Zero-Percent Student Loan Refinancing Act
Bill: S.4344 | Sponsor: Sen. Whitehouse, Sheldon (D-RI)
Policy area: Education

Summary:
Zero-Percent Student Loan Refinancing Act
This bill establishes temporary refinancing programs for federal and private student loans.
Specifically, the bill establishes a program through which the Department of Education (ED) must make interest-free refinancing loans to borrowers of federal student loans from August 1, 2022, through December 31, 2025.
The bill requires ED to automatically refinance Federal Direct Loans and notify each borrower of the refinancing.
Borrowers who have other types of eligible loans (i.e., Federal Family Education Loans, Federal Perkins Loans, and certain health profession and nursing loans) must apply for refinancing.
The bill also creates the Federal Direct Refinanced Private Loan to allow certain borrowers to refinance their private student loans. Borrowers must apply for refinancing between August 1, 2022, and December 31, 2025.

To establish a temporary program for the refinancing of certain Federal 
           and private student loans, and for other purposes.

    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 ``Zero-Percent Student Loan 
Refinancing Act''.

SEC. 2. TEMPORARY PROGRAM FOR REFINANCING STUDENT LOANS.

    (a) Program Authority.--Section 451(a) of the Higher Education Act 
of 1965 (20 U.S.C. 1087a(a)) is amended--
            (1) by striking ``and (2)'' and inserting ``(2)''; and
            (2) by inserting ``; and (3) to make loans under section 
        460A and section 460B'' after ``section 459A''.
    (b) Refinancing Program.--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. TEMPORARY PROGRAM FOR THE REFINANCING OF FEDERAL DIRECT 
              LOANS AND OTHER FEDERAL STUDENT LOANS.

    ``(a) Definitions.--In this section:
            ``(1) Covered non-part d loan.--The term `covered non-part 
        D loan' means a loan--
                    ``(A) made, insured, or guaranteed under part B and 
                for which the first disbursement was made, or the 
                application for the consolidation loan was received, 
                before July 1, 2010;
                    ``(B) made under part E; or
                    ``(C) made under--
                            ``(i) subpart II of part A of title VII of 
                        the Public Health Service Act (42 U.S.C. 292q 
                        et seq.); or
                            ``(ii) part E of title VIII of the Public 
                        Health Service Act (42 U.S.C. 297a et seq.).
            ``(2) Covered period.--The term `covered period' means the 
        period beginning on August 1, 2022, and ending at the close of 
        December 31, 2025.
            ``(3) Original loan.--The term `original loan' means a loan 
        for which a borrower's liability is discharged by a refinanced 
        loan issued in accordance with this section.
            ``(4) Qualified borrower.--The term `qualified borrower' 
        means a borrower of a loan under this part, or a covered non-
        part D loan, for which the first disbursement was made, or the 
        application for a consolidation loan was received, before 
        January 1, 2026.
    ``(b) In General.--Beginning on August 1, 2022, the Secretary shall 
carry out a program under which the Secretary makes interest-free 
refinancing loans to qualified borrowers in accordance with this 
section.
    ``(c) Refinancing Direct Loans.--
            ``(1) Federal direct loans.--
                    ``(A) In general.--Beginning on August 1, 2022, the 
                Secretary shall cancel the obligation of a qualified 
                borrower to repay a Federal Direct Stafford Loan, a 
                Federal Direct Unsubsidized Stafford Loan, a Federal 
                Direct PLUS Loan, or a Federal Direct Consolidation 
                Loan for which the first disbursement was made, or the 
                application for the consolidation loan was received, 
                before January 1, 2025, and issue to such borrower in 
                accordance with this section a refinanced Federal 
                Direct Stafford Loan, a refinanced Federal Direct 
                Unsubsidized Stafford Loan, a refinanced Federal Direct 
                PLUS Loan, or a refinanced Federal Direct Consolidation 
                Loan, respectively, in an amount equal to the sum of 
                the unpaid principal, accrued unpaid interest, and late 
                charges of the original loan.
                    ``(B) Information.--The Secretary shall notify each 
                qualified borrower of a loan refinanced under 
                subparagraph (A) regarding the refinancing and the 
                benefits the refinancing provides to the qualified 
                borrower.
            ``(2) Refinancing covered non-part d loans as refinanced 
        federal direct loans.--Upon application of a qualified borrower 
        of any covered non-part D loan, the Secretary shall make a loan 
        under this part, in an amount equal to the sum of the unpaid 
        principal, accrued unpaid interest, and late charges of the 
        original loan to the borrower in accordance with the following:
                    ``(A) The Secretary shall pay the proceeds of such 
                loan to the holder of the covered non-part D loan, in 
                order to discharge the borrower from any remaining 
                obligation with respect to the original loan.
                    ``(B) Any Federal student loan made under this 
                section the proceeds of which are used to discharge a 
                loan that was made, insured, or guaranteed--
                            ``(i) under section 428 shall be a Federal 
                        Direct Stafford Loan;
                            ``(ii) under section 428B shall be a 
                        Federal Direct PLUS Loan;
                            ``(iii) under section 428H shall be a 
                        Federal Direct Unsubsidized Stafford Loan; and
                            ``(iv) under section 428C shall be a 
                        Federal Direct Consolidation Loan.
                    ``(C) Any Federal student loan made under this 
                section the proceeds of which are used to discharge a 
                loan described in subparagraph (B) or (C) of subsection 
                (a)(1) shall be a Federal Direct Consolidation Loan.
            ``(3) Application deadline.--To be eligible to receive a 
        refinancing loan under paragraph (2) a qualified borrower shall 
        submit an application to the Secretary during the covered 
        period. A borrower who submits an application after the 
        expiration of the covered period shall not be eligible to 
        receive a refinancing loan under such paragraph.
    ``(d) Terms and Conditions of Loans.--
            ``(1) In general.--A loan made under this section shall 
        have the same terms and conditions as the original loan, except 
        as otherwise provided in this section.
            ``(2) Interest rates.--No interest shall accrue on a loan 
        that is made under this section.
            ``(3) No automatic extension of repayment period.--A loan 
        made under this section shall not result in the extension of 
        the duration of the repayment period of the loan, and the 
        borrower shall retain the same repayment term that was in 
        effect on the original loan. Nothing in this paragraph shall be 
        construed to prevent a borrower from electing a different 
        repayment plan at any time in accordance with section 
        455(d)(3).
            ``(4) Special rule for refinanced perkins and health 
        loans.--Notwithstanding paragraph (1), in the case of a loan 
        that is made under this section as a Federal Direct 
        Consolidation Loan the proceeds of which are used to discharge 
        a loan described in subparagraph (B) or (C) of subsection 
        (a)(1)--
                    ``(A) the refinanced Federal Direct Consolidation 
                Loan shall have the same terms and conditions as a 
                Federal Direct Consolidation Loan, except as otherwise 
                provided in this section; and
                    ``(B) the Secretary may adjust such terms and 
                conditions as necessary to enable the borrower to 
                access loan forgiveness or other benefits available to 
                the borrower under the loan before refinancing under 
                this section, in any case where such benefits are more 
                generous than provided under a Federal Direct 
                Consolidation Loan.
            ``(5) Rule of construction.--Nothing in this section shall 
        be construed to prevent a borrower of a Federal student loan 
        described in subparagraph (B) or (C) of subsection (a)(1) from 
        consolidating such loans with other loans eligible for 
        consolidation under this section, or to require such a borrower 
        to consolidate such loans with other Federal student loans into 
        a single consolidation loan under this section.
    ``(e) Notification to Borrowers.--The Secretary, in coordination 
with the Director of the Bureau of Consumer Financial Protection, shall 
undertake a campaign to alert borrowers of covered non-part D loans 
that are eligible for refinancing under this section that the borrowers 
are eligible to apply for such refinancing. The campaign shall include 
the following activities:
            ``(1) Developing consumer information materials about the 
        availability of Federal student loan refinancing.
            ``(2) Requiring servicers of loans under part B to provide 
        such consumer information to borrowers in a manner determined 
        appropriate by the Secretary, in consultation with the Director 
        of the Bureau of Consumer Financial Protection.

``SEC. 460B. TEMPORARY PROGRAM FOR REFINANCING OF PRIVATE EDUCATION 
              LOANS.

    ``(a) Definitions.--In this section:
            ``(1) Covered period.--The term `covered period' means the 
        period beginning on August 1, 2022, and ending at the close of 
        December 31, 2025.
            ``(2) Eligible private education loan.--The term `eligible 
        private education loan' means a private education loan, as 
        defined in section 140(a) of the Truth in Lending Act (15 
        U.S.C. 1650(a)), that--
                    ``(A) was disbursed to the borrower before January 
                1, 2026; and
                    ``(B) was for the borrower's own postsecondary 
                educational expenses for an eligible program at an 
                institution of higher education participating in the 
                loan program under this part, as of the date that the 
                loan was disbursed.
            ``(3) Federal direct refinanced private loan.--The term 
        `Federal Direct Refinanced Private Loan' means a loan issued 
        under subsection (b)(1).
            ``(4) Private educational lender.--The term `private 
        educational lender' has the meaning given that term in section 
        140(a) of the Truth in Lending Act (15 U.S.C. 1650(a)).
            ``(5) Qualified borrower.--The term `qualified borrower' 
        means an individual who has an eligible private education loan.
    ``(b) Program Authorized.--
            ``(1) In general.--Beginning on August 1, 2022, the 
        Secretary, in consultation with the Secretary of the Treasury, 
        shall carry out a program under which the Secretary, upon 
        application by a qualified borrower who has an eligible private 
        education loan, shall issue such borrower a loan under this 
        part in accordance with the following:
                    ``(A) The loan issued under this program shall be 
                in an amount equal to the sum of the unpaid principal, 
                accrued unpaid interest, and late charges of the 
                private education loan.
                    ``(B) The Secretary shall pay the proceeds of the 
                loan issued under this program to the private 
                educational lender of the private education loan, in 
                order to discharge the qualified borrower from any 
                remaining obligation to the lender with respect to the 
                original loan.
                    ``(C) The Secretary shall require that the 
                qualified borrower undergo loan counseling that 
                provides all of the information and counseling required 
                under clauses (i) through (ix) of section 485(b)(1)(A) 
                before the loan is refinanced in accordance with this 
                section, and before the proceeds of such loan are paid 
                to the private educational lender.
                    ``(D) The Secretary shall issue the loan as a 
                Federal Direct Refinanced Private Loan, which shall 
                have the same terms, conditions, and benefits as a 
                Federal Direct Unsubsidized Stafford Loan, except as 
                otherwise provided in this section.
            ``(2) Private educational lenders.--Not later than August 
        1, 2022, the Secretary, in consultation with the Secretary of 
        the Treasury and the Director of the Bureau of Consumer 
        Financial Protection, shall establish eligibility requirements 
        to preclude windfall profits for private educational lenders.
    ``(c) Application Deadline.--To be eligible to receive a Federal 
Direct Refinanced Private Loan under this section a qualified borrower 
shall submit an application to the Secretary during the covered period. 
A borrower who submits an application after the expiration of the 
covered period shall not be eligible to receive a Federal Direct 
Refinanced Private Loan under this section.
    ``(d) Interest Rate.--No interest shall accrue on a Federal Direct 
Refinanced Private Loan under this section.
    ``(e) No Inclusion in Aggregate Limits.--The amount of a Federal 
Direct Refinanced Private Loan, or a Federal Direct Consolidated Loan 
to the extent such loan was used to repay a Federal Direct Refinanced 
Private Loan, shall not be included in calculating a borrower's annual 
or aggregate loan limits under section 428 or 428H.
    ``(f) Special Rule for Eligibility for Service-Related Repayment.--
Notwithstanding sections 428K(a)(2), 428L(b)(2), 455(m)(3)(A), and 
460(b), a Federal Direct Refinanced Private Loan shall be eligible for 
any loan repayment or loan forgiveness program under section 428K, 
428L, or 460, or for the repayment plan for public service employees 
under section 455(m), but only with respect to any balance due, 
payments made, or service completed, after the date on which such 
Federal Direct Refinanced Private Loan was issued.
    ``(g) Private Educational Lender Reporting Requirement.--
            ``(1) Reporting required.--Not later than August 1, 2022, 
        the Secretary, in consultation with the Secretary of the 
        Treasury and the Director of the Bureau of Consumer Financial 
        Protection, shall establish a requirement that private 
        educational lenders report the data described in paragraph (2) 
        to the Secretary, to Congress, to the Secretary of the 
        Treasury, and to the Director of the Bureau of Consumer 
        Financial Protection, in order to allow for an assessment of 
        the private education loan market.
            ``(2) Contents of reporting.--The data that private 
        educational lenders shall report in accordance with paragraph 
        (1) shall include each of the following about private education 
        loans (as defined in section 140(a) of the Truth in Lending Act 
        (15 U.S.C. 1650(a))):
                    ``(A) The total amount of private education loan 
                debt the lender holds.
                    ``(B) The total number of private education loan 
                borrowers the lender serves.
                    ``(C) The average interest rate on the outstanding 
                private education loan debt held by the lender.
                    ``(D) The proportion of private education loan 
                borrowers who are in default on a loan held by the 
                lender.
                    ``(E) The proportion of the outstanding private 
                education loan volume held by the lender that is in 
                default.
                    ``(F) The proportions of outstanding private 
                education loan borrowers who are 30, 60, and 90 days 
                delinquent.
                    ``(G) The proportions of outstanding private 
                education loan volume that is 30, 60, and 90 days 
                delinquent.
    ``(h) Notification to Borrowers.--The Secretary, in coordination 
with the Secretary of the Treasury and the Director of the Bureau of 
Consumer Financial Protection, shall undertake a campaign to alert 
borrowers about the availability of private student loan refinancing 
under this section.''.
    (c) Income-Contingent Repayment.--Section 455(e) of the Higher 
Education Act of 1965 (20 U.S.C. 1087e(e)) is amended by adding at the 
end the following new paragraph:
            ``(9) Special rule for refinanced loans.--For purposes of 
        paragraph (7), the period of time during which a borrower of a 
        loan that is refinanced under section 460A or 460B has made 
        monthly payments shall be calculated in the manner described in 
        section 493C(f) for the applicable type of loan.''.
    (d) Income-Based Repayment.--Section 493C of the Higher Education 
Act of 1965 (20 U.S.C. 1098e) is amended by adding at the end the 
following:
    ``(f) Special Rule for Refinanced Loans.--
            ``(1) Refinanced federal direct, ffel, and plus loans.--In 
        calculating the period of time during which a borrower of a 
        loan (with the exception of a Federal Direct Consolidation 
        Loan) that is refinanced under section 460A has made monthly 
        payments for purposes of subsection (b)(7), the Secretary shall 
        deem the period to include all monthly payments made for the 
        original loan, and all monthly payments made for the refinanced 
        loan, that otherwise meet the requirements of this section.
            ``(2) Refinanced federal direct consolidation loans.--In 
        calculating the period of time during which a borrower of a 
        Federal Direct Consolidation Loan that is refinanced under 
        section 460A has made monthly payments for the purposes of 
        subsection (b)(7), the Secretary shall--
                    ``(A) review the borrower's payment history to 
                identify each component loan of such Federal Direct 
                Consolidation Loan;
                    ``(B) for each such component loan--
                            ``(i) calculate the weighted factor of the 
                        component loan, which shall be the factor that 
                        represents the portion of such Federal Direct 
                        Consolidation Loan that is attributable to such 
                        component loan; and
                            ``(ii) determine the number of qualifying 
                        monthly payments made on such component loan 
                        before consolidation;
                    ``(C) calculate the number of qualifying monthly 
                payments determined under subparagraph (B)(ii) with 
                respect to a component loan that shall be deemed as 
                qualifying monthly payments made on the Federal Direct 
                Consolidation Loan by multiplying--
                            ``(i) the weighted factor of such component 
                        loan as determined under subparagraph (B)(i); 
                        by
                            ``(ii) the number of qualifying monthly 
                        payments made on such component loan as 
                        determined under subparagraph (B)(ii); and
                    ``(D) calculate and inform the borrower of the 
                total number of qualifying monthly payments with 
                respect to the component loans of the Federal Direct 
                Consolidation Loan that shall be deemed as qualifying 
                monthly payments made on the refinanced Federal 
                Consolidation Loan, by--
                            ``(i) adding together the result of each 
                        calculation made under subparagraph (C) with 
                        respect to each such component loan; and
                            ``(ii) rounding the number determined under 
                        clause (i) to the nearest whole number.
            ``(3) Federal direct refinanced private loans.--In 
        calculating the period of time during which a borrower of a 
        Federal Direct Refinanced Private Loan under section 460B has 
        made monthly payments for purposes of subsection (b)(7), the 
        Secretary shall include only payments--
                    ``(A) that are made after the date of the issuance 
                of the Federal Direct Refinanced Private Loan; and
                    ``(B) that otherwise meet the requirements of this 
                section.
            ``(4) Component loan defined.--In this subsection, the term 
        `component loan', used with respect to a Federal Direct 
        Consolidation Loan, means a loan for which the liability was 
        discharged by the proceeds of such Federal Direct Consolidation 
        Loan.''.
    (e) Conforming Amendments.--The Higher Education Act of 1965 (20 
U.S.C. 1001 et seq.) is amended--
            (1) in section 428C(a)(3)(B)(i)(V) (20 U.S.C. 1078-
        3(3)(B)(i)(V))--
                    (A) by striking ``or'' at the end of item (bb);
                    (B) by striking the period at the end of item (cc) 
                and inserting ``; or''; and
                    (C) by adding at the end the following:
                                            ``(dd) for the purpose of 
                                        obtaining a refinancing loan 
                                        under section 460A.'';
            (2) in section 428J(c)(2) (20 U.S.C. 1078-10(c)(2)), by 
        inserting ``a Federal Direct Refinanced Private Loan,'' after 
        ``a Federal Direct Unsubsidized Stafford Loan,'';
            (3) in section 455 (20 U.S.C. 1087e)--
                    (A) in subsection (b), by striking ``(b) Interest 
                Rate.--'' and inserting the following:
    ``(b) Interest Rate.--Except as otherwise provided in sections 460A 
and 460B, the terms and conditions of interest for loans made under 
this part are as follows:'';
                    (B) in subsection (f)(1)(B), by inserting ``a 
                Federal Direct Refinanced Private Loan,'' after ``a 
                Federal Direct Unsubsidized Stafford Loan,''; and
                    (C) in subsection (m)(3)(A), by striking ``or 
                Federal Direct Unsubsidized Stafford Loan,'' and 
                inserting ``Federal Direct Unsubsidized Stafford Loan, 
                or Federal Direct Refinanced Private Loan,''; and
            (4) in section 460 (20 U.S.C. 1087j)--
                    (A) in subsection (b), by striking ``and Federal 
                Direct Unsubsidized Stafford Loans'' and inserting 
                ``Federal Direct Unsubsidized Stafford Loans, and 
                Federal Direct Refinanced Private Loans''; and
                    (B) in subsection (c)--
                            (i) in paragraph (1), by striking ``or a 
                        Federal Direct Unsubsidized Stafford Loan'' and 
                        inserting ``, a Federal Direct Unsubsidized 
                        Stafford Loan, or a Federal Direct Refinanced 
                        Private Loan''; and
                            (ii) in paragraph (2), by inserting ``a 
                        Federal Direct Refinanced Private Loan,'' after 
                        ``a Federal Direct Unsubsidized Stafford 
                        Loan,''.
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