II 

114TH CONGRESS 

1ST SESSION S. 2050 

To provide for the establishment of a mechanism to allow borrowers of 

private education loans to refinance their loans, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

SEPTEMBER 17, 2015 

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

referred to the Committee on Health, Education, Labor, and Pensions 

A BILL 

To provide for the establishment of a mechanism to allow 

borrowers of private education loans to refinance their 

loans, 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 ‘‘Private Education 

5 Loan Modification Act of 2015’’. 

6 SEC. 2. FINDINGS AND PURPOSE. 

7 (a) FINDINGS.—Congress finds that— 

8 (1) as of 2015, the Federal Reserve Consumer 

9 Credit Report stated that there is more than 

10 $1,300,000,000,000 in outstanding student loan 


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1 debt in the United States, including more than 

2 $150,000,000,000 in private education loans; 

3 (2) in 2008, 81 percent of individuals grad4 uating with an undergraduate degree with more 

5 than $40,000 in student loans had a private edu6 cation loan; 

7 (3) according to a 2012 study of the private 

8 student loan market published by the Department of 

9 Education and the Bureau of Consumer Financial 

10 Protection, there were 850,000 private student loan 

11 defaults with an outstanding principal balance more 

12 than $8,000,000,000; 

13 (4) the limited number of lenders in the private 

14 education loan marketplace reduce the ability of bor15 rowers with private education loans to restructure, 

16 refinance, or negotiate repayment terms for their 

17 current loans, leading to excessive debt burdens and 

18 potential default; 

19 (5) as reported by the Student Loan Ombuds20 man of the Consumer Financial Protection Bureau 

21 in the 2014 annual report, it appears that few, if 

22 any, private student lenders and loan servicers have 

23 developed transparent, widely offered flexible repay24 ment options that mitigate defaults for borrowers in 

25 distress; 


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1 (6) excessive student indebtedness reduces eco2 nomic activity, threatens homeownership, hurts 

3 small business growth, and limits opportunities for 

4 economic expansion across rural and urban commu5 nities; and 

6 (7) as noted in 2013, the Federal Deposit In7 surance Corporation, the Office of the Comptroller 

8 of the Currency, and the Board of Governors of the 

9 Federal Reserve System encouraged financial insti10 tutions to work constructively with private student 

11 loan borrowers experiencing financial difficulties, so 

12 borrowers have access to safe-and-sound lending 

13 practices. 

14 (b) PURPOSE.—The purpose of this Act is to spur 

15 economic growth, by establishing a mechanism to allow 

16 borrowers of private education loans to refinance their 

17 loans in order— 

18 (1) to facilitate greater competition in the pri19 vate education lending and refinancing markets, par20 ticularly those serving underserved and rural loca21 tions; 

22 (2) to address inefficiencies in the private edu23 cation lending and refinancing markets; 

24 (3) to encourage innovation in the private edu25 cation refinancing markets; and 


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1 (4) to promote the participation of private cap2 ital in the private education refinancing markets. 

3 SEC. 3. DEFINITIONS. 

4 In this Act— 

5 (1) the term ‘‘private education loan’’ has the 

6 same meaning as in section 140(a) of the Truth in 

7 Lending Act (15 U.S.C. 1650(a)); and 

8 (2) the term ‘‘Secretary’’ means the Secretary 

9 of the Treasury, other than in the context of the 

10 Secretary of Education. 

11 SEC. 4. TEMPORARY AUTHORITY TO CREATE A CREDIT FA12 CILITY TO INCREASE MARKET EFFICIENCY IN 

13 THE STUDENT LOAN MARKET. 

14 (a) AUTHORITY.— 

15 (1) IN GENERAL.— 

16 (A) CREDIT FACILITIES AUTHORIZA17 TION.—Upon a determination by the Secretary 

18 that borrowers are unable to secure adequate 

19 credit accommodations with existing private 

20 education loans, the Secretary, notwithstanding 

21 any provision of section 484 of the Higher Edu22 cation Act of 1965 (20 U.S.C. 1091), is author23 ized to establish lending, purchase, and other 

24 credit facilities to— 


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1 (i) accommodate reasonable refi2 nancing opportunities or other loan adjust3 ments that— 

4 (I) improve the sustainability of 

5 payments for the borrower; and 

6 (II) reduce the likelihood of de7 linquency and default on private edu8 cation loans; 

9 (ii) benefit borrowers that are most 

10 likely to have private student debt service 

11 obligations that represent a dispropor12 tionate share of their income; and 

13 (iii) ensure that borrowers pay lower 

14 interest rates that are commensurate with 

15 credit risk, so that they may pursue more 

16 economically productive activities, such as 

17 home purchases and small business forma18 tion. 

19 (B) CONSULTATION.— 

20 (i) IN GENERAL.—Any determination 

21 under subparagraph (A) shall be made 

22 jointly with the Secretary of Education 

23 and the Director of the Bureau of Con24 sumer Financial Protection. 


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1 (ii) COMPLIANCE SYSTEM.—Prior to 

2 establishing a facility under this sub3 section, the Secretary, or any adminis4 trator designated by the Secretary to es5 tablish a program to carry out the author6 ity provided in this subsection, shall estab7 lish a compliance system in consultation 

8 with the Bureau of Consumer Financial 

9 Protection. 

10 (2) NO NET COST TO GOVERNMENT.—Mecha11 nisms established under this subsection shall not re12 sult in any net cost to the Federal Government, as 

13 determined jointly by the Secretary, the Secretary of 

14 Education, and the Director of the Office of Man15 agement and Budget. 

16 (b) FEDERAL REGISTER NOTICE.—Prior to exer17 cising any authority provided under subsection (a), the 

18 Secretary shall publish a notice in the Federal Register 

19 to seek comment from interested parties on its proposed 

20 exercise of such authority, including— 

21 (1) the terms and conditions governing the 

22 lending, purchases, or other credit facilities author23 ized by subsection (a); 


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1 (2) an outline of methodology and factors con2 sidered in the purchase or restructuring of private 

3 education loans; 

4 (3) private education loan modification options 

5 that may be available for existing loans; 

6 (4) how they will ensure that borrowers whose 

7 education debt service obligations represent a dis8 proportionate share of their income will be provided 

9 relief; 

10 (5) how the use of the methodology and factors, 

11 as proposed in the notice, will be used to ensure that 

12 any exercise of authority by the Secretary will result 

13 in no net cost to the Federal Government; and 

14 (6) how any mechanism will be designed to 

15 avoid extraordinary gains by market participants 

16 holding loans in distress. 

17 (c) INITIAL REPORT.—Not later than 90 days after 

18 the date of enactment of this Act, the Secretary shall sub19 mit to the appropriate committees of Congress a report 

20 that includes— 

21 (1) current market liquidity and the status of 

22 loan financing by lenders, including those serving 

23 underserved and rural locations; 


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1 (2) the public economic benefits and funds nec2 essary for initiating a private education loan pro3 gram; 

4 (3) upon determining limited access to loans by 

5 borrowers, a plan of the Secretary to implement 

6 credit mechanisms under the authority of this Act; 

7 (4) a description of macroeconomic benefits of 

8 increased efficiency and refinance activity in the stu9 dent loan market; and 

10 (5) a description of the benefits through the use 

11 of such authority to private education loan bor12 rowers, including how any incidental net gain from 

13 the credit mechanism would be used to benefit stu14 dent borrowers. 

15 (d) ANNUAL REPORTS.—Beginning 1 year after the 

16 date of the first use of the authority provided under this 

17 section, the Secretary shall provide an annual report to 

18 the Committee on Banking, Housing, and Urban Affairs 

19 of the Senate and the Committee on Financial Services 

20 of the House of Representatives describing the utilization, 

21 impact, and financial performance of any program estab22 lished under the authority of this section. 

23 (e) PUBLIC AWARENESS.—Not later than 60 days 

24 after the date of publication of a notice in the Federal 

25 Register pursuant to subsection (b), the Secretary, in conVerDate Sep 11 2014 04:29 Sep 18, 2015 Jkt 049200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S2050.IS S2050

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1 sultation with the Secretary of Education and the Director 

2 of the Bureau of Consumer Financial Protection, shall 

3 begin a national awareness campaign to alert all private 

4 education loan borrowers who may benefit from any pro5 gram or facilities established under this section. Such 

6 campaign shall include outreach to targeted populations 

7 of borrowers that are most likely to have private education 

8 loan debt service obligations that represent a dispropor9 tionate share of their income. 

10 (f) EXPIRATION OF AUTHORITY.—Three years after 

11 the date on which a credit facility is established under this 

12 Act, and not later than 5 years after the date of enactment 

13 of this Act, any new lending, purchase, or other activity 

14 initiated through the facilities established by the Secretary 

15 under subsection (a) shall cease. 

16 SEC. 5. SENSE OF CONGRESS. 

17 It is the sense of Congress that the Federal financial 

18 institutions, such as the Federal Financing Bank and the 

19 Federal Reserve banks, and federally chartered private en20 tities, such as the Federal home loan banks, should con21 sider, in consultation with the Secretary, the Secretary of 

22 Education, and the Director of the Bureau of Consumer 

23 Financial Protection, using available authorities in a time24 ly manner, if needed, to assist in ensuring that borrowers 

25 of private education loans can secure credit accommodaVerDate Sep 11 2014 04:29 Sep 18, 2015 Jkt 049200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S2050.IS S2050

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1 tions to refinance existing loans, in a manner that results 

2 in no increased costs to taxpayers and will avoid extraor3 dinary gains by market participants holding loans in dis4 tress in order to avoid unnecessary loan modifications. 

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