Parent PLUS Loan Improvement Act of 2016

To amend the Higher Education Act of 1965 to include Parent PLUS loans in income-contingent and income-based repayment plans, and for other purposes. 1. Short title This Act may be cited as the Parent PLUS Loan Improvement Act of 2016 2. Applicable rate of interest for PLUS Loans Section 455(b)(8) of the Higher Education Act of 1965 ( 20 U.S.C. 1087e(b)(8) (1) in subparagraph (C), by inserting and before July 1, 2016, , 2013, (2) by adding at the end the following: (F) Reduced rate for Parent PLUS loans Notwithstanding the preceding paragraphs of this subsection, for Federal Direct PLUS Loans made on behalf of a dependent student for which the first disbursement is made on or after July 1, 2016, the applicable rate of interest shall be determined under subparagraph (C) of this paragraph— (i) by substituting 3.6 percent 4.6 percent (ii) by substituting 9.5 percent 10.5 percent . 3. Elimination of origination fee for Parent PLUS loans Section 455(c) of the Higher Education Act of 1965 ( 20 U.S.C. 1087e(c) (3) PLUS loans With respect to Federal Direct PLUS loans made on behalf of a dependent student for which the first disbursement of principal is made on or after July 1, 2016, paragraph (1) shall be applied by substituting 0.0 percent 4.0 percent . 4. Counseling for Parent PLUS borrowers Section 485 of the Higher Education Act of 1965 ( 20 U.S.C. 1092 (n) Counseling for parent PLUS borrowers (1) In general The Secretary, prior to disbursement of a Federal Direct PLUS loan made on behalf of a dependent student, shall ensure that the borrower receives comprehensive information on the terms and conditions of the loan and the responsibilities the borrower has with respect to such loan. Such information— (A) shall be provided through the use of interactive programs that use mechanisms to check the borrower’s understanding of the terms and conditions of the borrower’s loan, using simple and understandable language and clear formatting; and (B) shall be provided— (i) during a counseling session conducted in person; or (ii) online. (2) Information to be provided The information to be provided to the borrower under paragraph (1) shall include the following: (A) Information on how interest accrues and is capitalized during periods when the interest is not paid by the borrower. (B) An explanation of when loan repayment begins, of the options available for a borrower who may need a deferment, and that interest accrues during a deferment. (C) The repayment plans that are available to the borrower, including personalized information showing— (i) estimates of the borrower’s anticipated monthly payments under each repayment plan that is available; and (ii) the difference in interest paid and total payments under each repayment plan. (D) The obligation of the borrower to repay the full amount of the loan, regardless of whether the student on whose behalf the loan was made completes the program in which the student is enrolled. (E) The likely consequences of default on the loan, including adverse credit reports, delinquent debt collection procedures under Federal law, and litigation. (F) The name and contact information of the individual the borrower may contact if the borrower has any questions about the borrower’s rights and responsibilities or the terms and conditions of the loan. . 5. Inclusion of parent PLUS loans in income-contingent and income-based repayment plans (a) Income-Contingent repayment plan Section 455(d)(1)(D) of the Higher Education Act of 1965 ( 20 U.S.C. 1087e(d)(1)(D) , except that the plan described in this subparagraph shall not be available to the borrower of a Federal Direct PLUS loan made on behalf of a dependent student; (b) Income-Based repayment (1) Section 493C Section 493C of the Higher Education Act of 1965 ( 20 U.S.C. 1098e (A) in subsection (a)— (i) by striking this section hardship In this section, the term partial financial hardship (ii) by striking, (other than an excepted PLUS loan or excepted consolidation loan) (B) in subsection (b)— (i) in paragraph (1), by striking (other than an excepted PLUS loan or excepted consolidation loan) (ii) in paragraph (6)(A), by striking (other than an excepted PLUS loan or excepted consolidation loan) (iii) in paragraph (7), by striking (other than a loan under section 428B or a Federal Direct PLUS Loan) (C) in subsection (c), by striking (other than an excepted PLUS loan or excepted consolidation loan), (2) Section 455(d)(1)(E) Section 455(d)(1)(E) of such Act ( 20 U.S.C. 1087e(d)(1)(D) , except that the plan described in this subparagraph shall not be available to the borrower of a Federal Direct PLUS Loan made on behalf of a dependent student or a Federal Direct Consolidation Loan, if the proceeds of such loan were used to discharge the liability on such Federal Direct PLUS Loan or a loan under section 428B made on behalf of a dependent student (c) Application to regulations The Secretary shall ensure that any Federal Direct PLUS Loan and any loan under section 428B of the Higher Education Act of 1965 ( 20 U.S.C. 1078–2 20 U.S.C. 1001 et seq. 20 U.S.C. 1001 et seq.

Summary: Parent PLUS Loan Improvement Act of 2016 This bill amends title IV (Student Assistance) of the Higher Education Act of 1965 to modify the applicable terms and conditions with respect to Federal Direct PLUS Loans to parent borrowers (i.e., parent PLUS loans). Specifically, it reduces the interest rate and eliminates the origination fee for a parent PLUS loan disbursed on or after July 1, 2016. The Department of Education must ensure, prior to disbursement, that a parent PLUS loan borrower receives counseling that includes comprehensive information on the terms, conditions, and responsibilities with respect to the loan. The bill makes a parent PLUS loan eligible for the income-contingent and income-based repayment plans. Additionally, it makes a consolidation loan that repays parent PLUS loan eligible for the income-based repayment plan.