Reigniting Opportunity for Innovators Act

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. Short title This Act may be cited as the Reigniting Opportunity for Innovators Act 2. Small business startup founder and employee loan deferment and cancellation (a) Deferment without interest accrual for small business startup founders and employees Section 455(f) of the Higher Education Act of 1965 ( 20 U.S.C. 1087e(f) (5) Deferment without interest accrual for small business startup founders and employees (A) In general Subject to subparagraph (B), a qualifying small business startup borrower shall be eligible for a deferment, during which periodic installments of principal need not be paid and interest shall not accrue, during any period while the borrower is employed as a founder or full-time employee of a small business startup. (B) Limitations A qualifying small business startup borrower shall not receive a deferment under this paragraph for any period— (i) in excess of 3 years; or (ii) that begins more than 5 years, or ends more than 8 years, after the date the small business startup was established (as determined by the small business development center that approved such borrower under section 21(o)(5) of the Small Business Act ( 15 U.S.C. 648(o)(5) (C) Definitions In this paragraph— (i) the terms founder full-time employee small business startup (ii) the term qualifying small business startup borrower 15 U.S.C. 648(o)(5) . (b) Loan cancellation Section 455 of the Higher Education Act of 1965 ( 20 U.S.C. 1087e (r) Loan cancellation for founders and employees of small business startups in distressed areas (1) Loan cancellation (A) In general The Secretary shall cancel the balance of interest and principal due, subject to subparagraph (B), on any eligible Federal Direct Loan not in default for a borrower who— (i) at the time of such cancellation, is employed as a founder or full-time employee of a small business startup in a distressed area who— (I) has been approved for loan cancellation by a small business development center under section 21(o)(6) of the Small Business Act ( 15 U.S.C. 648(o)(6) (II) began such employment during the 5-year period beginning on the date that the small business startup was established (as determined by such small business development center); and (ii) during the time period for which the borrower has been approved by the small business development center, which in no case shall be more than 10 years after the date on which the small business startup was established, has made 24 monthly payments on the eligible Federal Direct Loan pursuant to any repayment plan under subsection (d)(1) or a combination of such plans while so employed. (B) Loan cancellation maximum The Secretary shall cancel under this subsection not more than an aggregate of $20,000 of the loan obligation on the eligible Federal Direct Loans of a borrower. (C) Timing requirements Each of the 24 monthly payments required under this subsection shall be made after the date of enactment of this subsection. (D) Ineligibility for double benefits No borrower may, for the same service, receive a reduction of loan obligations under both this subsection and— (i) subsection (m); or (ii) section 428J, 428K, 428L, or 460. (2) Definitions In this subsection: (A) Distressed area The term distressed area 15 U.S.C. 648(o)(1) (B) Eligible Federal direct loan The term eligible Federal Direct Loan (C) Founder; full-time employee The terms founder full-time employee 15 U.S.C. 648(o)(1) (D) Small business startup The term small business startup 15 U.S.C. 648(o)(3) . (c) Conforming amendments Title IV of the Higher Education Act of 1965 ( 20 U.S.C. 1070a (1) in section 428J(g)(2), by striking section 455(m) subsection (m) or (r) of section 455 (2) in section 428K(f)— (A) by inserting subsection (m) or (r) of section 455 or section 428J (B) by striking 455(m) (3) in section 428L(g), by striking 455(m) subsection (m) or (r) of section 455 (4) in section 455(m)(4), by inserting subsection (r) or section 428J (5) in section 460(g)(2)(B), by striking section 455(m) subsection (m) or (r) of section 455 3. Small business development centers Section 21 of the Small Business Act ( 15 U.S.C. 648 (1) in subsection (c)(3)— (A) in subparagraph (S), by striking and (B) in subparagraph (T), by striking the period at the end and inserting a semicolon; and (C) by adding at the end the following: (U) certifying small business startups under subsection (o)(3); and (V) approving loan deferment or cancellation under paragraph (5) or (6) of subsection (o) for founders and full-time employees of certain small business startups. ; and (2) by adding at the end the following: (o) Deferment or cancellation of certain loans (1) Definitions In this subsection— (A) the term distressed area low-income community section 45D(e) (B) the term eligible Federal Direct Loan (C) the terms founder full-time employee (D) the term small business startup (2) Role of small business development centers Any small business development center may, for purposes of eligible Federal Direct Loan deferment or cancellation under subsection (f)(5) or (r) of section 455 of the Higher Education Act of 1965 ( 20 U.S.C. 1087e (A) certify a small business startup under paragraph (3); and (B) approve eligible Federal Direct Loan deferment or cancellation for a founder or full-time employee of a qualifying small business startup under paragraph (5) or (6). (3) Certification In order to be certified by a small business development center, a small business startup shall submit to the small business development center an application that includes— (A) a 5-year business plan for the small business startup; (B) the number of employees that the small business startup intends to employ on an annual basis; and (C) information that demonstrates that the small business startup has the potential for success. (4) Publication of distressed areas The Administrator shall identify and make publicly available on the website of the Administration a list of distressed areas. (5) Loan deferment for founders and full-time employees of a small business startup (A) Application In order to be approved by a small business development center for eligible Federal Direct Loan deferment under subsection (f)(5) of section 455 of the Higher Education Act of 1965 ( 20 U.S.C. 1087e (B) Requirements A small business development center shall approve a borrower who applies under subparagraph (A) for eligible Federal Direct Loan deferment if the small business development center determines that— (i) the borrower is, as of the date of the application, a founder or full-time employee of a small business startup that is certified under paragraph (3); and (ii) the employment of the borrower with the small business startup began during the 5-year period beginning on the date on which the small business startup was established. (6) Loan cancellation for founders and full-time employees of a small business startup in a distressed area (A) Application In order to be approved by a small business development center for eligible Federal Direct Loan cancellation under subsection (r) of section 455 of the Higher Education Act of 1965 ( 20 U.S.C. 1087e (B) Requirements A small business development center shall approve a borrower who applies under subparagraph (A) for eligible Federal Direct Loan cancellation if the small business development center determines that the borrower— (i) as of the date of the application, is employed as a founder or full-time employee of a small business startup that— (I) is located in an area that was a distressed area when the small business startup was established; (II) is certified under paragraph (3) by the small business development center; and (III) as of the date that the small business development center approves the borrower under this paragraph, has been operating continuously for not less than 5 years and not more than 10 years; and (ii) was employed as a founder or a full-time employee by a small business startup described in clause (i) during a period beginning not more than 5 years after the date on which the small business startup was established, as identified by the borrower under subparagraph (A). .

Summary: Reigniting Opportunity for Innovators Act This bill amends title IV (Student Assistance) of the Higher Education Act of 1965 to make qualified founders and full-time employees of small business start-ups eligible for deferring for up to three years their loans under the federal Direct Loan program. If the start-up is located in an economically distressed area, qualified founders and employees are also eligible for loan cancellation of up to $20,000 under that program.