Student Loan Default Collection Act of 1989

Student Loan Default Collection Act of 1989 - Amends the Higher Education Act of 1965 to establish a student loan default reduction program.

Establishes such program as an amnesty program for student loan defaulters on guaranteed loans under the Robert T. Stafford Student Loan Program. Allows borrowers with defaulted loans to fully repay the debt: (1) without penalties; (2) with any information on the defaulted loans removed from credit bureaus; and (3) with their student aid eligibility restored. Directs the Secretary of Education (the Secretary) to sell to an eligible lender the loans of students: (1) who are in default because of a clerical error; or (2) who have made 12 consecutive payments on a defaulted loan (with the student aid eligibility of such students to be restored). Directs the Secretary to widely publicize the availability of such amnesty program.

 
B37 4-19-89 [update]
HR 2043 IH
101st CONGRESS
1st Session
 H. R. 2043
To amend the Higher Education Act of 1965 to establish a program to improve
the collections of defaulted student loans, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
April 18, 1989
Mr. JONTZ (for himself, Mr. GAYDOS, Mr. SMITH of Vermont, Mr. PENNY,
Mr. PERKINS, Mr. OWENS of New York, Mr. RAHALL, Mr. TOWNS, Mr. PORTER,
and Mr. ATKINS) 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 establish a program to improve
the collections of defaulted student loans, 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 Default Collection Act of 1989'.
SEC. 2. DEFAULT REDUCTION PROGRAM.
  (a) AMENDMENT- Section 428F of the Act (20 U.S.C. 1078-6) is amended to
  read as follows:
`DEFAULT REDUCTION PROGRAM
  `SEC. 482F. (a) PROGRAM REQUIREMENTS-
  `(1) AUTHORITY TO ESTABLISH A DEFAULT REDUCTION PROGRAM- The Secretary
  shall, in accordance with the requirements of this section, establish a
  default reduction program for borrowers who have one or more loans under
  title IVB of the Act which are in default, as defined in section 435(l), as
  of the date of enactment of this section. Such program shall be commenced
  within six months after the date of enactment of this section and shall
  last for six months.
  `(2) ELIGIBILITY FOR THE BENEFITS OF THE DEFAULT REDUCTION PROGRAM- In
  order to be eligible for the benefits of the default reduction program,
  a borrower who has a loan or loans which are in default shall contact
  the holder of such loan or loans during the default reduction program and
  shall pay in full all remaining principal and interest on such loan or loans.
  `(3) BENEFITS OF THE DEFAULT REDUCTION PROGRAM- For each borrower meeting
  the requirement of paragraph (2)--
  `(A) no penalties shall be charged on defaulted loans which are paid in full;
  `(B) any information on the defaulted loan or loans which has been reported
  to credit bureaus shall be removed; and
  `(C) notwithstanding section 484, eligibility to receive additional
  assistance under this title shall be reestablished.
  `(b) OTHER REPAYMENT INCENTIVES-
  `(1) SALE OF LOAN-
  `(A) Upon securing consecutive payments for 12 months of amounts owed
  on a loan for which the Secretary has made a payment under paragraph (1)
  of section 428(c), the guaranty agency (pursuant to an agreement with the
  Secretary) or the Secretary shall, if practicable, sell the loan to an
  eligible lender. Such loan shall not be sold to an eligible lender who has
  been found by the guaranty agency or the Secretary to have substantially
  failed to exercise the due diligence required of lenders under this part.
  `(B) An agreement between the guaranty agency and the Secretary for purposes
  of this paragraph shall provide--
  `(i) for the repayment by the agency to the Secretary of 81.5 percent of
  the amount of the principal balance outstanding at the time of such sale,
  multiplied by a percentage in effect when payment under the guaranty
  agreement was made with respect to the loan; and
  `(ii) for the reinstatement by the Secretary (I) of the obligation to
  reimburse such agency for the amount expended by it in discharge of its
  insurance obligation under its loan insurance program and (II) of the
  obligation to pay to the holder of such loan a special allowance pursuant
  to section 438.
  `(C) A loan which does not meet the requirements of subparagraph (A) may
  also be eligible for sale under this paragraph upon a determination that a
  loan was in default due to clerical or data processing error and would not,
  in the absence of such error, be in a delinquent status.
  `(2) USE OF PROCEEDS OF SALES- Amounts received by the Secretary pursuant
  to the sale of such loans by a guaranty agency under this paragraph shall
  be deducted from the calculations of the amount of reimbursement for which
  the agency is eligible under paragraph (1)(B)(ii) of this section for the
  fiscal year in which the amount was received, notwithstanding the fact
  that the default occurred in a prior fiscal year.
  `(3) BORROWER ELIGIBILITY- Any borrower whose loan is sold under paragraph
  (1) shall not be precluded by section 484 from receiving additional loans
  under this title (for which he or she is otherwise eligible) on the basis
  of defaulting on the loan prior to such loan sale.
  `(4) APPLICABILITY OF GENERAL LOAN CONDITIONS- A loan which is sold under
  this paragraph shall, so long as the borrower continues to make scheduled
  repayments thereon, be subject to the same terms and conditions and qualify
  for the same benefits and privileges as other loans made under this part.'.
  (b) PUBLICITY- The Secretary of Education shall, from funds otherwise
  available to the Secretary, commencing not less than 30 days before the
  beginning of the default reduction program required by the amendment made
  by this section, and continuing throughout the duration of such program,
  widely publicize (through various communications media) the availability
  of the default reduction program.