Emergency Student Loan Consolidation Act of 1983

(Measure passed House, amended)

Emergency Student Loan Consolidation Act of 1983 - Amends part B (Federal, State, and Private Programs of Low-Interest Insured Loans to Students in Institutions of Higher Education) of title IV (Student Assistance) of the Higher Education Act of 1965 (HEA) to add new provisions for student loan consolidation.

Directs the Secretary of Education (or a State or nonprofit private institution or organization with which the Secretary has an agreement under provisions for Federal payments to reduce interest costs) to enter into agreements with the Student Loan Marketing Association (Sallie Mae) and specified eligible commercial lenders to provide consolidation loans to eligible borrowers. Provides for such consolidation of student loans made, insured, or guaranteed under part B or under part E (Direct Loans to Students in Institutions of Higher Education).

Requires that such consolidation loans be covered by a properly issued certificate of insurance. Provides that loans covered by a certificate of insurance issued by a State or nonprofit private institution or organization shall be considered to be insured loans for purposes of Federal reimbursements, but that no administrative cost allowance will be paid with respect to such loans.

Defines eligible borrowers, for consolidation loan purposes, as those who: (1) either owe at least $5,000 to two or more lenders or programs under title IV or owe $7,500 to a single lender under part B; (2) are in repayment status, or in the grace period preceding repayment status, and are not delinquent with respect to any required payment on such indebtedness by more than 60 days; and (3) are not parent borrowers under the Auxiliary Loan program.

Terminates an individual's eligibility for a consolidation loan upon receipt of a consolidation loan, except with respect to student loans received after the date of receipt of the consolidation loan. Provides that only loans received after such date shall be taken into account for the purpose of computing the outstanding indebtedness of such an individual.

Sets forth requirements for such consolidation loan agreements. Requires eligible commercial lenders to agree to make consolidation loans upon application of any eligible borrower, if and only if the lender holds an outstanding loan of the borrower and the borrower has no other application pending with another lender for a consolidation loan. Requires Sallie Mae to agree to make a consolidation loan upon application of any eligible borrower, if that borrower has no other application pending with another lender for a consolidation loan.

Sets forth requirements for certificates of insurance for consolidation loans. Requires that such certificates include: (1) reporting requirements of the Secretary on the lender and an identification of the office of the Department of Education, or of the State or nonprofit private institution or organization, which will process claims and perform other related administrative functions; (2) any alternative repayment terms which will be offered to borrowers by the lender; (3) a requirement that a lender who no longer proposes to make consolidation loans notify the issuer so that the certificate may be terminated; and (4) the terms upon which the issuer may limit, suspend, or terminate the lender's authority to make consolidation loans under the certificate.

Provides that such consolidation loans shall be insurable only if the loan is made to an eligible borrower who has agreed to notify the holder of the loan promptly concerning any change of address and the loan is evidenced by a note or other written agreement which meets specified requirements.

Sets the interest rate for such consolidation loans at nine percent per year (but at ten percent in the case of consolidation of auxiliary loans made to an independent undergraduate or graduate student).

Permits consolidation loan lenders, to the extent authorized by the certificate of insurance, to establish repayment terms, including graduated and income sensitive repayment schedules. Limits repayment periods to specified maximum periods depending on the loan amount. Requires commencement of repayment within a specified period after all holders have discharged the borrower's liability on the loans selected for consolidation.

Prohibits charging an origination fee or insurance premium to the borrower on any consolidation loan. Provides that no insurance premium shall be payable by the lender to the issuer of the certificate of insurance with respect to any such loan.

Provides that authority to make such consolidation loans expires at the close of September 30, 1986. Provides that consolidation loans shall not be considered to be new loans made to students for purposes of determining the maximum amount of loans that can be federally-insured under specified HEA provisions.

Makes technical and conforming amendments.

Provides that the applicable percentage to be added in determining the special allowance on consolidation loans shall be three percent (rather than three and one half percent).

Extends the authority of Sallie Mae to make consolidation loans under its current certificate of comprehensive insurance coverage from the Secretary for the first six months after the enactment of this Act. Requires that loans made under such extended consolidation authority: (1) be made only to individuals who filed applications prior to November 1, 1983; (2) bear nine percent interest; (3) use three percent as part of the formula for determining the special allowance; and (4) be repaid within 15 years. Declares that no holder of a consolidation loan made under such extended authority shall have a contractual right against the United States to receive a special allowance which is greater than that permitted under the three percent formula.

Provides that HEA provisions for termination of Sallie Mae's authority to make consolidation loans shall not preclude Sallie Mae from making specified consolidation loans (with certain interest, repayment period, and special allowance terms) for which the promissory note was signed, or delivered or sent for signature, before November 1, 1983.

Directs the National Institute of Education to: (1) evaluate the cost, efficiency, and impact of the consolidation loan program established by this Act; and (2) report to the Congress by June 30, 1986, on its findings and recommendations.