SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Student Loan Fairness 
Act of 2005’’. 
SEC. 2. REMOVAL OF PROHIBITION ON REFINANCING CON-
SOLIDATION LOANS. 
Section 428C(a)(3) the Higher Education Act of 
1965 (20 U.S.C. 1078–3(a)(3)) is amended— 
(1) by striking subparagraph (B); 
(2) in subparagraph (C), by striking ‘‘subpara-
graphs (A) and (B)’’ and inserting ‘‘subparagraph 
(A)’’; and 
(3) by redesignating subparagraph (C) as sub-
paragraph (B). 
SEC. 3. STUDENT LOAN BORROWER CHOICE OF LOAN 
CONSOLIDATOR. 
(a) SELECTION OF LENDER.—Section 428C(b)(1)(A) 
of the Higher Education Act of 1965 (20 U.S.C. 1078– 
3(b)(1)(A)) is amended by striking ‘‘and (i) the lender 
holds’’ and all that follows through ‘‘selected for consolida-
tion)’’. 
(b) INFORMATION ABOUT CONSOLIDATION LOANS.— 
(1) INFORMATION
FROM
LENDERS.—Section 
428C(b)(1) of such Act is further amended— 
(A) by striking ‘‘and’’ at the end of sub-
paragraph (E);
(B) by redesignating subparagraph (F) as 
subparagraph (G); and 
(C) by inserting after subparagraph (E) 
the following new subparagraph: 
‘‘(F) that the lender will provide to each 
applicant for a consolidation loan a clear and 
conspicuous notice, in such form as the Sec-
retary shall prescribe, describing, in relation to 
the borrower’s reported current loan balance 
and the likely interest rate estimated by the 
lender for the consolidation loan— 
‘‘(i) the effects of a consolidation loan 
and its available repayment plans on the 
borrower’s interest rate, the amount of his 
or her monthly and total payments, total 
interest accrued, the length of the repay-
ment term; 
‘‘(ii) the ability of the student bor-
rower to pre-pay loans; and 
‘‘(iii) the differences between variable 
and fixed interest rates; and’’. 
(2) INFORMATION
FROM
INSTITUTIONS.—Sec-
tion 485(b)(1)(A) of such Act (20 U.S.C. 1092(b)) 
is amended—
(A) by striking ‘‘and’’ at the end of clause 
(i); 
(B) by striking the period at the end of 
clause (ii) and inserting ‘‘; and’’; and 
(C) by adding at the end the following new 
clause: 
‘‘(iii) providing to the borrower of a loan made 
under part B, D, or E, a clear and conspicuous no-
tice, in such form as the Secretary shall prescribe, 
describing the effect of using a consolidation loan to 
discharge the borrower’s student loans, and includ-
ing, with respect to a series of loan amounts 
ranges— 
‘‘(I) the differences between fixed and vari-
able interest rates; 
‘‘(II) the effects of consolidation loan and 
its available repayment plans on the borrower’s 
interest rate, the amount of his or her monthly 
and total payments, total interest accrued, and 
the length of repayment term; and 
‘‘(III) the ability of the student borrower 
to prepay loans.’’.
SEC. 4. INTEREST RATES ON CONSOLIDATED AND RE-
CONSOLIDATED LOANS. 
(a) INTEREST RATE CHANGES.—Section 427A of the 
Higher Education Act of 1965 (20 U.S.C. 1077a) is 
amended by striking subsection (l) and inserting the fol-
lowing: 
‘‘(l) INTEREST RATES
FOR NEW LOANS
ON
OR 
AFTER JULY 1, 2006.— 
‘‘(1) IN GENERAL.—Notwithstanding subsection 
(h), with respect to any loan made, insured, or guar-
anteed under this part (other than a loan made pur-
suant to section 428B or 428C) for which the first 
disbursement is made on or after July 1, 2006, the 
applicable rate of interest shall, during any 12- 
month period beginning on July 1 and ending on 
June 30, be determined on the preceding June 1 
and be equal to— 
‘‘(A) the bond equivalent rate of 91-day 
Treasury bills auctioned at the final auction 
held prior to such June 1; plus 
‘‘(B) 2.3 percent, 
except that such rate shall not exceed 6.8 percent. 
‘‘(2) PLUS 
LOANS.—Notwithstanding sub-
section (h), with respect to any loan under section 
428B for which the first disbursement is made on or