(3) by amending subparagraph (B) to read as 
follows: 
‘‘(B) without regard to the employment 
status of the borrower at the time of such can-
cellation.’’. 
(b) REDESIGNATIONS.—Section 455(m) of the High-
er Education Act of 1965 (20 U.S.C. 1087e(m)) is further 
amended by redesignating paragraphs (2), (3), and (4), 
as paragraphs (3), (6), and (7), respectively. 
(c) MONTHLY PAYMENTS.—Section 455(m) of the 
Higher Education Act of 1965 (20 U.S.C. 1087e(m)) is 
further amended— 
(1) by inserting after paragraph (1), as so 
amended, the following: 
‘‘(2) MONTHLY PAYMENTS.— 
‘‘(A) QUALIFYING MONTHLY PAYMENTS.— 
For the purpose of determining under para-
graph (1) the number of qualifying monthly 
payments made by a borrower on an eligible 
Federal Direct Loan, the Secretary shall con-
sider the borrower to have made a qualifying 
monthly payment for each month that— 
‘‘(i) the borrower pays (as a lump 
sum or in multiple installments) an 
amount that is not less than the monthly 
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payment amount due on the eligible Fed-
eral Direct Loan pursuant to any one or a 
combination of the following— 
‘‘(I) payments under an income- 
based repayment plan under section 
493C; 
‘‘(II) payments under a standard 
repayment 
plan 
under 
subsection 
(d)(1)(A), based on a 10-year repay-
ment period; 
‘‘(III) monthly payments under a 
repayment 
plan 
under 
subsection 
(d)(1) or (g) of not less than the 
monthly amount calculated under sub-
section (d)(1)(A), based on a 10-year 
repayment period; 
‘‘(IV) payments under an income 
contingent repayment plan under sub-
section (d)(1)(D); 
‘‘(V) payments under the In-
come-Driven Repayment Plan under 
section 455A(c); or 
‘‘(VI) payments under the fixed 
repayment 
plan 
under 
section 
455A(b); or 
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‘‘(ii) in lieu of a payment described in 
clause (i), the borrower is in one of the fol-
lowing periods of deferment or forbear-
ance— 
‘‘(I) cancer treatment deferment 
under 
section 
427(a)(2)(C)(iv), 
428(b)(1)(M)(v), or 455(f)(3); 
‘‘(II) rehabilitation training pro-
gram 
deferment 
under 
section 
427(a)(2)(C)(i)(II), 
428(b)(1)(M)(i)(II), 
or 
455(f)(2)(A)(ii); 
‘‘(III) military service deferment 
under section 428(b)(1)(M)(iii) or 
455(f)(2)(C); 
‘‘(IV) unemployment deferment 
under 
section 
427(a)(2)(C)(ii), 
428(b)(1)(M)(ii), 428B(d)(1)(A)(i), or 
455(f)(2)(B); 
‘‘(V) deferment due to an eco-
nomic hardship described in section 
427(a)(2)(C)(iii), 
section 
428(b)(1)(M)(iv), 
section 
428B(d)(1)(A)(i), section 435(o), or 
section 455(f)(2)(D); 
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‘‘(VI) 
Peace 
Corps 
service 
deferment 
under 
section 
682.210(b)(2)(ii) or 682.210(k) of 
title 34, Code of Federal Regulations 
(or successor regulations), as made 
applicable to Direct Loan borrowers 
under section 685.204(j) of such title 
34; 
‘‘(VII) post-active-duty student 
deferment under section 493D; 
‘‘(VIII) AmeriCorps forbearance 
under section 428(c)(3)(A)(i)(III); 
‘‘(IX) National Guard Duty for-
bearance 
under 
section 
682.211(h)(2)(iii) or 685.205(a)(7) of 
title 34, Code of Federal Regulations 
(or successor regulations); 
‘‘(X) Department of Defense stu-
dent loan repayment program forbear-
ance 
under 
section 
428(c)(3)(A)(i)(IV); 
‘‘(XI) administrative forbearance 
or mandatory administrative forbear-
ance under section 428(c)(3)(D) or 
428H(e)(7); or 
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‘‘(XII) student loan debt burden 
forbearance 
under 
section 
428(c)(3)(A)(i)(II). 
‘‘(B) PREPAYMENTS.— 
‘‘(i) IN GENERAL.—Subject to clause 
(ii), if, for any month, a borrower makes a 
qualifying monthly payment on an eligible 
Federal Direct Loan in an amount that ex-
ceeds the monthly payment amount due on 
such loan for such month, the Secretary 
shall— 
‘‘(I) if the excess amount is less 
than the monthly payment amount 
due for the subsequent month on such 
loan, apply the excess amount toward 
the monthly payment amount due for 
such subsequent month; 
‘‘(II) if the excess amount is 
equal to the monthly payment amount 
due for the subsequent month on such 
loan, treat the excess amount as the 
monthly payment for such subsequent 
month; 
‘‘(III) if the excess amount is 
greater than the monthly payment 
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amount due for the subsequent month 
on such loan, but less than the total 
monthly payment amounts due for the 
2 subsequent months on such loan— 
‘‘(aa) treat the portion of 
the excess amount that covers 
the monthly payment amount due 
for the subsequent month as the 
monthly payment for such subse-
quent month; and 
‘‘(bb) apply the remainder of 
the excess amount toward the 
monthly payment amount due for 
the second subsequent month; 
‘‘(IV) if the excess amount is 
equal to or greater than the monthly 
payment amount due for the 2 subse-
quent months on such loan, but less 
than the total monthly payment 
amounts due for the 3 subsequent 
months on such loan— 
‘‘(aa) treat the portion of 
the excess amount that covers 
the monthly payment amounts 
due for the subsequent month 
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and the second subsequent month 
as the monthly payments for 
such months; and 
‘‘(bb) apply any remainder 
of such excess amount toward the 
monthly payment amount due for 
the third subsequent month; 
‘‘(V) if the excess amount is 
equal 
to 
the 
monthly 
payment 
amounts due for the 3 subsequent 
months on such loan, treat the excess 
amount as the monthly payments for 
such months; 
‘‘(VI) if the excess amount is 
greater than the monthly payment 
amounts due for the 3 subsequent 
months on such loan— 
‘‘(aa) treat the portion of 
the excess amount that covers 
the monthly payment amounts 
due for the 3 subsequent months 
as the monthly payments for 
such months; and 
‘‘(bb) apply any remainder 
of such excess amount to the 
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principal balance of the eligible 
Federal Direct loan; and 
‘‘(VII) 
notwithstanding 
sub-
clauses (I) through (VI), if the bor-
rower has a monthly payment amount 
due on such loan for such month that 
is equal to $0, apply any excess 
amount for such month to the prin-
cipal balance of the eligible Federal 
Direct loan. 
‘‘(ii) ALTERNATIVE
APPLICATION.— 
Prior to or at the time of making a pay-
ment that exceeds the monthly payment 
amount due on an eligible Federal Direct 
Loan for such month, a borrower may re-
quest that any excess amount for such 
month be applied to the principal balance 
of an eligible Federal Direct loan in lieu of 
such excess amount being applied in ac-
cordance with clause (i). 
‘‘(C) BUYBACK PAYMENT PROCESS.— 
‘‘(i) IN
GENERAL.—The Secretary 
shall establish a buyback payment process 
under which a qualified borrower of an eli-
gible Federal Direct Loan may make a 
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buyback payment in order to have eligible 
months of the borrower’s public service 
employment period during which the bor-
rower did not make a qualifying monthly 
payment on such loan be treated as if the 
borrower had made a qualifying monthly 
payment on such loan. 
‘‘(ii) QUALIFIED BORROWER.—A bor-
rower is a qualified borrower for the pur-
poses of making a buyback payment in ac-
cordance with this subparagraph if the 
borrower— 
‘‘(I) has an eligible Federal Di-
rect Loan that is not in default; 
‘‘(II) has been employed in a 
public service job for not less than a 
96 month employment period, but 
during such employment period has 
made fewer than 96 qualifying month-
ly payments on an eligible Federal Di-
rect Loan; and 
‘‘(III) 
requests 
to 
make 
a 
buyback payment in accordance with 
this subparagraph. 
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‘‘(iii) ELIGIBLE
MONTH.—For the 
purposes of this subparagraph, an eligible 
month means a month during which a 
qualified borrower was employed in a pub-
lic service job, was not in an in-school 
deferment or grace period, and did not 
make a qualifying monthly payment on an 
eligible Federal Direct Loan for such 
month— 
‘‘(I) because the borrower made a 
monthly payment on such eligible 
Federal Direct Loan pursuant to a re-
payment plan that is not a qualifying 
repayment plan; 
‘‘(II) because the borrower was 
in a period of deferment or forbear-
ance other than a period described in 
clause (ii) of subparagraph (A); or 
‘‘(III) for another reason deter-
mined appropriate by the Secretary. 
‘‘(iv) BUYBACK
PAYMENT
REQUIRE-
MENTS.—A buyback payment made in ac-
cordance with this subparagraph— 
‘‘(I) shall be made by a qualified 
borrower as a lump sum payment 
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amount, and in an amount that equals 
the total amount the borrower would 
have paid in qualifying monthly pay-
ments on the eligible Federal Direct 
Loan for all eligible months the bor-
rower is requesting to buyback, pursu-
ant to a qualifying repayment plan 
applicable to the borrower, in accord-
ance with section 685.219(g)(6) of 
title 34, Code of Federal Regulations 
(as such section is in effect on the 
date of enactment of this paragraph) 
or any other relevant regulations in 
effect on such date; 
‘‘(II) may not be made with re-
spect to an eligible Federal Direct 
Loan that has been paid off, dis-
charged, or cancelled; and 
‘‘(III) with respect to an eligible 
Federal Direct Loan that is a consoli-
dation loan, may not be used to 
buyback eligible months that occurred 
before the date of the consolidation of 
such loan. 
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‘‘(D) HOLD
HARMLESS
AGAINST
RETRO-
ACTIVE
DETERMINATIONS.—For purposes of 
determining under paragraph (1) the number of 
qualifying monthly payments made by a bor-
rower, any payment or period of deferment or 
forbearance that is determined to be a quali-
fying monthly payment may not, at a later 
time, be determined not to be a qualifying 
monthly payment.’’; and 
(2) in paragraph (6), as redesignated by sub-
section (b), by adding at the end the following: 
‘‘(C) QUALIFYING
REPAYMENT
PLAN.— 
The term ‘qualifying repayment plan’ means 
any of the repayment plans listed in clause (i) 
of paragraph (2)(A).’’. 
(d) LOAN CANCELLATION.—Paragraph (3) of section 
455(m) of the Higher Education Act of 1965 (20 U.S.C. 
1087e(m)), as redesignated by subsection (b), is amended 
to read as follows: 
‘‘(3) LOAN
CANCELLATION
AMOUNT.—Upon 
certification by a borrower of completion of 96 quali-
fying monthly payments by the borrower, the Sec-
retary shall determine whether the borrower meets 
each of the requirements of paragraph (1), and— 
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‘‘(A) if the Secretary determines that the 
borrower does meet such requirements, cancel 
the obligation to repay the balance of principal 
and interest due as of the time of such cancella-
tion on the eligible Federal Direct Loans made 
to the borrower under this part, without further 
action by the borrower; or 
‘‘(B) if the Secretary determines that the 
borrower does not meet such requirements, no-
tify the borrower of such determination in ac-
cordance with paragraph (4).’’. 
(e) RECONSIDERATION PROCESS.—Section 455(m) of 
the Higher Education Act of 1965 (20 U.S.C. 1087e(m)), 
as redesignated by subsection (b), is further amended by 
inserting after paragraph (3), as so amended, the fol-
lowing: 
‘‘(4) INITIAL
DETERMINATION
OF
INELIGI-
BILITY
FOR
LOAN
CANCELLATION.—In a case in 
which the Secretary determines that a borrower has 
not met the requirements of paragraph (1), the Sec-
retary shall— 
‘‘(A) notify the borrower that— 
‘‘(i) the borrower’s application has 
been denied, including the basis for such 
denial; 
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‘‘(ii) the borrower is in a 90-day for-
bearance period described in subparagraph 
(B); and 
‘‘(iii) the Secretary will resume collec-
tion of the eligible Federal Direct Loans 
for which the borrower was seeking loan 
cancellation under this subsection after 
such 90-day forbearance period, unless the 
borrower opts to extend such forbearance 
period under paragraph (5)(A)(ii); and 
‘‘(B) grant the borrower a 90-day forbear-
ance period, beginning on the date of the notice 
described in subparagraph (A) provided to the 
borrower, and during which— 
‘‘(i) payments of principal and inter-
est need not be made on the eligible Fed-
eral Direct Loans for which the borrower 
was seeking loan cancellation under this 
subsection; and 
‘‘(ii) any interest accrued and not 
paid may not be capitalized. 
‘‘(5) RECONSIDERATION PROCESS.— 
‘‘(A) REQUEST FOR RECONSIDERATION.— 
Not later than 90 days after the date of the no-
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tice described in paragraph (4)(A) provided to 
the borrower— 
‘‘(i) the borrower may request, on a 
form approved by the Secretary, that the 
Secretary reconsider the basis for the Sec-
retary’s denial under paragraph (4)(A)(i); 
and 
‘‘(ii) if the Secretary grants the bor-
rower’s reconsideration request, offer the 
borrower an extension of the 90-day for-
bearance period described in paragraph 
(4)(B), which shall— 
‘‘(I) begin on the date of the bor-
rower’s reconsideration request under 
this subparagraph; and 
‘‘(II) end on the date of the no-
tice provided to the borrower under 
subparagraph (C)(i)(I) of the Sec-
retary’s reconsideration decision. 
‘‘(B) CONSIDERATION
OF
RECONSIDER-
ATION REQUEST.—In evaluating a reconsider-
ation request from a borrower, the Secretary 
shall consider any relevant evidence or sup-
porting documentation that may assist the Sec-
retary in determining whether the borrower 
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meets each of the requirements of paragraph 
(1) to qualify for loan cancellation under this 
subsection. 
‘‘(C) DECISION BY THE SECRETARY.— 
‘‘(i) IN GENERAL.—Not later than 6 
months after receipt of a borrower’s recon-
sideration request, the Secretary shall— 
‘‘(I) notify the borrower of the 
reconsideration decision and the rea-
son for the Secretary’s determination; 
‘‘(II) in a case in which the re-
consideration request is granted, ad-
just the borrower’s number of quali-
fying monthly payments under para-
graph (1) or cancel the loan under 
paragraph (3); and 
‘‘(III) in a case in which the Sec-
retary denies the reconsideration re-
quest, with respect to a borrower who 
agrees to the forbearance extension 
described in subparagraph (A)(ii), in-
clude in the notice provided to the 
borrower under subclause (I), a re-
minder that the Secretary will resume 
collection of the eligible Federal Di-
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rect Loans for which the borrower 
was seeking loan cancellation under 
this subsection as of the date of such 
notice. 
‘‘(ii) FINAL
DECISION.—After the 
Secretary makes a decision on the bor-
rower’s reconsideration request, the Sec-
retary’s decision is final, and the borrower 
will not receive additional reconsider-
ation.’’. 
SEC. 232. TERMS AND CONDITIONS OF EMPLOYMENT. 
(a) INDEPENDENT CONTRACTORS.—Section 455(m) 
is further amended by adding at the end the following: 
‘‘(8) TREATMENT OF INDEPENDENT CONTRAC-
TORS.—For purposes of this subsection, each ref-
erence to ‘employment’ and ‘employed’ shall be 
treated as including work as an independent con-
tractor.’’. 
(b) DEFINITIONS.—Paragraph (6) of section 455(m) 
of the Higher Education Act of 1965 (20 U.S.C. 
1087e(m)), as redesignated by section 231(b), is further 
amended by adding at the end the following: 
‘‘(D) FULL-TIME.—The term ‘full-time’ 
means, with respect to a public service job, 
working 1 or more such jobs— 
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‘‘(i) a minimum average of 30 hours 
per week during the period being certified; 
‘‘(ii) a minimum of 30 hours per week 
throughout a contractual or employment 
period of at least 8 months in a 12-month 
period; and 
‘‘(iii) with respect to an individual 
who is in nontenure track employment at 
an institution of higher education, the 
equivalent of 30 hours per week as deter-
mined by multiplying each credit or con-
tact hour taught by such individual per 
week by a number to be determined by the 
Secretary. 
‘‘(E) INDEPENDENT
CONTRACTOR.—The 
term ‘independent contractor’ means an indi-
vidual who is not an employee and who is work-
ing in a public service job in a position or pro-
viding services which, under applicable State 
law, cannot be filled or provided by an employee 
of the public service job.’’. 
SEC. 233. ONLINE PORTAL AND DATABASE OF PUBLIC 
SERVICE JOBS. 
Section 455(m) of the Higher Education Act of 1965 
is further amended by adding at the end the following: 
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‘‘(9) ONLINE PORTAL AND DATABASE OF PUB-
LIC SERVICE JOBS.— 
‘‘(A) ONLINE PORTAL.— 
‘‘(i) 
BORROWERS.—The 
Secretary 
shall establish an online portal that pro-
vides to borrowers of eligible Federal Di-
rect Loans the following information: 
‘‘(I) Instructions on how to ac-
cess the database established under 
subparagraph (B) so that the bor-
rower can determine whether the bor-
rower is employed in a public service 
job. 
‘‘(II) An identification of the 
loans of the borrower that are eligible 
Federal Direct Loans, and an identi-
fication of the qualifying repayment 
plans for which such eligible Federal 
Direct Loans qualify. 
‘‘(III) With respect to each such 
eligible Federal Direct Loan— 
‘‘(aa) the number of quali-
fying monthly payments the bor-
rower has made in accordance 
with paragraph (1); and 
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‘‘(bb) the estimated number 
of qualifying monthly payments 
under such paragraph remaining 
on such loan before the borrower 
may be eligible for loan cancella-
tion under this subsection. 
‘‘(IV) With respect to each loan 
of the borrower that is not eligible for 
loan cancellation under paragraph (3) 
of this subsection, an explanation of 
why the loan is not so eligible and in-
structions on how what, if anything, 
the borrower may do to make the loan 
so eligible. 
‘‘(V) Instructions for the submis-
sion of any forms associated with such 
loan cancellation, and an ability for 
the borrower to use the portal to elec-
tronically sign and submit such forms. 
‘‘(VI) In a case in which a bor-
rower submits to the Secretary an ap-
plication for loan cancellation under 
this subsection that is denied by the 
Secretary— 
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‘‘(aa) a notice of such denial 
that meets each of the require-
ments of paragraph (4)(A), in-
cluding an explanation of the 90- 
day forbearance period; 
‘‘(bb) a form that meets 
each of the requirements of para-
graph (5)(A), which the borrower 
may use to request reconsider-
ation of such denial, including 
accepting an extension of the 90- 
day forbearance period; and 
‘‘(cc) a notice of the Sec-
retary’s reconsideration decision, 
which meets each of the require-
ments of paragraph (5)(C). 
‘‘(VII) An explanation of the 
buyback payment process described in 
paragraph (2)(C), and a form to re-
quest such a buyback, including the 
eligible months for which the borrower 
may request a buyback, and the 
amount that the borrower would be 
required to pay for such buyback. 
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100 
‘‘(VIII) An explanation of how 
consolidating one or more Direct 
Loans into a Direct Consolidation 
Loan, including a Direct PLUS Loan 
made to a parent borrower, will affect 
the number of qualifying monthly pay-
ments attributed to the borrower. 
‘‘(ii) APPROPRIATE
CONTACTS.—The 
Secretary shall ensure that an appropriate 
contact for a public service job of a bor-
rower has the option to electronically sign 
and submit any forms associated with loan 
cancellation under paragraph (3) of this 
subsection. 
‘‘(iii) INFORMATION.—The Secretary 
shall ensure that any information provided 
through the online portal described in this 
subparagraph contains up-to-date informa-
tion. 
‘‘(B) DATABASE
OF
PUBLIC
SERVICE 
JOBS.— 
‘‘(i) IN GENERAL.—The Secretary, in 
consultation with the Secretary of Labor, 
shall establish and regularly update a data-
base that lists public service jobs. 
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101 
‘‘(ii) 
PUBLIC
AVAILABILITY.—The 
database established under clause (i) shall 
be made available on a publicly accessible 
website of the Department of Education in 
an easily searchable format.’’. 
SEC. 234. TREATMENT OF CONSOLIDATED AND REFI-
NANCED LOANS. 
Section 455(m)(2) of the Higher Education Act of 
1965 (20 U.S.C. 1087e(m)(2)), as amended by the pre-
ceding provisions of this Act, is further amended by insert-
ing after subparagraph (D) the following: 
‘‘(E) DETERMINATION
OF
NUMBER
OF 
QUALIFYING
MONTHLY
PAYMENTS
FOR
CON-
SOLIDATION
LOANS.—With respect to deter-
mining the number of qualifying monthly pay-
ments for a borrower seeking loan forgiveness 
under this subsection who consolidates one or 
more Direct Loans into a Direct Consolidation 
Loan, including a Direct PLUS Loan made to 
a parent borrower, the Secretary shall use the 
weighted average of the payments the borrower 
made on the Direct Loans prior to consoli-
dating that met the criteria under this sub-
section.’’. 
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SEC. 235. LOAN FORGIVENESS FOR TEACHERS. 
(a) IN GENERAL.—The Higher Education Act of 
1965 (20 U.S.C. 1001 et seq.) is further amended— 
(1) in section 428J(g)(2) (20 U.S.C. 1078– 
10(g)(2))— 
(A) in subparagraph (A), by inserting ‘‘or’’ 
after the semicolon at the end; 
(B) by striking subparagraph (B); and 
(C) by redesignating subparagraph (C) as 
subparagraph (B); and 
(2) 
in 
section 
460(g)(2) 
(20 
U.S.C. 
1087j(g)(2))— 
(A) in subparagraph (A), by inserting ‘‘or’’ 
after the semicolon at the end; 
(B) by striking subparagraph (B); and 
(C) by redesignating subparagraph (C) as 
subparagraph (B). 
(b) CONFORMING AMENDMENT.—Section 455(m)(7) 
of the Higher Education Act of 1965, as redesignated by 
section 231(b) of this Act, is amended by striking ‘‘section 
428J, 428K, 428L, or 460’’ and inserting ‘‘section 428K 
or 428L’’. 
SEC. 236. GAO STUDY ON DATA MATCHING AGREEMENTS 
FOR PUBLIC SERVICE LOAN FORGIVENESS. 
(a) IN GENERAL.—The Comptroller General of the 
United States shall conduct a study on the feasibility of 
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establishing data matching agreements for public service 
loan forgiveness under section 455(m) of the Higher Edu-
cation Act of 1965 (20 U.S.C. 1087e(m)) that would allow 
a borrower to forego requesting certification of employ-
ment from the appropriate contact for the public service 
job of the borrower. The study shall include an examina-
tion of the Department of Education and the Department 
of Defense’s progress towards automatic data matching 
for military and veteran borrowers. 
(b) REPORT.—Not later than 1 year after the date 
of enactment of this Act, the Comptroller General shall 
submit a report to the Committee on Education and 
Workforce of the House of Representatives and the Com-
mittee on Health, Education, Labor, and Pensions of the 
Senate containing the findings and recommendations re-
sulting from the study required under subsection (a). 
(c) COOPERATION.—The head of each relevant Fed-
eral agency, including the Secretary of Education, Sec-
retary of Defense, and Commissioner of Internal Revenue, 
shall cooperate with the Comptroller General to facilitate 
the completion of the study required under subsection (a). 
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104 
PART E—SUPPORT FOR BORROWERS IN 
DEFAULT 
SEC. 241. REMOVAL OF RECORD OF DEFAULT. 
Part G of title IV of the Higher Education Act of 
1965 (20 U.S.C. 1088 et seq.), as amended by this Act, 
is further amended by adding at the end the following: 
‘‘SEC. 494C. REMOVAL OF RECORD OF DEFAULT. 
‘‘Upon repaying in full the amount due on a defaulted 
loan made, insured, or guaranteed under this title, the 
Secretary, guaranty agency, or other holder of the loan 
shall request any consumer reporting agency to which the 
Secretary, guaranty agency, or holder, as applicable, re-
ported the default of the loan, to remove any adverse item 
of information relating to such loan from the borrower’s 
credit history.’’. 
SEC. 242. REMOVAL OF RECORD OF DEFAULT FROM CRED-
IT HISTORY UPON LOAN CONSOLIDATION. 
Section 455(g) of the Higher Education Act of 1965 
(20 U.S.C. 1087e(g)) is amended by adding at the end 
the following: 
‘‘(3) CONSUMER REPORTING AGENCIES.—Upon 
obtaining a Federal Direct Consolidation Loan that 
discharges the liability on a defaulted loan made, in-
sured, or guaranteed under this title, the Secretary, 
guaranty agency, or other holder of the loan shall 
request any consumer reporting agency to which the 
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Secretary, guaranty agency or holder, as applicable, 
reported the default of the loan, to remove any ad-
verse item of information relating to such loan from 
the borrower’s credit history.’’. 
SEC. 243. DEFAULT REDUCTION PROGRAM. 
Section 428F of the Higher Education Act of 1965 
(20 U.S.C. 1078–6(a)) is amended by adding at the end 
the following: 
‘‘(d) DEFAULT REDUCTION PROGRAM.—Notwith-
standing subsection (a), beginning on July 1, 2026, with 
respect to a defaulted loan made, insured, or guaranteed 
under this part or part D, the following shall apply: 
‘‘(1) REHABILITATION AUTHORIZED.— 
‘‘(A) IN GENERAL.—Such a defaulted loan 
(other than a loan described in subparagraph 
(B)) shall be rehabilitated if the borrower 
makes 9 voluntary, reasonable and affordable 
monthly payments within 20 days of the due 
date during 10 consecutive months. The Sec-
retary determines the amount of a borrower’s 
reasonable and affordable payment on the basis 
of a borrower’s total financial circumstances. 
‘‘(B) INELIGIBLE
LOANS.—A defaulted 
loan may not be eligible for rehabilitation under 
this subsection if— 
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‘‘(i) a judgment has been obtained on 
such loan; or 
‘‘(ii) such loan has been obtained by 
fraud for which the borrower has been con-
victed of, or has pled nolo contendere or 
guilty to, a crime involving fraud in obtain-
ing financial assistance under this title. 
‘‘(C) LIMITATION ON BORROWER.—A bor-
rower may obtain the benefits available under 
this subsection with respect to rehabilitating a 
loan not more than two times per loan. 
‘‘(D) LIMITATION ON THE SECRETARY.— 
During the rehabilitation period described in 
this paragraph, the Secretary shall limit contact 
with the borrower on the loan being rehabili-
tated to collection activities that are required by 
law or regulation and to communications that 
support the rehabilitation. 
‘‘(2) DETERMINATION
OF
REASONABLE
AND 
AFFORDABLE PAYMENT.— 
‘‘(A) IN
GENERAL.—Subject to subpara-
graphs (A) through (H), the Secretary shall 
consider the borrower’s reasonable and afford-
able payment amount to be an amount equal to 
the minimum payment required under the In-
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come-Driven Repayment Plan, except that if 
such amount is less than $5, the borrower’s 
monthly payment shall be $5. 
‘‘(B) DOCUMENTATION
REQUIREMENT.— 
The Secretary may calculate the payment 
amount based on information provided orally by 
the borrower or the borrower’s representative 
and provide the borrower with a rehabilitation 
agreement using that amount. The Secretary 
requires the borrower to provide documentation 
to confirm the borrower’s adjusted gross income 
and family size. If the borrower does not pro-
vide the Secretary with any documentation re-
quested by the Secretary to calculate or confirm 
the reasonable and affordable payment amount 
within a reasonable time deadline set by the 
Secretary, the rehabilitation agreement provided 
is null and void. A borrower may request that 
the monthly payment amount be adjusted due 
to a change in the borrower’s total financial cir-
cumstances only upon providing the documenta-
tion specified in paragraph (3). 
‘‘(C) PROHIBITIONS.—For purposes of 
subparagraph (A), a reasonable and affordable 
payment amount shall not— 
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‘‘(i) be a required minimum loan pay-
ment amount if the Secretary determines 
that a smaller amount is reasonable and 
affordable; 
‘‘(ii) a percentage of the borrower’s 
total loan balance; or 
‘‘(iii) based on other criteria unrelated 
to the borrower’s total financial cir-
cumstances. 
‘‘(D) REHABILITATION
PAYMENT
AGREE-
MENT.— 
‘‘(i) IN GENERAL.—Not later than 15 
business days of the Secretary’s determina-
tion of the borrower’s loan rehabilitation 
payment amount, the Secretary shall pro-
vide the borrower with a written rehabilita-
tion agreement which shall include— 
‘‘(I) the borrower’s reasonable 
and affordable payment amount, a 
prominent statement that the bor-
rower may object orally or in writing 
to the reasonable and affordable pay-
ment amount with the method and 
timeframe for raising such an objec-
tion; 
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‘‘(II) a statement that the reha-
bilitation is null and void if the bor-
rower does not provide the docu-
mentation required to calculate the 
reasonable and affordable payment 
amount; 
‘‘(III) an explanation of any 
other terms and conditions applicable 
to the required series of payments 
that must be made; and 
‘‘(IV) information on the effects 
of having the loans rehabilitated. 
‘‘(ii) ACCEPTANCE
BY
THE
BOR-
ROWER.—To accept the agreement, the 
borrower shall sign and return the agree-
ment or accept the agreement electroni-
cally under a process provided by the Sec-
retary. 
‘‘(iii) PROHIBITION.—The Secretary 
may not impose any other conditions unre-
lated to the amount or timing of the reha-
bilitation payments in the rehabilitation 
agreement. 
‘‘(E) STATEMENT
CONFIRMING
REASON-
ABLE AND AFFORDABLE PAYMENT AMOUNT.— 
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The Secretary shall provide the borrower with 
a written statement that— 
‘‘(i) confirms the borrower’s reason-
able and affordable payment amount, as 
determined by the Secretary; 
‘‘(ii) explains any other terms and 
conditions applicable to the required series 
of payments that shall be made before the 
borrower’s account can be rehabilitated; 
‘‘(iii) informs the borrower that the 
borrower may object to the terms and con-
ditions of the rehabilitation agreement; and 
‘‘(iv) explains the method and time-
frame for objecting to the terms and condi-
tions of the rehabilitation agreement. 
‘‘(F) OBJECTION BY BORROWER.—If the 
borrower objects to the monthly payment 
amount described in the statement under sub-
paragraph (E), the Secretary shall recalculate 
the payment based solely on information pro-
vided on a form approved by the Secretary and, 
if requested, supporting documentation from 
the borrower and other sources, and shall con-
sider each of the following: 
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‘‘(i) The borrower’s, and if applicable, 
the spouse’s current disposable income, in-
cluding public assistance payments, and 
other income received by the borrower and 
the spouse, such as welfare benefits, Social 
Security benefits, Supplemental Security 
Income, 
and 
workers’ 
compensation. 
Spousal income is not considered if the 
spouse does not contribute to the bor-
rower’s household income. 
‘‘(ii) Family size. 
‘‘(iii) Reasonable and necessary ex-
penses, which shall include— 
‘‘(I) Food. 
‘‘(II) Housing. 
‘‘(III) Utilities. 
‘‘(IV) Basic communication ex-
penses. 
‘‘(V) Necessary medical and den-
tal costs. 
‘‘(VI) Necessary insurance costs. 
‘‘(VII) Transportation costs. 
‘‘(VIII) 
Dependent 
care 
and 
other work-related expenses. 
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‘‘(IX) Legally required child and 
spousal support. 
‘‘(X) Other student loan pay-
ments for loans made, insured, or 
guaranteed under this title, or any 
other Federal law. 
‘‘(XI) Other expenses approved 
by the Secretary. 
‘‘(G) 
NEW
REHABILITATION
AGREE-
MENT.—The Secretary shall provide the bor-
rower with a new written rehabilitation agree-
ment confirming the borrower’s recalculated 
reasonable and affordable payment amount. To 
accept the agreement, the borrower must sign 
and return the agreement or accept the agree-
ment electronically under a process provided by 
the Secretary. 
‘‘(H) CHANGE
IN
CIRCUMSTANCES.—A 
borrower may request that the monthly pay-
ment amount be adjusted due to a change in 
the borrower’s total financial circumstances 
only upon providing the documentation specified 
in subparagraph (F). 
‘‘(3) ADMINISTRATIVE WAGE GARNISHMENT.— 
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‘‘(A) IN GENERAL.—If a borrower’s loan is 
being collected by administrative wage garnish-
ment while the borrower is also making monthly 
payments on the same loan under a loan reha-
bilitation agreement, the Secretary shall con-
tinue collecting the loan by administrative wage 
garnishment until the borrower makes five 
qualifying monthly payments under the rehabili-
tation agreement, unless the Secretary is other-
wise precluded from doing so. 
‘‘(B) SUSPENSION.—After the borrower 
makes the fifth qualifying monthly payment, 
the Secretary, unless otherwise directed by the 
borrower, suspends the garnishment order 
issued to the borrower’s employer. 
‘‘(C) LIMITATION.—A borrower may only 
obtain the benefit of a suspension of adminis-
trative wage garnishment while also attempting 
to rehabilitate a defaulted loan once. 
‘‘(4) INSTRUCTION TO CONSUMER REPORTING 
AGENCY.—If a defaulted loan is rehabilitated, the 
Secretary shall instruct any consumer reporting 
agency to which the default was reported to remove 
the default, and any adverse item of information re-
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lating to such loan, from the borrower’s credit his-
tory. 
‘‘(e) REMOVAL FROM DEFAULT.—Beginning on July 
1, 2026, the Secretary shall not consider a borrower in 
default on a loan if— 
‘‘(1) the borrower provides information nec-
essary to calculate a payment under an income-con-
tingent or income-based repayment plan under this 
part or; 
‘‘(2) the payment calculated pursuant to such a 
repayment plan is $0; and 
‘‘(3) the income information used to calculate 
such payment covers the date on which the loan de-
faulted.’’. 
TITLE III—INTEREST 
CAPITALIZATION 
SEC. 301. ELIMINATION OF INTEREST CAPITALIZATION. 
(a) FEDERAL PLUS LOANS.—Section 428B(d)(2) of 
the Higher Education Act of 1965 (20 U.S.C. 1078– 
2(d)(2)) is amended to read as follows: 
‘‘(2) NO CAPITALIZATION OF INTEREST.—Inter-
est on loans made under this section for which pay-
ments of principal are deferred pursuant to para-
graph (1) shall be paid by the borrower and shall 
not be capitalized.’’. 
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(b) FEDERAL
CONSOLIDATION
LOANS
DEFER-
RALS.—Section 428C(b)(4)(C)(ii)(III) of the Higher Edu-
cation Act of 1965 (20 U.S.C. 1078–3(b)(4)(C)(III)) is 
amended by striking ‘‘or capitalized,’’. 
(c) 
DEFAULT
REDUCTION
PROGRAM.—Section 
428F(a)(1)(E) of such Act of 1965 (20 U.S.C. 1078– 
6(a)(1)(E)) is amended to read as follows: 
‘‘(E) DUTIES
UPON
ASSIGNMENT.—With 
respect to a loan assigned under subparagraph 
(A)(ii)— 
‘‘(i) the guaranty agency shall add to 
the principal and interest outstanding at 
the time of the assignment of such loan an 
amount equal to the amount described in 
subparagraph (D)(i)(II)(aa); 
‘‘(ii) the Secretary shall pay the guar-
anty agency, for deposit in the agency’s 
Operating Fund established pursuant to 
section 422B, an amount equal to the 
amount added to the principal and interest 
outstanding at the time of the assignment 
in accordance with clause (i); 
‘‘(iii) for a loan assigned on or after 
the date of enactment of the LOAN Act, 
the interest outstanding at the time of the 
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assignment of such loan, and any interest 
accruing after such time, shall not be cap-
italized; and 
‘‘(iv) beginning on the date of enact-
ment of LOAN Act, interest shall only ac-
crue on the percentage of such a loan that 
is equal to— 
‘‘(I) the amount of the out-
standing principal on the original loan 
on the date it was assigned; divided 
by 
‘‘(II) the total amount of such 
assigned loan, including interest out-
standing at the time of the assign-
ment of such loan and the amount 
added by the guaranty agency in ac-
cordance with clause (i), on the date 
such loan was assigned.’’. 
(d) LOAN LIMITS
FOR UNSUBSIDIZED STAFFORD 
LOANS.—Section 428H(d)(5) of the Higher Education 
Act of 1965 (20 U.S.C. 1078–8(d)(5)) is amended by in-
serting ‘‘before the date of enactment of the LOAN Act’’ 
after ‘‘Interest capitalized’’. 
(e) UNSUBSIDIZED STAFFORD LOANS FOR MIDDLE 
INCOME BORROWERS.—Section 428H(e)(2) of the Higher 
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Education Act of 1965 (20 U.S.C. 1078–8(e)(2)) is 
amended— 
(1) in the header, by striking ‘‘CAPITALIZA-
TION’’ and inserting ‘‘NO CAPITALIZATION’’; 
(2) in subparagraph (A), in the matter before 
clause (i), by striking ‘‘, if agreed upon by the bor-
rower and the lender’’ and all that follows through 
clause (ii)(IV) and inserting ‘‘be paid by the bor-
rower and shall not be capitalized.’’; 
(3) by striking subparagraph (B); and 
(4) by redesignating subparagraph (C) as sub-
paragraph (B). 
(f) INCOME
CONTINGENT
REPAYMENT.—Section 
455(e)(5) of the Higher Education Act of 1965 (20 U.S.C. 
1087e(e)(5)) is amended by striking the last sentence and 
inserting ‘‘No interest may be capitalized on such loan on 
or after the date of the enactment of the LOAN Act, and 
the Secretary shall promulgate regulations with respect to 
the treatment of accrued interest that is not capitalized’’. 
(g) DEFERMENT AND FORBEARANCE.— 
(1) IN GENERAL.—Section 455(f) of the Higher 
Education Act of 1965 (20 U.S.C. 1087e(f)) is 
amended— 
(A) in the subsection heading, by inserting 
at the end the following: ‘‘AND FORBEARANCE’’; 
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(B) in subparagraph (B), by striking ‘‘cap-
italized or’’; and 
(C) by adding at the end the following: 
‘‘(6) FORBEARANCE.—At the expiration of a 
period of forbearance, interest shall not be capital-
ized on any loans made under this part.’’. 
(2) 
APPLICATION
OF
AMENDMENT.—The 
amendments made by paragraph (1) shall apply to 
any deferment or forbearance period in effect on the 
date of enactment of this Act, or any deferment or 
forbearance period beginning on or after such date 
of enactment. 
(h) INCOME-BASED REPAYMENT PROGRAM.—Section 
493C(b)(3) of the Higher Education Act of 1965 (20 
U.S.C. 1098e(b)(3)) is amended to read as follows: 
‘‘(3) on subsidized loans, any interest due and 
not paid under paragraph (2) shall be paid by the 
Secretary for a period of not more than 3 years 
after the date of the borrower’s election under para-
graph (1), except that such period shall not include 
any period during which the borrower is in 
deferment due to an economic hardship described in 
section 435(o);’’. 
(i) NOTES AND INSURANCE CERTIFICATES IN COM-
BINED PAYMENT PLANS.—Section 485A(f) of the Higher 
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Education Act of 1965 (20 U.S.C. 1092a(f)) is amended 
by adding at the end the following new paragraph: 
‘‘(3) TREATMENT
OF
INTEREST.—Not with-
standing paragraphs (1) and (2), beginning on the 
date of enactment of the LOAN Act, interest on a 
loan reissued under subsection (e) shall not be cap-
italized, and interest shall only accrue on the per-
centage of such reissued loan that is equal to— 
‘‘(A) the amount of the outstanding prin-
cipal on the original loan on the date it was re-
issued; divided by 
‘‘(B) the total amount of such reissued 
loan on the date such loan was reissued.’’. 
SEC. 302. ELIMINATION OF DISCLOSURE REQUIREMENTS 
RELATING TO CAPITALIZATION. 
(a) INSURANCE PROGRAM AGREEMENTS TO QUAL-
IFY
LOANS
FOR
INTEREST
SUBSIDIES.—Section 
428(b)(1)(Y) of the Higher Education Act of 1965 (20 
U.S.C. 1078(b)(1)(Y)) is amended— 
(1) in clause (i)(IV), by inserting ‘‘and’’ after 
the semicolon; 
(2) in clause (ii), by striking ‘‘; and’’ and in-
serting a period; and 
(3) by striking clause (iii). 
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(b) FORBEARANCE.—Section 428(c)(3)(C) of such 
Act of 1965 (20 U.S.C. 1078(c)(3)(C)) is amended— 
(1) in clause (ii), by inserting ‘‘and’’ after the 
semicolon; and 
(2) by striking clauses (iii) and (iv) and insert-
ing the following: 
‘‘(iii) the lender shall contact the bor-
rower not less often than once every 180 
days during the period of forbearance to 
inform the borrower of— 
‘‘(I) the amount of unpaid prin-
cipal and the amount of interest that 
has accrued since the last statement 
of such amounts provided to the bor-
rower by the lender; 
‘‘(II) the fact that interest will 
accrue on the loan for the period of 
forbearance; 
‘‘(III) the responsibility of the 
borrower to pay the interest that has 
accrued; and 
‘‘(IV) the borrower’s option to 
discontinue the forbearance at any 
time; and’’. 
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(c) REQUIRED DISCLOSURE BEFORE DISBURSE-
MENT.—Section 433(a) of the Higher Education Act of 
1965 (20 U.S.C. 1083(a)) is amended— 
(1) by amending paragraph (6) to read as fol-
lows: 
‘‘(6) for loans made under section 428H or to 
a student borrower under section 428B, an expla-
nation that the borrower has the option to pay the 
interest that accrues on the loan while the borrower 
is a student at an institution of higher education;’’; 
and 
(2) in paragraph (7)— 
(A) in subparagraph (A), by inserting 
‘‘and’’ after the semicolon; 
(B) by striking subparagraph (B); and 
(C) by redesignating subparagraph (C) as 
subparagraph (B). 
(d) REQUIRED DISCLOSURE BEFORE REPAYMENT.— 
Section 433(b)(3) of the Higher Education Act of 1965 
(20 U.S.C. 1083(b)(3)) is amended by striking ‘‘(includ-
ing, if applicable, the estimated amount of interest to be 
capitalized)’’. 
(e) SPECIAL DISCLOSURE RULES ON PLUS LOANS 
AND UNSUBSIDIZED LOANS.—Section 433(d) of the High-
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122 
er Education Act of 1965 (20 U.S.C. 1083(d)) is amend-
ed— 
(1) in the matter preceding paragraph (1)— 
(A) by striking ‘‘resulting from capitaliza-
tion of interest’’; and 
(B) by striking ‘‘borrower of—’’ and in-
serting ‘‘borrower of paying the interest as the 
interest accrues.’’; and 
(2) by striking paragraphs (1) and (2). 
(f) DISCLOSURE REQUIRED PRIOR TO PERKINS RE-
PAYMENT.—Section 463A(b)(3) of the Higher Education 
Act of 1965 (20 U.S.C. 1087cc–1(b)(3)) is amended by 
striking ‘‘(including, if applicable, the estimated amount 
of interest to be capitalized)’’. 
(g) DEPARTMENTAL
PUBLICATION
OF
DESCRIP-
TIONS OF ASSISTANCE PROGRAMS.—Section 485(d)(1) of 
the Higher Education Act of 1965 (20 U.S.C. 1092(d)(1)) 
is amended by striking ‘‘, including the increase in debt 
that results from capitalization of interest’’. 
(h) INFORMATION TO BE PROVIDED DURING EN-
TRANCE
COUNSELING
FOR
BORROWERS.—Section 
485(l)(2)(C) of the Higher Education Act of 1965 (20 
U.S.C. 1092(l)(2)) is amended by striking ‘‘and is capital-
ized’’. 
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123 
TITLE IV—INTEREST RATES 
SEC. 401. INTEREST RATE PROVISIONS FOR NEW FEDERAL 
STUDENT LOANS ON OR AFTER JULY 1, 2026. 
Section 455(b) of the Higher Education Act of 1965 
(20 U.S.C. 1087e(b)) is amended— 
(1) in paragraph (8)— 
(A) in the paragraph heading, by inserting 
‘‘, AND BEFORE JULY 1, 2026’’ before the period; 
and 
(B) by inserting ‘‘and before July 1, 
2026,’’ after ‘‘July 1, 2013,’’ each place it ap-
pears; 
(2) by redesignating paragraphs (9) and (10) 
as paragraphs (10) and (11), respectively; and 
(3) by inserting after paragraph (8) the fol-
lowing new paragraph: 
‘‘(9) INTEREST
RATE
PROVISIONS
FOR
NEW 
LOANS ON OR AFTER JULY 1, 2026.— 
‘‘(A) RATE FOR FDSL, FDUSL, AND PLUS 
LOANS.—Notwithstanding the preceding para-
graphs of this subsection, for Federal Direct 
Stafford Loans, Federal Direct Unsubsidized 
Stafford Loans, and Federal Direct PLUS 
Loans, for which the first disbursement is made 
on or after July 1, 2026, the applicable rate of 
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interest shall, for loans disbursed during any 
12-month period beginning on July 1 and end-
ing on June 30, be determined on the preceding 
June 1 and be equal to the lesser of— 
‘‘(i) a rate equal to the high yield of 
the 10-year Treasury note auctioned at the 
final auction held prior to such June 1; or 
‘‘(ii) 5.0 percent. 
‘‘(B) CONSOLIDATION
LOANS.—Notwith-
standing the preceding paragraphs of this sub-
section, any Federal Direct Consolidation Loan 
for which the application is received on or after 
July 1, 2026, shall— 
‘‘(i) bear interest at an annual rate on 
the unpaid principal balance of the loan 
that is equal to the lesser of— 
‘‘(I) the weighted average of the 
interest rates on the loans consoli-
dated, rounded to the nearest higher 
one-eighth of one percent; or 
‘‘(II) 5.0 percent; and 
‘‘(ii) only accrue interest on the per-
centage of such Federal Direct Consolida-
tion Loan that is equal to— 
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125 
‘‘(I) the amount of the sum of 
the unpaid principal on the loans con-
solidated; divided by 
‘‘(II) the total amount of such 
Federal Direct Consolidation Loan. 
‘‘(C) CONSULTATION.—The Secretary shall 
determine the applicable rate of interest under 
this paragraph after consultation with the Sec-
retary of the Treasury and shall publish such 
rate in the Federal Register as soon as prac-
ticable after the date of determination. 
‘‘(D) FIXED RATE.—The applicable rate of 
interest determined under this paragraph for a 
Federal Direct Stafford Loan, a Federal Direct 
Unsubsidized Stafford Loan, a Federal Direct 
PLUS Loan, or a Federal Direct Consolidation 
Loan shall be fixed for the period of the loan.’’. 
SEC. 402. REFINANCING FFEL AND FEDERAL DIRECT 
LOANS. 
Part D of title IV of the Higher Education Act of 
1965 (20 U.S.C. 1087a et seq.) is amended by adding at 
the end the following: 
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‘‘SEC. 460A. REFINANCING FFEL AND FEDERAL DIRECT 
LOANS. 
‘‘(a) IN GENERAL.—The Secretary shall establish a 
program under which the Secretary, upon the receipt of 
an application from a qualified borrower, makes a loan 
under this part, in accordance with the provisions of this 
section, in order to permit the borrower to obtain the in-
terest rate provided under subsection (c). 
‘‘(b) REFINANCING DIRECT LOANS.— 
‘‘(1) FEDERAL DIRECT LOANS.—Upon applica-
tion of a qualified borrower, the Secretary shall 
repay a Federal Direct Stafford Loan, a Federal Di-
rect Unsubsidized Stafford Loan, a Federal Direct 
PLUS Loan, or a Federal Direct Consolidation 
Loan of the qualified borrower, for which the first 
disbursement was made, or the application for the 
consolidation loan was received, before July 1, 2026, 
with the proceeds of a refinanced Federal Direct 
Stafford Loan, a Federal Direct Unsubsidized Staf-
ford Loan, a Federal Direct PLUS Loan, or a Fed-
eral Direct Consolidation Loan, respectively, issued 
to the borrower in an amount equal to the sum of 
the unpaid principal, accrued unpaid interest, and 
late charges of the original loan. 
‘‘(2) REFINANCING FFEL PROGRAM LOANS AS 
REFINANCED FEDERAL DIRECT LOANS.—Upon ap-
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‘‘(A) the amount of the unpaid principal of 
the original loan, or in the case of a refinanced 
Federal Direct Consolidation Loan, the sum of 
the unpaid principal of all the component loans, 
comprising the refinanced loan; divided by 
‘‘(B) the total amount of such refinanced 
loan. 
‘‘(d) TERMS AND CONDITIONS OF LOANS.— 
‘‘(1) IN GENERAL.—A loan that is refinanced 
under this section shall have the same terms and 
conditions as the original loan, except as otherwise 
provided in this section. 
‘‘(2) NO
AUTOMATIC
EXTENSION
OF
REPAY-
MENT PERIOD.—Refinancing a loan under this sec-
tion shall not result in the extension of the duration 
of the repayment period of the loan, and the bor-
rower shall retain the same repayment term that 
was in effect on the original loan. Nothing in this 
paragraph shall be construed to prevent a borrower 
from electing a different repayment plan at any time 
in accordance with section 455A(a). 
‘‘(e) DEFINITION OF QUALIFIED BORROWER.—For 
purposes of this section, the term ‘qualified borrower’ 
means a borrower— 
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‘‘(1) of a loan under this part or part B for 
which the first disbursement was made, or the appli-
cation for a consolidation loan was received, before 
July 1, 2026; and 
‘‘(2) who has one or more loans described in 
paragraph (1) or (2) of subsection (b) with an inter-
est rate that exceeds 5 percent. 
‘‘(f) NOTIFICATION TO BORROWERS.—The Secretary, 
in coordination with the Director of the Bureau of Con-
sumer Financial Protection, shall undertake a campaign 
to alert borrowers of loans that are eligible for refinancing 
under this section that the borrowers are eligible to apply 
for such refinancing. The campaign shall include the fol-
lowing activities: 
‘‘(1) Developing consumer information mate-
rials about the availability of Federal student loan 
refinancing. 
‘‘(2) Requiring servicers of loans under this 
part or part B to provide such consumer information 
to borrowers in a manner determined appropriate by 
the Secretary, in consultation with the Director of 
the Bureau of Consumer Financial Protection.’’. 
SEC. 403. REFINANCING PRIVATE STUDENT LOANS. 
Part D of title IV of the Higher Education Act of 
1965 (20 U.S.C. 1087a et seq.), as amended by section 
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402, is further amended by adding at the end the fol-
lowing: 
‘‘SEC. 460B. FEDERAL DIRECT REFINANCED PRIVATE LOAN 
PROGRAM. 
‘‘(a) DEFINITIONS.—In this section: 
‘‘(1) ELIGIBLE PRIVATE EDUCATION LOAN.— 
The term ‘eligible private education loan’ means a 
private education loan, as defined in section 140(a) 
of the Truth in Lending Act (15 U.S.C. 1650(a)), 
that— 
‘‘(A) was disbursed to the borrower before 
July 1, 2026; and 
‘‘(B) was for the borrower’s own postsec-
ondary educational expenses for an eligible pro-
gram at an institution of higher education par-
ticipating in the loan program under this part, 
as of the date that the loan was disbursed. 
‘‘(2) FEDERAL DIRECT REFINANCED PRIVATE 
LOAN.—The term ‘Federal Direct Refinanced Pri-
vate Loan’ means a loan issued under subsection 
(b)(1). 
‘‘(3) PRIVATE
EDUCATIONAL
LENDER.—The 
term ‘private educational lender’ has the meaning 
given the term in section 140(a) of the Truth in 
Lending Act (15 U.S.C. 1650(a)). 
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135 
‘‘(4) QUALIFIED BORROWER.—The term ‘quali-
fied borrower’ means an individual who— 
‘‘(A) has an eligible private education loan; 
‘‘(B) has been current on payments on the 
eligible private education loan for the 6 months 
prior to the date of the qualified borrower’s ap-
plication for refinancing under this section, and 
is in good standing on the loan at the time of 
such application; 
‘‘(C) is not in default on the eligible pri-
vate education loan or on any loan made, in-
sured, or guaranteed under this part or part B 
or E; and 
‘‘(D) meets the eligibility requirements de-
scribed in subsection (b)(2). 
‘‘(b) PROGRAM AUTHORIZED.— 
‘‘(1) IN GENERAL.—The Secretary, in consulta-
tion with the Secretary of the Treasury, shall carry 
out a program under which the Secretary, upon ap-
plication by a qualified borrower who has an eligible 
private education loan, shall issue such borrower a 
loan under this part in accordance with the fol-
lowing: 
‘‘(A) The loan issued under this program 
shall be in an amount equal to the sum of the 
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136 
unpaid principal, accrued unpaid interest, and 
late charges of the private education loan. 
‘‘(B) The Secretary shall pay the proceeds 
of the loan issued under this program to the 
private educational lender of the private edu-
cation loan, in order to discharge the qualified 
borrower from any remaining obligation to the 
lender with respect to the original loan. 
‘‘(C) The Secretary shall require that the 
qualified borrower undergo loan counseling that 
provides all of the relevant information and 
counseling required under section 485(l)(2) be-
fore the loan is refinanced in accordance with 
this section, and before the proceeds of such 
loan are paid to the private educational lender. 
‘‘(D) The Secretary shall issue the loan as 
a Federal Direct Refinanced Private Loan, 
which shall have the same terms, conditions, 
and benefits as a Federal Direct Unsubsidized 
Stafford Loan, except as otherwise provided in 
this section. 
‘‘(E) The interest rate for each loan made 
by the Secretary under this section shall be the 
rate provided under subsection (c). 
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‘‘(2) BORROWER ELIGIBILITY.—The Secretary, 
in consultation with the Secretary of the Treasury 
and the Director of the Consumer Financial Protec-
tion Bureau, shall establish eligibility require-
ments— 
‘‘(A) to ensure eligibility only for borrowers 
in good standing; 
‘‘(B) to minimize inequities between Fed-
eral Direct Refinanced Private Loans and other 
Federal student loans; 
‘‘(C) to preclude windfall profits for pri-
vate educational lenders; and 
‘‘(D) to ensure full access to the program 
authorized in this subsection for borrowers with 
private loans who otherwise meet the criteria 
established in accordance with subparagraph 
(A). 
‘‘(c) INTEREST RATE.— 
‘‘(1) IN
GENERAL.—The interest rate for a 
Federal Direct Refinanced Private Loan is a rate 
equal to the interest rate determined under section 
455(b)(9)(A) for the date on which the refinanced 
private loan is made. 
‘‘(2) FIXED
RATE.—The interest rate deter-
mined under this subsection for a Federal Direct 
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Refinanced Private Loan shall be fixed for the pe-
riod of the loan. 
‘‘(3) CAPITALIZED
INTEREST
AND
FEES
EX-
CLUDED.—With respect to a Federal Direct Refi-
nanced Private Loan under this section, interest 
shall only accrue on the percentage of such Refi-
nanced Private Loan that is equal to— 
‘‘(A) the amount of the unpaid principal of 
the original loan comprising the Refinanced 
Private Loan on the date such original loan was 
refinanced; divided by 
‘‘(B) the total amount of such Refinanced 
Private Loan. 
‘‘(d) NO INCLUSION IN AGGREGATE LIMITS.—The 
amount of a Federal Direct Refinanced Private Loan, or 
a Federal Direct Consolidated Loan to the extent such 
loan was used to repay a Federal Direct Refinanced Pri-
vate Loan, shall not be included in calculating a bor-
rower’s annual or aggregate loan limits under section 428 
or 428H. 
‘‘(e) NO ELIGIBILITY FOR SERVICE-RELATED RE-
PAYMENT.—A Federal Direct Refinanced Private Loan, or 
any Federal Direct Consolidation Loan to the extent such 
loan was used to repay a Federal Direct Refinanced Pri-
vate Loan, shall not be eligible for any loan repayment 
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or loan forgiveness program under section 428K, 428L, 
or 460 or for the loan cancellation repayment plan for 
public service employees under section 455(m). 
‘‘(f) PRIVATE EDUCATIONAL LENDER REPORTING 
REQUIREMENT.— 
‘‘(1) REPORTING
REQUIRED.—The Secretary, 
in consultation with the Secretary of the Treasury 
and the Director of the Bureau of Consumer Finan-
cial Protection, shall establish a requirement that, in 
order to allow for an assessment of the private edu-
cation loan market, private educational lenders re-
port the data described in paragraph (2) to— 
‘‘(A) the Secretary; 
‘‘(B) the Secretary of the Treasury; 
‘‘(C) the Director of the Consumer Finan-
cial Protection Bureau; 
‘‘(D) the Committee on Education and 
Workforce of the House of Representatives; 
‘‘(E) the Committee on Financial Services 
of the House of Representatives; 
‘‘(F) the Senate Committee on Health, 
Education, Labor, and Pensions; and 
‘‘(G) the Senate Committee on Banking, 
Housing, and Urban Affairs. 
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140 
‘‘(2) CONTENTS
OF
REPORTING.—The data 
that private educational lenders shall report in ac-
cordance with paragraph (1) shall include each of 
the following about private education loans (as de-
fined in section 140(a) of the Truth in Lending Act 
(15 U.S.C. 1650(a))): 
‘‘(A) The total amount of private education 
loan debt the lender holds. 
‘‘(B) The total number of private edu-
cation loan borrowers the lender serves. 
‘‘(C) The average interest rate on the out-
standing private education loan debt held by the 
lender. 
‘‘(D) The proportion of private education 
loan borrowers who are in default on a loan 
held by the lender. 
‘‘(E) The proportion of the outstanding 
private education loan volume held by the lend-
er that is in default. 
‘‘(F) The proportions of outstanding pri-
vate education loan borrowers who are 30, 60, 
and 90 days delinquent. 
‘‘(G) The proportions of outstanding pri-
vate education loan volume that is 30, 60, and 
90 days delinquent. 
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‘‘(g) NOTIFICATION
TO
BORROWERS.—The Sec-
retary, in coordination with the Secretary of the Treasury 
and the Director of the Consumer Financial Protection 
Bureau, shall undertake a campaign to alert borrowers 
about the availability of private student loan refinancing 
under this section.’’. 
Æ 
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