I 

116TH CONGRESS 

1ST SESSION H. R. 3786 

To amend the Higher Education Act of 1965 to direct the Secretary of 

Education to carry out a program under which an institution of higher 

education may elect to cosign Federal student loans made to students 

attending the institution, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

JULY 16, 2019 

Mr. PERRY introduced the following bill; which was referred to the Committee 

on Education and Labor 

A BILL 

To amend the Higher Education Act of 1965 to direct the 

Secretary of Education to carry out a program under 

which an institution of higher education may elect to 

cosign Federal student loans made to students attending 

the institution, 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 ‘‘Student Loan Reform 

5 Act’’. 


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1 SEC. 2. INSTITUTIONAL COSIGNER PROGRAM. 

2 Part D of title IV of the Higher Education Act of 

3 1965 (20 U.S.C. 1087a et seq.) is amended by inserting 

4 after section 454 the following: 

5 ‘‘SEC. 454A. INSTITUTIONAL COSIGNER PROGRAM. 

6 ‘‘(a) PROGRAM REQUIRED.—Beginning on July 1, 

7 2020, the Secretary shall carry out a program under which 

8 an institution of higher education may elect to cosign all 

9 eligible direct loans made to students enrolled at the insti10 tution for an academic year. 

11 ‘‘(b) AGREEMENT WITH SECRETARY.—To be eligible 

12 to participate in the program under this section for an 

13 academic year, an institution of higher education shall 

14 enter into an agreement with the Secretary under which 

15 the institution agrees to the following: 

16 ‘‘(1) The institution will cosign all new eligible 

17 direct loans made to students enrolled at the institu18 tion for such academic year. 

19 ‘‘(2) With respect to each such loan, the institu20 tion will abide by the terms and conditions of co21 signer liability described in subsection (d). 

22 ‘‘(c) MASTER PROMISSORY NOTE.—As part of the 

23 program under this section, the Secretary shall— 

24 ‘‘(1) revise the master promissory note applica25 ble to each eligible direct loan to include— 


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1 ‘‘(A) the terms and conditions of cosigner 

2 and borrower liability described in subsection 

3 (d); 

4 ‘‘(B) the interest rate for the loan, as de5 termined under subsection (e); and 

6 ‘‘(C) a field in which an authorized rep7 resentative of an institution participating in the 

8 program may cosign the note on behalf of the 

9 institution; and 

10 ‘‘(2) ensure that each institution participating 

11 in the program signs the note applicable to each new 

12 eligible direct loan made to a student at the institu13 tion for the academic year concerned. 

14 ‘‘(d) COSIGNER AND BORROWER LIABILITY.— 

15 ‘‘(1) IN GENERAL.—Notwithstanding any other 

16 provision of law, an institution of higher education 

17 that is a cosigner of an eligible direct loan of a bor18 rower shall assume the obligation to repay, in ac19 cordance with paragraph (2), the outstanding bal20 ance of principal and interest due on the loan if— 

21 ‘‘(A) the borrower defaulted on the loan; 

22 ‘‘(B) a period of 90 days has elapsed since 

23 the date on which the loan entered default; and 

24 ‘‘(C) the loan has not been rehabilitated. 


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1 ‘‘(2) AMOUNT AND SCHEDULE OF REPAY2 MENT.—An institution that is obligated to repay an 

3 eligible direct loan under paragraph (1) shall make 

4 payments on the loan pursuant to a standard repay5 ment plan under section 455(d)(1)(A) with a repay6 ment period of 10 years. 

7 ‘‘(3) TERMINATION OF OBLIGATION.—The obli8 gation of an institution to repay an eligible direct 

9 loan under paragraph (1) shall terminate on the ear10 lier of— 

11 ‘‘(A) the date on which the loan is rehabili12 tated; or 

13 ‘‘(B) the date on which the total out14 standing balance of principal and interest due 

15 on the loan has been repaid. 

16 ‘‘(4) EFFECT ON DEFAULT STATUS OF BOR17 ROWER.—A borrower who has defaulted on an eligi18 ble direct loan on which an institution is making 

19 payments under paragraph (1) shall be considered in 

20 default on such loan for purposes of adverse credit 

21 reporting and delinquent debt collection procedures 

22 under Federal law. 

23 ‘‘(5) RECOVERY FROM BORROWER.—Any 

24 amounts recovered from the borrower of an eligible 

25 direct loan during a period in which an institution 


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1 is making payments on the loan under paragraph 

2 (1) shall be subtracted from the total outstanding 

3 balance of principal and interest due on the loan. 

4 ‘‘(6) RULE OF CONSTRUCTION.—Nothing in 

5 this subsection shall be construed to limit the rem6 edies available under this part against the borrower 

7 of an eligible Federal student loan. 

8 ‘‘(e) REDUCED INTEREST RATE.—Notwithstanding 

9 any other provision of law, the interest rate applicable to 

10 an eligible direct loan cosigned by an institution partici11 pating in the program under this section shall be a rate 

12 determined by the Secretary that is— 

13 ‘‘(1) lower than the standard rate applicable to 

14 the loan under section 455(b); and 

15 ‘‘(2) reduced below such standard rate by a per16 centage that is proportionate to the reduced risk 

17 posed by the loan, as determined by the Secretary. 

18 ‘‘(f) LIST OF PARTICIPATING INSTITUTIONS.—On an 

19 annual basis, the Secretary shall publish, on a publicly ac20 cessible website of the Department of Education, a list 

21 that identifies each institution participating in the pro22 gram under this section for an academic year. 

23 ‘‘(g) ELIGIBLE DIRECT LOAN DEFINED.—In this 

24 section, the term ‘eligible direct loan’ means a loan made 

25 under this part on or after July 1, 2020.’’. 


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1 SEC. 3. MODIFICATION OF COHORT DEFAULT RATE 

2 THRESHOLD. 

3 (a) IN GENERAL.—Section 435(a) of the Higher 

4 Education Act of 1965 (20 U.S.C. 1085(a)) is amended— 

5 (1) in paragraph (2)— 

6 (A) by striking subparagraphs (B) and (C) 

7 and inserting the following: 

8 ‘‘(B) For purposes of determinations under 

9 subparagraph (A), the threshold percentage 

10 is— 

11 ‘‘(i) 40 percent, in the case of an in12 stitution that is participating in the insti13 tutional cosigner program under section 

14 454A in the year in which the cohort de15 fault rate is determined; or 

16 ‘‘(ii) 30 percent, in the case of an in17 stitution that is not participating in such 

18 program in the year in which the cohort 

19 default rate is determined.’’; and 

20 (B) by redesignating subparagraph (D) as 

21 subparagraph (C); 

22 (2) in paragraph (3), by striking ‘‘paragraph 

23 (2)(B)(iv)’’ and inserting ‘‘paragraph (2)(B)’’; and 

24 (3) in paragraph (7), by striking ‘‘paragraph 

25 (2)(B)(iv)’’ each place it appears and inserting 

26 ‘‘paragraph (2)(B)’’. 


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1 (b) EFFECTIVE DATE.—The amendments made by 

2 subsection (a) shall take effect on July 1, 2020. 

Æ 


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