I 

112TH CONGRESS 

2D SESSION H. R. 4170 

To increase purchasing power, strengthen economic recovery, and restore 

fairness in financing higher education in the United States through 

student loan forgiveness, caps on interest rates on Federal student loans, 

and refinancing opportunities for private borrowers, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

MARCH 8, 2012 

Mr. CLARKE of Michigan introduced the following bill; which was referred to 

the Committee on Education and the Workforce, and in addition to the 

Committees on Foreign Affairs and Armed 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 increase purchasing power, strengthen economic recovery, 

and restore fairness in financing higher education in 

the United States through student loan forgiveness, caps 

on interest rates on Federal student loans, and refinancing opportunities for private borrowers, and for 

other purposes. 

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


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1 SECTION 1. SHORT TITLE. 

2 This Act may be cited as the ‘‘Student Loan Forgive3 ness Act of 2012’’. 

4 SEC. 2. FINDINGS. 

5 Congress finds the following: 

6 (1) A well-educated citizenry is critical to our 

7 Nation’s ability to compete in the global economy. 

8 (2) The Federal Government has a vested inter9 est in ensuring access to higher education. 

10 (3) Higher education should be viewed as a 

11 public good benefitting our country rather than as a 

12 commodity solely benefitting individual students. 

13 (4) Total outstanding student loan debt offi14 cially surpassed total credit card debt in the United 

15 States in 2010, and is on track to exceed 

16 $1,000,000,000,000 during 2012. 

17 (5) Excessive student loan debt is impeding eco18 nomic growth in the United States. Faced with ex19 cessive repayment burdens, many individuals are un20 able to start businesses, invest, or buy homes. Re21 lieving student loan debt would give these individuals 

22 greater control over their earnings and would in23 crease entrepreneurship and demand for goods and 

24 services. 

25 (6) Because of soaring tuition costs, students 

26 often have no choice but to amass significant debt 


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1 to obtain an education that is widely considered a 

2 prerequisite for earning a living wage. 

3 (7) Amidst rising tuition rates and stagnant 

4 grant funding, many students are forced to supple5 ment Federal loans with private loans, which fre6 quently feature higher interest rates with fewer con7 sumer protections. 

8 (8) A borrower who experiences an extended 

9 hardship for whatever reason, or a borrower who ex10 periences a series of separate hardships over a 

11 longer period of time, will often have no choice but 

12 to default on his or her private student loans. Op13 portunities to put such private loans into forbear14 ance are limited. 

15 (9) During the period of forbearance on private 

16 student loans, interest continues to accrue and is 

17 capitalized, and once the borrower comes out of for18 bearance, he or she owes significantly more on the 

19 principal of the loan than before the hardship period 

20 began. 

21 SEC. 3. 10/10 LOAN REPAYMENT AND FORGIVENESS. 

22 Part G of title IV of the Higher Education Act of 

23 1965 is amended by adding at the end the following: 

24 ‘‘SEC. 493E. 10/10 LOAN REPAYMENT AND FORGIVENESS. 

25 ‘‘(a) 10/10 LOAN REPAYMENT PLAN.— 


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1 ‘‘(1) 10/10 LOAN REPAYMENT PLAN AUTHOR2 IZED.—Notwithstanding any other provision of this 

3 Act, the Secretary shall carry out a program (to be 

4 known as the ‘10/10 Loan Repayment Plan’) under 

5 which— 

6 ‘‘(A) a borrower of an eligible loan who is 

7 eligible under paragraph (3) may elect to have 

8 the borrower’s aggregate monthly payment for 

9 all such loans not exceed the monthly payment 

10 amount described in paragraph (2); 

11 ‘‘(B) the holder of such an eligible loan 

12 shall apply the borrower’s monthly payment 

13 under this subsection first toward interest due 

14 on the loan, next toward any fees due on the 

15 loan, and then toward the principal of the loan; 

16 ‘‘(C) any interest due and not paid under 

17 subparagraph (B) shall continue to accrue but 

18 shall not be capitalized, and— 

19 ‘‘(i) shall not be capitalized if the bor20 rower ends the election to make 10/10 

21 Loan Repayment under this subsection; or 

22 ‘‘(ii) shall be forgiven in accordance 

23 with subsection (b) if the borrower meets 

24 the requirements for forgiveness under 

25 such subsection; 


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1 ‘‘(D) any principal due and not paid under 

2 subparagraph (B) shall be deferred, and shall 

3 be forgiven in accordance with subsection (b) if 

4 the borrower meets the requirements for for5 giveness under such subsection; 

6 ‘‘(E) the amount of time the borrower 

7 makes monthly payments under this subsection 

8 may exceed 10 years; 

9 ‘‘(F) a borrower who is repaying an eligible 

10 loan pursuant to 10/10 Loan Repayment under 

11 this subsection may elect, at any time, to termi12 nate repayment pursuant to 10/10 Loan Repay13 ment and repay such loan under the standard 

14 repayment plan, in which case the amount of 

15 time the borrower is permitted to repay such 

16 loans may exceed 10 years; and 

17 ‘‘(G) the special allowance payment to a 

18 lender calculated under section 438(b)(2)(I), 

19 when calculated for a loan in repayment under 

20 this section, shall be calculated on the principal 

21 balance of the loan and on any accrued interest 

22 unpaid by the borrower in accordance with this 

23 section. 

24 ‘‘(2) 10/10 LOAN REPAYMENT MONTHLY PAY25 MENT FORMULA.—A borrower who has elected to 


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1 participate in the 10/10 Loan Repayment Plan 

2 under this subsection shall, during each month the 

3 borrower is participating in such Plan, make a 

4 monthly payment in an amount equal to— 

5 ‘‘(A) one-twelfth of the amount that is 10 

6 percent of the result obtained by calculating, on 

7 at least an annual basis, the amount by 

8 which— 

9 ‘‘(i) the borrower’s, and the bor10 rower’s spouse’s (if applicable), adjusted 

11 gross income; exceeds 

12 ‘‘(ii) 150 percent of the poverty line 

13 applicable to the borrower’s family size as 

14 determined under section 673(2) of the 

15 Community Services Block Grant Act (42 

16 U.S.C. 9902(2)); 

17 ‘‘(B) in the case of a borrower who is in 

18 deferment due to an economic hardship de19 scribed in section 435(o), $0; or 

20 ‘‘(C) in the case of a borrower for whom 

21 the payment calculated under subparagraph (A) 

22 is $0, but who is not in deferment due to an 

23 economic hardship described in section 435(o), 

24 an amount determined by the Secretary, on a 

25 case-by-case basis and not less than annually, 


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1 based on criteria established by the Secretary 

2 that shall take into consideration— 

3 ‘‘(i) the specific financial and other 

4 relevant circumstances of a borrower, and 

5 the borrower’s spouse (if applicable), in6 cluding income, assets, total amount of eli7 gible loans, other debt, family size, employ8 ment status, and the period of time the 

9 borrower has been subject to this subpara10 graph; 

11 ‘‘(ii) the need to prevent abuse of the 

12 relief provided under the 10/10 Loan Re13 payment Plan under this subsection and 

14 the 10/10 Forgiveness Program under sub15 section (b); and 

16 ‘‘(iii) any other factors the Secretary 

17 considers to be appropriate to such deter18 mination. 

19 ‘‘(3) ELIGIBILITY.— 

20 ‘‘(A) ELIGIBILITY DETERMINATIONS.—The 

21 Secretary shall establish procedures for annu22 ally determining the borrower’s eligibility for 

23 10/10 Loan Repayment, including verification 

24 of a borrower’s annual adjusted gross income 

25 and the annual amount due on the total 


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1 amount of eligible loans, and such other proce2 dures as are necessary to effectively implement 

3 10/10 Loan Repayment under this subsection. 

4 The Secretary shall consider, but is not limited 

5 to, the procedures established in accordance 

6 with section 455(e)(1) or in connection with in7 come sensitive repayment schedules under sec8 tion 428(b)(9)(A)(iii) or 428C(b)(1)(E). 

9 ‘‘(B) AUTO-DEBIT REQUIREMENT.—To be 

10 eligible to participate in the 10/10 Loan Repay11 ment Plan under this subsection, a borrower 

12 shall agree to have all eligible loan payments 

13 that are made on or after the date that the bor14 rower elects to participate in such repayment 

15 plan automatically electronically debited from a 

16 bank account. 

17 ‘‘(4) SPECIAL RULE FOR MARRIED BORROWERS

18 FILING SEPARATELY.—In the case of a married bor19 rower who files a separate Federal income tax re20 turn, the Secretary shall calculate the amount of the 

21 borrower’s 10/10 Loan Repayment under this sub22 section solely on the basis of the borrower’s student 

23 loan debt and adjusted gross income. 

24 ‘‘(b) 10/10 LOAN FORGIVENESS.— 


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1 ‘‘(1) IN GENERAL.—The Secretary shall carry 

2 out a program (to be known as the ‘10/10 Loan 

3 Forgiveness Program’) to forgive a qualified loan 

4 amount, in accordance with paragraph (3), on an eli5 gible loan for a borrower who, after the date that is 

6 10 years prior to the date of enactment of the Stu7 dent Loan Forgiveness Act of 2012, has made 120 

8 monthly payments on the eligible loan pursuant to 

9 any one or a combination of the following: 

10 ‘‘(A) Monthly payment under the 10/10 

11 Loan Repayment Plan under subsection (a). 

12 ‘‘(B) Monthly payment under any other re13 payment plan authorized under part B or D of 

14 an amount that, for a given month, is not less 

15 than the monthly payment amount calculated 

16 under subsection (a) that the borrower would 

17 have owed in the year in which such payment 

18 was made, based on the borrower’s adjusted 

19 gross income and eligible loan balance for such 

20 year. 

21 ‘‘(C) For any month after such date dur22 ing which the borrower is in deferment due to 

23 an economic hardship described in section 

24 435(o), monthly payment of $0. 


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1 ‘‘(2) METHOD OF LOAN FORGIVENESS.—To 

2 provide loan forgiveness under paragraph (1), the 

3 Secretary is authorized to carry out a program— 

4 ‘‘(A) through the holder of the loan, to as5 sume the obligation to repay a qualified loan 

6 amount for a loan made, insured, or guaranteed 

7 under part B of this title; and 

8 ‘‘(B) to cancel a qualified loan amount for 

9 a loan made under part D of this title. 

10 ‘‘(3) QUALIFIED LOAN AMOUNT.—After the 

11 borrower has made 120 monthly payments described 

12 in paragraph (1), the Secretary shall forgive— 

13 ‘‘(A) with respect to new borrowers on or 

14 after the date of enactment of the Student 

15 Loan Forgiveness Act of 2012, the sum of— 

16 ‘‘(i) the balance of principal and fees 

17 due on the borrower’s eligible loans as of 

18 the time of such forgiveness, not to exceed 

19 $45,520; and 

20 ‘‘(ii) the amount of interest that has 

21 accrued on the balance described in clause 

22 (i) as of the time of such forgiveness; or 

23 ‘‘(B) with respect to any other eligible bor24 rower, the balance of principal, interest, and 


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1 fees due on the borrower’s eligible loans as of 

2 the time of such forgiveness. 

3 ‘‘(4) EXCLUSION FROM TAXABLE INCOME.— 

4 The amount of a borrower’s eligible loans forgiven 

5 under this section shall not be included in gross in6 come of the borrower for purposes of the Internal 

7 Revenue Code of 1986. 

8 ‘‘(c) SUPPORTING DOCUMENTATION REQUIRED.—A 

9 borrower who has elected to participate in the 10/10 Loan 

10 Repayment Plan under subsection (a), or who is request11 ing forgiveness under the 10/10 Loan Forgiveness Pro12 gram under subsection (b), shall provide to the Secretary 

13 such information and documentation as the Secretary de14 termines, by regulation, to be necessary to verify the bor15 rower’s adjusted gross income and payment amounts 

16 made on eligible loans of the borrower for the purposes 

17 of such Plan or Program. 

18 ‘‘(d) DEFINITION OF ELIGIBLE LOAN.—In this sec19 tion the term ‘eligible loan’ means any loan made, insured, 

20 or guaranteed under part B or D (including loans de21 scribed in clauses (i) through (iii) of section 

22 428L(b)(2)(B) and loans under paragraph (2) of section 

23 455(g)).’’. 


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1 SEC. 4. CAPPING INTEREST RATES FOR ALL FEDERAL DI2 RECT LOANS. 

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

4 (20 U.S.C. 1087e(b)) is amended— 

5 (1) by redesignating paragraphs (8) and (9) as 

6 paragraphs (9) and (10), respectively; and 

7 (2) by inserting after paragraph (7) the fol8 lowing: 

9 ‘‘(8) RATE OF INTEREST FOR ALL NEW FED10 ERAL DIRECT LOANS.—Notwithstanding any other 

11 provision of this Act, with respect to a loan under 

12 this part for which the first disbursement of prin13 cipal is made (or in the case of a Federal Direct 

14 Consolidation Loan, for which the application is re15 ceived) on or after July 1, 2012, or the date of en16 actment of the Student Loan Forgiveness Act of 

17 2012, whichever is later, the applicable rate of inter18 est shall not exceed 3.4 percent.’’. 

19 SEC. 5. IMPROVING AND EXPANDING PUBLIC SERVICE 

20 LOAN FORGIVENESS. 

21 Section 455(m) of the Higher Education Act of 1965 

22 (20 U.S.C. 1087e(m)) is amended— 

23 (1) in paragraph (1), by striking ‘‘120’’ and in24 serting ‘‘60’’ each place it appears; and 

25 (2) in paragraph (3)(B)— 


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1 (A) in clause (i), by striking ‘‘or’’ after the 

2 semicolon; 

3 (B) in clause (ii), by striking the period 

4 and inserting ‘‘; or’’; and 

5 (C) by adding at the end the following: 

6 ‘‘(iii) a full-time job as a primary care 

7 physician in an area or population des8 ignated as a Medically Underserved Area 

9 or Population by the Health Resource and 

10 Services Administration.’’. 

11 SEC. 6. REFINANCING PRIVATE EDUCATION LOANS FOR 

12 CERTAIN BORROWERS. 

13 (a) CONSOLIDATION FOR CERTAIN BORROWERS.— 

14 Section 455(g) of the Higher Education Act of 1965 (20 

15 U.S.C. 1087e(g)) is amended— 

16 (1) by striking ‘‘A borrower’’ and inserting the 

17 following: 

18 ‘‘(1) IN GENERAL.—A borrower’’; 

19 (2) by inserting ‘‘, and any loan described in 

20 paragraph (2)’’ after ‘‘July 1, 2010’’; and 

21 (3) by adding at the end the following new 

22 paragraph: 

23 ‘‘(2) CONSOLIDATION OF PRIVATE EDUCATION

24 LOANS AS A FEDERAL DIRECT CONSOLIDATION LOAN

25 FOR CERTAIN BORROWERS.— 


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

2 other provision of law, a borrower who meets 

3 the eligibility criteria described in subparagraph 

4 (B) shall be eligible to obtain a Federal Direct 

5 Consolidation loan under this paragraph that— 

6 ‘‘(i) shall include an eligible private 

7 education loan; and 

8 ‘‘(ii) may include a loan described in 

9 section 428C(a)(4). 

10 ‘‘(B) ELIGIBLE BORROWER.—A borrower 

11 of an eligible private education loan is eligible 

12 to obtain a Federal Direct Consolidation Loan 

13 under this paragraph if the borrower— 

14 ‘‘(i) was eligible to borrow a loan 

15 under section 428H, a Federal Direct Un16 subsidized Stafford Loan, a loan under 

17 section 428B, or a Federal Direct PLUS 

18 loan for a period of enrollment at an insti19 tution of higher education, or, with respect 

20 to a borrower who was enrolled at an insti21 tution of higher education on less than a 

22 half-time basis, would have been eligible to 

23 borrow such a loan for such period of en24 rollment if the borrower had been enrolled 

25 on at least a half-time basis; 


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1 ‘‘(ii) borrowed at least one eligible pri2 vate education loan for a period of enroll3 ment described in clause (i); and 

4 ‘‘(iii) has an average adjusted gross 

5 income (based on the borrower’s adjusted 

6 gross income from the 3 most recent cal7 endar years before application for consoli8 dation under this section) that is equal to 

9 or less than the borrower’s total education 

10 debt (determined by calculating the sum of 

11 the borrower’s loans described in section 

12 428C(a)(4) and eligible private education 

13 loans) at the time of such application. 

14 ‘‘(C) DEFINITION OF ELIGIBLE PRIVATE

15 EDUCATION LOAN.—For purposes of this para16 graph, the term ‘eligible private education loan’ 

17 means a private education loan (as such term 

18 is defined in section 140 of the Truth in Lend19 ing Act (15 U.S.C. 1650)) made on or before 

20 the date of enactment of the Student Loan For21 giveness Act of 2012, including the amount of 

22 outstanding principal, accrued interest, and re23 lated fees and costs (as determined by the Sec24 retary) owed by a borrower on such a loan. 

25 ‘‘(D) PAYMENT TO THE HOLDER.— 


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1 ‘‘(i) SECRETARY.—For each eligible 

2 private education loan that a borrower is 

3 consolidating under this paragraph, the 

4 Secretary shall make a payment to the 

5 holder of such loan in an amount equal to 

6 the amount consolidated under this para7 graph with respect to such loan. 

8 ‘‘(ii) HOLDER.—Upon receipt of a 

9 payment described in clause (i), a holder 

10 shall discharge the liability on the loan 

11 consolidated under this paragraph in the 

12 amount of such payment. 

13 ‘‘(E) TERMS AND RATE OF INTEREST.—A 

14 Federal Direct Consolidation Loan made under 

15 this paragraph shall have the same terms and 

16 conditions as a Federal Direct Consolidation 

17 loan under paragraph (1), except that the appli18 cable rate of interest for a Federal Direct Con19 solidation loan made under this paragraph shall 

20 not exceed 3.4 percent. 

21 ‘‘(F) NOTIFICATION OF ELIGIBLE BOR22 ROWERS.—The Secretary shall take such steps 

23 as may be necessary to notify eligible borrowers 

24 of the availability of consolidation under this 

25 paragraph no later than 60 days after the date 


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1 of enactment of the Student Loan Forgiveness 

2 Act of 2012, including notifying such borrowers 

3 of the deadline to apply for such a loan under 

4 subparagraph (G). 

5 ‘‘(G) APPLICATION DEADLINE FOR LOANS

6 UNDER THIS PARAGRAPH.—A borrower may 

7 apply for loans under this paragraph during the 

8 1-year period beginning on the date of enact9 ment of the Student Loan Forgiveness Act of 

10 2012. The Secretary shall not make a Federal 

11 Direct Consolidation Loan under this para12 graph to any borrower who has not submitted 

13 an application for such a loan to the Secretary 

14 before the end of such period. 

15 ‘‘(H) AUTHORIZATION AND APPROPRIA16 TION.—There are authorized to be appro17 priated, and there are appropriated, such sums 

18 as may be necessary to carry out this para19 graph.’’. 

20 (b) CONFORMING AMENDMENT.—Section 

21 428C(a)(3)(B)(i)(V) of the Higher Education Act of 1965 

22 (20 U.S.C. 1078–3(a)(3)(B)(i)(V)) is amended— 

23 (1) by striking ‘‘or’’ at the end of item (bb); 

24 (2) by striking the period at the end of item 

25 (cc) and inserting ‘‘; or’’; and 


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1 (3) by adding at the end the following: 

2 ‘‘(dd) for the purpose of 

3 consolidating an eligible private 

4 education loan under section 

5 455(g)(2), whether such loan is 

6 consolidated alone, with other eli7 gible private education loans, or 

8 with loans described in para9 graph (4).’’. 

10 SEC. 7. OFFSET. 

11 Funds appropriated or otherwise made available for 

12 a fiscal year to carry out this Act and the amendments 

13 made by this Act shall be made available from the funds 

14 available for Overseas Contingency Operations. 

Æ 


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