II 

116TH CONGRESS 

2D SESSION S. 4903 

To amend the Higher Education Act of 1965 to encourage entrepreneurship 

by providing loan deferment and loan cancellation for founders and 

employees of small business startups, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

NOVEMBER 17, 2020 

Ms. HASSAN introduced the following bill; which was read twice and referred 

to the Committee on Finance 

A BILL 

To amend the Higher Education Act of 1965 to encourage 

entrepreneurship by providing loan deferment and loan 

cancellation for founders and employees of small business 

startups, 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, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Reigniting Opportunity 

5 for Innovators Act’’. 


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1 SEC. 2. SMALL BUSINESS STARTUP FOUNDER AND EM2 PLOYEE LOAN DEFERMENT AND CANCELLA3 TION. 

4 (a) DEFERMENT WITHOUT INTEREST ACCRUAL FOR

5 SMALL BUSINESS STARTUP FOUNDERS AND EMPLOY6 EES.—Section 455(f) of the Higher Education Act of 

7 1965 (20 U.S.C. 1087e(f)) is amended— 

8 (1) by redesignating paragraphs (4) and (5) as 

9 paragraphs (5) and (6), respectively; and 

10 (2) by inserting after paragraph (3) the fol11 lowing: 

12 ‘‘(4) DEFERMENT WITHOUT INTEREST AC13 CRUAL FOR SMALL BUSINESS STARTUP FOUNDERS

14 AND EMPLOYEES.— 

15 ‘‘(A) IN GENERAL.—Subject to subpara16 graph (B), a qualifying small business startup 

17 borrower shall be eligible for a deferment, dur18 ing which periodic installments of principal 

19 need not be paid and interest shall not accrue, 

20 during any period while the borrower is em21 ployed as a founder or full-time employee of a 

22 small business startup. 

23 ‘‘(B) LIMITATIONS.—A qualifying small 

24 business startup borrower shall not receive a 

25 deferment under this paragraph for any pe26 riod— 


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1 ‘‘(i) in excess of 3 years; or 

2 ‘‘(ii) that begins more than 5 years, 

3 or ends more than 8 years, after the date 

4 the small business startup was established 

5 (as determined by the small business devel6 opment center that approved such bor7 rower under section 21(o)(5) of the Small 

8 Business Act (15 U.S.C. 648(o)(5))). 

9 ‘‘(C) DEFINITIONS.—In this paragraph— 

10 ‘‘(i) the terms ‘founder’, ‘full-time em11 ployee’, and ‘small business startup’ have 

12 the meanings given the terms in subsection 

13 (r)(2); and 

14 ‘‘(ii) the term ‘qualifying small busi15 ness startup borrower’ means a borrower 

16 of a loan made under this part whose em17 ployment as a small business startup 

18 founder or full-time employee is approved 

19 by a small business development center 

20 under section 21(o)(5) of the Small Busi21 ness Act (15 U.S.C. 648(o)(5)).’’. 

22 (b) LOAN CANCELLATION.—Section 455 of the High23 er Education Act of 1965 (20 U.S.C. 1087e) is amended 

24 by adding at the end the following: 


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1 ‘‘(r) LOAN CANCELLATION FOR FOUNDERS AND EM2 PLOYEES OF SMALL BUSINESS STARTUPS IN DISTRESSED

3 AREAS.— 

4 ‘‘(1) LOAN CANCELLATION.— 

5 ‘‘(A) IN GENERAL.—The Secretary shall 

6 cancel the balance of interest and principal due, 

7 subject to subparagraph (B), on any eligible 

8 Federal Direct Loan not in default for a bor9 rower who— 

10 ‘‘(i) at the time of such cancellation, 

11 is employed as a founder or full-time em12 ployee of a small business startup in a dis13 tressed area who— 

14 ‘‘(I) has been approved for loan 

15 cancellation by a small business devel16 opment center under section 21(o)(6) 

17 of the Small Business Act (15 U.S.C. 

18 648(o)(6)); and 

19 ‘‘(II) began such employment 

20 during the 5-year period beginning on 

21 the date that the small business start22 up was established (as determined by 

23 such small business development cen24 ter); and 


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1 ‘‘(ii) during the time period for which 

2 the borrower has been approved by the 

3 small business development center, which 

4 in no case shall be more than 10 years 

5 after the date on which the small business 

6 startup was established, has made 24 

7 monthly payments on the eligible Federal 

8 Direct Loan pursuant to any repayment 

9 plan under subsection (d)(1) or a combina10 tion of such plans while so employed. 

11 ‘‘(B) LOAN CANCELLATION MAXIMUM.— 

12 The Secretary shall cancel under this subsection 

13 not more than an aggregate of $20,000 of the 

14 loan obligation on the eligible Federal Direct 

15 Loans of a borrower. 

16 ‘‘(C) TIMING REQUIREMENTS.—Each of 

17 the 24 monthly payments required under this 

18 subsection shall be made after the date of en19 actment of this subsection. 

20 ‘‘(D) INELIGIBILITY FOR DOUBLE BENE21 FITS.—No borrower may, for the same service, 

22 receive a reduction of loan obligations under 

23 both this subsection and— 

24 ‘‘(i) subsection (m); or 


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1 ‘‘(ii) section 428J, 428K, 428L, or 

2 460. 

3 ‘‘(2) DEFINITIONS.—In this subsection: 

4 ‘‘(A) DISTRESSED AREA.—The term ‘dis5 tressed area’ has the meaning given the term in 

6 section 21(o)(1) of the Small Business Act (15 

7 U.S.C. 648(o)(1)). 

8 ‘‘(B) ELIGIBLE FEDERAL DIRECT LOAN.— 

9 The term ‘eligible Federal Direct Loan’ means 

10 a Federal Direct Stafford Loan, Federal Direct 

11 PLUS Loan, Federal Direct Unsubsidized Staf12 ford Loan, or a Federal Direct Consolidation 

13 Loan. 

14 ‘‘(C) FOUNDER; FULL-TIME EMPLOYEE.— 

15 The terms ‘founder’ and ‘full-time employee’ 

16 have the meanings given the terms in section 

17 21(o)(1) of the Small Business Act (15 U.S.C. 

18 648(o)(1)). 

19 ‘‘(D) SMALL BUSINESS STARTUP.—The 

20 term ‘small business startup’ means a business 

21 that is certified by a small business develop22 ment center under section 21(o)(3) of the Small 

23 Business Act (15 U.S.C. 648(o)(3)).’’. 


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1 (c) CONFORMING AMENDMENTS.—Title IV of the 

2 Higher Education Act of 1965 (20 U.S.C. 1070a et seq.) 

3 is further amended— 

4 (1) in section 428J(g)(2), by striking ‘‘section 

5 455(m)’’ and inserting ‘‘subsection (m) or (r) of sec6 tion 455’’; 

7 (2) in section 428K(f)— 

8 (A) by inserting ‘‘subsection (m) or (r) of 

9 section 455 or’’ before ‘‘section 428J’’; and 

10 (B) by striking ‘‘455(m)’’; 

11 (3) in section 428L(g), by striking ‘‘455(m)’’ 

12 and inserting ‘‘subsection (m) or (r) of section 455’’; 

13 (4) in section 455(m)(4), by inserting ‘‘sub14 section (r) or’’ before ‘‘section 428J’’; and 

15 (5) in section 460(g)(2)(B), by striking ‘‘section 

16 455(m)’’ and inserting ‘‘subsection (m) or (r) of sec17 tion 455’’. 

18 SEC. 3. SMALL BUSINESS DEVELOPMENT CENTERS. 

19 Section 21 of the Small Business Act (15 U.S.C. 648) 

20 is amended— 

21 (1) in subsection (c)(3)— 

22 (A) in subparagraph (T), by striking 

23 ‘‘and’’ at the end; 

24 (B) in the first subparagraph (U) (relating 

25 to encouraging and assisting the provision of 


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1 succession planning), by striking the period at 

2 the end of clause (v) and inserting a semicolon; 

3 (C) in the second subparagraph (U) (relat4 ing to providing training in conjunction with 

5 the United States Patent and Trademark Of6 fice)— 

7 (i) by redesignating that subpara8 graph as subparagraph (V); and 

9 (ii) in clause (ii)(II), by striking the 

10 period at the end and inserting a semi11 colon; and 

12 (D) by adding at the end the following: 

13 ‘‘(W) certifying small business startups under 

14 subsection (o)(3); and 

15 ‘‘(X) approving loan deferment or cancellation 

16 under paragraph (5) or (6) of subsection (o) for 

17 founders and full-time employees of certain small 

18 business startups, as those terms are defined in 

19 paragraph (1) of that subsection.’’; and 

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

21 ‘‘(o) DEFERMENT OR CANCELLATION OF CERTAIN

22 LOANS.— 

23 ‘‘(1) DEFINITIONS.—In this subsection— 

24 ‘‘(A) the term ‘distressed area’ has the 

25 meaning given the term ‘low-income community’ 


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1 in section 45D(e) of the Internal Revenue Code 

2 of 1986; 

3 ‘‘(B) the term ‘eligible Federal Direct 

4 Loan’ has the meaning given the term in sec5 tion 455(r)(2) of the Higher Education Act of 

6 1965; 

7 ‘‘(C) the terms ‘founder’ and ‘full-time em8 ployee’, with respect to a small business start9 up, have the meanings given the terms by the 

10 Administrator; and 

11 ‘‘(D) the term ‘small business startup’ 

12 means a small business concern that, as of the 

13 date that the small business concern submits an 

14 application under paragraph (3), has been in 

15 existence for not more than 3 years. 

16 ‘‘(2) ROLE OF SMALL BUSINESS DEVELOPMENT

17 CENTERS.—Any small business development center 

18 may, for purposes of eligible Federal Direct Loan 

19 deferment or cancellation under subsection (f)(4) or 

20 (r) of section 455 of the Higher Education Act of 

21 1965 (20 U.S.C. 1087e)— 

22 ‘‘(A) certify a small business startup under 

23 paragraph (3); and 

24 ‘‘(B) approve eligible Federal Direct Loan 

25 deferment or cancellation for a founder or fullVerDate Sep 11 2014 04:37 Nov 24, 2020 Jkt 019200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S4903.IS S4903

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1 time employee of a qualifying small business 

2 startup under paragraph (5) or (6). 

3 ‘‘(3) CERTIFICATION.—In order to be certified 

4 by a small business development center, a small 

5 business startup shall submit to the small business 

6 development center an application that includes— 

7 ‘‘(A) a 5-year business plan for the small 

8 business startup; 

9 ‘‘(B) the number of employees that the 

10 small business startup intends to employ on an 

11 annual basis; and 

12 ‘‘(C) information that demonstrates that 

13 the small business startup has the potential for 

14 success. 

15 ‘‘(4) PUBLICATION OF DISTRESSED AREAS.— 

16 Not less frequently than once every 3 years begin17 ning after the date of enactment of this subsection, 

18 the Administrator shall identify and make publically 

19 available on the website of the Administration a list 

20 of distressed areas. 

21 ‘‘(5) LOAN DEFERMENT FOR FOUNDERS AND

22 FULL-TIME EMPLOYEES OF A SMALL BUSINESS

23 STARTUP.— 

24 ‘‘(A) APPLICATION.—In order to be ap25 proved by a small business development center 


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1 for eligible Federal Direct Loan deferment 

2 under subsection (f)(4) of section 455 of the 

3 Higher Education Act of 1965 (20 U.S.C. 

4 1087e), a borrower of an eligible Federal Direct 

5 Loan shall submit to the small business devel6 opment center an application that includes such 

7 information as the Administrator may require. 

8 ‘‘(B) REQUIREMENTS.—A small business 

9 development center shall approve a borrower 

10 who applies under subparagraph (A) for eligible 

11 Federal Direct Loan deferment if the small 

12 business development center determines that— 

13 ‘‘(i) the borrower is, as of the date on 

14 which the application is submitted, a 

15 founder or full-time employee of a small 

16 business startup that is certified under 

17 paragraph (3); and 

18 ‘‘(ii) the employment of the borrower 

19 with the small business startup began dur20 ing the 5-year period beginning on the date 

21 on which the small business startup was 

22 established. 

23 ‘‘(6) LOAN CANCELLATION FOR FOUNDERS AND

24 FULL-TIME EMPLOYEES OF A SMALL BUSINESS

25 STARTUP IN A DISTRESSED AREA.— 


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1 ‘‘(A) APPLICATION.—In order to be ap2 proved by a small business development center 

3 for eligible Federal Direct Loan cancellation 

4 under subsection (r) of section 455 of the High5 er Education Act of 1965 (20 U.S.C. 1087e), a 

6 borrower of an eligible Federal Direct Loan 

7 shall submit to the small business development 

8 center an application that includes such infor9 mation as the Administrator may require, in10 cluding an identification of the time period dur11 ing which the borrower has made 24 monthly 

12 payments on the eligible Federal Direct Loan, 

13 as required under subparagraphs (A)(ii) and 

14 (C) of paragraph (1) of such subsection (r). 

15 ‘‘(B) REQUIREMENTS.—A small business 

16 development center shall approve a borrower 

17 who applies under subparagraph (A) for eligible 

18 Federal Direct Loan cancellation if the small 

19 business development center determines that 

20 the borrower— 

21 ‘‘(i) as of the date on which the appli22 cation is submitted, is employed as a 

23 founder or full-time employee of a small 

24 business startup that— 


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1 ‘‘(I) is located in an area that 

2 was a distressed area not more than 

3 3 years before the date on which the 

4 small business startup was estab5 lished; 

6 ‘‘(II) is certified under paragraph 

7 (3) by the small business development 

8 center; and 

9 ‘‘(III) as of the date on which the 

10 small business development center ap11 proves the borrower under this para12 graph, has been operating continu13 ously for not less than 5 years and 

14 not more than 10 years; and 

15 ‘‘(ii) was employed as a founder or a 

16 full-time employee by a small business 

17 startup described in clause (i) during a pe18 riod beginning not more than 5 years after 

19 the date on which the small business start20 up was established, as identified by the 

21 borrower under subparagraph (A).’’. 

22 SEC. 4. TREATMENT OF LOAN CANCELLATION. 

23 (a) IN GENERAL.—Section 108(f) of the Internal 

24 Revenue Code of 1986 is amended by adding at the end 

25 the following: 


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1 ‘‘(6) CANCELLATION OF CERTAIN FEDERAL

2 STUDENT LOANS.—In the case of an individual, 

3 gross income shall not include the discharge (in 

4 whole or in part) of any student loan pursuant to 

5 the cancellation (in whole or in part) of such loan 

6 by the Secretary of Education under subsection (r) 

7 of section 455 of the Higher Education Act of 1965 

8 (20 U.S.C. 1087e).’’. 

9 (b) EFFECTIVE DATE.—The amendment made by 

10 subsection (a) shall apply to discharges of indebtedness 

11 occurring after the date of enactment of this Act. 

Æ 


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