Private Education Loan Modification Act of 2015

Summary: Private Education Loan Modification Act of 2015 This bill temporarily authorizes the Department of the Treasury to establish credit facilities, at no net cost to the federal government, to refinance private student loans to ensure lower interest rates for borrowers. Treasury must first determine that existing borrowers are unable to secure adequate credit accommodations to refinance private student loans.  The bill directs Treasury to conduct a national awareness campaign to alert private student loan borrowers who may benefit. It expresses the sense of the Congress that federal financial institutions and federally chartered private entities should assist borrowers in refinancing existing private student loans.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Private Education Loan Modification 
Act of 2015''.

SEC. 2. FINDINGS AND PURPOSE.

    (a) Findings.--Congress finds that--
            (1) as of 2015, the Federal Reserve Consumer Credit Report 
        stated that there is more than $1,300,000,000,000 in 
        outstanding student loan debt in the United States, including 
        more than $150,000,000,000 in private education loans;
            (2) in 2008, 81 percent of individuals graduating with an 
        undergraduate degree with more than $40,000 in student loans 
        had a private education loan;
            (3) according to a 2012 study of the private student loan 
        market published by the Department of Education and the Bureau 
        of Consumer Financial Protection, there were 850,000 private 
        student loan defaults with an outstanding principal balance 
        more than $8,000,000,000;
            (4) the limited number of lenders in the private education 
        loan marketplace reduce the ability of borrowers with private 
        education loans to restructure, refinance, or negotiate 
        repayment terms for their current loans, leading to excessive 
        debt burdens and potential default;
            (5) as reported by the Student Loan Ombudsman of the 
        Consumer Financial Protection Bureau in the 2014 annual report, 
        it appears that few, if any, private student lenders and loan 
        servicers have developed transparent, widely offered flexible 
        repayment options that mitigate defaults for borrowers in 
        distress;
            (6) excessive student indebtedness reduces economic 
        activity, threatens homeownership, hurts small business growth, 
        and limits opportunities for economic expansion across rural 
        and urban communities; and
            (7) as noted in 2013, the Federal Deposit Insurance 
        Corporation, the Office of the Comptroller of the Currency, and 
        the Board of Governors of the Federal Reserve System encouraged 
        financial institutions to work constructively with private 
        student loan borrowers experiencing financial difficulties, so 
        borrowers have access to safe-and-sound lending practices.
    (b) Purpose.--The purpose of this Act is to spur economic growth, 
by establishing a mechanism to allow borrowers of private education 
loans to refinance their loans in order--
            (1) to facilitate greater competition in the private 
        education lending and refinancing markets, particularly those 
        serving underserved and rural locations;
            (2) to address inefficiencies in the private education 
        lending and refinancing markets;
            (3) to encourage innovation in the private education 
        refinancing markets; and
            (4) to promote the participation of private capital in the 
        private education refinancing markets.

SEC. 3. DEFINITIONS.

    In this Act--
            (1) the term ``private education loan'' has the same 
        meaning as in section 140(a) of the Truth in Lending Act (15 
        U.S.C. 1650(a)); and
            (2) the term ``Secretary'' means the Secretary of the 
        Treasury, other than in the context of the Secretary of 
        Education.

SEC. 4. TEMPORARY AUTHORITY TO CREATE A CREDIT FACILITY TO INCREASE 
              MARKET EFFICIENCY IN THE STUDENT LOAN MARKET.

    (a) Authority.--
            (1) In general.--
                    (A) Credit facilities authorization.--Upon a 
                determination by the Secretary that borrowers are 
                unable to secure adequate credit accommodations with 
                existing private education loans, the Secretary, 
                notwithstanding any provision of section 484 of the 
                Higher Education Act of 1965 (20 U.S.C. 1091), is 
                authorized to establish lending, purchase, and other 
                credit facilities to--
                            (i) accommodate reasonable refinancing 
                        opportunities or other loan adjustments that--
                                    (I) improve the sustainability of 
                                payments for the borrower; and
                                    (II) reduce the likelihood of 
                                delinquency and default on private 
                                education loans;
                            (ii) benefit borrowers that are most likely 
                        to have private student debt service 
                        obligations that represent a disproportionate 
                        share of their income; and
                            (iii) ensure that borrowers pay lower 
                        interest rates that are commensurate with 
                        credit risk, so that they may pursue more 
                        economically productive activities, such as 
                        home purchases and small business formation.
                    (B) Consultation.--
                            (i) In general.--Any determination under 
                        subparagraph (A) shall be made jointly with the 
                        Secretary of Education and the Director of the 
                        Bureau of Consumer Financial Protection.
                            (ii) Compliance system.--Prior to 
                        establishing a facility under this subsection, 
                        the Secretary, or any administrator designated 
                        by the Secretary to establish a program to 
                        carry out the authority provided in this 
                        subsection, shall establish a compliance system 
                        in consultation with the Bureau of Consumer 
                        Financial Protection.
            (2) No net cost to government.--Mechanisms established 
        under this subsection shall not result in any net cost to the 
        Federal Government, as determined jointly by the Secretary, the 
        Secretary of Education, and the Director of the Office of 
        Management and Budget.
    (b) Federal Register Notice.--Prior to exercising any authority 
provided under subsection (a), the Secretary shall publish a notice in 
the Federal Register to seek comment from interested parties on its 
proposed exercise of such authority, including--
            (1) the terms and conditions governing the lending, 
        purchases, or other credit facilities authorized by subsection 
        (a);
            (2) an outline of methodology and factors considered in the 
        purchase or restructuring of private education loans;
            (3) private education loan modification options that may be 
        available for existing loans;
            (4) how they will ensure that borrowers whose education 
        debt service obligations represent a disproportionate share of 
        their income will be provided relief;
            (5) how the use of the methodology and factors, as proposed 
        in the notice, will be used to ensure that any exercise of 
        authority by the Secretary will result in no net cost to the 
        Federal Government; and
            (6) how any mechanism will be designed to avoid 
        extraordinary gains by market participants holding loans in 
        distress.
    (c) Initial Report.--Not later than 90 days after the date of 
enactment of this Act, the Secretary shall submit to the appropriate 
committees of Congress a report that includes--
            (1) current market liquidity and the status of loan 
        financing by lenders, including those serving underserved and 
        rural locations;
            (2) the public economic benefits and funds necessary for 
        initiating a private education loan program;
            (3) upon determining limited access to loans by borrowers, 
        a plan of the Secretary to implement credit mechanisms under 
        the authority of this Act;
            (4) a description of macroeconomic benefits of increased 
        efficiency and refinance activity in the student loan market; 
        and
            (5) a description of the benefits through the use of such 
        authority to private education loan borrowers, including how 
        any incidental net gain from the credit mechanism would be used 
        to benefit student borrowers.
    (d) Annual Reports.--Beginning 1 year after the date of the first 
use of the authority provided under this section, the Secretary shall 
provide an annual report to the Committee on Banking, Housing, and 
Urban Affairs of the Senate and the Committee on Financial Services of 
the House of Representatives describing the utilization, impact, and 
financial performance of any program established under the authority of 
this section.
    (e) Public Awareness.--Not later than 60 days after the date of 
publication of a notice in the Federal Register pursuant to subsection 
(b), the Secretary, in consultation with the Secretary of Education and 
the Director of the Bureau of Consumer Financial Protection, shall 
begin a national awareness campaign to alert all private education loan 
borrowers who may benefit from any program or facilities established 
under this section. Such campaign shall include outreach to targeted 
populations of borrowers that are most likely to have private education 
loan debt service obligations that represent a disproportionate share 
of their income.
    (f) Expiration of Authority.--Three years after the date on which a 
credit facility is established under this Act, and not later than 5 
years after the date of enactment of this Act, any new lending, 
purchase, or other activity initiated through the facilities 
established by the Secretary under subsection (a) shall cease.

SEC. 5. SENSE OF CONGRESS.

    It is the sense of Congress that the Federal financial 
institutions, such as the Federal Financing Bank and the Federal 
Reserve banks, and federally chartered private entities, such as the 
Federal home loan banks, should consider, in consultation with the 
Secretary, the Secretary of Education, and the Director of the Bureau 
of Consumer Financial Protection, using available authorities in a 
timely manner, if needed, to assist in ensuring that borrowers of 
private education loans can secure credit accommodations to refinance 
existing loans, in a manner that results in no increased costs to 
taxpayers and will avoid extraordinary gains by market participants 
holding loans in distress in order to avoid unnecessary loan 
modifications.