Making College More Affordable Act

To carry out an income-contingent repayment program for Federal 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. Direct Federal Undergraduate Loans and repayment plan (a) Interest rates Section 455(a) of the Higher Education Act of 1965 ( 20 U.S.C. 1087e(a) (4) Undergraduate loans on or after the date of enactment of the Making College More Affordable Act (A) In general Notwithstanding any other provision of this Act, a new borrower on or after the date of enactment of the Making College More Affordable Act may only borrow a Federal Interest Free Education Loan for the undergraduate course work being pursued by such borrower. (B) Terms, conditions, and benefits A Federal Interest Free Education Loan shall have the same terms and conditions, and benefits to borrowers as Federal Direct Stafford Loans with respect to undergraduate borrowers, except that— (i) a Federal Interest Free Education Loan shall have an applicable rate of interest of 3.76 percent for the term of the loan; (ii) the aggregate maximum amount of Federal Interest Free Education Loan that may be awarded to a borrower shall be $90,000, for not more than a 4-year academic period; (iii) interest on a Federal Interest Free Education Loan shall only accrue during periods when a borrower is not earning taxable income due to professional negligence, professional incompetence, or malicious action on the part of the borrower; (iv) a borrower may consolidate any loan under section 428B, or a Federal Direct PLUS Loan, that is made, insured, or guaranteed on behalf of such borrower with the Federal Interest Free Education Loan of such borrower; (v) a Federal Interest Free Education Loan may only be repaid under the income-contingent repayment plan under subsection (r); and (vi) the Secretary may determine other terms and conditions, and benefits to borrowers of a Federal Interest Free Education Loan. . (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 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 pre-tax income of the borrower by the employer of the borrower in a manner which— (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; (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 will cancel any outstanding balance of principal or interest due on all Federal Interest Free Education Loans made to a borrower who has made 300 monthly payments under this subsection; and (3) a borrower will be taxed on the amount cancelled under paragraph (2), which taxes shall be applied to carry out the Federal Direct Loan program under this part. .

Summary: Making College More Affordable Act This bill amends the Higher Education Act of 1965 by creating federal interest-free education loans for undergraduate students. The loans must 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 not earning taxable income due to professional negligence, professional incompetence, or malicious action on the part of the borrower. The Department of Education (ED) must carry out a repayment plan program for the interest-free loans under which loans payments are automatically withheld from the pre-tax income 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 300 monthly payments. The borrower must be taxed on the amount canceled. Those taxes must be applied to carry out the federal direct loan program.