Student Loan Borrowers' Bill of Rights Act of 2013

Summary: Student Loan Borrowers' Bill of Rights Act of 2013 - Removes educational loans from the list of debts that are non-dischargeable in bankruptcy. Amends title IV (Student Assistance) of the Higher Education Act of 1965 (HEA) to reinstate the six-year statute of limitations on the recovery by:    institutions of higher education (IHEs) of refund amounts owed by students on grants made, or work assistance awarded, under title IV;   guaranty agencies of amounts owed on loans made under the Federal Family Education Loan (FFEL) program;   IHEs that have program participation agreements with the Secretary of Education of amounts owed under the William D. Ford Federal Direct Loan program or Federal Perkins Loans program; and   the federal government of amounts owed by students on grants made under title IV or amounts owed by borrowers on loans made under title IV that have been assigned to the Secretary.  Prohibits the collection of amounts individuals owe the Department of Education under title IV of the HEA through: (1) offsets of social security, railroad retirement, or black lung benefits; (2) offsets of tax refunds; or (3) wage garnishment. Amends the Internal Revenue Code to exclude discharged student loan debt from an individual's gross income. Excludes from gross income distributions from qualified tuition plans that are use to pay the interest or principal on student loans. Amends the HEA to make borrowers of PLUS loans made on behalf of dependent students under:    the Direct Loan program eligible for income-contingent repayment plans, including plans based on the President's Pay As You Earn repayment initiative;   the Direct Loan or FFEL programs eligible for income-based repayment plans that enable borrowers who have a partial financial hardship to make lower monthly payments; and   the Direct Loan or FFEL programs eligible for loan forgiveness for service in areas of national need.  Specifies the regulation to be used in determining whether individuals have an adverse credit history that disqualifies them from borrowing a Direct Plus loan (provided to graduate or professional students or the parents of dependent students). Prohibits evidence of an individual's default on a loan made, insured, or guaranteed under title IV of the HEA from being used in a federal or state proceeding involving the individual's professional or vocational license. Prohibits an IHE from blocking students' access to their student records at the IHE due to such students being in default on such loans. Directs the Secretary to cancel 50% of the balance of the interest and principal due on Direct loans that are not in default for borrowers who are employed in a public service job and make 60 monthly payments on such loans after October 1, 2013.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Student Loan Borrowers' Bill of 
Rights Act of 2013''.

        TITLE I--BORROWERS' RIGHT TO BASIC CONSUMER PROTECTIONS

SEC. 101. DISCHARGEABILITY OF STUDENT LOANS IN BANKRUPTCY CASES.

    Section 523(a) of title 11 of the United States Code is amended--
            (1) by striking paragraph (8); and
            (2) by redesignating paragraphs (9) through (19) as 
        paragraphs (8) through (18).

SEC. 102. REINSTATEMENT OF THE 6-YEAR STATUTE OF LIMITATIONS FOR 
              STUDENT LOANS.

    Subsection (a) of section 484A of the Higher Education Act of 1965 
(20 U.S.C. 1091a(a)) is amended to read as follows:
    ``(a) Statute of Limitations.--Notwithstanding any Federal or State 
statutory, regulatory, or administrative limitation on the period 
within which debts may be enforced--
            ``(1) an institution that receives funds under this title 
        may file a suit or initiate or take another action for 
        collection of a refund due from a student on a grant made, or 
        work assistance awarded, under this title, during the 6-year 
        period beginning on the day after the refund first became due 
        (exclusive of period during which the State statute of 
        limitations otherwise applicable to a suit under this paragraph 
        would be tolled under State law);
            ``(2) a guaranty agency that has an agreement with the 
        Secretary under section 428(c) may file a suit or initiate or 
        take another action for collection of the amount due from a 
        borrower on a loan made under part B during the 6-year period 
        beginning on the day after such guaranty agency reimburses the 
        previous holder of the loan for its loss on account of the 
        default of the borrower (exclusive of period during which the 
        State statute of limitations otherwise applicable to a suit 
        under this paragraph would be tolled under State law);
            ``(3) an institution that has an agreement with the 
        Secretary pursuant to section 487 may file a suit or initiate 
        or take another action for collection of the amount due from a 
        borrower on a loan made under part D or E after the default of 
        the borrower on such loan during the 6-year period beginning on 
        the day after the date of the default of the borrower with 
        respect to such amount (exclusive of period during which the 
        State statute of limitations otherwise applicable to a suit 
        under this paragraph would be tolled under State law); or
            ``(4) the Secretary, the Attorney General, or the 
        administrative head of another Federal agency, as the case may 
        be, may file a suit or initiate or take another action for 
        collection of a refund due from a student on a grant made under 
        this title, or for the repayment of the amount due from a 
        borrower on a loan made under this title that has been assigned 
        to the Secretary under this title, during the 6-year period 
        beginning on the day after the refund or the amount first 
        became due.''.

SEC. 103. PROHIBITION OF COLLECTION OF STUDENT LOANS THROUGH CERTAIN 
              OFFSETS OR THROUGH WAGE GARNISHMENT.

    (a) Prohibition on Offset of Social Security Benefits.--Section 
3716(c)(3)(A) of title 31, United States Code, is amended--
            (1) in clause (i), by striking ``except as provided in 
        clause (ii)'' and inserting ``except as provided in clauses 
        (ii) and (iii)''; and
            (2) by adding at the end the following new clause:
    ``(iii) Notwithstanding clause (i), any payments due to an 
individual under Federal benefits programs cited under clause (i) shall 
not be subject to offset under this subsection if the offset is for 
payments certified by the Department of Education under a program 
administered by the Secretary of Education under title IV of the Higher 
Education Act of 1965 (20 U.S.C. 1070 et seq.).''.
    (b) Prohibition on Offset of Tax Refund.--Section 3720A(a) of title 
31, United States Code, is amended--
            (1) by striking ``Any Federal agency'' and inserting ``(1) 
        Except as provided in paragraph (2), any Federal agency''; and
            (2) by adding at the end the following new paragraph:
    ``(2) Any past-due legally enforceable debt owed by an individual 
to the Department of Education under a program administered by the 
Secretary of Education under title IV of the Higher Education Act of 
1965 (20 U.S.C. 1070 et seq.) shall not be subject to notification 
under paragraph (1), and any refund of Federal taxes paid by the 
individual shall not be subject to reduction under subsection (c) for 
such debt.''.
    (c) Prohibition on Wage Garnishment.--Section 3720D(a) of title 31, 
United States Code, is amended--
            (1) by striking ``Notwithstanding'' and inserting: ``(1) 
        Except as provided in paragraph (2) and notwithstanding''; and
            (2) by adding at the end the following new paragraph:
    ``(2) Any delinquent nontax debt owed by an individual to the 
Department of Education under a program administered by the Secretary 
of Education under title IV of the Higher Education Act of 1965 (20 
U.S.C. 1070 et seq.) shall not be subject to collection under this 
section through garnishment of disposable pay of the individual.''.

TITLE II--BORROWER'S RIGHT TO REASONABLE AND FLEXIBLE REPAYMENT OPTIONS

SEC. 201. EXCLUSION FROM GROSS INCOME FOR DISCHARGE OF STUDENT LOAN 
              INDEBTEDNESS.

    (a) In General.--Paragraph (1) of section 108(f) of the Internal 
Revenue Code of 1986 is amended by striking ``if such discharge'' and 
all that follows and inserting a period.
    (b) Student Loans.--Paragraph (2) of section 108(f) of such Code is 
amended by striking ``made by--'' and all that follows and inserting 
the following: ``. Such term includes indebtedness used to refinance 
indebtedness which qualifies as a student loan under the preceding 
sentence.''.
    (c) Conforming Amendments.--Section 108(f) of such Code is amended 
by striking paragraphs (3) and (4).
    (d) Effective Date.--The amendments made by this section shall 
apply to discharges of indebtedness after the date of the enactment of 
this Act.

SEC. 202. 529 PLAN DISTRIBUTION FOR STUDENT LOAN PAYMENTS.

    (a) In General.--Subparagraph (A) of section 529(e)(3) is amended 
by striking clause (iii) and inserting the following new clause:
                            ``(iii) interest or principal paid with 
                        respect to a qualified education loan (as 
                        defined in section 221) with respect to a 
                        designated beneficiary.''.
    (b) Conforming Amendments.--
            (1) Section 529(e)(3)(A) of such Code is amended by 
        striking the second sentence.
            (2) Section 72(t)(7)(A) of such Code is amended by 
        inserting ``determined without regard to subparagraph (A)(iii) 
        thereof'' after ``section 529(e)(3)''.
            (3) Section 530(b)(2)(A)(i) of such Code is amended by 
        inserting ``determined without regard to subparagraph (A)(iii) 
        thereof'' after ``section 529(e)(3)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to distributions made after the date of the enactment of this 
Act.

SEC. 203. INCLUSION OF PARENT PLUS LOANS IN REPAYMENT PROGRAMS.

    (a) Income Contingent Repayment Plan.--Section 455(d)(1)(D) of the 
Higher Education Act of 1965 (20 U.S.C. 1087e(d)(1)(D)) is amended by 
striking ``, 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;''.
    (b) Income-Based Repayment.--
            (1) Section 493c.--Section 493C of the Higher Education Act 
        of 1965 (20 U.S.C. 1098e) is amended--
                    (A) in subsection (a)--
                            (i) by striking ``this section'' and all 
                        that follows through ``hardship'' and inserting 
                        ``In this section, the term `partial financial 
                        hardship'''; and
                            (ii) by striking, ``(other than an excepted 
                        PLUS loan or excepted consolidation loan)'';
                    (B) in subsection (b)--
                            (i) in paragraph (1), by striking ``(other 
                        than an excepted PLUS loan or excepted 
                        consolidation loan)''; and
                            (ii) in paragraph (6)(A), by striking 
                        ``(other than an excepted PLUS loan or excepted 
                        consolidation loan)''; and
                    (C) in subsection (c), by striking ``(other than an 
                excepted PLUS loan or excepted consolidation loan),''.
            (2) Section 455(d)(1)(E).--Section 455(d)(1)(E) of such Act 
        (20 U.S.C. 1087e(d)(1)(D)) is amended by striking ``, 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''.
    (c) Pay As You Earn.--The income-contingent repayment plan (based 
on the President's ``Pay As You Earn'' repayment initiative) 
implemented in parts 674, 682, and 685 of title 34, Code of Federal 
Regulations, as amended by the final regulations published by the 
Department of Education in the Federal Register on November 1, 2012 (77 
Fed. Reg. 66088 et seq.), shall be available to borrowers of--
            (1) a Federal Direct PLUS loan made on behalf of a 
        dependent student; and
            (2) a Federal Direct Consolidation Loan, the proceeds of 
        which were used to discharge the liability on a Federal Direct 
        PLUS Loan or a loan under section 428B made on behalf of a 
        dependent student.
    (d) Loan Forgiveness for Service in Areas of National Need.--
Section 428K(a)(2) of such Act (20 U.S.C. 1078-11(a)(2)) is amended--
            (1) in subparagraph (A), by striking ``(other than an 
        excepted PLUS loan or an excepted consolidation loan (as such 
        terms are defined in section 493C(a)))''; and
            (2) in subparagraph (B), by striking ``(other than an 
        excepted PLUS loan or an excepted consolidation loan)''.

SEC. 204. DETERMINATION OF ADVERSE CREDIT HISTORY.

    Section 428B(a)(1)(A) of the Higher Education Act of 1965 (20 
U.S.C. 1078-2(a)(1)(A)) is amended by striking ``regulations 
promulgated by the Secretary'' and inserting ``section 685.200(c) of 
title 34, Code of Federal Regulations (as in effect on September 30, 
2011)''.

           TITLE III--BORROWERS' RIGHT TO A MEANINGFUL DEGREE

SEC. 301. PROHIBITION ON SUSPENSIONS OF PROFESSIONAL LICENSES FOR LOAN 
              DEFAULT.

    No evidence of an individual's default on the repayment of a loan 
made, insured, or guaranteed under title IV of the Higher Education Act 
of 1965 (20 U.S.C. 1070 et seq.) may be admitted into evidence in a 
Federal or State proceeding involving the individual's professional or 
vocational license.

SEC. 302. PROHIBITION ON LOSS OF ACCESS TO TRANSCRIPTS FOR LOAN 
              DEFAULT.

    Section 487(a) of the Higher Education Act of 1965 (20 U.S.C. 
1094(a)) (as amended by section 301) is further amended by adding at 
the end the following new paragraph:
            ``(31)(A) The institution will not prohibit a student from 
        accessing the student's transcripts, degree scrolls, or other 
        certifications of coursework or educational attainments at the 
        institution because the student is in default on the repayment 
        of a loan made, insured, or guaranteed under this title.
            ``(B) For purposes of this paragraph, the term `student' 
        includes former students.''.

TITLE IV--RIGHT TO EFFECTIVE LOAN CANCELLATION FOR BORROWERS ENGAGED IN 
                         PUBLIC SERVICE CAREERS

SEC. 401. EXTENSION OF LOAN CANCELLATION FOR BORROWERS EMPLOYED IN 
              PUBLIC SERVICE JOBS FOR 5 YEARS.

    Section 455(m) of the Higher Education Act of 1965 (20 U.S.C. 
1087e) is amended by adding at the end the following new paragraph:
            ``(5) Loan cancellation after 5 years.--Beginning fiscal 
        year 2014, the Secretary shall also cancel 50 percent of the 
        balance of interest and principal due on any eligible Federal 
        Direct Loan not in default for borrowers employed in a public 
        service job for 5 years during the repayment of such loans--
                    ``(A) by applying paragraph (1)(A)--
                            ``(i) by substituting `60' for `120' each 
                        place it appears; and
                            ``(ii) by substituting `October 1, 2007' 
                        for `October 1, 2013'; and
                    ``(B) by applying paragraph (2), by substituting 
                `50 percent of the balance' with `the balance'.''.