I 

108TH CONGRESS 

1ST SESSION H. R. 2711

To permit refinancing of Federal student consolidation loans, and to permit 

students freedom to select a student loan consolidator. 

IN THE HOUSE OF REPRESENTATIVES 

JULY 10, 2003

Mr. WU (for himself, Mr. SIMMONS, Mr. WAXMAN, Mr. HINCHEY, Mr. BRADY

of Pennsylvania, Mr. SANDERS, Mr. CLAY, Mr. FARR, Mr. FILNER, Mr. 

RAHALL, Mr. FORD, Mr. PETRI, Mr. MCNULTY, Mr. SCOTT of Georgia, 

Mr. HOLDEN, Mr. MCGOVERN, Ms. WOOLSEY, Mr. GOODE, Mr. BOUCHER, Mr. SANDLIN, Ms. LEE, Mr. OWENS, Mr. CONYERS, Mr. 

ETHERIDGE, Mr. LANTOS, Mr. BISHOP of Georgia, Mr. UDALL of Colorado, Ms. JACKSON-LEE of Texas, Mr. BROWN of Ohio, Mr. SHAYS, Ms. 

BALDWIN, Mr. ROTHMAN, Mr. SERRANO, Mr. CLYBURN, Mr. RYAN of 

Ohio, Mr. RUSH, Ms. LOFGREN, Mr. MURPHY, Mr. WEXLER, Mr. RANGEL, Ms. LORETTA SANCHEZ of California, Mr. TERRY, Mr. PETERSON

of Minnesota, Mr. GILLMOR, Mr. HOLT, Mr. ISRAEL, Mrs. JONES of 

Ohio, Mrs. MALONEY, Mr. DOYLE, Mr. ROSS, Ms. WATSON, Mr. MOORE, 

and Mr. GRIJALVA) introduced the following bill; which was referred to 

the Committee on Education and the Workforce 

A BILL

To permit refinancing of Federal student consolidation loans, 

and to permit students freedom to select a student loan 

consolidator.

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 Fairness 

3 Act of 2003’’. 

4 SEC. 2. REMOVAL OF PROHIBITION ON REFINANCING CON5 SOLIDATION LOANS. 

6 Section 428C(a)(3) the Higher Education Act of 

7 1965 (20 U.S.C. 1078–3(a)(3)) is amended—

8 (1) by striking subparagraph (B); 

9 (2) in subparagraph (C), by striking ‘‘subpara10 graphs (A) and (B)’’ and inserting ‘‘subparagraph 

11 (A)’’; and 

12 (3) by redesignating subparagraph (C) as sub13 paragraph (B). 

14 SEC. 3. STUDENT LOAN BORROWER CHOICE OF LOAN 

15 CONSOLIDATOR. 

16 (a) SELECTION OF LENDER.—Section 428C(b)(1)(A) 

17 of the Higher Education Act of 1965 (20 U.S.C. 1078–

18 3(b)(1)(A)) is amended by striking ‘‘and (i) the lender 

19 holds’’ and all that follows through ‘‘selected for consolida20 tion)’’. 

21 (b) INFORMATION ABOUT CONSOLIDATION LOANS.—

22 (1) INFORMATION FROM LENDERS.—Section 

23 428C(b)(1) of such Act is further amended—

24 (A) by striking ‘‘and’’ at the end of sub25 paragraph (E); 
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1 (B) by redesignating subparagraph (F) as 

2 subparagraph (G); and 

3 (C) by inserting after subparagraph (E) 

4 the following new subparagraph: 

5 ‘‘(F) that the lender will provide to each 

6 applicant for a consolidation loan a clear and 

7 conspicuous notice, in such form as the Sec8 retary shall prescribe, describing, in relation to 

9 the borrower’s reported current loan balance 

10 and the likely interest rate estimated by the 

11 lender for the consolidation loan—

12 ‘‘(i) the effects of a consolidation loan 

13 and its available repayment plans on the 

14 borrower’s interest rate, the amount of his 

15 or her monthly and total payments, total 

16 interest accrued, the length of the repay17 ment term; 

18 ‘‘(ii) the ability of the student bor19 rower to pre-pay loans; and 

20 ‘‘(iii) the differences between variable 

21 and fixed interest rates; and’’. 

22 (2) INFORMATION FROM INSTITUTIONS.—Sec23 tion 485(b)(1)(A) of such Act (20 U.S.C. 1092(b)) 

24 is amended—
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1 (A) by striking ‘‘and’’ at the end of clause 

2 (i); 

3 (B) by striking the period at the end of 

4 clause (ii) and inserting ‘‘; and’’; and 

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

6 clause: 

7 ‘‘(iii) providing to the borrower of a loan made 

8 under part B, D, or E, a clear and conspicuous no9 tice, in such form as the Secretary shall prescribe, 

10 describing the effect of using a consolidation loan to 

11 discharge the borrower’s student loans, and includ12 ing, with respect to a series of loan amounts 

13 ranges—

14 ‘‘(I) the differences between fixed and vari15 able interest rates; 

16 ‘‘(II) the effects of consolidation loan and 

17 its available repayment plans on the borrower’s 

18 interest rate, the amount of his or her monthly 

19 and total payments, total interest accrued, and 

20 the length of repayment term; and 

21 ‘‘(III) the ability of the student borrower 

22 to prepay loans.’’. 
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1 SEC. 4. INTEREST RATES ON CONSOLIDATED AND RE2 CONSOLIDATED LOANS. 

3 (a) INTEREST RATE CHANGES.—Section 427A of the 

4 Higher Education Act of 1965 (20 U.S.C. 1077a) is 

5 amended by striking subsections (k) and (l) and inserting 

6 the following: 

7 ‘‘(k) INTEREST RATES FOR NEW LOANS ON OR

8 AFTER OCTOBER 1, 1998, AND BEFORE JANUARY 1, 

9 2004.—

10 ‘‘(1) IN GENERAL.—Notwithstanding subsection 

11 (h) and subject to paragraph (2) of this subsection, 

12 with respect to any loan made, insured, or guaran13 teed under this part (other than a loan made pursu14 ant to section 428B or 428C) for which the first dis15 bursement is made on or after October 1, 1998, and 

16 before January 1, 2004, the applicable rate of inter17 est shall, during any 12-month period beginning on 

18 July 1 and ending on June 30, be determined on the 

19 preceding June 1 and be equal to—

20 ‘‘(A) the bond equivalent rate of 91-day 

21 Treasury bills auctioned at the final auction 

22 held prior to such June 1; plus 

23 ‘‘(B) 2.3 percent, 

24 except that such rate shall not exceed 8.25 percent. 

25 ‘‘(2) IN SCHOOL AND GRACE PERIOD RULES.—

26 Notwithstanding subsection (h), with respect to any 
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1 loan under this part (other than a loan made pursu2 ant to section 428B or 428C) for which the first dis3 bursement is made on or after October 1, 1998, and 

4 before January 1, 2004, the applicable rate of inter5 est for interest which accrues—

6 ‘‘(A) prior to the beginning of the repay7 ment period of the loan; or 

8 ‘‘(B) during the period in which principal 

9 need not be paid (whether or not such principal 

10 is in fact paid) by reason of a provision de11 scribed in section 427(a)(2)(C) or 

12 428(b)(1)(M), 

13 shall be determined under paragraph (1) by sub14 stituting ‘1.7 percent’ for ‘2.3 percent’. 

15 ‘‘(3) PLUS LOANS.—Notwithstanding sub16 section (h), with respect to any loan under section 

17 428B for which the first disbursement is made on or 

18 after October 1, 1998, and before January 1, 2004, 

19 the applicable rate of interest shall be determined 

20 under paragraph (1)—

21 ‘‘(A) by substituting ‘3.1 percent’ for ‘2.3 

22 percent’; and 

23 ‘‘(B) by substituting ‘9.0 percent’ for ‘8.25 

24 percent’. 
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1 ‘‘(4) CONSOLIDATION LOANS.—With respect to 

2 any consolidation loan under section 428C for which 

3 the application is received by an eligible lender on or 

4 after October 1, 1998, and before January 1, 2004, 

5 the applicable rate of interest shall be at an annual 

6 rate on the unpaid principal balance of the loan that 

7 is equal to the lesser of—

8 ‘‘(A) the weighted average of the interest 

9 rates on the loans consolidated, rounded to the 

10 nearest higher one-eighth of 1 percent; or 

11 ‘‘(B) 8.25 percent. 

12 ‘‘(5) CONSULTATION.—The Secretary shall de13 termine the applicable rate of interest under this 

14 subsection after consultation with the Secretary of 

15 the Treasury and shall publish such rate in the Fed16 eral Register as soon as practicable after the date of 

17 determination. 

18 ‘‘(l) INTEREST RATES FOR NEW LOANS ON OR

19 AFTER JANUARY 1, 2004.—

20 ‘‘(1) IN GENERAL.—Notwithstanding subsection 

21 (h), with respect to any loan made, insured, or guar22 anteed under this part (other than a loan made pur23 suant to section 428B or 428C) for which the first 

24 disbursement is made on or after January 1, 2004, 

25 the applicable rate of interest shall, during any 12-
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1 month period beginning on July 1 and ending on 

2 June 30, be determined on the preceding June 1 

3 and be equal to—

4 ‘‘(A) the bond equivalent rate of 91-day 

5 Treasury bills auctioned at the final auction 

6 held prior to such June 1; plus 

7 ‘‘(B) 2.3 percent, 

8 except that such rate shall not exceed 6.8 percent. 

9 ‘‘(2) PLUS LOANS.—Notwithstanding sub10 section (h), with respect to any loan under section 

11 428B for which the first disbursement is made on or 

12 after January 1, 2004, the applicable rate of interest 

13 shall be determined under paragraph (1)—

14 ‘‘(A) by substituting ‘3.1 percent’ for ‘2.3 

15 percent’; and 

16 ‘‘(B) by substituting ‘7.5 percent’ for ‘6.8 

17 percent’. 

18 ‘‘(3) CONSOLIDATION LOANS.—With respect to 

19 any consolidation loan under section 428C for which 

20 the application is received by an eligible lender on or 

21 after January 1, 2004, the applicable rate of interest 

22 shall, during any 12-month period beginning on July 

23 1 and ending on June 30, be determined on the pre24 ceding June 1 and be equal to—
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1 ‘‘(A) the bond equivalent rate of 91-day 

2 Treasury bills auctioned at the final auction 

3 held prior to such June 1; plus 

4 ‘‘(B) 2.3 percent, 

5 except that such rate shall not exceed 6.8 percent.’’. 

6 (b) OFFSETTING ORIGINATION FEES.—Section 

7 438(c) of the Higher Education Act of 1965 (20 U.S.C. 

8 1087–1(c)) is amended—

9 (1) in paragraph (1), by inserting ‘‘or para10 graph (7)’’ after ‘‘paragraph (2)’’; 

11 (2) in paragraph (2), by striking ‘‘paragraph 

12 (8)’’ and inserting ‘‘paragraph (9)’’; 

13 (3) by redesignating paragraphs (7) and (8) as 

14 paragraphs (8) and (9), respectively; and 

15 (4) by inserting after paragraph (6) the fol16 lowing new paragraph: 

17 ‘‘(7) CONSOLIDATION LOANS.—With respect to 

18 any loans made under section 428C on or after Jan19 uary 1, 2004, each eligible lender under this part is 

20 authorized to charge the borrower an origination fee 

21 of not to exceed 0.5 percent of the principal amount 

22 of the loan. Except as provided in paragraph (9), a 

23 lender that charges an origination fee under this 

24 paragraph shall assess the same fee to all bor25 rowers.’’. 
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1 (c) SPECIAL ALLOWANCE CONFORMING CHANGES.—

2 Section 438(b)(2) of the Higher Education Act of 1965 

3 (20 U.S.C. 1087–1(b)(2)) is amended by striking ‘‘July 

4 1, 2006’’ each place it appears in clauses (ii), (v), and 

5 (vii) of subparagraph (I), including in the headings of such 

6 clauses, and inserting ‘‘January 1, 2004’’. 

7 (d) ADDITIONAL CONFORMING AMENDMENTS.—Sec8 tion 428C(c)(1) of the Higher Education Act of 1965 (20 

9 U.S.C. 1078–3(c)(1)) is amended by striking ‘‘July 1, 

10 2006’’ each place it appears and inserting ‘‘January 1, 

11 2004’’.

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