Parent PLUS Loan Improvement Act of 2016

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Parent PLUS Loan Improvement Act of 
2016''.

SEC. 2. APPLICABLE RATE OF INTEREST FOR PLUS LOANS.

    Section 455(b)(8) of the Higher Education Act of 1965 (20 U.S.C. 
1087e(b)(8)) is amended--
            (1) in subparagraph (C), by inserting ``and before July 1, 
        2016,'' after ``, 2013,''; and
            (2) by adding at the end the following:
                    ``(F) Reduced rate for parent plus loans.--
                Notwithstanding the preceding paragraphs of this 
                subsection, for Federal Direct PLUS Loans made on 
                behalf of a dependent student for which the first 
                disbursement is made on or after July 1, 2016, the 
                applicable rate of interest shall be determined under 
                subparagraph (C) of this paragraph--
                            ``(i) by substituting `3.6 percent' for 
                        `4.6 percent'; and
                            ``(ii) by substituting `9.5 percent' for 
                        `10.5 percent'.''.

SEC. 3. ELIMINATION OF ORIGINATION FEE FOR PARENT PLUS LOANS.

    Section 455(c) of the Higher Education Act of 1965 (20 U.S.C. 
1087e(c)) is amended by adding at the end the following new paragraph:
            ``(3) PLUS loans.--With respect to Federal Direct PLUS 
        loans made on behalf of a dependent student for which the first 
        disbursement of principal is made on or after July 1, 2016, 
        paragraph (1) shall be applied by substituting `0.0 percent' 
        for `4.0 percent'.''.

SEC. 4. COUNSELING FOR PARENT PLUS BORROWERS.

    Section 485 of the Higher Education Act of 1965 (20 U.S.C. 1092) is 
amended by adding at the end the following:
    ``(n) Counseling for Parent PLUS Borrowers.--
            ``(1) In general.--The Secretary, prior to disbursement of 
        a Federal Direct PLUS loan made on behalf of a dependent 
        student, shall ensure that the borrower receives comprehensive 
        information on the terms and conditions of the loan and the 
        responsibilities the borrower has with respect to such loan. 
        Such information--
                    ``(A) shall be provided through the use of 
                interactive programs that use mechanisms to check the 
                borrower's understanding of the terms and conditions of 
                the borrower's loan, using simple and understandable 
                language and clear formatting; and
                    ``(B) shall be provided--
                            ``(i) during a counseling session conducted 
                        in person; or
                            ``(ii) online.
            ``(2) Information to be provided.--The information to be 
        provided to the borrower under paragraph (1) shall include the 
        following:
                    ``(A) Information on how interest accrues and is 
                capitalized during periods when the interest is not 
                paid by the borrower.
                    ``(B) An explanation of when loan repayment begins, 
                of the options available for a borrower who may need a 
                deferment, and that interest accrues during a 
                deferment.
                    ``(C) The repayment plans that are available to the 
                borrower, including personalized information showing--
                            ``(i) estimates of the borrower's 
                        anticipated monthly payments under each 
                        repayment plan that is available; and
                            ``(ii) the difference in interest paid and 
                        total payments under each repayment plan.
                    ``(D) The obligation of the borrower to repay the 
                full amount of the loan, regardless of whether the 
                student on whose behalf the loan was made completes the 
                program in which the student is enrolled.
                    ``(E) The likely consequences of default on the 
                loan, including adverse credit reports, delinquent debt 
                collection procedures under Federal law, and 
                litigation.
                    ``(F) The name and contact information of the 
                individual the borrower may contact if the borrower has 
                any questions about the borrower's rights and 
                responsibilities or the terms and conditions of the 
                loan.''.

SEC. 5. INCLUSION OF PARENT PLUS LOANS IN INCOME-CONTINGENT AND INCOME-
              BASED REPAYMENT PLANS.

    (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)'';
                            (ii) in paragraph (6)(A), by striking 
                        ``(other than an excepted PLUS loan or excepted 
                        consolidation loan)''; and
                            (iii) in paragraph (7), by striking 
                        ``(other than a loan under section 428B or a 
                        Federal Direct PLUS 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) Application to Regulations.--The Secretary shall ensure that 
any Federal Direct PLUS Loan and any loan under section 428B of the 
Higher Education Act of 1965 (20 U.S.C. 1078-2) made on behalf of a 
dependent student are eligible for any repayment plan available under 
the Higher Education Act of 1965 (20 U.S.C. 1001 et seq.) or 
regulations authorized under such Act (20 U.S.C. 1001 et seq.)

Summary: Parent PLUS Loan Improvement Act of 2016 This bill amends title IV of the Higher Education Act of 1965 to modify the applicable terms and conditions with respect to Federal Direct PLUS Loans to parent borrowers . Specifically, it reduces the interest rate and eliminates the origination fee for a parent PLUS loan disbursed on or after July 1, 2016. The Department of Education must ensure, prior to disbursement, that a parent PLUS loan borrower receives counseling that includes comprehensive information on the terms, conditions, and responsibilities with respect to the loan. The bill makes a parent PLUS loan eligible for the income-contingent and income-based repayment plans. Additionally, it makes a consolidation loan that repays parent PLUS loan eligible for the income-based repayment plan.