Making College More Affordable Act

To carry out an income-contingent repayment program for Federal Direct Interest-Free Education Loans for undergraduate students, and for other purposes. 1. Short title This Act may be cited as the Making College More Affordable Act 2. Federal Direct Interest-Free Loans for undergraduate students and repayment plan (a) Interest rates Section 455(a) of the Higher Education Act of 1965 ( 20 U.S.C. 1087e(a) (4) Federal Direct Interest-Free Education Loans for undergraduate education (A) New borrowers Notwithstanding any other provision of this Act and subject to subparagraphs (C) and (D), an undergraduate student who is a new borrower on or after July 1, 2023, shall only be eligible to receive Federal Direct Interest-Free Education Loans under this part. (B) Existing borrowers Beginning on July 1, 2023, the Secretary shall cancel the obligation of a borrower, if the borrower submits an application to the Secretary under this subparagraph, to repay any loan made under this part for the borrower’s undergraduate education and for which the first disbursement was made, or the application for the consolidation loan was received, on or before June 30, 2023, and issue to such borrower a Federal Direct Interest-Free Education Loan in an amount equal to the sum of the unpaid principal, accrued unpaid interest, and late charges of the original loan. (C) Parent PLUS loans for undergraduate education Nothing in this section shall be construed to prohibit a parent from borrowing a Federal Direct PLUS Loan on behalf of a dependent, undergraduate student on or after July 1, 2023. (D) Federal Direct Consolidation Loans A borrower of a Federal Direct Interest-Free Education Loan and any other loan made under this part (such as a Federal Direct PLUS Loan or a Federal Direct Unsubsidized Stafford Loan for graduate or professional education) may consolidate such loans into a Federal Direct Consolidation Loan. (E) Terms, conditions, and benefits A Federal Direct Interest-Free Education Loan shall have the same terms and conditions, and benefits to borrowers as a Federal Direct Stafford Loan with respect to undergraduate borrowers, except that such a loan— (i) shall have an applicable rate of interest of 3.73 percent for the term of the loan; (ii) the aggregate maximum amount that may be awarded to a borrower shall be $90,000, for not more than a 4-year academic period; (iii) may only be repaid under the income-contingent repayment plan under subsection (r) or a standard repayment plan under subsection (d)(1)(A); (iv) interest on such loan shall only accrue during periods when a borrower is earning taxable income, is in repayment on such loan, and not making payments under a repayment plan described in clause (iii); and (v) may include other terms and conditions, and benefits to borrowers of such loan, as determined by the Secretary. . (b) Income-Contingent repayment plan for undergraduate loans Section 455 of the Higher Education Act of 1965 ( 20 U.S.C. 1087e (r) Income-Contingent repayment plan for undergraduate loans Notwithstanding any other provision of this Act, the Secretary shall carry out a program under which— (1) a borrower of a Federal Direct Interest-Free Education Loan— (A) shall have an aggregate monthly payment for the outstanding balance of principal and interest due on all such loans automatically withheld from the wages (as such term is defined in section 3401(a) (i) prohibits employers from using any information about an employee’s outstanding balance or principal and interest due on such loans for any purpose of use as an advantage against the employee; (ii) is determined by the Secretary, in coordination with the heads of other appropriate Federal agencies (including the Secretary of the Treasury and the Commissioner of the Social Security Administration); and (iii) is an amount equal to— (I) if the borrower’s gross income is less than 337 percent of the poverty line applicable to the borrower’s family size as determined under section 673(2) of the Community Services Block Grant Act ( 42 U.S.C. 9902(2) (II) if the borrower’s gross income is equal to or greater than 337 percent, but not more than 841 percent of such poverty line, 4 percent of the borrower’s gross income; (III) if the borrower’s gross income is equal to or greater than 842 percent, but not more than 925 percent of such poverty line, 5 percent of the borrower’s gross income; (IV) if the borrower’s gross income is equal to or greater than 926 percent, but not more than 1,010 percent of such poverty line, 6 percent of the borrower’s gross income; (V) if the borrower’s gross income is equal to or greater than 1,011 percent, but not more than 1,094 percent of such poverty line, 7 percent of the borrower’s gross income; (VI) if the borrower’s gross income is equal to or greater than 1,095 percent, but not more than 1,178 percent of such poverty line, 8 percent of the borrower’s gross income; (VII) if the borrower’s gross income is equal to or greater than 1,179 percent, and 1,262 percent of such poverty line, 9 percent of the borrower’s gross income; and (VIII) if the borrower’s gross income is equal to or greater than 1,263 percent of such poverty line, 10 percent of the borrower’s gross income; and (B) may elect to have any payments made under subparagraph (A) that exceed the amount owed by the borrower on such loans for a calendar year be refunded to the borrower or applied to the amount owed by the borrower on such loans for the succeeding calendar year; (2) the Secretary shall cancel any outstanding balance of principal or interest due on all Federal Direct Interest-Free Education Loans made to a borrower who has made 360 monthly payments under this subsection; and (3) the amount cancelled under paragraph (2) shall not be includible in the gross income of the borrower. . 3. Federal Direct Interest-Free Education Loan payments deductible (a) In general Part VII of subchapter B of chapter 1 224. Federal Direct Interest-Free Education Loans (a) In general In the case of an individual, there shall be allowed as a deduction for the taxable year an amount equal to the amounts paid by the taxpayer during the taxable year on any Federal Direct Interest-Free Education Loan described in section 455(a)(4) of the Higher Education Act of 1965. (b) Definitions and special rules For purposes of this section— (1) Denial of double benefit No deduction shall be allowed under this section for any amount for which a deduction is allowable under any other provision of this chapter, or for which an exclusion is allowable under section 127 to the taxpayer by reason of the payment by the taxpayer's employer of any indebtedness on a qualified education loan of the taxpayer. (2) Dependents not eligible for deduction No deduction shall be allowed by this section to an individual for the taxable year if a deduction under section 151 with respect to such individual is allowed to another taxpayer for the taxable year beginning in the calendar year in which such individual's taxable year begins. (3) Married couples must file joint return If the taxpayer is married at the close of the taxable year, the deduction shall be allowed under subsection (a) only if the taxpayer and the taxpayer’s spouse file a joint return for the taxable year. (4) Marital status Marital status shall be determined in accordance with section 7703. . (b) Deduction allowed whether or not taxpayer itemizes Section 62(a) of such Code is amended by inserting after paragraph (21) the following new paragraph: (22) Student loan principal payments The deduction allowed by section 224. . (c) Clerical amendment The table of sections for part VII of subchapter B of chapter 1 of such Code is amended by striking the item relating to section 224 and inserting the following: Sec. 224. Federal Direct Interest-Free Education Loans. Sec. 225. Cross-reference. . (d) Effective date The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.

Summary: Making College More Affordable Act This bill creates federal interest-free education loans for undergraduate students. The loans must generally have the same terms and conditions and benefits to borrowers as Federal Direct Stafford Loans. Interest on these loans may only accrue during periods when a borrower is earning taxable income, is in repayment on such loans, and is not making payments under a repayment plan. The Department of Education (ED) must carry out a repayment plan program for the interest-free loans under which loan payments are automatically withheld from the wages of the borrower. ED must cancel any outstanding balance of principal or interest due on those interest-free loans made to a borrower who has made 360 monthly payments. The bill also allows for a tax deduction for amounts paid on these loans.