Student Loan Fair Prepayment Act - Amends title IV (Student Assistance) of the Higher Education Act of 1965 to require that when the holder of a borrower's loans under the Federal Family Education Loan (FFEL) or William D. Ford Federal Direct Loan (DL) programs receives a prepayment for such loans, it is to be applied first toward any fees due on such loans and then, unless the borrower requests otherwise, toward the principal due on the loan that bears the highest interest rate.
Makes that requirement inapplicable to income-based or income contingent repayment plans for FFELs or DLs.
Requires an institution of higher education holding a borrower's loans under the Federal Perkins Loan program to first apply any excess payments by the borrower toward any fees due on such loans and then, unless the borrower requests otherwise, toward the principal due on the loan that bears the highest interest rate.
Amends the Truth in Lending Act to require a private education loan holder that holds more than one private education loan for a borrower to apply any prepayments on those loans first toward any fees due on such loans and then, unless the borrower requests otherwise, toward the principal due on the loan that bears the highest interest rate.
[Congressional Bills 113th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4236 Introduced in House (IH)]
113th CONGRESS
2d Session
H. R. 4236
To amend the Higher Education Act of 1965 and the Truth in Lending Act
to clarify the application of prepayment amounts on student loans.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
March 13, 2014
Mrs. Davis of California introduced the following bill; which was
referred to the Committee on Education and the Workforce, and in
addition to the Committee on Financial Services, for a period to be
subsequently determined by the Speaker, in each case for consideration
of such provisions as fall within the jurisdiction of the committee
concerned
_______________________________________________________________________
A BILL
To amend the Higher Education Act of 1965 and the Truth in Lending Act
to clarify the application of prepayment amounts on 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 Fair Prepayment Act''.
SEC. 2. APPLICATION OF PREPAYMENT AMOUNTS FOR FFEL AND DIRECT LOANS.
Section 455(d) of the Higher Education Act of 1965 (20 U.S.C.
1087e(d)) is amended by adding at the end the following new paragraph:
``(6) Application of prepayment amounts.--
``(A) Requirement.--Notwithstanding any other
provision of this subsection or any other provision of
law, with respect to loans made to an eligible borrower
under this part or part B, which are held by the same
holder and which have different applicable rates of
interest, the holder of such loans shall, except as
otherwise requested by the borrower in writing, apply
the borrower's prepayment amount (within the meaning of
section 682.209(b) of title 34, Code of Federal
Regulations, or a successor regulation) for one or more
of such loans, first toward the outstanding balance of
principal due on the loan with the highest applicable
rate of interest among such loans.
``(B) Eligible borrower.--
``(i) In general.--For purposes of this
paragraph, the term `eligible borrower' means a
borrower with no outstanding balance of fees,
including collection costs and authorized late
charges, due on any loan made under this part
or part B.
``(ii) Prepayment amounts.--A prepayment
amount (as described in subparagraph (A)) made
by a borrower who is not an eligible borrower
to a holder shall be applied first toward the
borrower's outstanding balance of fees,
including collection costs and authorized late
charges, due on any loan made under this part
or part B held by such holder.
``(C) Exceptions.--This paragraph shall not apply
to an income-based repayment plan under section 493C or
an income contingent repayment plan under section
455(d)(1)(D), such as a Pay As You Earn repayment
plan.''.
SEC. 3. APPLICATION OF PREPAYMENT AMOUNTS FOR PERKINS LOANS.
Section 464(c)(1)(C) of the Higher Education Act of 1965 (20 U.S.C.
1087dd(c)(1)(C)) is amended--
(1) by striking ``and'' at the end of clause (i);
(2) by adding at the end the following:
``(iii) shall provide that the institution
shall, in the case of a borrower with no
outstanding balance of fees (including
collection costs and authorized late charges)
due on the loans held by the institution and
who repays more than the amount due for a
repayment period, use the excess to prepay
(within the meaning of section 674.31(b)(4)(iv)
of title 34, Code of Federal Regulations, or a
successor regulation) the principal due on the
loan with the highest applicable rate of
interest among such loans, unless otherwise
requested by the borrower in writing; and
``(iv) shall provide that the institution
shall, in the case of a borrower with an
outstanding balance of fees (such as collection
costs and authorized late charges) due on the
loans held by the institution and who repays
more than the amount due for a repayment
period, first apply such excess toward such
outstanding balance of fees;''.
SEC. 4. APPLICATION OF PREPAYMENT AMOUNTS FOR PRIVATE EDUCATION LOANS.
Section 128(e) of the Truth in Lending Act (15 U.S.C. 1638(e)) is
amended by adding at the end the following:
``(12) Application of prepayment amounts.--
``(A) In general.--Notwithstanding any other
provision of law, with respect to a borrower with more
than one private education loan which are held by the
same holder and which have different applicable rates
of interest, the holder of such loans shall, except as
otherwise requested by the borrower in writing, apply
the borrower's prepayment amount (within the meaning of
section 682.209(b) of title 34, Code of Federal
Regulations, or a successor regulation) for one or more
of such loans, first toward the outstanding balance of
principal due on the loan with the highest applicable
rate of interest among such loans.
``(B) Exception.--
``(i) In general.--Subparagraph (A) shall
not apply to any prepayment amount made by a
borrower to a holder if the borrower has an
outstanding balance of fees, including
collection costs and authorized late charges,
due on any private education loan held by such
holder.
``(ii) Prepayment amounts.--A prepayment
amount (as described in subparagraph (A)) made
by a borrower described in subparagraph (B) to
a holder shall be applied first toward the
borrower's outstanding balance of fees,
including collection costs and authorized late
charges, due on any private education loan held
by such holder.''.
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Introduced in House
Introduced in House
Referred to the Committee on Education and the Workforce, and in addition to the Committee on Financial Services, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.
Referred to the Committee on Education and the Workforce, and in addition to the Committee on Financial Services, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.
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