Leveraging Opportunities for Americans Now Act of 2021
Bill: S.2596 | Sponsor: Sen. Rubio, Marco (R-FL)
Policy area: Education

Summary:
Leveraging Opportunities for Americans Now Act of 2021 or the LOAN Act of 2021
This bill revises interest rates and repayment plans for federal student loans.
Specifically, the bill directs the Department of Education (ED) to set the interest rate on federal student loans made on or after July 1, 2022, at 0% and replace the interest with a one-time financing fee.
Further, the bill permits ED to credit or refund borrowers who pay the balance of their loan earlier than required by their repayment plan with the amount of the financing fee.
In addition, the bill establishes an income-dependent education assistance repayment plan as the default repayment plan for federal student loans. A borrower may select either this new plan or a 10-year fixed repayment plan.
ED must calculate annual repayment amounts and provide annual statements to borrowers.
The Department of the Treasury must transmit tax information to ED as necessary to determine a borrower's repayment obligations and financing fee adjustments.

To amend the Higher Education Act of 1965 to provide for Federal 
                          student loan reform.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Leveraging Opportunities for 
Americans Now Act of 2021'' or the ``LOAN Act of 2021''.

SEC. 2. ELIMINATION OF INTEREST AND REPLACEMENT WITH FINANCING FEES.

    Section 455 of the Higher Education Act of 1965 (20 U.S.C. 1087e) 
is amended by adding at the end the following:
    ``(r) Elimination of Interest and Replacement With Financing 
Fees.--
            ``(1) In general.--
                    ``(A) In general.--Except as provided under 
                subparagraph (B), beginning on July 1, 2022, the 
                Secretary shall make loans under this part in 
                accordance with this subsection.
                    ``(B) Exception.--Beginning on July 1, 2022, the 
                Secretary shall make loans under this part in 
                accordance with the provisions of this part other than 
                this subsection to a borrower who--
                            ``(i) was enrolled in an institution of 
                        higher education on June 30, 2022; and
                            ``(ii) elects to borrow a loan under this 
                        part in accordance with the provisions of this 
                        part other than this subsection.
            ``(2) Elimination of interest.--For loans made under this 
        part in accordance with this subsection for which the first 
        disbursement is made on or after July 1, 2022, the applicable 
        rate of interest shall be equal to 0 percent.
            ``(3) Financing fees.--
                    ``(A) In general.--Beginning on July 1, 2022, the 
                Secretary shall charge the borrower of a loan made 
                under this part in accordance with this subsection a 
                financing fee determined in accordance with this 
                paragraph and issued on the date the loan is dispersed.
                    ``(B) Determination of fee.--The financing fee for 
                a borrower of a loan made under this part--
                            ``(i) that is used for enrollment in an 
                        undergraduate course of study (except a Federal 
                        Direct PLUS Loan made on behalf of a dependent 
                        student), shall be equal to, from the principal 
                        amount of the loan, 20 percent of the amount of 
                        such loan;
                            ``(ii) that is used for enrollment in a 
                        course of study necessary for enrollment in a 
                        program leading to a degree or certificate, 
                        shall be equal to, from the principal amount of 
                        the loan, 20 percent of the amount of such 
                        loan;
                            ``(iii) that is used for enrollment in a 
                        program that is necessary for a professional 
                        credential or certification from a State that 
                        is required for employment as a teacher in an 
                        elementary or secondary school in that State, 
                        shall be equal to, from the principal amount of 
                        the loan, 20 percent of the amount of such 
                        loan; and
                            ``(iv) that is a Federal Direct PLUS Loan 
                        made on behalf of a dependent student or used 
                        for enrollment in a graduate or professional 
                        course of study, shall be equal to, from the 
                        principal amount of the loan, 35 percent of the 
                        amount of such loan.
                    ``(C) Reduction due to prepayment.--
                            ``(i) In general.--In order to provide an 
                        incentive to borrowers to pay the balance of a 
                        loan made under this part earlier than required 
                        under the applicable repayment plan, the 
                        Secretary may credit or refund any such 
                        borrowers for an amount of the financing fee 
                        charged under this subsection.
                            ``(ii) Regulations.--
                                    ``(I) In general.--Not later than 9 
                                months after the date of enactment of 
                                the LOAN Act of 2021, the Secretary 
                                shall promulgate regulations 
                                establishing the methodology for 
                                crediting or refunding a financing fee 
                                charged under this subsection pursuant 
                                to clause (i). Such credit or refund 
                                shall not reduce the financing fee by 
                                more than--
                                            ``(aa) with respect to a 
                                        borrower whose income, as 
                                        determined under subclause 
                                        (II), was not more than $45,000 
                                        in the taxable year in which 
                                        the borrower paid an amount 
                                        from the balance of a loan made 
                                        under this part earlier than 
                                        required under the applicable 
                                        repayment plan, 15 percentage 
                                        points of such amount;
                                            ``(bb) with respect to a 
                                        borrower whose income, as 
                                        determined under subclause 
                                        (II), was more than $45,000 but 
                                        not more than $95,000 in the 
                                        taxable year in which the 
                                        borrower paid an amount from 
                                        the balance of a loan made 
                                        under this part earlier than 
                                        required under the applicable 
                                        repayment plan, 10 percentage 
                                        points of such amount; and
                                            ``(cc) with respect to a 
                                        borrower whose income, as 
                                        determined under subclause 
                                        (II), was more than $95,000 in 
                                        the taxable year in which the 
                                        borrower paid an amount from 
                                        the balance of a loan made 
                                        under this part earlier than 
                                        required under the applicable 
                                        repayment plan, 5 percentage 
                                        points of such amount.
                                    ``(II) Income determination.--For 
                                purposes of subclause (I), a borrower's 
                                income is equal to the amount by 
                                which--
                                            ``(aa) the borrower's, and 
                                        the borrower's spouse's (if 
                                        applicable), adjusted gross 
                                        income; exceeds
                                            ``(bb) 150 percent of the 
                                        poverty line applicable to the 
                                        borrower's family size as 
                                        determined under section 673(2) 
                                        of the Community Services Block 
                                        Grant Act (42 U.S.C. 9902(2)).
                    ``(D) Methodology of payment.--The Secretary shall 
                establish an amortization schedule for the repayment of 
                financing fees charged under this subsection.
            ``(4) Rulemaking for consolidation.--Not later than 18 
        months after the date of enactment of the LOAN Act of 2021, the 
        Secretary shall promulgate rules regarding Federal Direct 
        Consolidation Loans made under this part in accordance with 
        this subsection, including a rule that the financing fee for 
        such a Federal Direct Consolidation Loan determined in 
        accordance with this subsection shall not exceed the sum of the 
        financing fees applicable to the consolidated loans.''.

SEC. 3. INCOME DEPENDENT EDUCATION ASSISTANCE REPAYMENT PLAN.

    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:

``SEC. 460A. INCOME DEPENDENT EDUCATION ASSISTANCE REPAYMENT PLAN.

    ``(a) In General.--
            ``(1) Applicability.--Notwithstanding any other provision 
        of this Act, with respect to any loan made under this part 
        after the date of enactment of the LOAN Act of 2021, the 
        repayment plan options are only a 10-year fixed repayment plan 
        and the repayment plan under this section. If the borrower of 
        the loan does not select a repayment plan, the repayment of 
        such loan shall be made in accordance with this section. A 
        borrower of a loan made under this part after the date of 
        enactment of the LOAN Act of 2021 may affirmatively select the 
        repayment plan under this section.
            ``(2) Regulations.--Not later than 18 months after the date 
        of enactment of the LOAN Act of 2021, the Secretary shall 
        promulgate rules--
                    ``(A) outlining how the Department will implement 
                the income dependent education assistance repayment 
                plan requirements for borrowers under this section; and
                    ``(B) regarding monthly repayment processes for 
                borrowers of loans made under this part before the date 
                of enactment of the LOAN Act of 2021.
            ``(3) Rule of construction.--Nothing in this section shall 
        be construed to eliminate or otherwise affect the loan 
        forgiveness or loan cancellation options available under this 
        part to a borrower.
    ``(b) Duties of the Secretary of the Treasury.--
            ``(1) In general.--The Secretary of the Treasury shall, 
        with respect to each individual for whom a loan made under this 
        part after the date of enactment of the LOAN Act of 2021 is in 
        repayment status, transmit to the Secretary of Education--
                    ``(A) in the case of such an individual who files 
                an income tax return for such taxable year, such tax 
                information as is necessary to determine the 
                individual's repayment obligation and financing fee 
                adjustments, as determined by the Secretary under this 
                part; and
                    ``(B) in the case of any such individual who does 
                not file a return for such taxable year, any available 
                tax information of the individual as may be necessary 
                to determine such obligation and whether such 
                individual is delinquent under the terms of such loan 
                for not so filing.
            ``(2) Additional program requirements.--The Secretary of 
        the Treasury shall establish such other policies, procedures, 
        and guidance as may be necessary to carry out the purposes of 
        this section, including measures to prevent underreporting and 
        evasion of repayment or filing.
    ``(c) Duties of the Secretary of Education.--
            ``(1) In general.--The Secretary shall carry out, as part 
        of the loan repayment plan established under this section, the 
        following activities:
                    ``(A) Calculation of annual repayment amounts.--The 
                Secretary shall calculate the annual repayment amount 
                under this section for borrowers with 1 or more loans 
                made under this part after the date of enactment of the 
                LOAN Act of 2021 in repayment status for one or more 
                months in the taxable year for which the amount is 
                determined regardless of which repayment plan the 
                borrower is in, including the repayment obligations of 
                such borrowers in accordance with subsection (d)(3).
                    ``(B) Communication with the secretary of the 
                treasury.--The Secretary shall transmit to the 
                Secretary of the Treasury such information as is 
                necessary for the Secretary of the Treasury to carry 
                out subsection (d)(3).
                    ``(C) Annual statements.--Upon calculating the 
                annual repayment amounts under subparagraph (A) for a 
                taxable year, the Secretary shall provide a statement, 
                on an annual basis, to each borrower with a loan made 
                under this part after the date of enactment of the LOAN 
                Act of 2021 regardless of which repayment plan the 
                borrower is in, which lists the following:
                            ``(i) Total payments made on the borrower's 
                        annual repayment amount for such taxable year.
                            ``(ii) The borrower's annual repayment 
                        amount for such taxable year.
                            ``(iii) The outstanding balances on all the 
                        loans made to the borrower under this part 
                        after the date of enactment of the LOAN Act of 
                        2021 and any other outstanding balances on 
                        loans of the borrower that were made, insured, 
                        or guaranteed under this title.
                            ``(iv) A description of how the borrower's 
                        annual repayment amount was calculated.
                    ``(D) Payments on a borrower's behalf.--
                            ``(i) In general.--The Secretary shall--
                                    ``(I) provide a mechanism for other 
                                individuals or entities to make 
                                payments on the annual repayment amount 
                                of a borrower for a taxable year; and
                                    ``(II) notify the borrower that any 
                                payments made under subclause (I) for 
                                the taxable year that exceed the annual 
                                repayment amount for the year shall not 
                                be refunded to the borrower, except as 
                                provided through the appeals process 
                                described in clause (ii).
                            ``(ii) Appeals process.--The Secretary 
                        shall make available a process through which a 
                        borrower can appeal for refund of payments made 
                        under clause (i) that exceed the annual 
                        repayment amount for the year if such payments 
                        were made pursuant to improper wage 
                        garnishment.
                    ``(E) Appeals process.--
                            ``(i) In general.--The Secretary shall make 
                        available a process through which a borrower 
                        can appeal the calculation of the borrower's 
                        annual repayment amount, including a worksheet 
                        that enables a borrower to calculate the 
                        borrower's annual repayment amount.
                            ``(ii) Good standing.--A borrower who makes 
                        an appeal under clause (i) with respect to a 
                        loan shall be considered in good standing on 
                        such loan during the duration of the appeal.
                            ``(iii) Regulations.--The Secretary shall 
                        issue regulations outlining such process not 
                        later than 18 months after the date of 
                        enactment of the LOAN Act of 2021.
                    ``(F) Delinquent for failure to file a return.--
                            ``(i) In general.--In a case in which the 
                        Secretary receives information from the 
                        Secretary of the Treasury under subsection (b) 
                        that a borrower with a loan made under this 
                        part after the date of enactment of the LOAN 
                        Act of 2021 in repayment status in the 
                        repayment plan under this section, has failed 
                        to file a return under section 6012(a)(1) of 
                        the Internal Revenue Code of 1986 and such 
                        borrower was required to file such a return, 
                        the Secretary shall--
                                    ``(I) notify the borrower of the 
                                borrower's failure to file such a 
                                return; and
                                    ``(II) if the borrower fails to 
                                file such a return within 90 days of 
                                receipt of the notice described in 
                                subclause (I), consider the borrower's 
                                loans made under this part after the 
                                date of enactment of the LOAN Act of 
                                2021 in repayment status in the 
                                repayment plan under this section to be 
                                delinquent.
                            ``(ii) Appeals process.--The Secretary 
                        shall make available a process through which a 
                        borrower can appeal a determination under 
                        clause (i) that the borrower has failed to file 
                        a return under section 6012(a)(1) of the 
                        Internal Revenue Code of 1986 and such borrower 
                        was required to file such a return. The 
                        Secretary shall issue regulations outlining 
                        such process not later than 18 months after the 
                        date of enactment of the LOAN Act of 2021.
                    ``(G) Monthly payments process.--The Secretary 
                shall--
                            ``(i) establish a monthly payments process 
                        described in paragraph (2); and
                            ``(ii) issue regulations establishing 
                        penalties for default on such monthly payments.
                    ``(H) Calculating loan forgiveness.--The Secretary 
                shall determine appropriate loan forgiveness options 
                for students who select the repayment plan under this 
                section.
                    ``(I) Financial hardships.--
                            ``(i) In general.--The Secretary shall 
                        establish a process for providing an adjustment 
                        in both the monthly payment and annual 
                        repayment amount obligations on a loan for a 
                        borrower experiencing extreme unforeseen 
                        financial circumstances unrelated to a change 
                        in annual income.
                            ``(ii) Repayment status.--A borrower who 
                        receives an adjustment under clause (i) for a 
                        loan shall be deemed in repayment status with 
                        respect to such loan.
            ``(2) Monthly payments process.--
                    ``(A) In general.--The Secretary shall establish a 
                process under which a borrower, or one making payments 
                on behalf of a borrower under paragraph (1)(D), shall 
                make monthly payments towards the borrower's annual 
                repayment amount.
                    ``(B) Information required.--The procedure for 
                initiating the monthly payments process under 
                subparagraph (A) shall include an income estimate based 
                on the income verification provided by the Secretary of 
                the Treasury under subsection (b).
                    ``(C) Automatic continuation.--The monthly payments 
                process shall continue until the borrower's loans made 
                under this part after the date of enactment of the LOAN 
                Act of 2021 are repaid.
                    ``(D) Updating payment amounts.--
                            ``(i) Secretary.--The Secretary shall 
                        automatically recalculate a borrower's monthly 
                        payment amount--
                                    ``(I) at the beginning of a new 
                                taxable year using the most recent 
                                income estimate provided under 
                                subsection (b)(1) by the Secretary of 
                                the Treasury; and
                                    ``(II) not later than 30 days after 
                                the date the borrower's income estimate 
                                is adjusted after an appeal under 
                                paragraph (1)(E).
                            ``(ii) Borrower.--A borrower may request 
                        that the Secretary update the borrower's income 
                        estimate to adjust monthly payment amounts 
                        pursuant to subparagraph (E) or (I) of 
                        paragraph (1) at any time.
    ``(d) Borrower Repayment.--
            ``(1) Repayment period.--The repayment period of a loan in 
        the repayment plan under this section shall--
                    ``(A) begin on the first day of the first taxable 
                year that begins after the borrower's in-school 
                deferment period; and
                    ``(B) continue until the loan is paid in full, 
                except that the Secretary may grant a borrower 
                deferment of the borrower's annual repayment amount--
                            ``(i) for a period not to exceed 60 days, 
                        due to administrative or technical reasons;
                            ``(ii) for a period not to exceed 3 months, 
                        due to unusual circumstances that disrupt the 
                        borrower's ability to make timely payments on 
                        the loan; or
                            ``(iii) renewable at 12-month intervals for 
                        a period not to exceed 3 years, due to 
                        documented extreme economic hardship on the 
                        part of a borrower.
            ``(2) Prepayment authorized.--A borrower shall have the 
        right to prepay all or part of such loan, at any time and 
        without penalty. Any such prepayment amount shall be applied in 
        accordance with section 455(r)(3)(C).
            ``(3) Determination of income-based repayment obligation.--
                    ``(A) In general.--The repayment obligation under 
                this section with respect to an individual for any 
                taxable year is an amount equal to 10 percent of the 
                amount by which--
                            ``(i) the individual's, and the 
                        individual's spouse's (if applicable), adjusted 
                        gross income; exceeds
                            ``(ii) 150 percent of the poverty line 
                        applicable to the borrower's family size as 
                        determined under section 673(2) of the 
                        Community Services Block Grant Act (42 U.S.C. 
                        9902(2)).
                    ``(B) Exclusion of certain amounts paid on behalf 
                of individual.--Any amount paid on the borrower's 
                behalf under subsection (c)(1)(D) shall not be taken 
                into account in determining such borrower's income-
                based repayment obligation.
                    ``(C) Individuals not filing a return.--The income-
                based repayment obligation with respect to an 
                individual not required to file a return under section 
                6012(a)(1) of the Internal Revenue Code of 1986 shall 
                be treated as zero.''.
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