II 116th CONGRESS 2d Session S. 4903 IN THE SENATE OF THE UNITED STATES November 17, 2020 Ms. Hassan introduced the following bill; which was read twice and referred to the Committee on Finance A BILL To amend the Higher Education Act of 1965 to encourage entrepreneurship by providing loan deferment and loan cancellation for founders and employees of small business startups, and for other purposes.

1. Short title This Act may be cited as the Reigniting Opportunity for Innovators Act . 2. Small business startup founder and employee loan deferment and cancellation (a) Deferment without interest accrual for small business startup founders and employees Section 455(f) of the Higher Education Act of 1965 ( 20 U.S.C. 1087e(f) ) is amended— (1) by redesignating paragraphs (4) and (5) as paragraphs (5) and (6), respectively; and (2) by inserting after paragraph (3) the following: (4) Deferment without interest accrual for small business startup founders and employees (A) In general Subject to subparagraph (B), a qualifying small business startup borrower shall be eligible for a deferment, during which periodic installments of principal need not be paid and interest shall not accrue, during any period while the borrower is employed as a founder or full-time employee of a small business startup. (B) Limitations A qualifying small business startup borrower shall not receive a deferment under this paragraph for any period— (i) in excess of 3 years; or (ii) that begins more than 5 years, or ends more than 8 years, after the date the small business startup was established (as determined by the small business development center that approved such borrower under section 21(o)(5) of the Small Business Act ( 15 U.S.C. 648(o)(5) )). (C) Definitions In this paragraph— (i) the terms founder , full-time employee , and small business startup have the meanings given the terms in subsection (r)(2); and (ii) the term qualifying small business startup borrower means a borrower of a loan made under this part whose employment as a small business startup founder or full-time employee is approved by a small business development center under section 21(o)(5) of the Small Business Act ( 15 U.S.C. 648(o)(5) ). . (b) Loan cancellation Section 455 of the Higher Education Act of 1965 ( 20 U.S.C. 1087e ) is amended by adding at the end the following: (r) Loan cancellation for founders and employees of small business startups in distressed areas (1) Loan cancellation (A) In general The Secretary shall cancel the balance of interest and principal due, subject to subparagraph (B), on any eligible Federal Direct Loan not in default for a borrower who— (i) at the time of such cancellation, is employed as a founder or full-time employee of a small business startup in a distressed area who— (I) has been approved for loan cancellation by a small business development center under section 21(o)(6) of the Small Business Act ( 15 U.S.C. 648(o)(6) ); and (II) began such employment during the 5-year period beginning on the date that the small business startup was established (as determined by such small business development center); and (ii) during the time period for which the borrower has been approved by the small business development center, which in no case shall be more than 10 years after the date on which the small business startup was established, has made 24 monthly payments on the eligible Federal Direct Loan pursuant to any repayment plan under subsection (d)(1) or a combination of such plans while so employed. (B) Loan cancellation maximum The Secretary shall cancel under this subsection not more than an aggregate of $20,000 of the loan obligation on the eligible Federal Direct Loans of a borrower. (C) Timing requirements Each of the 24 monthly payments required under this subsection shall be made after the date of enactment of this subsection. (D) Ineligibility for double benefits No borrower may, for the same service, receive a reduction of loan obligations under both this subsection and— (i) subsection (m); or (ii) section 428J, 428K, 428L, or 460. (2) Definitions In this subsection: (A) Distressed area The term distressed area has the meaning given the term in section 21(o)(1) of the Small Business Act ( 15 U.S.C. 648(o)(1) ). (B) Eligible Federal direct loan The term eligible Federal Direct Loan means a Federal Direct Stafford Loan, Federal Direct PLUS Loan, Federal Direct Unsubsidized Stafford Loan, or a Federal Direct Consolidation Loan. (C) Founder; full-time employee The terms founder and full-time employee have the meanings given the terms in section 21(o)(1) of the Small Business Act ( 15 U.S.C. 648(o)(1) ). (D) Small business startup The term small business startup means a business that is certified by a small business development center under section 21(o)(3) of the Small Business Act ( 15 U.S.C. 648(o)(3) ). . (c) Conforming amendments Title IV of the Higher Education Act of 1965 ( 20 U.S.C. 1070a et seq.) is further amended— (1) in section 428J(g)(2), by striking section 455(m) and inserting subsection (m) or (r) of section 455 ; (2) in section 428K(f)— (A) by inserting subsection (m) or (r) of section 455 or before section 428J ; and (B) by striking 455(m) ; (3) in section 428L(g), by striking 455(m) and inserting subsection (m) or (r) of section 455 ; (4) in section 455(m)(4), by inserting subsection (r) or before section 428J ; and (5) in section 460(g)(2)(B), by striking section 455(m) and inserting subsection (m) or (r) of section 455 . 3. Small business development centers Section 21 of the Small Business Act ( 15 U.S.C. 648 ) is amended— (1) in subsection (c)(3)— (A) in subparagraph (T), by striking and at the end; (B) in the first subparagraph (U) (relating to encouraging and assisting the provision of succession planning), by striking the period at the end of clause (v) and inserting a semicolon; (C) in the second subparagraph (U) (relating to providing training in conjunction with the United States Patent and Trademark Office)— (i) by redesignating that subparagraph as subparagraph (V); and (ii) in clause (ii)(II), by striking the period at the end and inserting a semicolon; and (D) by adding at the end the following: (W) certifying small business startups under subsection (o)(3); and (X) approving loan deferment or cancellation under paragraph (5) or (6) of subsection (o) for founders and full-time employees of certain small business startups, as those terms are defined in paragraph (1) of that subsection. ; and (2) by adding at the end the following: (o) Deferment or cancellation of certain loans (1) Definitions In this subsection— (A) the term distressed area has the meaning given the term low-income community in section 45D(e) of the Internal Revenue Code of 1986; (B) the term eligible Federal Direct Loan has the meaning given the term in section 455(r)(2) of the Higher Education Act of 1965; (C) the terms founder and full-time employee , with respect to a small business startup, have the meanings given the terms by the Administrator; and (D) the term small business startup means a small business concern that, as of the date that the small business concern submits an application under paragraph (3), has been in existence for not more than 3 years. (2) Role of small business development centers Any small business development center may, for purposes of eligible Federal Direct Loan deferment or cancellation under subsection (f)(4) or (r) of section 455 of the Higher Education Act of 1965 ( 20 U.S.C. 1087e )— (A) certify a small business startup under paragraph (3); and (B) approve eligible Federal Direct Loan deferment or cancellation for a founder or full-time employee of a qualifying small business startup under paragraph (5) or (6). (3) Certification In order to be certified by a small business development center, a small business startup shall submit to the small business development center an application that includes— (A) a 5-year business plan for the small business startup; (B) the number of employees that the small business startup intends to employ on an annual basis; and (C) information that demonstrates that the small business startup has the potential for success. (4) Publication of distressed areas Not less frequently than once every 3 years beginning after the date of enactment of this subsection, the Administrator shall identify and make publically available on the website of the Administration a list of distressed areas. (5) Loan deferment for founders and full-time employees of a small business startup (A) Application In order to be approved by a small business development center for eligible Federal Direct Loan deferment under subsection (f)(4) of section 455 of the Higher Education Act of 1965 ( 20 U.S.C. 1087e ), a borrower of an eligible Federal Direct Loan shall submit to the small business development center an application that includes such information as the Administrator may require. (B) Requirements A small business development center shall approve a borrower who applies under subparagraph (A) for eligible Federal Direct Loan deferment if the small business development center determines that— (i) the borrower is, as of the date on which the application is submitted, a founder or full-time employee of a small business startup that is certified under paragraph (3); and (ii) the employment of the borrower with the small business startup began during the 5-year period beginning on the date on which the small business startup was established. (6) Loan cancellation for founders and full-time employees of a small business startup in a distressed area (A) Application In order to be approved by a small business development center for eligible Federal Direct Loan cancellation under subsection (r) of section 455 of the Higher Education Act of 1965 ( 20 U.S.C. 1087e ), a borrower of an eligible Federal Direct Loan shall submit to the small business development center an application that includes such information as the Administrator may require, including an identification of the time period during which the borrower has made 24 monthly payments on the eligible Federal Direct Loan, as required under subparagraphs (A)(ii) and (C) of paragraph (1) of such subsection (r). (B) Requirements A small business development center shall approve a borrower who applies under subparagraph (A) for eligible Federal Direct Loan cancellation if the small business development center determines that the borrower— (i) as of the date on which the application is submitted, is employed as a founder or full-time employee of a small business startup that— (I) is located in an area that was a distressed area not more than 3 years before the date on which the small business startup was established; (II) is certified under paragraph (3) by the small business development center; and (III) as of the date on which the small business development center approves the borrower under this paragraph, has been operating continuously for not less than 5 years and not more than 10 years; and (ii) was employed as a founder or a full-time employee by a small business startup described in clause (i) during a period beginning not more than 5 years after the date on which the small business startup was established, as identified by the borrower under subparagraph (A). . 4. Treatment of loan cancellation (a) In general Section 108(f) of the Internal Revenue Code of 1986 is amended by adding at the end the following: (6) Cancellation of certain Federal student loans In the case of an individual, gross income shall not include the discharge (in whole or in part) of any student loan pursuant to the cancellation (in whole or in part) of such loan by the Secretary of Education under subsection (r) of section 455 of the Higher Education Act of 1965 ( 20 U.S.C. 1087e ). . (b) Effective date The amendment made by subsection (a) shall apply to discharges of indebtedness occurring after the date of enactment of this Act.