Title: Student Loan Fair Prepayment Act
Policy area: Education

Summary:
Student Loan Fair Prepayment Act
This bill amends the Higher Education Act of 1965 to set forth how a student loan borrower's prepayment amount on a Federal Family Education Loan, Federal Direct Loan, or Federal Perkins Loan must be applied.



[Congressional Bills 115th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3836 Introduced in House (IH)]

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115th CONGRESS
  1st Session
                                H. R. 3836

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

                           September 26, 2017

   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 determined 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 Representatives 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''.

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--
                            ``(i) which have different applicable rates 
                        of interest, the holder of such loans shall, 
                        unless otherwise requested by the borrower in 
                        writing, apply the borrower's prepayment amount 
                        (within the meaning of section 682.209(b)(2) of 
                        title 34, Code of Federal Regulations, or a 
                        successor regulation) 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; 
                        and
                            ``(ii) which have the same applicable rates 
                        of interest, the holder of such loans shall, 
                        unless otherwise requested by the borrower in 
                        writing, apply the borrower's prepayment amount 
                        (as described in clause (i)) for one or more of 
                        such loans, first toward the outstanding 
                        balance of principal due on the loan with the 
                        highest principal balance among such loans.
                    ``(B) Eligible borrower.--
                            ``(i) In general.--The term `eligible 
                        borrower' means a borrower with no outstanding 
                        balance of fees, including collection costs and 
                        authorized late charges, due on any loan made 
                        under this part or part B.
                            ``(ii) Prepayment amounts.--A prepayment 
                        amount (as described in subparagraph (A)) made 
                        by a borrower who is not an eligible borrower 
                        to a holder shall be applied first toward the 
                        borrower's outstanding balance of fees, 
                        including collection 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 repayment plan under section 
                455(d)(1)(D), such as a Pay As You Earn repayment 
                plan.''.

SEC. 3. APPLICATION OF PREPAYMENT AMOUNTS FOR PERKINS 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); and
            (2) by adding at the end the following:
                            ``(iii) shall provide that the institution 
                        shall, in the case of a borrower with no 
                        outstanding balance of fees (including 
                        collection 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, with respect to loans held by 
                        the same institution and--
                                    ``(I) which have different 
                                applicable rates of interest, use the 
                                excess to prepay (within the meaning of 
                                section 674.31(b)(4)(iv) of title 34, 
                                Code of Federal 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
                                    ``(II) which have the same 
                                applicable rates of interest, use the 
                                excess to prepay (as described in 
                                subclause (I)) the principal due on the 
                                loan with the highest principal balance 
                                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 collection 
                        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 PRIVATE 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 following:
            ``(12) Application of prepayment amounts.--
                    ``(A) In general.--Notwithstanding any other 
                provision of law, with respect to a borrower with more 
                than one private education loan which are held by the 
                same holder and--
                            ``(i) which have different applicable rates 
                        of interest, the holder of such loans shall, 
                        unless otherwise requested by the borrower in 
                        writing, apply the borrower's prepayment amount 
                        (within the meaning of section 682.209(b)(2) of 
                        title 34, Code of Federal Regulations, or a 
                        successor regulation) 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; 
                        and
                            ``(ii) which have the same applicable rates 
                        of interest, the holder of such loans shall, 
                        unless otherwise requested by the borrower in 
                        writing, apply the borrower's prepayment amount 
                        (as described in clause (i)) for one or more of 
                        such loans, first toward the outstanding 
                        balance of principal due on the loan with the 
                        highest principal balance 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 borrower has an 
                        outstanding balance of fees, including 
                        collection costs and authorized late charges, 
                        due on any private education loan held by such 
                        holder.
                            ``(ii) Prepayment amounts.--A prepayment 
                        amount made by a borrower described in clause 
                        (i) of this subparagraph to a holder shall be 
                        applied first toward the borrower's 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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