A bill to amend the Higher Education Act of 1965 to provide for temporary student loan debt conversion authority.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Student Loan Simplification and 
Opportunity Act of 2011''.

SEC. 2. TEMPORARY STUDENT LOAN DEBT CONVERSION AUTHORITY.

    (a) Repeal.--
            (1) In general.--Section 459A of the Higher Education Act 
        of 1965 (20 U.S.C. 1087i-1) is repealed.
            (2) Conforming amendments.--Part D of the Higher Education 
        Act of 1965 (20 U.S.C. 1087a et seq.) is amended--
                    (A) in section 451(a) (20 U.S.C. 1087a), by 
                striking ``(1) to make loans to all eligible students 
                (and the eligible parents of such students) in 
                attendance at participating institutions of higher 
                education selected by the Secretary, to enable such 
                students to pursue their courses of study at such 
                institutions during the period beginning July 1, 1994; 
                and (2) for purchasing loans under section 459A.'' and 
                inserting ``to make loans to all eligible students (and 
                the eligible parents of such students) in attendance at 
                participating institutions of higher education selected 
                by the Secretary, to enable such students to pursue 
                their courses of study at such institutions during the 
                period beginning July 1, 1994.''; and
                    (B) in section 459B(a)(2)(B) (20 U.S.C. 1087i-
                2(a)(2)(B)), by striking ``purchased by the Secretary 
                pursuant to section 459A'' and inserting ``purchased by 
                the Secretary pursuant to section 459A under the terms 
                of that provision in effect on or before June 30, 2010, 
                or converted by the Secretary pursuant to section 
                459A''.
    (b) Student Loan Debt Conversion.--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 459 the following:

``SEC. 459A. TEMPORARY AUTHORITY TO CONVERT STUDENT LOAN DEBT.

    ``(a) In General.--
            ``(1) Authority.--The Secretary shall, at the request of an 
        eligible borrower (as described in subsection (b)), convert an 
        eligible student loan debt (as described in subsection (c)) 
        into a Federal debt by paying the holder of the eligible 
        student loan the outstanding balance of principal and interest 
        on that loan, and the borrower shall enter into an agreement to 
        repay to the Secretary the amount advanced to convert the debt 
        to a Federal debt.
            ``(2) Duration of authority.--The Secretary shall convert 
        eligible student loan debt under this section for those 
        eligible borrowers whose applications for conversion are 
        received on or after January 1, 2012 and before October 1, 
        2012.
            ``(3) Designation of loan.--The repayment obligation of the 
        borrower whose eligible student loan debt was repaid by the 
        Secretary and converted to a Federal debt under this section 
        shall be referred to as a `FFEL Debt Conversion Loan'.
    ``(b) Eligible Borrower.--A borrower is eligible for a FFEL Debt 
Conversion Loan if the borrower, in addition to the loans described in 
subsection (c), has an outstanding loan that was made under this part, 
or an outstanding loan that was purchased by the Secretary pursuant to 
section 459A under the terms of that provision in effect on or before 
June 30, 2010.
    ``(c) Eligible Student Loan Debt.--A student loan of an eligible 
borrower is eligible for payment by a FFEL Debt Conversion Loan if--
            ``(1) the loan was made, insured, or guaranteed under part 
        B, and not previously purchased by the Secretary pursuant to 
        section 459A under the terms of that provision in effect on or 
        before June 30, 2010;
            ``(2) the loan is not in default; and
            ``(3) the loan is not delinquent for 270 days or more.
    ``(d) Terms and Conditions of Debt Conversion Loans.--
            ``(1) Continuation of terms.--A FFEL Debt Conversion Loan 
        shall be repayable by the borrower under the same terms and 
        conditions as were applicable under the promissory note signed 
        by the borrower for the eligible student loan debt being repaid 
        by the Secretary under this section, including such terms as 
        applied when the borrower entered repayment, and the 
        availability of grace periods and deferments.
            ``(2) Aggregate loan limits.--Notwithstanding any other 
        provision of this title, a FFEL Debt Conversion Loan shall be 
        included in the calculation of the aggregate loan limit that 
        was applicable to the borrower's eligible student loan for 
        which the FFEL Debt Conversion Loan was obtained.
            ``(3) Other terms.--
                    ``(A) FFEL terms.--Other borrower benefits offered 
                by the originating lender or the holder of the eligible 
                student loan being repaid that are not specified in 
                part B or in the borrower's promissory note for that 
                loan are not available with respect to a FFEL Debt 
                Conversion Loan.
                    ``(B) Direct loan terms.--Except as provided in 
                paragraph (5), benefits offered only for loans made 
                under this part are not available with respect to a 
                FFEL Debt Conversion Loan.
            ``(4) Fees.--
                    ``(A) No fees imposed by secretary.--The Secretary 
                shall not charge the borrower any origination or other 
                fee for the making of a FFEL Debt Conversion Loan.
                    ``(B) No fees imposed by holder of eligible student 
                loan debt.--Notwithstanding any other provision of law, 
                the holder of an eligible student loan shall not charge 
                the Secretary or the borrower any origination or other 
                fee, including any fee for providing the information 
                described in subsection (e), for the conversion of the 
                eligible student loan debt to a FFEL Debt Conversion 
                Loan.
            ``(5) Ffel debt conversion benefits.--The Secretary may 
        offer benefits to a borrower of a FFEL Debt Conversion Loan, in 
        an amount that shall not exceed 2 percent of the amount 
        advanced on the FFEL Debt Conversion Loan, which may include 
        payments to borrowers, reductions in the outstanding principal 
        and interest on the FFEL Debt Conversion Loan, or such other 
        benefits as the Secretary may establish.
    ``(e) Information From Holders of Student Loan Debt Eligible for 
Conversion.--A holder of an eligible student loan shall promptly 
provide the Secretary with the amount outstanding and such other 
information as may be needed to convert that debt under this section.
    ``(f) Notification.--Not later than December 1, 2011, the Secretary 
shall notify eligible borrowers--
            ``(1) of their eligibility to convert an eligible student 
        loan debt under this section; and
            ``(2) of the time frame for applying for such 
        conversion.''.
    (c) Conforming Amendments.--
            (1) Cohort default rate.--Section 435(m)(2) of the Higher 
        Education Act of 1965 (20 U.S.C. 1085(m)(2)) is amended by 
        adding at the end the following:
                    ``(E) For purposes of this subsection, a borrower 
                who obtains a FFEL Debt Conversion Loan under section 
                459A shall continue to be considered as having entered 
                repayment on the date the borrower entered repayment on 
                the eligible student loan debt that was repaid by the 
                Secretary and converted to a Federal debt under that 
                section.''.
            (2) Contracts.--Section 456(b) of the Higher Education Act 
        of 1965 (20 U.S.C. 1087f(b)) is amended--
                    (A) in paragraph (2), by inserting ``, converted,'' 
                after ``made''; and
                    (B) in paragraph (3), by inserting ``, converted,'' 
                after ``made''.
            (3) Federal consolidation loans.--Section 428C(a)(4)(C) of 
        the Higher Education Act of 1965 (20 U.S.C. 1078-3(a)(4)(C)) is 
        amended by inserting ``or converted'' after ``made''.
            (4) Income-based repayment.--Section 493C of the Higher 
        Education Act of 1965 (20 U.S.C. 1098e) is amended--
                    (A) in subsection (a)(3)(A), by inserting 
                ``converted,'' after ``made,'';
                    (B) in subsection (b)(1), by inserting 
                ``converted,'' after ``made,''; and
                    (C) in subsection (c), by inserting ``converted,'' 
                after ``made,''.
    (d) Inapplicability of Title IV Negotiated Rulemaking and Master 
Calendar Exception.--Sections 482(c) and 492 of the Higher Education 
Act of 1965 (20 U.S.C. 1089(c), 1098a) shall not apply to the 
amendments made by this section, or to any regulations promulgated 
under those amendments.
    (e) Annual Cost Estimate.--Notwithstanding any other provision of 
this Act or an amendment made by this Act, the Secretary of Education 
shall carry out the requirement of section 459A(e)(3) of the Higher 
Education Act of 1965, as in effect on the day before the date of 
enactment of this Act, with respect to the annual cost estimates 
required to be submitted not later than February 15, 2012.
    (f) Funds for Federal Pell Grants.--The proceeds to the Federal 
Government from the temporary authority to convert student loan debt 
provided by the amendments made by this Act shall be used to carry out 
Federal Pell Grants under section 401 of the Higher Education Act of 
1965 (20 U.S.C. 1070a).

Summary: Student Loan Simplification and Opportunity Act of 2011 - Amends title IV (Student Assistance) of the Higher Education Act of 1965 to repeal the Secretary of Education's authority, under the Direct Loan (DL) program, to purchase or enter into forward commitments to purchase: (1) Federal Family Education Loans (FFELs) from lenders, upon the determination that there is an inadequate availability of loan capital to meet the demand for such loans; and (2) rehabilitated loans that eligible lenders purchased under the FFEL default reduction program. (Currently, the Secretary's authority to purchase or enter into forward commitments to purchase such loans is set to expire in July 2010, as is the FFEL program.)

Authorizes the Secretary to offer borrowers FFEL Debt Conversion Loans, until October 2012, that cover FFELs that have not been purchased under the program this Act repeals, provided such borrowers: (1) are not in default or delinquent for 270 days or more on such loans, and (2) have an outstanding DL or an outstanding FFEL that was purchased pursuant to the program this Act repeals. (FFEL Debt Conversion Loans pay the holder of the FFEL the outstanding principal and interest on the loan, which the borrower is then obligated to repay to the Secretary under the terms of the converted FFEL.)

Authorizes the Secretary to offer benefits to borrowers of FFEL Debt Conversion Loans in an amount up to 2% of the amount advanced on the FFEL Debt Conversion Loan.

Requires federal proceeds from this Act's temporary authorization of FFEL Debt Conversion Loans to be used for the Pell grant program.