I 

114TH CONGRESS 

2D SESSION H. R. 6197 

To amend the Higher Education Act of 1965 to provide loan deferment 

and loan cancellation for founders and employees of small business startups, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

SEPTEMBER 28, 2016 

Ms. VELA ́ZQUEZ introduced the following bill; which was referred to the Committee on Education and the Workforce, and in addition to the Committees on Financial Services, Ways and Means, and Small Business, 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 to provide 

loan deferment and loan cancellation for founders and 

employees of small business start-ups, 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 ‘‘Supporting America’s 

5 Young Entrepreneurs Act of 2016’’. 

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1 SEC. 2. SMALL BUSINESS START-UP EMPLOYEE LOAN 

2 DEFERMENT AND CANCELLATION. 

3 (a) DEFERMENT.—Section 455(f) of the Higher Edu4 cation Act of 1965 (20 U.S.C. 1087e(f)) is amended— 

5 (1) in paragraph (1), by striking ‘‘A borrower 

6 of a loan’’ and inserting ‘‘Except as provided in 

7 paragraph (5), a borrower of a loan’’; and 

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

9 ‘‘(5) NO INTEREST DEFERMENT ELIGIBILITY

10 FOR FOUNDERS OF SMALL BUSINESS START-UPS.— 

11 A borrower of a loan made under this part shall be 

12 eligible for a deferment, during which periodic in13 stallments of principal and interest need not be paid, 

14 during any period not in excess of 3 years during 

15 which the borrower is employed as a founder of a 

16 small business start-up (as defined in subsection 

17 (r)(3)).’’. 

18 (b) LOAN CANCELLATION.—Section 455 of the High19 er Education Act of 1965 (20 U.S.C. 1087e) is amended 

20 by adding at the end the following: 

21 ‘‘(r) LOAN CANCELLATION FOR CERTAIN SMALL

22 BUSINESS START-UP EMPLOYEES.— 

23 ‘‘(1) FOUNDER OF A SMALL BUSINESS START24 UP IN A DISTRESSED AREA.— 

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

26 cancel $20,000 of the balance of interest and 

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1 principal due, in accordance with subparagraph 

2 (B), on any eligible Federal Direct Loan not in 

3 default for a borrower who— 

4 ‘‘(i) has made 24 monthly payments 

5 on the eligible Federal Direct Loan after 

6 the date of the enactment of this sub7 section pursuant to any one or a combina8 tion of payments under a repayment plan 

9 under subsection (d)(1) or (g); 

10 ‘‘(ii) has been employed as a founder 

11 of a small business start-up in a distressed 

12 area during the period in which the bor13 rower makes each of the 24 payments; 

14 ‘‘(iii) is employed as a founder of a 

15 small business start-up in a distressed area 

16 at the time of such cancellation; and 

17 ‘‘(iv) is approved for loan cancellation 

18 by the young entrepreneurs business center 

19 under section 47 of the Small Business Act 

20 (16 U.S.C. 631 et seq.). 

21 ‘‘(B) LOAN CANCELLATION AMOUNT.— 

22 ‘‘(i) IN GENERAL.—After the conclu23 sion of the employment period described in 

24 subparagraph (A), the Secretary shall can25 cel the obligation to repay $20,000 of the 

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1 balance of interest and principal due as of 

2 the time of such cancellation, on the eligi3 ble Federal Direct Loans made to the bor4 rower under this part. 

5 ‘‘(ii) LIMITATION.—A borrower may 

6 not receive an aggregate amount of more 

7 than $20,000 under this subparagraph. 

8 ‘‘(C) INELIGIBILITY FOR DOUBLE BENE9 FITS.—No borrower may, for the same service, 

10 receive a reduction of loan obligations under 

11 both this paragraph and— 

12 ‘‘(i) paragraph (2); 

13 ‘‘(ii) subsection (m); or 

14 ‘‘(iii) section 428J, 428K, 428L, or 

15 460. 

16 ‘‘(2) EMPLOYEE OF A SMALL BUSINESS START17 UP.— 

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

19 cancel $3,000 of the balance of interest and 

20 principal due, in accordance with subparagraph 

21 (B), on any eligible Federal Direct Loan not in 

22 default for a borrower who— 

23 ‘‘(i) has made 12 monthly payments 

24 on the eligible Federal Direct Loan after 

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1 section pursuant to any one or a combina2 tion of payments under a repayment plan 

3 under subsection (d)(1) or (g); 

4 ‘‘(ii) has been employed in a small 

5 business start-up job during the period in 

6 which the borrower makes each of the 12 

7 payments; and 

8 ‘‘(iii) is employed in a small business 

9 start-up job at the time of such cancella10 tion. 

11 ‘‘(B) LOAN CANCELLATION AMOUNT.— 

12 ‘‘(i) IN GENERAL.—After the conclu13 sion of the employment period described in 

14 subparagraph (A), the Secretary shall can15 cel the obligation to repay $3,000 of the 

16 balance of interest and principal due as of 

17 the time of such cancellation, on the eligi18 ble Federal Direct Loans made to the bor19 rower under this part. 

20 ‘‘(ii) LIMITATION.—A borrower may 

21 not receive an aggregate amount of more 

22 than $15,000 under this subparagraph. 

23 ‘‘(C) INELIGIBILITY FOR DOUBLE BENE24 FITS.—No borrower may, for the same service, 

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1 receive a reduction of loan obligations under 

2 both this paragraph and— 

3 ‘‘(i) paragraph (1); 

4 ‘‘(ii) subsection (m); or 

5 ‘‘(iii) section 428J, 428K, 428L, or 

6 460. 

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

8 ‘‘(A) DISTRESSED AREA.—The term ‘dis9 tressed area’ means an area identified under 

10 section 47 of the Small Business Act (16 

11 U.S.C. 631 et seq.). 

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

13 The term ‘eligible Federal Direct Loan’ means 

14 a Federal Direct Stafford Loan, Federal Direct 

15 PLUS Loan, or Federal Direct Unsubsidized 

16 Stafford Loan, or a Federal Direct Consolida17 tion Loan. 

18 ‘‘(C) FOUNDER.—The term ‘founder’ shall 

19 have the meaning given such term by the Ad20 ministrator of the Small Business Administra21 tion under this paragraph. 

22 ‘‘(D) SMALL BUSINESS START-UP.—The 

23 term ‘small business start-up’ means a business 

24 that is certified by the young entrepreneurs 

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1 business center under section 47 of the Small 

2 Business Act (16 U.S.C. 631 et seq.). 

3 ‘‘(E) SMALL BUSINESS START-UP JOB.— 

4 The term ‘small business start-up job’ means a 

5 full-time job as an employee of a small business 

6 start-up.’’. 

7 SEC. 3. LOAN REFINANCING. 

8 (a) IN GENERAL.—Part D of title IV of the Higher 

9 Education Act of 1965 is amended by adding at the end 

10 the following: 

11 ‘‘SEC. 460. FEDERAL DIRECT REFINANCED PRIVATE LOAN 

12 PROGRAM. 

13 ‘‘(a) DEFINITIONS.—In this section: 

14 ‘‘(1) ELIGIBLE PRIVATE EDUCATION LOAN.— 

15 The term ‘eligible private education loan’ means a 

16 private education loan, as defined in section 140(a) 

17 of the Truth in Lending Act (15 U.S.C. 1650(a)), 

18 that was for the borrower’s own postsecondary edu19 cational expenses for an eligible program at an insti20 tution of higher education participating in the loan 

21 program under this part, as of the date that the 

22 loan was disbursed. 

23 ‘‘(2) FEDERAL DIRECT REFINANCED PRIVATE

24 LOAN.—The term ‘Federal Direct Refinanced Primstockstill on DSK3G9T082PROD with BILLS

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1 vate Loan’ means a loan issued under subsection 

2 (b)(1). 

3 ‘‘(3) PRIVATE EDUCATIONAL LENDER.—The 

4 term ‘private educational lender’ has the meaning 

5 given the term in section 140(a) of the Truth in 

6 Lending Act (15 U.S.C. 1650(a)). 

7 ‘‘(4) QUALIFIED BORROWER.—The term ‘quali8 fied borrower’ means an individual who— 

9 ‘‘(A) has an eligible private education loan; 

10 ‘‘(B) has been current on payments on the 

11 eligible private education loan for the 6 months 

12 prior to the date of the qualified borrower’s ap13 plication for refinancing under this section, and 

14 is in good standing on the loan at the time of 

15 such application; 

16 ‘‘(C) is not in default on the eligible pri17 vate education loan or on any loan made, in18 sured, or guaranteed under this part or part B 

19 or E; and 

20 ‘‘(D) meets the eligibility requirements de21 scribed in subsection (b)(2). 

22 ‘‘(b) PROGRAM AUTHORIZED.— 

23 ‘‘(1) IN GENERAL.—The Secretary, in consulta24 tion with the Secretary of the Treasury, shall carry 

25 out a program under which the Secretary, upon apmstockstill on DSK3G9T082PROD with BILLS

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1 plication by a qualified borrower who has an eligible 

2 private education loan, shall issue such borrower a 

3 loan under this part in accordance with the fol4 lowing: 

5 ‘‘(A) The loan issued under this program 

6 shall be in an amount equal to the sum of the 

7 unpaid principal, accrued unpaid interest, and 

8 late charges of the private education loan. 

9 ‘‘(B) The Secretary shall pay the proceeds 

10 of the loan issued under this program to the 

11 private educational lender of the private edu12 cation loan, in order to discharge the qualified 

13 borrower from any remaining obligation to the 

14 private educational lender with respect to the 

15 original private education loan. 

16 ‘‘(C) The Secretary shall require that the 

17 qualified borrower undergo loan counseling that 

18 provides all of the information and counseling 

19 required under clauses (i) through (viii) of sec20 tion 485(b)(1)(A) before the loan is refinanced 

21 in accordance with this section, and before the 

22 proceeds of such loan are paid to the private 

23 educational lender. 

24 ‘‘(D) The Secretary shall issue the loan as 

25 a Federal Direct Refinanced Private Loan, 

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1 which shall have the same terms, conditions, 

2 and benefits as a Federal Direct Subsidized 

3 Loan, except as otherwise provided in this sec4 tion. 

5 ‘‘(2) BORROWER ELIGIBILITY.—Not later than 

6 180 days after the date of the enactment of this sec7 tion, the Secretary, in consultation with the Sec8 retary of the Treasury and the Director of the Bu9 reau of Consumer Financial Protection, shall estab10 lish eligibility requirements— 

11 ‘‘(A) to ensure eligibility only for qualified 

12 borrowers in good standing; 

13 ‘‘(B) to minimize inequities between Fed14 eral Direct Refinanced Private Loans and other 

15 Federal student loans; 

16 ‘‘(C) to preclude windfall profits for pri17 vate educational lenders; and 

18 ‘‘(D) to ensure full access to the program 

19 authorized in this subsection for borrowers with 

20 private loans who otherwise meet the criteria 

21 established in accordance with subparagraphs 

22 (A) and (B). 

23 ‘‘(c) INTEREST RATE.— 

24 ‘‘(1) IN GENERAL.—The interest rate for a 

25 Federal Direct Refinanced Private Loan is, in the 

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1 case a private education loan originally issued for 

2 undergraduate, graduate, or professional degree 

3 postsecondary educational expenses, a rate equal to 

4 the rate for Federal Direct Subsidized Stafford 

5 Loans issued to undergraduate students for the 12- 

6 month period beginning on July 1, 2016, and ending 

7 on June 30, 2017. 

8 ‘‘(2) FIXED RATE.—The applicable rate of in9 terest determined under this subsection for a Fed10 eral Direct Refinanced Private Loan shall be fixed 

11 for the period of the loan. 

12 ‘‘(d) TREATMENT OF LOANS.—Nothing in this sec13 tion shall affect the ability of a borrower to qualify for 

14 loan repayment under a repayment plan under subsection 

15 (d)(1) or (g) of section 455.’’. 

16 (b) NOTICE OF POTENTIAL ELIGIBILITY.—Section 

17 128(e) of the Truth in Lending Act (15 U.S.C. 1638(e)) 

18 is amended by adding at the end the following new para19 graph: 

20 ‘‘(12) NOTICE REQUIRED ALONG WITH BILLING

21 STATEMENTS.—Along with each billing statement 

22 sent to the borrower, the private educational lender 

23 shall include a statement informing the borrower 

24 that the borrower may be eligible for the Federal Di25 rect Refinanced Private Loan program established 

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1 under section 460 of the Higher Education Act of 

2 1965.’’. 

3 SEC. 4. YOUNG ENTREPRENEURS BUSINESS CENTER. 

4 The Small Business Act (15 U.S.C. 631 et seq.) is 

5 amended— 

6 (1) by redesignating section 47 as section 48; 

7 and 

8 (2) by inserting after section 46 the following: 

9 ‘‘SEC. 47. YOUNG ENTREPRENEURS BUSINESS CENTER. 

10 ‘‘(a) ESTABLISHMENT.—There is established within 

11 the Administration a young entrepreneurs business center 

12 that shall, for purposes of loan cancellation for start-up 

13 employees established under subsection (r) of section 455 

14 of the Higher Education Act of 1965 (20 U.S.C. 1087e)— 

15 ‘‘(1) certify small business start-ups under sub16 section (b); 

17 ‘‘(2) identify distressed areas under subsection 

18 (c); and 

19 ‘‘(3) approve loan cancellation for founders of 

20 small business start-ups in distressed areas under 

21 subsection (d). 

22 ‘‘(b) CERTIFICATION.— 

23 ‘‘(1) APPLICATION.—To be certified by the 

24 young entrepreneurs business center, a small busimstockstill on DSK3G9T082PROD with BILLS

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1 ness start-up shall submit an application to the Ad2 ministrator that includes— 

3 ‘‘(A) a 5-year business plan for such small 

4 business start-up; and 

5 ‘‘(B) the number of employees the small 

6 business start-up intends to employ on a yearly 

7 basis. 

8 ‘‘(2) REQUIREMENTS.—The young entre9 preneurs business center may not certify a small 

10 business start-up unless such small business start11 up, on the date the application is submitted under 

12 paragraph (1)— 

13 ‘‘(A) has a founder who is a recent grad14 uate of a 4-year institution of higher education; 

15 ‘‘(B) is a start-up for which at least 50 

16 percent of the employees of the start-up are re17 cent graduates of such an institution. 

18 ‘‘(c) DISTRESSED AREA.— 

19 ‘‘(1) IN GENERAL.—Not less than once every 3 

20 years after the date of the enactment of this section, 

21 the young entrepreneurs business center shall iden22 tify and make publically available on the website of 

23 the Administration a list of distressed areas. 

24 ‘‘(2) REQUIREMENTS.—A distressed area iden25 tified under paragraph (1) shall be a county or 

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1 equivalent division of local government of a State in 

2 which the small business concern is located that— 

3 ‘‘(A) has, for the most recent 24-month pe4 riod for which statistics are available— 

5 ‘‘(i) a per capita income of 80 percent 

6 or less of the national average; or 

7 ‘‘(ii) an unemployment rate that is 1 

8 percent greater than the national average; 

9 and 

10 ‘‘(B) the young entrepreneurs business 

11 center determines would economically benefit 

12 from having small business start-ups estab13 lished in such area. 

14 ‘‘(d) LOAN CANCELLATION FOR FOUNDERS OF A

15 SMALL BUSINESS START-UP IN A DISTRESSED AREA.— 

16 For purposes of loan cancellation under subsection (r)(1) 

17 of section 455 of the Higher Education Act of 1965 (20 

18 U.S.C. 1087e) the young entrepreneurs business center 

19 shall approve a founder of a small business start-up in 

20 a distressed area if such founder— 

21 ‘‘(1) established a small business start-up 

22 that— 

23 ‘‘(A) on the date such small business start24 up was established, was located in a distressed 

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1 ness center under subsection (c) not more than 

2 3 years before such date of establishment; 

3 ‘‘(B) was certified under subsection (b); 

4 and 

5 ‘‘(C) on the date of approval under this 

6 subsection, has been operating continuously for 

7 not less than 5 years; and 

8 ‘‘(2) was employed as a founder of a small busi9 ness start-up in a distressed area during the period 

10 in which such founder made the 24 payments de11 scribed in subsection (r)(1)(A) of such section 455. 

12 ‘‘(e) DEFINITIONS.—In this section: 

13 ‘‘(1) INSTITUTION OF HIGHER EDUCATION.— 

14 The term ‘institution of higher education’ has the 

15 meaning given such term in section 102 of the High16 er Education Act (20 U.S.C. 1002). 

17 ‘‘(2) SMALL BUSINESS START-UP.—The term 

18 ‘small business start-up’ means a small business 

19 concern that— 

20 ‘‘(A) is not yet in existence; or 

21 ‘‘(B) has been in existence for not more 

22 than 3 years.’’. 

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1 SEC. 5. TREATMENT OF LOAN CANCELLATION. 

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

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

4 the following new paragraph: 

5 ‘‘(5) CANCELLATION OF CERTAIN FEDERAL

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

7 gross income shall not include the discharge (in 

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

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

10 by the Secretary of Education under subsection (r) 

11 of section 455 of the Higher Education Act of 1965 

12 (20 U.S.C. 1087e).’’. 

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

14 this section shall apply to discharges of indebtedness oc15 curring after the date of the enactment of this Act. 

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