I 
114TH CONGRESS 
1ST SESSION H. R. 3947 
To amend the Higher Education Act of 1965 and the Truth in Lending 
Act to clarify the application of prepayment and underpayment amounts 
on student loans, and for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
NOVEMBER 5, 2015 
Mr. DEUTCH introduced the following bill; which was referred to the Com-
mittee on Education and the Workforce, and in addition to the Com-
mittee 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 committee concerned 
A BILL 
To amend the Higher Education Act of 1965 and the Truth 
in Lending Act to clarify the application of prepayment 
and underpayment amounts on student loans, and for 
other purposes. 
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 Payment 
Optimization Act’’. 
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the loan with the highest applicable rate of 
interest among such loans. 
‘‘(B) UNDERPAYMENT
AMOUNTS.—Not-
withstanding any other provision of this sub-
section or any other provision of law, with re-
spect 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 interest, the holder of such loans shall 
apply any payment made by the borrower which 
is less than the amount due at the time of the 
payment for one or more of such loans— 
‘‘(i) first toward any outstanding bal-
ance of fees, including collection costs and 
authorized late charges, due on such loans; 
and 
‘‘(ii) then, except as otherwise re-
quested by the borrower in writing, toward 
the balance of the loan with the smallest 
balance of principal and interest among 
such loans. 
‘‘(C) SPECIAL
RULE
FOR
BORROWERS 
UNDER INCOME-BASED REPAYMENT PLAN.—In 
the case of a loan for which the borrower has 
elected to participate in an income-based repay-
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ment plan under section 493C, subparagraphs 
(A) and (B) shall not apply unless there is no 
interest due on the loan.’’. 
(b) 
REQUIREMENTS
FOR
CONTRACTS
WITH 
SERVICERS OF LOANS.—Section 456(a)(2) of such Act 
(20 U.S.C. 1087f(a)(2)) is amended by striking the period 
at the end of the first sentence and inserting the following: 
‘‘, including the requirements with respect to the applica-
tion of prepayment and underpayment amounts under sec-
tion 455(d)(6).’’. 
SEC. 3. APPLICATION OF PREPAYMENT AND UNDER-
PAYMENT AMOUNTS FOR PERKINS LOANS. 
(a) IN GENERAL.—Section 464(c)(1)(C) of the High-
er Education Act of 1965 (20 U.S.C. 1087dd(c)(1)(C)) 
is amended— 
(1) by striking ‘‘and’’ at the end of clause (i); 
and 
(2) by adding at the end the following: 
‘‘(iii) shall provide that the institution shall, in 
the case of a borrower who provides the institution 
with a prepayment amount (within the meaning of 
section 682.209(b) of title 34, Code of Federal Reg-
ulations, or a successor regulation) for one or more 
of the loans held by the institution, apply such pre-
payment amount— 
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‘‘(I) first toward any outstanding balance 
of fees, including collection costs and authorized 
late charges, due on such loans; and 
‘‘(II) then, except as otherwise requested 
by the borrower in writing, toward the out-
standing balance of principal due on the loan 
with the highest applicable rate of interest 
among such loans; and 
‘‘(iv) shall provide that the institution shall 
apply any payment made by the borrower which is 
less than the amount due for a repayment period for 
one or more of the loans held by the institution— 
‘‘(I) first toward any outstanding balance 
of fees, including collection costs and authorized 
late charges, due on such loans; and 
‘‘(II) then, except as otherwise requested 
by the borrower in writing, toward the balance 
of the loan with the smallest balance of prin-
cipal and interest among such loans;’’. 
(b) AGREEMENTS
WITH
INSTITUTIONS.—Section 
463(a) of such Act (20 U.S.C. 1087cc(a)) is amended— 
(1) by striking ‘‘and’’ at the end of paragraph 
(8); 
(2) by redesignating paragraph (9) as para-
graph (10); and 
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(3) by inserting after paragraph (8) the fol-
lowing new paragraph: 
‘‘(9) provide assurances that the institution will 
meet the requirements with respect to the applica-
tion of prepayment and underpayment amounts 
under section 464(c)(1)(C); and’’. 
SEC. 4. APPLICATION OF PREPAYMENT AND UNDER-
PAYMENT 
AMOUNTS 
FOR 
PRIVATE 
EDU-
CATION 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 AND UN-
DERPAYMENT AMOUNTS.— 
‘‘(A) PREPAYMENT
AMOUNTS.—Notwith-
standing any other provision of law, with re-
spect to a borrower with one or more private 
education loans which are held by the same 
holder and which have different applicable rates 
of interest, the holder of such loans shall apply 
the borrower’s prepayment amount (within the 
meaning of section 682.209(b) of title 34, Code 
of Federal Regulations, or a successor regula-
tion) for one or more of such loans— 
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‘‘(i) first toward any outstanding bal-
ance of fees, including collection costs and 
authorized late charges, due on any private 
education loan held by such holder; and 
‘‘(ii) then, except as otherwise re-
quested by the borrower in writing, toward 
the outstanding balance of principal due on 
the loan with the highest applicable rate of 
interest among such loans. 
‘‘(B) UNDERPAYMENT
AMOUNTS.—Not-
withstanding any other provision of law, with 
respect to a borrower with one or more private 
education loans which are held by the same 
holder and which have different applicable rates 
of interest, the holder of such loans shall apply 
any payment made by the borrower which is 
less than the amount due at the time of the 
payment for one or more of such loans— 
‘‘(i) first toward any outstanding bal-
ance of fees, including collection costs and 
authorized late charges, due on any private 
education loans held by such holder; and 
‘‘(ii) then, except as otherwise re-
quested by the borrower in writing, toward 
the balance of the loan with the smallest 
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balance of principal and interest among 
such loans.’’. 
Æ 
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