I 
113TH CONGRESS 
2D SESSION 
H. R. 4236 
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 
MARCH 13, 2014 
Mrs. DAVIS of California introduced the following 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 deter-
mined 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 
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, 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 interest, 
the holder of such loans shall, except as 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 regula-
tion) for one or more of such loans, first toward 
the outstanding balance of principal due on the 
loan with the highest applicable rate of interest 
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-
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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-
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 
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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, use the excess to 
prepay (within the meaning of section 
674.31(b)(4)(iv) of title 34, Code of Fed-
eral Regulations, or a successor regulation) 
the principal due on the loan with the 
highest applicable rate of interest 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 
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: 
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‘‘(12) 
APPLICATION
OF
PREPAYMENT 
AMOUNTS.— 
‘‘(A) IN GENERAL.—Notwithstanding any 
other provision of law, with respect to a bor-
rower with more than one private education 
loan which are held by the same holder and 
which have different applicable rates of interest, 
the holder of such loans shall, except as 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 regula-
tion) for one or more of such loans, first toward 
the outstanding balance of principal due on the 
loan with the highest applicable rate of interest 
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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