Title: Student Loan Lower Interest Rate and Lower Monthly Payment Refinancing Act of 2017
Policy area: Education

Summary:
Student Loan Lower Interest Rate and Lower Monthly Payment Refinancing Act of 2017
This bill amends title IV (Student Assistance) of the Higher Education Act of 1965 to address refinancing of student loans, including to authorize states and private lenders to refinance federal student loans at lower market-based variable interest rates.


[Congressional Bills 115th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2725 Introduced in House (IH)]

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115th CONGRESS
  1st Session
                                H. R. 2725

     To amend the Higher Education Act of 1965 to provide for the 
             refinancing of certain Federal student loans.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                              May 25, 2017

  Mr. Rokita (for himself and Mr. Hastings) introduced the following 
    bill; which was referred to the Committee on Education and the 
                               Workforce

_______________________________________________________________________

                                 A BILL


 
     To amend the Higher Education Act of 1965 to provide for the 
             refinancing of certain Federal 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 Lower Interest Rate and 
Lower Monthly Payment Refinancing Act of 2017''.

SEC. 2. REFINANCING PROGRAM.

    (a) Program Authority.--Part C of title I of the Higher Education 
Act of 1965 is amended by adding at the end the following:

``SEC. 138A. REFINANCING CERTAIN FEDERAL STUDENT LOANS.

    ``(a) In General.--To enable State, private and nonprofit lenders 
to make loans at lower market-based variable interest rates to all 
eligible borrowers for the purpose of refinancing existing student loan 
debt incurred pursuant to parts B, D, and E, of title IV, there are 
hereby made available, in accordance with the provisions of this title 
and title IV, such sums as may be necessary to insure a portion of each 
loan, as set forth in this part, and to otherwise make payments 
consistent with the terms in this part.
    ``(b) Discrimination by Creditors Prohibited.--No agency, 
organization, institution, bank, credit union, corporation, or other 
lender who regularly extends, renews, or continues credit or provides 
insurance under this part shall exclude from receipt or deny the 
benefits of, or discriminate against any borrower or applicant in 
obtaining, such credit or insurance on the basis of race, national 
origin, religion, sex, marital status, age, or handicapped status.
    ``(c) Designation.--
            ``(1) In general.--The program established under this part 
        shall be referred to as the `Student Loan Lower Interest Rate 
        and Lower Monthly Payment Refinancing Program'.
            ``(2) Refinancing loans.--Notwithstanding any other 
        provision of this part, loans made to borrowers under this part 
        that, except as otherwise specified in this part, have the same 
        terms, conditions, and benefits as loans made to borrowers 
        under section 428C, shall be known as `Refinancing Loans'.

``SEC. 138B. REFINANCING CERTAIN FEDERAL STUDENT LOANS.

    ``(a) In General.--Beginning not later than 180 days after the date 
of enactment of the Student Loan Lower Interest Rate and Lower Monthly 
Payment Refinancing Act, the Secretary shall establish a process under 
which eligible lenders may receive loan insurance from the Secretary 
for the purpose of extending, upon the receipt of an application from 
an eligible borrower, a loan to refinance one or more eligible loans, 
in accordance with the provisions of this section.
    ``(b) Definitions.--
            ``(1) Definition of eligible borrower.--For the purpose of 
        this section, the term `eligible borrower' means a borrower 
        who--
                    ``(A) has one or more eligible loans;
                    ``(B) is not subject to a judgment secured through 
                litigation with respect to a loan under this title or 
                to an order for wage garnishment under section 488A; 
                and
                    ``(C) at the time of application for a Refinancing 
                Loan--
                            ``(i) is in repayment status as determined 
                        under section 428(b)(7)(A);
                            ``(ii) is in a grace period preceding 
                        repayment; or
                            ``(iii) is a defaulted borrower who has 
                        made arrangements to repay the obligation on 
                        the defaulted loans satisfactory to the holders 
                        of the defaulted loans.
            ``(2) Termination.--An individual's status as an eligible 
        borrower under this section terminates upon receipt of a 
        Refinancing Loan under this section, except that--
                    ``(A) an individual who receives eligible loans 
                after the date of receipt of the Refinancing loan may 
                receive a subsequent Refinancing Loan;
                    ``(B) eligible loans received prior to the date of 
                a Refinancing Loan may be added during the 180-day 
                period following the making of the Refinancing Loan;
                    ``(C) eligible loans received following the making 
                of the Refinancing Loan may be added during the 180-day 
                period following the making of the Refinancing Loan; 
                and
                    ``(D) eligible loans received prior to the date of 
                the first Refinancing Loan may be added to a subsequent 
                Refinancing Loan.
            ``(3) Eligible lenders.--Entities eligible to make 
        Refinancing Loans, and receive default insurance from the 
        Secretary, shall be either--
                    ``(A) State agencies described in subparagraphs (D) 
                and (F) of section 435(d)(1);
                    ``(B) other eligible lenders described in 
                subparagraphs (A) and (J) of such section, which made 
                or held loans prior to July 1, 2010; and
                    ``(C) any other entity that prior to July 1, 2010, 
                made or held a loan as a beneficiary of an eligible 
                lender trustee agreement under part B of title IV.
            ``(4) Eligible loans.--For the purposes of this section, 
        `eligible loans' shall include any loan made, insured or 
        guaranteed under parts B, D, and E of title IV.
    ``(c) Refinancing Eligible Loans.--Upon application of an eligible 
borrower, an eligible lender shall repay directly to the existing 
holder of each of that eligible borrower's eligible loans with the 
proceeds of a Refinancing Loan in an amount equal to the sum of the 
unpaid principal, accrued unpaid interest, and late charges of the 
original eligible loans in order to discharge the eligible borrower 
from any remaining obligation to the existing holder with respect to 
the original eligible loans.
    ``(d) Interest Rates.--
            ``(1) In general.--Notwithstanding the current interest 
        rates of the eligible loans being refinanced, the interest rate 
        for the Refinancing Loan, shall be a variable rate equal to no 
        more than--
                    ``(A) for the calendar quarter beginning on July 1, 
                2015, and each subsequent calendar quarter, the daily 
                average of 1-month London Inter Bank Offered Rate 
                (LIBOR) for United States dollars in effect for each of 
                the days in the prior calendar quarter as compiled and 
                released by the British Bankers Association, plus
                    ``(B) 3.5 percent per annum.
            ``(2) Adjustable rate.--The applicable rate of interest 
        determined under paragraph (1) for a Refinancing Loan under 
        this section shall adjust on the first day of each calendar 
        quarter for the period of the loan.
    ``(e) Insurance.--
            ``(1) Default insurance.--The Secretary shall provide 
        default insurance on Refinancing Loans and shall upon 
        presentment with a defaulted Refinancing Loan shall pay an 
        amount, as set for below, to the eligible lender in exchange 
        for all rights, title and interest to the Refinancing Loan.
            ``(2) Default.--
                    ``(A) a Refinancing Loan is in default and eligible 
                for an insurance payment, if the Refinancing Loan has, 
                experienced at least 270 consecutive days of 
                nonpayment; and
                    ``(B) such state of nonpayment is not caused by 
                application of a deferment or forbearance as described 
                in section 435.
            ``(3) Phase-out of default insurance coverage.--To the 
        extent an eligible lender provides the Secretary with a 
        defaulted eligible loan, the Secretary shall pay to the 
        eligible lender an amount equal to--
                    ``(A) for a default occurring in the first 5 years 
                from the date of disbursement of the Refinancing Loan 
                made, the Secretary shall insure 97 percent of the 
                unpaid principal and accrued interest and fees;
                    ``(B) for a default occurring in the second 5 years 
                (years 6 through 10) from the date of disbursement of 
                the Refinancing Loan, the Secretary shall insure 87 
                percent of the unpaid principal and accrued interest 
                and fees; and
                    ``(C) for a default occurring at any point after 
                the tenth year after disbursement of the Refinancing 
                Loan, the Secretary shall insure 77 percent of the 
                unpaid principal and accrued interest.
    ``(f) Insurance Fees Paid to the Secretary.--In lieu of any other 
fees or charges by the Secretary associated with loans under this part, 
eligible lenders shall pay to the Secretary--
            ``(1) a Default Insurance Fee equal to 0.50 percent of the 
        disbursed loan amount; and
            ``(2) a Monthly Insurance Fee payable each month calculated 
        on annual basis equal to 1.05 percent of the average principal 
        plus accrued unpaid interest for the prior month of the 
        Refinancing Loans disbursed under this section.
    ``(g) No Special Allowance.--No special allowance under section 438 
shall be paid with respect to the portion of any Refinancing Loan.
    ``(h) Terms and Conditions of Refinancing Loans.--
            ``(1) In general.--A Refinancing Loan made under this 
        section shall have the same terms and conditions as the loans 
        authorized under section 455, except as otherwise provided in 
        this section.
            ``(2) No automatic extension of repayment period.--
        Refinancing a loan under this section may, at the behest of the 
        eligible borrower, result in the extension of the duration of 
        the repayment period of the loan. In addition, a borrower may, 
        at the time of making the Refinancing Loan, enroll in any 
        repayment plan for which the eligible borrower is eligible in 
        accordance with section 455(d)(3).
            ``(3) Borrower benefits.--Eligible lenders may offer any 
        borrower benefits, including interest rate and principal 
        reductions as desirable in connection with Refinancing Loans. 
        In addition to such benefits, and any other benefits required 
        of Consolidation loans authorized under section 455--
                    ``(A) Refinancing Loans may, to the extent offered 
                under the Direct Loan Program, also offer--
                            ``(i) an income contingent repayment plan;
                            ``(ii) an income-based repayment plan;
                            ``(iii) a Pay As You Earn (PAYE) Repayment 
                        Plan; and
                            ``(iv) the public service loan forgiveness 
                        program under section 455(m); and
                    ``(B) Refinancing Loans shall, to the extent 
                offered under the Direct Loan Program, also offer--
                            ``(i) the benefit for active duty service 
                        members benefit offered under section 455(o);
                            ``(ii) deferment as provided for in section 
                        435;
                            ``(iii) forbearance as provided for in 
                        section 435; and
                            ``(iv) discharge for disability or death of 
                        the borrower.
    ``(i) Loan Discharge.--In the case of loans discharged under income 
contingent repayment, income-based repayment, or public service loan 
forgiveness, or for disability or death of the borrower, the Secretary 
shall, upon such discharge, pay to the eligible lender an amount equal 
to the unpaid principal and accrued interest.''.
    (b) Conforming Amendments.--
            (1) Part b.--Section 428C(a)(3)(B)(i) of the Higher 
        Education Act of 1965 (20 U.S.C. 1078-3(a)(3)(B)(i)) is 
        amended--
                    (A) in the matter preceding subclause (I)--
                            (i) by inserting ``, section 138A,'' after 
                        ``An individual's status as an eligible 
                        borrower under this section'';
                            (ii) by striking ``both sections'' and 
                        inserting ``each such section''; and
                            (iii) by inserting ``, a Refinancing Loan 
                        under section 138A,'' after ``upon receipt of a 
                        consolidation loan under this section'';
                    (B) in subclause (III), by striking the semicolon 
                and inserting ``; and'';
                    (C) in subclause (IV), by striking ``; and'' and 
                inserting a period; and
                    (D) by striking subclause (V).
            (2) Part d.--Section 455 of the Higher Education Act of 
        1965 (20 U.S.C. 1087e) is amended--
                    (A) in subsection (a), by adding at the end the 
                following:
            ``(4)(A) Consolidation of refinancing loans.--
        Notwithstanding any provisions of this part, eligible borrowers 
        may consolidate Refinancing Loans authorized under section 138A 
        into a Direct Consolidation Loan in the event that the interest 
        rate on each such Refinancing Loan exceeds 6.875 percent for 
        the quarter.
            ``(B) Eligibility period.--Any application for a 
        Consolidation Loan that includes Refinancing Loans under this 
        paragraph must be received by the Secretary by the end of a 
        quarter during which the Refinancing Loan interest exceeds 
        6.875 percent.''; and
                    (B) by adding at the end the following new 
                subsection:
    ``(r) Repayment Terms for Federal Family Education Loans.--
            ``(1) Applicability of programs available under this 
        section.--The Secretary shall apply subsections (d), (e), (f), 
        (l), (m), and (o) to all loans made under part B as if such 
        loans were made under this part.
            ``(2) Payment of balance and interest.--In carrying out 
        paragraph (1), the Secretary shall pay to the holder of a loan 
        made under part B the amount of principal, interest, or special 
        allowance payments necessary to apply subsections (d), (e), 
        (f), (l), (m), and (o) to such loan, as appropriate.''.

SEC. 3. OFFSET.

    (a) Public Service Loan Forgiveness.--Section 455(m) of the Higher 
Education Act of 1965 (20 U.S.C. 1087e(m)) is amended--
            (1) in paragraph (1), by striking ``The Secretary'' and 
        inserting ``Except as provided in paragraph (2)(B), the 
        Secretary''; and
            (2) in paragraph (2)--
                    (A) by striking ``After the'' and inserting the 
                following:
                    ``(A) In general.--Except as provided in 
                subparagraph (B), after the''; and
                    (B) by adding after subparagraph (A) the following:
                    ``(B) Cap on loan cancellation.--With respect to 
                any eligible Federal Direct Loans made to a new 
                borrower on or after July 1, 2017, the Secretary may 
                cancel, in accordance with subparagraph (A), up to 
                $57,500 of the obligation on such loans.''.
    (b) 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 Terms for New Borrowers On and After July 1, 2017.--
Subsection (e)(2) shall not apply with respect to any loan made to a 
new borrower on or after July 1, 2017, for enrollment in a graduate or 
professional program.''.
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