II 115th CONGRESS 1st Session S. 1521 IN THE SENATE OF THE UNITED STATES July 10, 2017 Mr. Nelson introduced the following bill; which was read twice and referred to the Committee on Health, Education, Labor, and Pensions A BILL To amend the Higher Education Act of 1965 to reduce the interest rate caps for Federal Direct student loans, to eliminate loan origination fees on all Federal Direct student loans, and to provide for refinancing of Federal Direct student loans and Federal family education loans.

1. Short title This Act may be cited as the Student Loan Relief Act of 2017 . 2. Reduction of interest rates for federal direct student loans Section 455(b) of the Higher Education Act of 1965 ( 20 U.S.C. 1087e(b) ) is amended by adding at the end the following: (11) Interest rate provisions for new loans on or after july 1, 2018 (A) Rates for undergraduate fdsl and fdusl Notwithstanding the preceding paragraphs of this subsection, for Federal Direct Stafford Loans and Federal Direct Unsubsidized Stafford Loans issued to undergraduate students, for which the first disbursement is made on or after July 1, 2018, the applicable rate of interest shall, for loans disbursed during any 12-month period beginning on July 1 and ending on June 30, be determined on the preceding June 1 and be equal to the lesser of— (i) a rate equal to the high yield of the 10-year Treasury note auctioned at the final auction held prior to such June 1 plus the Federal Reserve discount rate charged for primary credit on the date of such auction, as authorized under section 14(d) of the Federal Reserve Act ( 12 U.S.C. 357 ); or (ii) 4 percent. (B) Rates for graduate and professional fdusl Notwithstanding the preceding paragraphs of this subsection, for Federal Direct Unsubsidized Stafford Loans issued to graduate or professional students, for which the first disbursement is made on or after July 1, 2018, the applicable rate of interest shall, for loans disbursed during any 12-month period beginning on July 1 and ending on June 30, be determined on the preceding June 1 and be equal to the lesser of— (i) a rate equal to the high yield of the 10-year Treasury note auctioned at the final auction held prior to such June 1 plus the Federal Reserve discount rate charged for primary credit on the date of such auction, as authorized under section 14(d) of the Federal Reserve Act ( 12 U.S.C. 357 ); or (ii) 5 percent. (C) Plus loans Notwithstanding the preceding paragraphs of this subsection, for Federal Direct PLUS Loans, for which the first disbursement is made on or after July 1, 2018, the applicable rate of interest shall, for loans disbursed during any 12-month period beginning on July 1 and ending on June 30, be determined on the preceding June 1 and be equal to the lesser of— (i) a rate equal to the high yield of the 10-year Treasury note auctioned at the final auction held prior to such June 1 plus the Federal Reserve discount rate charged for primary credit on the date of such auction, as authorized under section 14(d) of the Federal Reserve Act ( 12 U.S.C. 357 ); or (ii) 6 percent. (D) Consolidation loans Notwithstanding the preceding paragraphs of this subsection, any Federal Direct Consolidation Loan for which the application is received on or after July 1, 2018, shall bear interest at an annual rate on the unpaid principal balance of the loan that is equal to the weighted average of the interest rates on the loans consolidated, rounded to the nearest higher one-eighth of one percent. (E) Consultation The Secretary shall determine the applicable rate of interest under this paragraph after consultation with the Secretary of the Treasury and the Chairman of the Board of Governors of the Federal Reserve System and shall publish such rate in the Federal Register as soon as practicable after the date of determination. (F) Rate The applicable rate of interest determined under this paragraph for a Federal Direct Stafford Loan, a Federal Direct Unsubsidized Stafford Loan, or a Federal Direct PLUS Loan shall be fixed for the period of the loan. . 3. Elimination of the loan origination fees on federal direct student loans Section 455(c) of the Higher Education Act of 1965 ( 20 U.S.C. 1087e(c) ) is amended by adding at the end the following: (3) Sunset The Secretary may not charge the borrower of a loan under this part for which the first disbursement is made on or after July 1, 2018, an origination fee. . 4. Refinancing FFEL and federal direct loans 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: 460A. Refinancing FFEL and federal direct loans (a) In general Beginning not later than 180 days after the date of enactment of the Student Loan Relief Act of 2017 , the Secretary shall establish a program under which the Secretary, upon the receipt of an application from a qualified borrower, makes a loan under this part, in accordance with the provisions of this section, in order to permit the borrower to obtain the interest rate provided under subsection (c). (b) Refinancing direct loans (1) Federal direct loans Upon application of a qualified borrower, the Secretary shall repay any Federal Direct Stafford Loan, Federal Direct Unsubsidized Stafford Loan, Federal Direct PLUS Loan, or Federal Direct Consolidation Loan of the qualified borrower, for which the first disbursement was made, or the application for the original consolidation loan was received, before July 1, 2018, with the proceeds of a new Federal Direct Stafford Loan, Federal Direct Unsubsidized Stafford Loan, Federal Direct PLUS Loan, or Federal Direct Consolidation Loan, respectively, issued to the borrower in an amount equal to the sum of the unpaid principal, accrued unpaid interest, and late charges of the original loan. (2) Refinancing FFEL program loans as refinanced Federal Direct Loans Upon application of a qualified borrower for any loan that was 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, 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 eligible lender of the loan made, insured, or guaranteed under part B, in order to discharge the borrower from any remaining obligation to the lender with respect to the original loan. (B) A loan made under this paragraph that covers— (i) a loan originally made, insured, or guaranteed under section 428 shall be a Federal Direct Stafford Loan; (ii) a loan originally made, insured, or guaranteed under section 428B shall be a Federal Direct PLUS Loan; (iii) a loan originally made, insured, or guaranteed under section 428H shall be a Federal Direct Unsubsidized Stafford Loan; and (iv) a loan originally made, insured, or guaranteed under section 428C shall be a Federal Direct Consolidation Loan. (C) The interest rate for each loan made by the Secretary under this paragraph shall be the applicable rate provided under subsection (c). (c) Interest rates (1) In general The interest rate for the new Federal Direct Stafford Loans, Federal Direct Unsubsidized Stafford Loans, Federal Direct PLUS Loans, and Federal Direct Consolidation Loans, shall be a rate equal to— (A) in any case where the original loan was a loan under section 428 or 428H, a Federal Direct Stafford loan, or a Federal Direct Unsubsidized Stafford Loan, that was issued to an undergraduate student, a rate equal to the rate determined under section 455(b)(11)(A); (B) in any case where the original loan was a loan under section 428 or 428H, a Federal Direct Stafford Loan, or a Federal Direct Unsubsidized Stafford Loan, that was issued to a graduate or professional student, a rate equal to the rate determined under section 455(b)(11)(B); (C) in any case where the original loan was a loan under section 428B or a Federal Direct PLUS Loan, a rate equal to the rate determined under section 455(b)(11)(C); and (D) in any case where the original loan was a loan under section 428C or a Federal Direct Consolidation Loan, a rate calculated in accordance with paragraph (2). (2) Interest rate for consolidation loans (A) Method of calculation In order to determine the interest rate for any new Federal Direct Consolidation Loan under paragraph (1)(D), the Secretary shall— (i) determine each of the component loans that were originally consolidated in the loan under section 428C or the Federal Direct Consolidation Loan, and calculate the proportion of the unpaid principal balance of the loan under section 428C or the Federal Direct Consolidation Loan that each component loan represents; (ii) use the proportions determined in accordance with clause (i) and the interest rate applicable for each component loan, as determined under subparagraph (B), to calculate the weighted average of the interest rates on the loans consolidated into the loan under section 428C or the Federal Direct Consolidation Loan; and (iii) apply the weighted average calculated under clause (ii) as the interest rate for the new Federal Direct Consolidation Loan. (B) Interest rates for component loans The interest rates for the component loans of a loan made under section 428C or a Federal Direct Consolidation Loan shall be the following: (i) The interest rate for any loan under section 428 or 428H, Federal Direct Stafford Loan, or Federal Direct Unsubsidized Stafford Loan issued to an undergraduate student shall be a rate equal to the rate for Federal Direct Stafford Loans and Federal Direct Unsubsidized Stafford Loans issued to undergraduate students that is applicable on the date of the application for the new Federal Direct Consolidation Loan. (ii) The interest rate for any loan under section 428 or 428H, Federal Direct Stafford Loan, or Federal Direct Unsubsidized Stafford Loan issued to a graduate or professional student shall be a rate equal to the rate for Federal Direct Unsubsidized Stafford Loans issued to graduate or professional students that is applicable on the date of the application for the new Federal Direct Consolidation Loan. (iii) The interest rate for any loan under section 428B or Federal Direct PLUS Loan shall be a rate equal to the rate for Federal Direct PLUS Loans that is applicable on the date of the application for the new Federal Direct Consolidation Loan. (iv) The interest rate for any component loan that is a loan under section 428C or a Federal Direct Consolidation Loan shall be the weighted average of the interest rates that would apply under this subparagraph for each loan comprising the component consolidation loan. (v) The interest rate for any eligible loan that is a component of a loan made under section 428C or a Federal Direct Consolidation Loan and is not described in clauses (i) through (iv) shall be the interest rate on the original component loan. (d) Terms and conditions of loans (1) In general A loan that is refinanced under this section shall have the same terms and conditions as the original loan, except as otherwise provided in this section. (2) No automatic extension of repayment period Refinancing a loan under this section shall not require the extension of the duration of the repayment period of the loan, and the borrower shall retain the right to use 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). (e) Definition of qualified borrower (1) In general For purposes of this section, the term qualified borrower means a borrower— (A) of a loan under this part or part B for which the first disbursement was made, or the application for a consolidation loan was received, before July 1, 2018; and (B) who meets the eligibility requirements established under paragraph (2). (2) Income requirements Not later than 180 days after the date of enactment of the Student Loan Relief Act of 2017 , the Secretary shall establish eligibility requirements based on income or debt-to-income ratio that take into consideration providing access to refinancing under this section for borrowers with the greatest financial need. (f) 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 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 this part or 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. .