Zero-Percent Student Loan Refinancing Act

To establish a temporary program for the refinancing of certain Federal student loans, and for other purposes. 1. Short title This Act may be cited as the Zero-Percent Student Loan Refinancing Act 2. Temporary program for refinancing student loans (a) Program authority Section 451(a) of the Higher Education Act of 1965 ( 20 U.S.C. 1087a(a) (1) by striking and (2) (2) (2) by inserting ; and (3) to make loans under section 460A section 459A (b) Refinancing program Part D of title IV of the Higher Education Act of 1965 ( 20 U.S.C. 1087a 460A. Temporary program for the refinancing of Federal Direct loans and other Federal student loans (a) Definitions In this section: (1) Covered non-part D loan The term covered non-part D loan (A) made, insured, or guaranteed under part B and for which the first disbursement was made, or the application for the consolidation loan was received, before July 1, 2010; (B) made under part E; or (C) made under— (i) subpart II of part A of title VII of the Public Health Service Act ( 42 U.S.C. 292q (ii) part E of title VIII of the Public Health Service Act ( 42 U.S.C. 297a (2) Covered period The term covered period (3) Original loan The term original loan (4) Qualified borrower The term qualified borrower (b) In general Beginning on August 1, 2021, the Secretary shall carry out a program under which the Secretary makes interest-free refinancing loans to qualified borrowers in accordance with this section. (c) Refinancing Direct loans (1) Federal Direct Loans (A) In general Beginning on August 1, 2021, the Secretary shall cancel the obligation of a qualified borrower to repay a Federal Direct Stafford Loan, a Federal Direct Unsubsidized Stafford Loan, a Federal Direct PLUS Loan, or a Federal Direct Consolidation Loan for which the first disbursement was made, or the application for the consolidation loan was received, before January 1, 2025, and issue to such borrower in accordance with this section a refinanced Federal Direct Stafford Loan, a refinanced Federal Direct Unsubsidized Stafford Loan, a refinanced Federal Direct PLUS Loan, or a refinanced Federal Direct Consolidation Loan, respectively, in an amount equal to the sum of the unpaid principal, accrued unpaid interest, and late charges of the original loan. (B) Information The Secretary shall notify each qualified borrower of a loan refinanced under subparagraph (A) regarding the refinancing and the benefits the refinancing provides to the qualified borrower. (2) Refinancing covered non-part D loans as refinanced Federal Direct loans Upon application of a qualified borrower of any covered non-part D loan, the Secretary shall make a loan under this part, in an amount equal to the sum of the unpaid principal, accrued unpaid interest, and late charges of the original loan to the borrower in accordance with the following: (A) The Secretary shall pay the proceeds of such loan to the holder of the covered non-part D loan, in order to discharge the borrower from any remaining obligation with respect to the original loan. (B) Any Federal student loan made under this section the proceeds of which are used to discharge a loan that was made, insured, or guaranteed— (i) under section 428 shall be a Federal Direct Stafford Loan; (ii) under section 428B shall be a Federal Direct PLUS Loan; (iii) under section 428H shall be a Federal Direct Unsubsidized Stafford Loan; and (iv) under section 428C shall be a Federal Direct Consolidation Loan. (C) Any Federal student loan made under this section the proceeds of which are used to discharge a loan described subparagraph (B) or (C) of subsection (a)(1) shall be a Federal Direct Consolidation Loan. (3) Application deadline To be eligible to receive a refinancing loan under paragraph (2) a qualified borrower shall submit an application to the Secretary during the covered period. A borrower who submits an application after the expiration of the covered period shall not eligible to receive a refinancing loan under such paragraph. (d) Terms and conditions of loans (1) In general A loan made under this section shall have the same terms and conditions as the original loan, except as otherwise provided in this section. (2) Interest rates No interest shall accrue on a loan that is made under this section. (3) No automatic extension of repayment period A loan made under this section shall not result in the extension of the duration of the repayment period of the loan, and the borrower shall retain the same repayment term that was in effect on the original loan. Nothing in this paragraph shall be construed to prevent a borrower from electing a different repayment plan at any time in accordance with section 455(d)(3). (4) Special rule for refinanced Perkins and health loans Notwithstanding paragraph (1), in the case of a loan that is made under this section as a Federal Direct Consolidation Loan the proceeds of which are used to discharge a loan described in subparagraph (B) or (C) of subsection (a)(1)— (A) the refinanced Federal Direct Consolidation Loan shall have the same terms and conditions as a Federal Direct Consolidation Loan, except as otherwise provided in this section; and (B) the Secretary may adjust such terms and conditions as necessary to enable the borrower to access loan forgiveness or other benefits available to the borrower under the loan before refinancing under this section, in any case where such benefits are more generous than provided under a Federal Direct Consolidation Loan. (5) Rule of construction Nothing in this section shall be construed to prevent a borrower of a Federal student loan described in subparagraph (B) or (C) of subsection (a)(1) from consolidating such loans with other loans eligible for consolidation under this section, or to require such a borrower to consolidate such loans with other Federal student loans into a single consolidation loan under this section. (e) Notification to borrowers The Secretary, in coordination with the Director of the Bureau of Consumer Financial Protection, shall undertake a campaign to alert borrowers of covered non-part D loans that are eligible for refinancing under this section that the borrowers are eligible to apply for such refinancing. The campaign shall include the following activities: (1) Developing consumer information materials about the availability of Federal student loan refinancing. (2) Requiring servicers of loans under part B to provide such consumer information to borrowers in a manner determined appropriate by the Secretary, in consultation with the Director of the Bureau of Consumer Financial Protection. . (c) Income-Contingent repayment Section 455(e) of the Higher Education Act of 1965 ( 20 U.S.C. 1087e(e) (9) Special rule for refinanced loans For purposes of paragraph (7), the period of time during which a borrower of a loan that is refinanced under section 460A has made monthly payments shall be calculated in the manner described in section 493C(f) for the applicable type of loan. . (d) Income-Based repayment Section 493C of the Higher Education Act of 1965 ( 20 U.S.C. 1098e (f) Special rule for refinanced loans (1) Refinanced Federal Direct, FFEL, and Plus loans In calculating the period of time during which a borrower of a loan (with the exception of a Federal Direct Consolidation Loan) that is refinanced under section 460A has made monthly payments for purposes of subsection (b)(7), the Secretary shall deem the period to include all monthly payments made for the original loan, and all monthly payments made for the refinanced loan, that otherwise meet the requirements of this section. (2) Refinanced Federal Direct Consolidation Loans In calculating the period of time during which a borrower of a Federal Direct Consolidation Loan that is refinanced under section 460A has made monthly payments for the purposes of subsection (b)(7), the Secretary shall— (A) review the borrower’s payment history to identify each component loan of such Federal Direct Consolidation Loan; (B) for each such component loan— (i) calculate the weighted factor of the component loan, which shall be the factor that represents the portion of such Federal Direct Consolidation Loan that is attributable to such component loan; and (ii) determine the number of qualifying monthly payments made on such component loan before consolidation; (C) calculate the number of qualifying monthly payments determined under subparagraph (B)(ii) with respect to a component loan that shall be deemed as qualifying monthly payments made on the Federal Direct Consolidation Loan by multiplying— (i) the weighted factor of such component loan as determined under subparagraph (B)(i); by (ii) the number of qualifying monthly payments made on such component loan as determined under subparagraph (B)(ii); and (D) calculate and inform the borrower of the total number of qualifying monthly payments with respect to the component loans of the Federal Direct Consolidation Loan that shall be deemed as qualifying monthly payments made on the refinanced Federal Consolidation Loan, by— (i) adding together the result of each calculation made under subparagraph (C) with respect to each such component loan; and (ii) rounding the number determined under clause (i) to the nearest whole number. (3) Component loan defined In this subsection, the term component loan . (e) Conforming amendments The Higher Education Act of 1965 ( 20 U.S.C. 1001 (1) in section 428C(a)(3)(B)(i)(V) ( 20 U.S.C. 1078–3(3)(B)(i)(V) (A) by striking or (B) by striking the period at the end of item (cc) and inserting ; or (C) by adding at the end the following: (dd) for the purpose of obtaining a refinancing loan under section 460A. ; and (2) in section 455 ( 20 U.S.C. 1087e (A) in subsection (b), by striking (b) (b) Interest rate Except as otherwise provided in sections 460A, the terms and conditions of interest for loans made under this part are as follows: .

Summary: Zero-Percent Student Loan Refinancing Act This bill establishes a temporary program through which the Department of Education (ED) must make interest-free refinancing loans to borrowers of federal student loans from August 1, 2021, through December 31, 2024. The bill requires ED to automatically refinance Federal Direct Loans and notify each borrower of the refinancing. Borrowers who have other types of eligible loans (i.e., Federal Family Education Loans, Federal Perkins Loans, and certain health profession and nursing loans) must apply for refinancing. ED and the Consumer Financial Protection Bureau must carry out a campaign to notify borrowers of these types of loans that they are eligible to apply for refinancing under the program.