I 
116TH CONGRESS 
1ST SESSION H. R. 3786 
To amend the Higher Education Act of 1965 to direct the Secretary of 
Education to carry out a program under which an institution of higher 
education may elect to cosign Federal student loans made to students 
attending the institution, and for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
JULY 16, 2019 
Mr. PERRY introduced the following bill; which was referred to the Committee 
on Education and Labor 
A BILL 
To amend the Higher Education Act of 1965 to direct the 
Secretary of Education to carry out a program under 
which an institution of higher education may elect to 
cosign Federal student loans made to students attending 
the institution, 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 Reform 
Act’’. 
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SEC. 2. INSTITUTIONAL COSIGNER PROGRAM. 
Part D of title IV of the Higher Education Act of 
1965 (20 U.S.C. 1087a et seq.) is amended by inserting 
after section 454 the following: 
‘‘SEC. 454A. INSTITUTIONAL COSIGNER PROGRAM. 
‘‘(a) PROGRAM REQUIRED.—Beginning on July 1, 
2020, the Secretary shall carry out a program under which 
an institution of higher education may elect to cosign all 
eligible direct loans made to students enrolled at the insti-
tution for an academic year. 
‘‘(b) AGREEMENT WITH SECRETARY.—To be eligible 
to participate in the program under this section for an 
academic year, an institution of higher education shall 
enter into an agreement with the Secretary under which 
the institution agrees to the following: 
‘‘(1) The institution will cosign all new eligible 
direct loans made to students enrolled at the institu-
tion for such academic year. 
‘‘(2) With respect to each such loan, the institu-
tion will abide by the terms and conditions of co-
signer liability described in subsection (d). 
‘‘(c) MASTER PROMISSORY NOTE.—As part of the 
program under this section, the Secretary shall— 
‘‘(1) revise the master promissory note applica-
ble to each eligible direct loan to include— 
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‘‘(A) the terms and conditions of cosigner 
and borrower liability described in subsection 
(d); 
‘‘(B) the interest rate for the loan, as de-
termined under subsection (e); and 
‘‘(C) a field in which an authorized rep-
resentative of an institution participating in the 
program may cosign the note on behalf of the 
institution; and 
‘‘(2) ensure that each institution participating 
in the program signs the note applicable to each new 
eligible direct loan made to a student at the institu-
tion for the academic year concerned. 
‘‘(d) COSIGNER AND BORROWER LIABILITY.— 
‘‘(1) IN GENERAL.—Notwithstanding any other 
provision of law, an institution of higher education 
that is a cosigner of an eligible direct loan of a bor-
rower shall assume the obligation to repay, in ac-
cordance with paragraph (2), the outstanding bal-
ance of principal and interest due on the loan if— 
‘‘(A) the borrower defaulted on the loan; 
‘‘(B) a period of 90 days has elapsed since 
the date on which the loan entered default; and 
‘‘(C) the loan has not been rehabilitated. 
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‘‘(2) AMOUNT
AND
SCHEDULE
OF
REPAY-
MENT.—An institution that is obligated to repay an 
eligible direct loan under paragraph (1) shall make 
payments on the loan pursuant to a standard repay-
ment plan under section 455(d)(1)(A) with a repay-
ment period of 10 years. 
‘‘(3) TERMINATION OF OBLIGATION.—The obli-
gation of an institution to repay an eligible direct 
loan under paragraph (1) shall terminate on the ear-
lier of— 
‘‘(A) the date on which the loan is rehabili-
tated; or 
‘‘(B) the date on which the total out-
standing balance of principal and interest due 
on the loan has been repaid. 
‘‘(4) EFFECT ON DEFAULT STATUS OF BOR-
ROWER.—A borrower who has defaulted on an eligi-
ble direct loan on which an institution is making 
payments under paragraph (1) shall be considered in 
default on such loan for purposes of adverse credit 
reporting and delinquent debt collection procedures 
under Federal law. 
‘‘(5) 
RECOVERY
FROM
BORROWER.—Any 
amounts recovered from the borrower of an eligible 
direct loan during a period in which an institution 
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is making payments on the loan under paragraph 
(1) shall be subtracted from the total outstanding 
balance of principal and interest due on the loan. 
‘‘(6) RULE
OF
CONSTRUCTION.—Nothing in 
this subsection shall be construed to limit the rem-
edies available under this part against the borrower 
of an eligible Federal student loan. 
‘‘(e) REDUCED INTEREST RATE.—Notwithstanding 
any other provision of law, the interest rate applicable to 
an eligible direct loan cosigned by an institution partici-
pating in the program under this section shall be a rate 
determined by the Secretary that is— 
‘‘(1) lower than the standard rate applicable to 
the loan under section 455(b); and 
‘‘(2) reduced below such standard rate by a per-
centage that is proportionate to the reduced risk 
posed by the loan, as determined by the Secretary. 
‘‘(f) LIST OF PARTICIPATING INSTITUTIONS.—On an 
annual basis, the Secretary shall publish, on a publicly ac-
cessible website of the Department of Education, a list 
that identifies each institution participating in the pro-
gram under this section for an academic year. 
‘‘(g) ELIGIBLE DIRECT LOAN DEFINED.—In this 
section, the term ‘eligible direct loan’ means a loan made 
under this part on or after July 1, 2020.’’. 
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SEC. 
3. 
MODIFICATION 
OF 
COHORT 
DEFAULT 
RATE 
THRESHOLD. 
(a) IN GENERAL.—Section 435(a) of the Higher 
Education Act of 1965 (20 U.S.C. 1085(a)) is amended— 
(1) in paragraph (2)— 
(A) by striking subparagraphs (B) and (C) 
and inserting the following: 
‘‘(B) For purposes of determinations under 
subparagraph (A), the threshold percentage 
is— 
‘‘(i) 40 percent, in the case of an in-
stitution that is participating in the insti-
tutional cosigner program under section 
454A in the year in which the cohort de-
fault rate is determined; or 
‘‘(ii) 30 percent, in the case of an in-
stitution that is not participating in such 
program in the year in which the cohort 
default rate is determined.’’; and 
(B) by redesignating subparagraph (D) as 
subparagraph (C); 
(2) in paragraph (3), by striking ‘‘paragraph 
(2)(B)(iv)’’ and inserting ‘‘paragraph (2)(B)’’; and 
(3) in paragraph (7), by striking ‘‘paragraph 
(2)(B)(iv)’’ each place it appears and inserting 
‘‘paragraph (2)(B)’’. 
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(b) EFFECTIVE DATE.—The amendments made by 
subsection (a) shall take effect on July 1, 2020. 
Æ 
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