Title: Student Loan Reform Act
Policy area: Education

Summary:
Student Loan Reform Act
This bill requires the Department of Education to carry out a program that allows participating institutions of higher education (IHEs) to cosign certain Federal Direct Loans made to its enrolled students.
An IHE that participates in the program assumes the obligation to repay the outstanding balance of principal and interest due on the loan over 10 years if the borrower defaults on the loan.

[Congressional Bills 117th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1586 Introduced in House (IH)]

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117th CONGRESS
  1st Session
                                H. R. 1586

 To amend the Higher Education Act of 1965 to direct the Secretary of 
 Education to carry out a program under which an institution of higher 
 education may elect to cosign Federal student loans made to students 
           attending the institution, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             March 3, 2021

 Mr. Perry (for himself and Mr. San Nicolas) introduced the following 
    bill; which was referred to the Committee on Education and Labor

_______________________________________________________________________

                                 A BILL


 
 To amend the Higher Education Act of 1965 to direct the Secretary of 
 Education to carry out a program under which an institution of higher 
 education may elect to cosign Federal student loans made to students 
           attending the institution, 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 ``Student Loan Reform Act''.

SEC. 2. INSTITUTIONAL COSIGNER PROGRAM.

    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 454 the following:

``SEC. 454A. INSTITUTIONAL COSIGNER PROGRAM.

    ``(a) Program Required.--Beginning on July 1, 2022, the Secretary 
shall carry out a program under which an institution of higher 
education may elect to cosign all eligible direct loans made to 
students enrolled at the institution for an academic year.
    ``(b) Agreement With Secretary.--To be eligible to participate in 
the program under this section for an academic year, an institution of 
higher education shall enter into an agreement with the Secretary under 
which the institution agrees to the following:
            ``(1) The institution will cosign all new eligible direct 
        loans made to students enrolled at the institution for such 
        academic year.
            ``(2) With respect to each such loan, the institution will 
        abide by the terms and conditions of cosigner liability 
        described in subsection (d).
    ``(c) Master Promissory Note.--As part of the program under this 
section, the Secretary shall--
            ``(1) revise the master promissory note applicable to each 
        eligible direct loan to include--
                    ``(A) the terms and conditions of cosigner and 
                borrower liability described in subsection (d);
                    ``(B) the interest rate for the loan, as determined 
                under subsection (e); and
                    ``(C) a field in which an authorized representative 
                of an institution participating in the program may 
                cosign the note on behalf of the institution; and
            ``(2) ensure that each institution participating in the 
        program signs the note applicable to each new eligible direct 
        loan made to a student at the institution for the academic year 
        concerned.
    ``(d) Cosigner and Borrower Liability.--
            ``(1) In general.--Notwithstanding any other provision of 
        law, an institution of higher education that is a cosigner of 
        an eligible direct loan of a borrower shall assume the 
        obligation to repay, in accordance with paragraph (2), the 
        outstanding balance of principal and interest due on the loan 
        if--
                    ``(A) the borrower defaulted on the loan;
                    ``(B) a period of 90 days has elapsed since the 
                date on which the loan entered default; and
                    ``(C) the loan has not been rehabilitated.
            ``(2) Amount and schedule of repayment.--An institution 
        that is obligated to repay an eligible direct loan under 
        paragraph (1) shall make payments on the loan pursuant to a 
        standard repayment plan under section 455(d)(1)(A) with a 
        repayment period of 10 years.
            ``(3) Termination of obligation.--The obligation of an 
        institution to repay an eligible direct loan under paragraph 
        (1) shall terminate on the earlier of--
                    ``(A) the date on which the loan is rehabilitated; 
                or
                    ``(B) the date on which the total outstanding 
                balance of principal and interest due on the loan has 
                been repaid.
            ``(4) Effect on default status of borrower.--A borrower who 
        has defaulted on an eligible direct loan on which an 
        institution is making payments under paragraph (1) shall be 
        considered in default on such loan for purposes of adverse 
        credit reporting and delinquent debt collection procedures 
        under Federal law.
            ``(5) Recovery from borrower.--Any amounts recovered from 
        the borrower of an eligible direct loan during a period in 
        which an institution is making payments on the loan under 
        paragraph (1) shall be subtracted from the total outstanding 
        balance of principal and interest due on the loan.
            ``(6) Rule of construction.--Nothing in this subsection 
        shall be construed to limit the remedies available under this 
        part against the borrower of an eligible Federal student loan.
    ``(e) Reduced Interest Rate.--Notwithstanding any other provision 
of law, the interest rate applicable to an eligible direct loan 
cosigned by an institution participating in the program under this 
section shall be a rate determined by the Secretary that is--
            ``(1) lower than the standard rate applicable to the loan 
        under section 455(b); and
            ``(2) reduced below such standard rate by a percentage that 
        is proportionate to the reduced risk posed by the loan, as 
        determined by the Secretary.
    ``(f) List of Participating Institutions.--On an annual basis, the 
Secretary shall publish, on a publicly accessible website of the 
Department of Education, a list that identifies each institution 
participating in the program under this section for an academic year.
    ``(g) Eligible Direct Loan Defined.--In this section, the term 
`eligible direct loan' means a loan made under this part on or after 
July 1, 2022.''.

SEC. 3. MODIFICATION OF COHORT DEFAULT RATE THRESHOLD.

    (a) In General.--Section 435(a) of the Higher Education Act of 1965 
(20 U.S.C. 1085(a)) is amended--
            (1) in paragraph (2)--
                    (A) by striking subparagraphs (B) and (C) and 
                inserting the following:
                    ``(B) For purposes of determinations under 
                subparagraph (A), the threshold percentage is--
                            ``(i) 40 percent, in the case of an 
                        institution that is participating in the 
                        institutional cosigner program under section 
                        454A in the year in which the cohort default 
                        rate is determined; or
                            ``(ii) 30 percent, in the case of an 
                        institution that is not participating in such 
                        program in the year in which the cohort default 
                        rate is determined.''; and
                    (B) by redesignating subparagraph (D) as 
                subparagraph (C);
            (2) in paragraph (3), by striking ``paragraph (2)(B)(iv)'' 
        and inserting ``paragraph (2)(B)''; and
            (3) in paragraph (7), by striking ``paragraph (2)(B)(iv)'' 
        each place it appears and inserting ``paragraph (2)(B)''.
    (b) Effective Date.--The amendments made by subsection (a) shall 
take effect on July 1, 2022.
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