I 
114TH CONGRESS 
1ST SESSION H. R. 3786 
To amend the Higher Education Act of 1965 and the Truth in Lending 
Act to clarify the application of prepayment amounts on student loans. 
IN THE HOUSE OF REPRESENTATIVES 
OCTOBER 21, 2015 
Mrs. DAVIS of California (for herself and Mr. PETERS) introduced the fol-
lowing bill; which was referred to the Committee on Education and the 
Workforce, and in addition to the Committee on Financial Services, for 
a period to be subsequently determined by the Speaker, in each case for 
consideration of such provisions as fall within the jurisdiction of the com-
mittee concerned 
A BILL 
To amend the Higher Education Act of 1965 and the Truth 
in Lending Act to clarify the application of prepayment 
amounts on student loans. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Student Loan Fair 
Prepayment Act’’. 
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SEC. 2. APPLICATION OF PREPAYMENT AMOUNTS FOR 
FFEL AND DIRECT LOANS. 
Section 455(d) of the Higher Education Act of 1965 
(20 U.S.C. 1087e(d)) is amended by adding at the end 
the following new paragraph: 
‘‘(6) 
APPLICATION
OF
PREPAYMENT 
AMOUNTS.— 
‘‘(A) 
REQUIREMENT.—Notwithstanding 
any other provision of this subsection or any 
other provision of law— 
‘‘(i) with respect to loans made to an 
eligible borrower under this part or part B, 
which are held by the same holder and 
which have different applicable rates of in-
terest, the holder of such loans shall, un-
less otherwise requested by the borrower in 
writing, apply the borrower’s prepayment 
amount (within the meaning of section 
682.209(b) of title 34, Code of Federal 
Regulations, or a successor regulation) for 
one or more of such loans, first toward the 
outstanding balance of principal due on the 
loan with the highest applicable rate of in-
terest among such loans; and 
‘‘(ii) except as provided in clause (i), 
with respect to loans made to an eligible 
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borrower under this part or part B, which 
are held by the same holder and which 
have the same applicable rates of interest, 
the holder of such loans shall, unless other-
wise requested by the borrower in writing, 
apply the borrower’s prepayment amount 
(within the meaning of section 682.209(b) 
of title 34, Code of Federal Regulations, or 
a successor regulation) for one or more of 
such loans, first toward the outstanding 
balance of principal due on the loan with 
the highest principal balance among such 
loans. 
‘‘(B) ELIGIBLE BORROWER.— 
‘‘(i) IN
GENERAL.—For purposes of 
this paragraph, the term ‘eligible borrower’ 
means a borrower with no outstanding bal-
ance of fees, including collection costs and 
authorized late charges, due on any loan 
made under this part or part B. 
‘‘(ii) PREPAYMENT AMOUNTS.—A pre-
payment amount (as described in subpara-
graph (A)) made by a borrower who is not 
an eligible borrower to a holder shall be 
applied first toward the borrower’s out-
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standing balance of fees, including collec-
tion costs and authorized late charges, due 
on any loan made under this part or part 
B held by such holder. 
‘‘(C) EXCEPTIONS.—This paragraph shall 
not apply to an income-based repayment plan 
under section 493C or an income contingent re-
payment plan under section 455(d)(1)(D), such 
as a Pay As You Earn repayment plan.’’. 
SEC. 3. APPLICATION OF PREPAYMENT AMOUNTS FOR PER-
KINS LOANS. 
Section 464(c)(1)(C) of the Higher Education Act of 
1965 (20 U.S.C. 1087dd(c)(1)(C)) is amended— 
(1) by striking ‘‘and’’ at the end of clause (i); 
(2) by adding at the end the following: 
‘‘(iii) shall provide that the institution 
shall, in the case of a borrower with no 
outstanding balance of fees (including col-
lection costs and authorized late charges) 
due on the loans held by the institution 
and who repays more than the amount due 
for a repayment period— 
‘‘(I) with respect to loans held by 
the same institution and which have 
different applicable rates of interest, 
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use the excess to prepay (within the 
meaning of section 674.31(b)(4)(iv) of 
title 34, Code of Federal Regulations, 
or a successor regulation) the prin-
cipal due on the loan with the highest 
applicable rate of interest among such 
loans, unless otherwise requested by 
the borrower in writing; and 
‘‘(II) except as provided in sub-
clause (I), with respect to loans held 
by the same institution and which 
have the same applicable rates of in-
terest, use the excess to prepay (with-
in 
the 
meaning 
of 
section 
674.31(b)(4)(iv) of title 34, Code of 
Federal Regulations, or a successor 
regulation) the principal due on the 
loan with the highest principal balance 
among such loans, unless otherwise 
requested by the borrower in writing; 
and 
‘‘(iv) shall provide that the institution 
shall, in the case of a borrower with an 
outstanding balance of fees (such as collec-
tion costs and authorized late charges) due 
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on the loans held by the institution and 
who repays more than the amount due for 
a repayment period, first apply such excess 
toward such outstanding balance of fees;’’. 
SEC. 4. APPLICATION OF PREPAYMENT AMOUNTS FOR PRI-
VATE EDUCATION LOANS. 
Section 128(e) of the Truth in Lending Act (15 
U.S.C. 1638(e)) is amended by adding at the end the fol-
lowing: 
‘‘(12) 
APPLICATION
OF
PREPAYMENT 
AMOUNTS.— 
‘‘(A) IN GENERAL.—Notwithstanding any 
other provision of law— 
‘‘(i) with respect to a borrower with 
more than one private education loan 
which are held by the same holder and 
which have different applicable rates of in-
terest, the holder of such loans shall, un-
less otherwise requested by the borrower in 
writing, apply the borrower’s prepayment 
amount (within the meaning of section 
682.209(b) of title 34, Code of Federal 
Regulations, or a successor regulation) for 
one or more of such loans, first toward the 
outstanding balance of principal due on the 
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loan with the highest applicable rate of in-
terest among such loans; and 
‘‘(ii) except as provided in clause (i), 
with respect to a borrower with more than 
one private education loan which are held 
by the same holder and which have the 
same applicable rates of interest, the hold-
er of such loans shall, unless otherwise re-
quested by the borrower in writing, apply 
the borrower’s prepayment amount (within 
the meaning of section 682.209(b) of title 
34, Code of Federal Regulations, or a suc-
cessor regulation) for one or more of such 
loans, first toward the outstanding balance 
of principal due on the loan with the high-
est principal balance among such loans. 
‘‘(B) EXCEPTION.— 
‘‘(i) IN GENERAL.—Subparagraph (A) 
shall not apply to any prepayment amount 
made by a borrower to a holder if the bor-
rower has an outstanding balance of fees, 
including collection costs and authorized 
late charges, due on any private education 
loan held by such holder. 
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‘‘(ii) PREPAYMENT AMOUNTS.—A pre-
payment amount (as described in subpara-
graph (A)) made by a borrower described 
in subparagraph (B) to a holder shall be 
applied first toward the borrower’s out-
standing balance of fees, including collec-
tion costs and authorized late charges, due 
on any private education loan held by such 
holder.’’. 
Æ 
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