Eligible loan

(1)

In General

An eligible loan is a loan issued under this part on or after the date of enactment of the Affordable Future Loan Program Act of 2024 to an undergraduate student who is otherwise eligible under section 484, who meets the requirements of paragraph (2), and who is enrolled or will be enrolled at an eligible institution of higher education, to enable such student to pursue the student's courses of study at such institution. (2)

Federal loans

A student who desires to apply for a loan under this part and is otherwise eligible to do so, may not apply for such loan until the student—(A)has applied for, and received a determination notice about, financial assistance under subpart 1 of part A and part D for the applicable period of study; or(B)states that the student elects not to apply for financial assistance under subpart 1 of part A and part D for the applicable period of study.

499A-3.

Agreements with eligible lenders

(a)

Participation agreements

An agreement with an eligible lender for participation in the program under this part shall—(1)provide that an eligible lender will offer the maximum amount of eligible loans under this part to any undergraduate student for attendance at an eligible institution of higher education;(2)provide that the eligible lender accepts responsibility and financial liability stemming from its failure to perform its functions pursuant to the agreement;(3)provide for the implementation of a quality assurance system, as established by the Secretary and developed in consultation with eligible lenders, to ensure that the eligible lender is complying with program requirements and meeting program objectives; (4)provide that an eligible lender will comply with the requirements of subsection (c);(5)provide that the funds borrowed by a student are disbursed to the institution by check or other means that is payable to and requires the endorsement or other certification by such student, except—(A)that nothing in this section shall be interpreted—(i)to allow the Secretary to require checks to be made copayable to the institution and the borrower; or(ii)to prohibit the disbursement of loan proceeds by means other than by check; and(B)in the case of any student who is studying outside the United States in a program of study abroad that is approved for credit by the home institution at which such student is enrolled, the funds shall, at the request of the borrower, be delivered directly to the student and the checks may be endorsed, and fund transfers authorized, pursuant to an authorized power-of-attorney; (6)provide that funds will be disbursed in a manner that ensures that any Federal Pell Grant funds, any Federal Direct Loan funds, and any State or institutional grant or scholarship funds awarded to the borrower are disbursed prior to disbursement of any funds from a loan under this part; and(7)provide that the funds borrowed by a student are otherwise disbursed in accordance with section 428G. (b)

Withdrawal and termination procedures

The Secretary shall establish procedures by which eligible lenders may withdraw or be terminated from the program under this part.(c)

Submission of statements by holders on amount of payment

Each holder of an eligible loan under this part, with respect to which payments of interest are required to be made by the Secretary, shall submit to the Secretary, at such time or times and in such manner as the Secretary may prescribe, statements containing such information as may be required by or pursuant to regulation for the purpose of enabling the Secretary to determine the amount of the payment which the Secretary must make with respect to that loan.

499A-4.

Payment of loan guarantee for defaulted loans

(a)

Notice to secretary and payment of loss

Upon default by the student borrower on any eligible loan under this part, and prior to the commencement of suit or other enforcement proceedings upon security for that loan, the insurance beneficiary shall promptly notify the Secretary, and the Secretary shall if requested (at that time or after further collection efforts) by the beneficiary, or may on the Secretary's own motion, if the insurance is still in effect, pay to the beneficiary 96 percent of the amount of the loss sustained by the insured upon that loan as soon as that amount has been determined. (b)

Amount of loss

The amount of the loss on any loan shall, for the purposes of this subsection and subsection (e), be deemed to be an amount equal to the unpaid balance of the principal amount and accrued interest, including interest accruing from the date of submission of a valid default claim (as determined by the Secretary) to the date on which payment is authorized by the Secretary, except that such amount may be reduced based on default rate in a manner similar to the reductions described in section 425(b). (c)

Due diligence

Such beneficiary shall be required to meet the standards of due diligence in the collection of the loan and shall be required to submit proof that the institution was contacted and other reasonable attempts were made to locate the borrower (when the location of the borrower is unknown) and proof that contact was made with the borrower (when the location is known). (d)

Timing of determination

The Secretary shall make the determination required to carry out the provisions of this section not later than 90 days after the notification by the insurance beneficiary and shall make payment in full on the amount of the beneficiary's loss pending completion of the due diligence investigation.(e)

Effect of payment of loss

Upon payment of the amount of the loss pursuant to subsection (a), the United States shall be subrogated for all of the rights of the holder of the obligation upon the insured loan and shall be entitled to an assignment of the note or other evidence of the insured loan by the insurance beneficiary. The Secretary may, in attempting to make recovery on such loans, contract with private business concerns, State student loan insurance agencies, or State guaranty agencies, for payment for services rendered by such concerns or agencies in assisting the Secretary in making such recovery. Any contract under this subsection entered into by the Secretary shall provide that attempts to make recovery on such loans shall be fair and reasonable, and do not involve harassment, intimidation, false or misleading representations, or unnecessary communications concerning the existence of any such loan to persons other than the student borrower.(f)

Forbearance not precluded

Nothing in this section or in this part shall be construed to preclude any forbearance for the benefit of the student borrower which may be agreed upon by the parties to the insured loan and approved by the Secretary, or to preclude forbearance by the Secretary in the enforcement of the insured obligation after payment on that insurance. Any forbearance which is approved by the Secretary under this subsection with respect to the repayment of a loan, including a forbearance during default, shall not be considered as indicating that a holder of a federally insured loan has failed to exercise reasonable care and due diligence in the collection of the loan.(g)

Care and diligence required of holders

Nothing in this section or in this part shall be construed to excuse the holder of a federally insured loan from exercising reasonable care and diligence in the making and collection of loans under the provisions of this part. If the Secretary, after a reasonable notice and opportunity for hearing to an eligible lender, finds that it has substantially failed to exercise such care and diligence or to make the reports and statements required under section 499A–3(c), the Secretary shall disqualify that lender for further Federal insurance on loans granted pursuant to this part until the Secretary is satisfied that its failure has ceased and finds that there is reasonable assurance that the lender will in the future exercise necessary care and diligence or comply with such requirements, as the case may be.(h)

Reports to consumer reporting agencies and institutions of higher education

For the purpose of promoting responsible repayment of loans under this part, the Secretary and each eligible lender and subsequent holder shall enter into an agreement with each consumer reporting agency to exchange information concerning student borrowers in the same manner as such agreements are made under section 430A.

499A-5.

Purchase of loans sold in secondary market

(a)

In General

Loans under this part may be sold in the secondary market to another eligible lender.(b)

Servicing and liquidation

When an eligible lender has sold the guaranteed portion of a loan in the secondary market, the loan holder must perform all necessary servicing and liquidation actions for such loan.(c)

Status report

In the event that the Secretary purchases its guaranteed portion of such a loan from the holder of the loan, the loan holder shall provide the Secretary with a loan status report within 15 business days of such purchase. This report shall include a status report on the borrower and plans for any type of loan workout or loan restructuring. The report shall accompany requested documentation that the Secretary determines is sufficient to be able to review the loan holder's administration of the loan. Failure to provide requested documentation to the Secretary may lead to initiation of an action for recovery from the loan holder of all or some of the amounts the Secretary paid to the holder of the loan on a guarantee.(d)

Further evaluation

The Secretary shall evaluate the eligible lender's continued participation in the secondary market and may restrict further sale of guaranteed portions into the secondary market until the Secretary determines that the eligible lender has provided sufficient documentation for purchases.

499A-6.

Default reduction program

(a)

Other repayment incentives

(1)

Sale or assignment of loan

(A)

In general

The Secretary, upon securing 9 payments made within 20 days of the due date during 10 consecutive months of amounts owed on a loan for which the Secretary has made a payment under this section, shall, if practicable, sell the loan to another eligible lender.(B)

Monthly payments

The Secretary shall not demand from a borrower as monthly payment amounts described in subparagraph (A) more than is reasonable and affordable based on the borrower's total financial circumstances, except such monthly payment amount shall not be less than $5.(C)

Consumer reporting agencies

Upon the sale or assignment of the loan, the Secretary shall request any consumer reporting agency to which the Secretary or holder, as applicable, reported the default of the loan, to remove the record of the default from the borrower's credit history.(D)

Eligible lender limitation

A loan shall not be sold to an eligible lender under subparagraph (A) if such lender has been found by the Secretary to have substantially failed to exercise the due diligence required of lenders under this part.(E)

Default due to error

A loan that does not meet the requirements of subparagraph (A) may also be eligible for sale or assignment under this paragraph upon a determination that the loan was in default due to clerical or data processing error and would not, in the absence of such error, be in a delinquent status.(2)

Borrower eligibility

Any borrower whose loan is sold under paragraph (1)(A) shall not be precluded by section 484 from receiving additional loans or grants under this title (for which he or she is otherwise eligible) on the basis of defaulting on the loan prior to such loan sale.(3)

Applicability of general loan conditions

A loan that is sold under paragraph (1)(A) shall, so long as the borrower continues to make scheduled repayments thereon, be subject to the same terms and conditions and qualify for the same benefits and privileges as other loans made under this part.(4)

Limitation

A borrower may obtain the benefits available under this subsection with respect to rehabilitating a loan (whether by loan sale or assignment) not more than 2 times per loan.(b)

Satisfactory repayment arrangements To renew eligibility

The Secretary shall establish a program which allows a borrower with a defaulted loan or loans to renew eligibility for all title IV student financial assistance (regardless of whether the defaulted loan has been sold to an eligible lender or assigned to the Secretary) upon the borrower's payment of 6 consecutive monthly payments. The loan holder shall not demand from a borrower as a monthly payment amount under this subsection more than is reasonable and affordable based upon the borrower's total financial circumstances. A borrower may only obtain the benefit of this subsection with respect to renewed eligibility once.(c)

Financial and economic literacy

Each program described in subsection (b) shall include making available financial and economic education materials for a borrower who has rehabilitated a loan.

499A-7.

Terms and conditions of loans

(a)

Eligibility; Maximum aid

(1)

Eligibility

A student's amount of need for a loan under this part shall be based solely on the student's estimated cost of attendance and estimated financial assistance, including other assistance through a Federal Pell Grant or a Federal Direct Loan under this title or any State or institutional grant or scholarship funds awarded to the student. An expected family contribution or student aid index shall not be considered. (2)

Maximum aid

(A)

In General

Subject to subparagraph (B), the maximum dollar amount of financial assistance provided annually under this part to a student shall not exceed an amount equal to—(i)the cost of attendance for such student; minus(ii)the total amount of—(I)other financial assistance not received under this title (as defined in section 480(i)); and(II)other financial assistance received under this title, including a Federal Pell Grant or a Federal Direct Loan.(B)

Limitation

A loan under this part shall not exceed an amount equal to—(i)$19,000 adjusted annually according to the estimated percentage change in the Consumer Price Index (as determined by the Secretary, using the definition in section 478(f)) for the most recent calendar year ending prior to the beginning of that award year; minus(ii)the amount described in subclause (II) of subparagraph (A)(ii). (b)

Interest rate

(1)

Rates for Borrowers not in repayment status

In the case of a borrower who is not in repayment status, for an Affordable Future Loan for which the first disbursement is made on or after July 1, 2025, 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 the lesser of—(A)a rate equal to the high yield of the 10-year Treasury note auctioned at the final auction held prior to such June 1 plus 1 percent; or(B)6.28 percent.(2)

Rates for Borrowers in repayment status

In the case of a borrower who is in repayment status, for an Affordable Future Loan for which the first disbursement is made on or after July 1, 2025, 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 the lesser of—(A)a rate equal to the high yield of the 10-year Treasury note auctioned at the final auction held prior to such June 1 plus 2 percent; or(B)6.28 percent. (3)

Publication

The Secretary shall determine the applicable rates of interest under this subsection 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, but before June 1 preceding the award year.(4)

Subsidized interest

The amount of interest for a loan under this part shall be paid by the Secretary to the eligible lender on behalf of the borrower only during the period of time that the borrower is not in repayment status.(5)

Not in repayment status

In this section the term not in repayment status means any period of time described in subparagraphs (A), (C), or (D) of subsection (e)(2).(c)

Loan fee

Each eligible lender under this part may charge the borrower an origination fee in an amount not to exceed 1.0 percent of the principal amount of the loan, to be deducted proportionately from each installment payment of the proceeds of the loan prior to payment to the borrower. A lender that charges an origination fee under this paragraph shall assess the same fee to all student borrowers.(d)

Repayment plans

(1)

Design and selection

Consistent with criteria established by the Secretary, a borrower of a loan made under this part shall be offered 2 repayment plans for such 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 15-year fixed installment repayment plan; or(B)the income driven repayment plan described in paragraph (2).(2)

Income driven repayment plan

(A)

In General

Under the income-driven repayment plan under this subsection the borrower’s aggregate monthly payment for loans under this part shall be equal to the income-driven calculation, divided by 12. (B)

Discretionary income

The term discretionary income means the amount by which a borrower’s (and the borrower's spouse, if applicable) annual adjusted gross income exceeds 150 percent of the poverty line applicable to the borrower’s family size.(C)

Discretionary income bend point

The term discretionary income bend point means $25,000, adjusted annually for inflation as determined by the Consumer Price Index (as such term is defined in section 478(f)) for the previous calendar year.(D)

Income-driven calculation

(i)

In general

The term income-driven calculation, when used with respect to a borrower, means the annual amount due on the total amount of loans under this part, which annual amount is equivalent to—(I)10 percent of the borrower’s discretionary income that is less than the discretionary income bend point, plus(II)15 percent of the borrower’s discretionary income that is equal to or greater than the discretionary income bend point.(ii)

Annual calculation

The calculation under clause (i) shall be determined on an annual basis for the duration of the repayment period.(3)

Selection by lender

If a borrower of a loan made under this part does not select a repayment plan described in paragraph (1), the eligible lender shall provide the borrower with a repayment plan described in subparagraph (A) of paragraph (1).(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 the eligible lender's selection of the plan for the borrower under paragraph (3), as the case may be, without penalty or subject to additional fees, except that such borrower shall remain in a selected repayment plan for not less than 6 months. (5)

Alternative repayment plans

The lender may provide, on a case by case basis, an alternative repayment plan to a borrower of a loan made under this part who demonstrates to the satisfaction of the lender that the terms and conditions of the repayment plans available under paragraph (1) are not adequate to accommodate the borrower's exceptional circumstances. In designing such alternative repayment plans, the lender 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 (1).(6)

Repayment after default

(A)

Lender costs

The eligible lender may require any borrower who has defaulted on a loan made under this part to pay all reasonable collection costs associated with such loan.(B)

Payment to Secretary

The Secretary may require any borrower who has defaulted on a loan made under this part to repay the loan pursuant to the income driven repayment plan described in paragraph (1)(B).(e)

Deferment

(1)

In General

A borrower of a loan made under this part who meets any of the requirements described in subparagraphs (A) through (D) of paragraph (2) shall be eligible for a deferment, during which periodic installments of principal and interest need not be paid.(2)

Eligibility

A borrower of a loan made under this part shall be eligible for a deferment during any period—(A)during which the borrower is carrying at least a normal full-time work load for the course of study that the borrower is pursuing, as determined by the eligible institution (as such term is defined in section 435(a)) the borrower is attending; or(B)for 6 months following the date on which the borrower ceases to carry the normal full-time work load as described in subparagraph (A); (C)during which the borrower—(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 for the 180-day period following the demobilization date for the service described in clause (i) or (ii); or

(D)during—(i)any period in which such borrower is receiving treatment for cancer; and(ii)the 6 months after such period.(3)

Interest accrual

During periods described in subparagraphs (A), (C), and (D) of paragraph (2) interest shall be subsidized in accordance with subsection (b)(4).(f)

Loan application and promissory note

The common financial reporting form required in section 483(a)(1) shall constitute the application for loans made under this part. The Secretary shall develop, print, and distribute to participating eligible lenders a standard promissory note and loan disclosure form.(g)

Loan disbursement

Loans shall be disbursed in accordance with section 499A–3.(h)

Disclosures

With respect to loans under this part and in accordance with such regulations as the Secretary shall prescribe, each eligible lender participating in this part shall comply with each of the requirements under section 433 that apply to a lender with respect to a loan under part B.(i)

Enrollment period limitations

In order to continue to be eligible for a loan under this part, a borrower shall complete the program of study not more than 5 years after the date the borrower first enters the program of study.

499A-8.

Relationship to other Federal Loans

(a)

In general

A borrower may borrow loans both under part D and under this part for the same period of study. If a borrower is borrowing loans under both part D and this part for the same period of study, the eligible lender shall ensure that the Secretary has made determinations about the amount of loans awarded under part D for such period prior to determining the amount of loans under this part that the borrower is eligible to borrow, in accordance with section 499A–2(b).(b)

Rule of construction

Nothing in this Act shall be construed to require a borrower who borrows loans under this part to also borrow loans under part D.(c)

Prohibition on combining loans

The Secretary may not combine or otherwise consolidate a loan made under this part with a loan made under part D, unless the borrower of such loans elects to consolidate such loans.