I 

113TH CONGRESS 

2D SESSION H. R. 4236 

To amend the Higher Education Act of 1965 and the Truth in Lending 

Act to clarify the application of prepayment amounts on student loans. 

IN THE HOUSE OF REPRESENTATIVES 

MARCH 13, 2014 

Mrs. DAVIS of California introduced the following bill; which was referred to 

the Committee on Education and the Workforce, and in addition to the 

Committee on Financial Services, 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 and the Truth 

in Lending Act to clarify the application of prepayment 

amounts on student loans. 

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 Fair 

5 Prepayment Act’’. 


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1 SEC. 2. APPLICATION OF PREPAYMENT AMOUNTS FOR 

2 FFEL AND DIRECT LOANS. 

3 Section 455(d) of the Higher Education Act of 1965 

4 (20 U.S.C. 1087e(d)) is amended by adding at the end 

5 the following new paragraph: 

6 ‘‘(6) APPLICATION OF PREPAYMENT

7 AMOUNTS.— 

8 ‘‘(A) REQUIREMENT.—Notwithstanding 

9 any other provision of this subsection or any 

10 other provision of law, with respect to loans 

11 made to an eligible borrower under this part or 

12 part B, which are held by the same holder and 

13 which have different applicable rates of interest, 

14 the holder of such loans shall, except as other15 wise requested by the borrower in writing, apply 

16 the borrower’s prepayment amount (within the 

17 meaning of section 682.209(b) of title 34, Code 

18 of Federal Regulations, or a successor regula19 tion) for one or more of such loans, first toward 

20 the outstanding balance of principal due on the 

21 loan with the highest applicable rate of interest 

22 among such loans. 

23 ‘‘(B) ELIGIBLE BORROWER.— 

24 ‘‘(i) IN GENERAL.—For purposes of 

25 this paragraph, the term ‘eligible borrower’ 

26 means a borrower with no outstanding balVerDate Mar 15 2010 05:45 Mar 20, 2014 Jkt 039200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H4236.IH H4236

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1 ance of fees, including collection costs and 

2 authorized late charges, due on any loan 

3 made under this part or part B. 

4 ‘‘(ii) PREPAYMENT AMOUNTS.—A pre5 payment amount (as described in subpara6 graph (A)) made by a borrower who is not 

7 an eligible borrower to a holder shall be 

8 applied first toward the borrower’s out9 standing balance of fees, including collec10 tion costs and authorized late charges, due 

11 on any loan made under this part or part 

12 B held by such holder. 

13 ‘‘(C) EXCEPTIONS.—This paragraph shall 

14 not apply to an income-based repayment plan 

15 under section 493C or an income contingent re16 payment plan under section 455(d)(1)(D), such 

17 as a Pay As You Earn repayment plan.’’. 

18 SEC. 3. APPLICATION OF PREPAYMENT AMOUNTS FOR PER19 KINS LOANS. 

20 Section 464(c)(1)(C) of the Higher Education Act of 

21 1965 (20 U.S.C. 1087dd(c)(1)(C)) is amended— 

22 (1) by striking ‘‘and’’ at the end of clause (i); 

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

24 ‘‘(iii) shall provide that the institution 

25 shall, in the case of a borrower with no 


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1 outstanding balance of fees (including col2 lection costs and authorized late charges) 

3 due on the loans held by the institution 

4 and who repays more than the amount due 

5 for a repayment period, use the excess to 

6 prepay (within the meaning of section 

7 674.31(b)(4)(iv) of title 34, Code of Fed8 eral Regulations, or a successor regulation) 

9 the principal due on the loan with the 

10 highest applicable rate of interest among 

11 such loans, unless otherwise requested by 

12 the borrower in writing; and 

13 ‘‘(iv) shall provide that the institution 

14 shall, in the case of a borrower with an 

15 outstanding balance of fees (such as collec16 tion costs and authorized late charges) due 

17 on the loans held by the institution and 

18 who repays more than the amount due for 

19 a repayment period, first apply such excess 

20 toward such outstanding balance of fees;’’. 

21 SEC. 4. APPLICATION OF PREPAYMENT AMOUNTS FOR PRI22 VATE EDUCATION LOANS. 

23 Section 128(e) of the Truth in Lending Act (15 

24 U.S.C. 1638(e)) is amended by adding at the end the fol25 lowing: 


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1 ‘‘(12) APPLICATION OF PREPAYMENT

2 AMOUNTS.— 

3 ‘‘(A) IN GENERAL.—Notwithstanding any 

4 other provision of law, with respect to a bor5 rower with more than one private education 

6 loan which are held by the same holder and 

7 which have different applicable rates of interest, 

8 the holder of such loans shall, except as other9 wise requested by the borrower in writing, apply 

10 the borrower’s prepayment amount (within the 

11 meaning of section 682.209(b) of title 34, Code 

12 of Federal Regulations, or a successor regula13 tion) for one or more of such loans, first toward 

14 the outstanding balance of principal due on the 

15 loan with the highest applicable rate of interest 

16 among such loans. 

17 ‘‘(B) EXCEPTION.— 

18 ‘‘(i) IN GENERAL.—Subparagraph (A) 

19 shall not apply to any prepayment amount 

20 made by a borrower to a holder if the bor21 rower has an outstanding balance of fees, 

22 including collection costs and authorized 

23 late charges, due on any private education 

24 loan held by such holder. 


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1 ‘‘(ii) PREPAYMENT AMOUNTS.—A pre2 payment amount (as described in subpara3 graph (A)) made by a borrower described 

4 in subparagraph (B) to a holder shall be 

5 applied first toward the borrower’s out6 standing balance of fees, including collec7 tion costs and authorized late charges, due 

8 on any private education loan held by such 

9 holder.’’. 

Æ 


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