Student Loan Consolidation Act of 1984

(Reported to Senate from the Committee on Labor and Human Resources with amendment (without written report))

Student Loan Consolidation Act of 1984 - 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 and State agencies 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) owe at least $5,000 to one or more lenders or programs under title IV; (2) have not carried at least one-half the normal full-time academic work-load at an eligible institution during the previous four months; (3) if in repayment status are not delinquent with respect to any required payment on such indebtedness by more than 90 days; (4) are not parent borrowers under the Auxiliary Loan program; and (5) certify, subject to specified penalties, that they are not currently receiving compensation for employment for which the total annualized monthly rate of pay of the borrower is in excess of 200 percent of the outstanding principal balance of all such loans (provides for deductions for dependent children in determining such total annualized monthly rate of pay).

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: (1) upon application of any eligible borrower, if the lender holds an outstanding loan of the borrower which is selected by the borrower for such consolidation; and (2) to other eligible borrowers only to the extent permitted by the Secretary in an agreement under specified provisions.

Requires specified State lending agencies to make such consolidation loans, subject to the availability of funds allocated for such purpose, to any eligible borrower who: (1) is, or was at the time of receiving a loan which is selected for consolidation, a resident of the State of such lender; or (2) received loans under title IV while attending an institution of higher education in the State of such lender. Permits such State lending agencies to elect to limit the further availability of their consolidation loans to those borrowers for whom the State lending agency is the holder of a loan selected for consolidation.

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 such consolidation loan agreements. Limits the making of any such consolidation loan from the proceeds of any tax-exempt bond or other obligation to an amount no greater than 15 percent of the total outstanding principal on all loans under title IV held by a lender. Requires lenders to notify borrowers of the availability and terms of consolidation loans.

Directs the Secretary to issue certificates of comprehensive insurance coverage to lenders which have entered into such consolidation loan agreements. Sets forth required provisions for such certificates.

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 except that in the case of a consolidation of auxiliary loans made to an independent undergraduate or graduate student the consolidation loan shall have an annual interest rate equal to the highest applicable interest rate on such auxiliary loans (either 12 or 14 percent).

Permits consolidation loan lenders, except as provided in specified provisions, to establish repayment terms, including graduated and income sensitive repayment schedules. Limits the initial repayment period to a specified maximum period. Sets minimum monthly installment requirements. Provides that such initial repayment schedule shall continue to be effective unless the borrower demonstrates, pursuant to specified requirements, to the lender that the borrower's eligibility index is less than or equal to a specified level. Provides for determination of such eligibility index on the basis of the dependent-adjusted gross income on the borrower's Federal income tax return for the preceding taxable year.

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 shall expire at the close of FY 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).

Directs the Secretary 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 findings and recommendations relating to such evaluation.