I 

114TH CONGRESS 

1ST SESSION H. R. 3786 

To amend the Higher Education Act of 1965 and the Truth in Lending 

Act to clarify the application of prepayment amounts on student loans. 

IN THE HOUSE OF REPRESENTATIVES 

OCTOBER 21, 2015 

Mrs. DAVIS of California (for herself and Mr. PETERS) introduced the following bill; which was referred to the Committee on Education and the 

Workforce, and in addition to the Committee on Financial Services, for 

a period to be subsequently determined by the Speaker, in each case for 

consideration of such provisions as fall within the jurisdiction of the committee concerned 

A BILL 

To amend the Higher Education Act of 1965 and the Truth 

in Lending Act to clarify the application of prepayment 

amounts on student loans. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Student Loan Fair 

5 Prepayment Act’’. 


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1 SEC. 2. APPLICATION OF PREPAYMENT AMOUNTS FOR 

2 FFEL AND DIRECT LOANS. 

3 Section 455(d) of the Higher Education Act of 1965 

4 (20 U.S.C. 1087e(d)) is amended by adding at the end 

5 the following new paragraph: 

6 ‘‘(6) APPLICATION OF PREPAYMENT

7 AMOUNTS.— 

8 ‘‘(A) REQUIREMENT.—Notwithstanding 

9 any other provision of this subsection or any 

10 other provision of law— 

11 ‘‘(i) with respect to loans made to an 

12 eligible borrower under this part or part B, 

13 which are held by the same holder and 

14 which have different applicable rates of in15 terest, the holder of such loans shall, un16 less otherwise requested by the borrower in 

17 writing, apply the borrower’s prepayment 

18 amount (within the meaning of section 

19 682.209(b) of title 34, Code of Federal 

20 Regulations, or a successor regulation) for 

21 one or more of such loans, first toward the 

22 outstanding balance of principal due on the 

23 loan with the highest applicable rate of in24 terest among such loans; and 

25 ‘‘(ii) except as provided in clause (i), 

26 with respect to loans made to an eligible 


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1 borrower under this part or part B, which 

2 are held by the same holder and which 

3 have the same applicable rates of interest, 

4 the holder of such loans shall, unless other5 wise requested by the borrower in writing, 

6 apply the borrower’s prepayment amount 

7 (within the meaning of section 682.209(b) 

8 of title 34, Code of Federal Regulations, or 

9 a successor regulation) for one or more of 

10 such loans, first toward the outstanding 

11 balance of principal due on the loan with 

12 the highest principal balance among such 

13 loans. 

14 ‘‘(B) ELIGIBLE BORROWER.— 

15 ‘‘(i) IN GENERAL.—For purposes of 

16 this paragraph, the term ‘eligible borrower’ 

17 means a borrower with no outstanding bal18 ance of fees, including collection costs and 

19 authorized late charges, due on any loan 

20 made under this part or part B. 

21 ‘‘(ii) PREPAYMENT AMOUNTS.—A pre22 payment amount (as described in subpara23 graph (A)) made by a borrower who is not 

24 an eligible borrower to a holder shall be 

25 applied first toward the borrower’s outVerDate Sep 11 2014 04:04 Oct 22, 2015 Jkt 059200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H3786.IH H3786

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1 standing balance of fees, including collec2 tion costs and authorized late charges, due 

3 on any loan made under this part or part 

4 B held by such holder. 

5 ‘‘(C) EXCEPTIONS.—This paragraph shall 

6 not apply to an income-based repayment plan 

7 under section 493C or an income contingent re8 payment plan under section 455(d)(1)(D), such 

9 as a Pay As You Earn repayment plan.’’. 

10 SEC. 3. APPLICATION OF PREPAYMENT AMOUNTS FOR PER11 KINS LOANS. 

12 Section 464(c)(1)(C) of the Higher Education Act of 

13 1965 (20 U.S.C. 1087dd(c)(1)(C)) is amended— 

14 (1) by striking ‘‘and’’ at the end of clause (i); 

15 (2) by adding at the end the following: 

16 ‘‘(iii) shall provide that the institution 

17 shall, in the case of a borrower with no 

18 outstanding balance of fees (including col19 lection costs and authorized late charges) 

20 due on the loans held by the institution 

21 and who repays more than the amount due 

22 for a repayment period— 

23 ‘‘(I) with respect to loans held by 

24 the same institution and which have 

25 different applicable rates of interest, 


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1 use the excess to prepay (within the 

2 meaning of section 674.31(b)(4)(iv) of 

3 title 34, Code of Federal Regulations, 

4 or a successor regulation) the prin5 cipal due on the loan with the highest 

6 applicable rate of interest among such 

7 loans, unless otherwise requested by 

8 the borrower in writing; and 

9 ‘‘(II) except as provided in sub10 clause (I), with respect to loans held 

11 by the same institution and which 

12 have the same applicable rates of in13 terest, use the excess to prepay (with14 in the meaning of section 

15 674.31(b)(4)(iv) of title 34, Code of 

16 Federal Regulations, or a successor 

17 regulation) the principal due on the 

18 loan with the highest principal balance 

19 among such loans, unless otherwise 

20 requested by the borrower in writing; 

21 and 

22 ‘‘(iv) shall provide that the institution 

23 shall, in the case of a borrower with an 

24 outstanding balance of fees (such as collec25 tion costs and authorized late charges) due 


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1 on the loans held by the institution and 

2 who repays more than the amount due for 

3 a repayment period, first apply such excess 

4 toward such outstanding balance of fees;’’. 

5 SEC. 4. APPLICATION OF PREPAYMENT AMOUNTS FOR PRI6 VATE EDUCATION LOANS. 

7 Section 128(e) of the Truth in Lending Act (15 

8 U.S.C. 1638(e)) is amended by adding at the end the fol9 lowing: 

10 ‘‘(12) APPLICATION OF PREPAYMENT

11 AMOUNTS.— 

12 ‘‘(A) IN GENERAL.—Notwithstanding any 

13 other provision of law— 

14 ‘‘(i) with respect to a borrower with 

15 more than one private education loan 

16 which are held by the same holder and 

17 which have different applicable rates of in18 terest, the holder of such loans shall, un19 less otherwise requested by the borrower in 

20 writing, apply the borrower’s prepayment 

21 amount (within the meaning of section 

22 682.209(b) of title 34, Code of Federal 

23 Regulations, or a successor regulation) for 

24 one or more of such loans, first toward the 

25 outstanding balance of principal due on the 


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1 loan with the highest applicable rate of in2 terest among such loans; and 

3 ‘‘(ii) except as provided in clause (i), 

4 with respect to a borrower with more than 

5 one private education loan which are held 

6 by the same holder and which have the 

7 same applicable rates of interest, the hold8 er of such loans shall, unless otherwise re9 quested by the borrower in writing, apply 

10 the borrower’s prepayment amount (within 

11 the meaning of section 682.209(b) of title 

12 34, Code of Federal Regulations, or a suc13 cessor regulation) for one or more of such 

14 loans, first toward the outstanding balance 

15 of principal due on the loan with the high16 est principal balance among such loans. 

17 ‘‘(B) EXCEPTION.— 

18 ‘‘(i) IN GENERAL.—Subparagraph (A) 

19 shall not apply to any prepayment amount 

20 made by a borrower to a holder if the bor21 rower has an outstanding balance of fees, 

22 including collection costs and authorized 

23 late charges, due on any private education 

24 loan held by such holder. 


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1 ‘‘(ii) PREPAYMENT AMOUNTS.—A pre2 payment amount (as described in subpara3 graph (A)) made by a borrower described 

4 in subparagraph (B) to a holder shall be 

5 applied first toward the borrower’s out6 standing balance of fees, including collec7 tion costs and authorized late charges, due 

8 on any private education loan held by such 

9 holder.’’. 

Æ 


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