,,ii #aahth ,,congress #b;d ,session ,s4 #dibf ,,in ,,the ,,senate ,,of ,,the ,,united ,,states ,august #a1 #bjbd,mr4 ,rounds introduced the following bill2 which was read twice and referred to the ,committee on ,health1 ,education1 ,labor1 and ,pensions ,a ,,bill ,to establish a new ,guaranteed ,student ,loan ,program4 #a4 ,short title ,this ,act may be cited as the ,affordable ,future ,loan ,program ,act of #bjbd4 #b4 ,government ,guaranteed ,student ,loan ,program ,at the end of title ,,iv of the ,higher ,education ,act of #aife 7#bj ,u4,s4,c4 #ajgj et seq471 add the following3 ,j ,guaranteed ,student ,loan ,program #dii;,a4 ,statement of purpose2 nondiscrimination2 appropriations authorized 7a7 ,purpose2 discrimination prohibited 7#a7 ,purpose ,the purpose of this part is to enable the ,secretary-- 7,a7 to pay a portion of the interest on loans to qualified students that are guaranteed under this part2 and 7,b7 to guarantee a portion of each loan under this part4 7#b7 ,discrimination by creditors prohibited ,no agency1 organization1 institution1 bank1 credit union1 corporation1 or other lender who regularly extends1 renews1 or continues credit under this part shall exclude from receipt or deny the benefits of1 or discriminate against any borrower or applicant in obtaining1 such credit on the basis of-- 7,a7 race1 national origin1 religion1 sex1 marital status1 age1 or disability status2 7,b7 the type or category of institution of higher education that the borrower or applicant attends or attended2 7,c7 the degree or program of study of the borrower or applicant2 or 7,d7 the creditworthiness of the borrower or applicant4 7b7 ,authorization of appropriations ,there are authorized to be appropriated to carry out this part such sums as may be necessary for the period of fiscal years #bjbe through #bjbi4 7c7 ,designation ,the program established under this part shall be referred to as the ,affordable ,future ,loan ,program4 ,loans made pursuant to this part shall be known as ,affordable ,future loans4 #dii;,a-#a4 ,program authority ,the ,secretary shall implement the ,affordable ,future ,loan ,program1 through which the ,secretary shall-- 7#a7 pay an eligible lender #ih percent of the amount of principal and interest due on each defaulted eligible loan that is issued under this part by an eligible lender2 7#b7 reimburse an eligible lender for amounts of subsidized interest under this part2 and 7#c7 ensure that only eligible lenders that issue loans in accordance with this part receive the guarantee funds described in paragraph 7#a7 and the reimbursement described in paragraph 7#b74 #dii;,a-#b4 ,eligible lenders and eligible loans 7a7 ,eligible lender ,for purposes of this part an eligible lender is an eligible lender as described in subparagraphs 7,a7 through 7,d71 7,i71 and 7,k7 of section #dce7;d77#a71 except that references to 'this part' or references to other sections in part ,b in such subsection shall be construed to mean this part rather than part ,b or any section of part ,b4 7b7 ,eligible loan 7#a7 ,in ,general ,an eligible loan is a loan issued under this part on or after the date of enactment of the ,affordable ,future ,loan ,program ,act of #bjbd to an undergraduate student who is otherwise eligible under section #dhd1 who meets the requirements of paragraph 7#b71 and who is enrolled or will be enrolled at an eligible institution of higher education1 to enable such student to pursue the student's courses of study at such institution4 7#b7 ,federal loans ,a student who desires to apply for a loan under this part and is otherwise eligible to do so1 may not apply for such loan until the student-- 7,a7 has applied for1 and received a determination notice about1 financial assistance under subpart #a of part ,a and part ,d for the applicable period of study2 or 7,b7 states that the student elects not to apply for financial assistance under subpart #a of part ,a and part ,d for the applicable period of study4 #dii;,a-#c4 ,agreements with eligible lenders 7a7 ,participation agreements ,an agreement with an eligible lender for participation in the program under this part shall-- 7#a7 provide that an eligible lender will offer the maximum amount of eligible loans under this part to any undergraduate student for attendance at an eligible institution of higher education2 7#b7 provide that the eligible lender accepts responsibility and financial liability stemming from its failure to perform its functions pursuant to the agreement2 7#c7 provide for the implementation of a quality assurance system1 as established by the ,secretary and developed in consultation with eligible lenders1 to ensure that the eligible lender is complying with program requirements and meeting program objectives2 7#d7 provide that an eligible lender will comply with the requirements of subsection 7c72 7#e7 provide that the funds borrowed by a student are disbursed to the institution by check or other means that is payable to and requires the endorsement or other certification by such student1 except-- 7,a7 that nothing in this section shall be interpreted-- 7i7 to allow the ,secretary to require checks to be made copayable to the institution and the borrower2 or 7ii7 to prohibit the disbursement of loan proceeds by means other than by check2 and 7,b7 in the case of any student who is studying outside the ,united ,states in a program of study abroad that is approved for credit by the home institution at which such student is enrolled1 the funds shall1 at the request of the borrower1 be delivered directly to the student and the checks may be endorsed1 and fund transfers authorized1 pursuant to an authorized power-of-attorney2 7#f7 provide that funds will be disbursed in a manner that ensures that any ,federal ,pell ,grant funds1 any ,federal ,direct ,loan funds1 and any ,state or institutional grant or scholarship funds awarded to the borrower are disbursed prior to disbursement of any funds from a loan under this part2 and 7#g7 provide that the funds borrowed by a student are otherwise disbursed in accordance with section #dbh;,g4 7b7 ,withdrawal and termination procedures ,the ,secretary shall establish procedures by which eligible lenders may withdraw or be terminated from the program under this part4 7c7 ,submission of statements by holders on amount of payment ,each holder of an eligible loan under this part1 with respect to which payments of interest are required to be made by the ,secretary1 shall submit to the ,secretary1 at such time or times and in such manner as the ,secretary may prescribe1 statements containing such information as may be required by or pursuant to regulation for the purpose of enabling the ,secretary to determine the amount of the payment which the ,secretary must make with respect to that loan4 #dii;,a-#d4 ,payment of loan guarantee for defaulted loans 7a7 ,notice to secretary and payment of loss ,upon default by the student borrower on any eligible loan under this part1 and prior to the commencement of suit or other enforcement proceedings upon security for that loan1 the insurance beneficiary shall promptly notify the ,secretary1 and the ,secretary shall if requested 7at that time or after further collection efforts7 by the beneficiary1 or may on the ,secretary's own motion1 if the insurance is still in effect1 pay to the beneficiary #if percent of the amount of the loss sustained by the insured upon that loan as soon as that amount has been determined4 7b7 ,amount of loss ,the amount of the loss on any loan shall1 for the purposes of this subsection and subsection 7e71 be deemed to be an amount equal to the unpaid balance of the principal amount and accrued interest1 including interest accruing from the date of submission of a valid default claim 7as determined by the ,secretary7 to the date on which payment is authorized by the ,secretary1 except that such amount may be reduced based on default rate in a manner similar to the reductions described in section #dbe7;b74 7c7 ,due diligence ,such beneficiary shall be required to meet the standards of due diligence in the collection of the loan and shall be required to submit proof that the institution was contacted and other reasonable attempts were made to locate the borrower 7when the location of the borrower is unknown7 and proof that contact was made with the borrower 7when the location is known74 7d7 ,timing of determination ,the ,secretary shall make the determination required to carry out the provisions of this section not later than #ij days after the notification by the insurance beneficiary and shall make payment in full on the amount of the beneficiary's loss pending completion of the due diligence investigation4 7e7 ,effect of payment of loss ,upon payment of the amount of the loss pursuant to subsection 7a71 the ,united ,states shall be subrogated for all of the rights of the holder of the obligation upon the insured loan and shall be entitled to an assignment of the note or other evidence of the insured loan by the insurance beneficiary4 ,the ,secretary may1 in attempting to make recovery on such loans1 contract with private business concerns1 ,state student loan insurance agencies1 or ,state guaranty agencies1 for payment for services rendered by such concerns or agencies in assisting the ,secretary in making such recovery4 ,any contract under this subsection entered into by the ,secretary shall provide that attempts to make recovery on such loans shall be fair and reasonable1 and do not involve harassment1 intimidation1 false or misleading representations1 or unnecessary communications concerning the existence of any such loan to persons other than the student borrower4 7f7 ,forbearance not precluded ,nothing in this section or in this part shall be construed to preclude any forbearance for the benefit of the student borrower which may be agreed upon by the parties to the insured loan and approved by the ,secretary1 or to preclude forbearance by the ,secretary in the enforcement of the insured obligation after payment on that insurance4 ,any forbearance which is approved by the ,secretary under this subsection with respect to the repayment of a loan1 including a forbearance during default1 shall not be considered as indicating that a holder of a federally insured loan has failed to exercise reasonable care and due diligence in the collection of the loan4 7g7 ,care and diligence required of holders ,nothing in this section or in this part shall be construed to excuse the holder of a federally insured loan from exercising reasonable care and diligence in the making and collection of loans under the provisions of this part4 ,if the ,secretary1 after a reasonable notice and opportunity for hearing to an eligible lender1 finds that it has substantially failed to exercise such care and diligence or to make the reports and statements required under section #dii;,a-#c7;c71 the ,secretary shall disqualify that lender for further ,federal insurance on loans granted pursuant to this part until the ,secretary is satisfied that its failure has ceased and finds that there is reasonable assurance that the lender will in the future exercise necessary care and diligence or comply with such requirements1 as the case may be4 7h7 ,reports to consumer reporting agencies and institutions of higher education ,for the purpose of promoting responsible repayment of loans under this part1 the ,secretary and each eligible lender and subsequent holder shall enter into an agreement with each consumer reporting agency to exchange information concerning student borrowers in the same manner as such agreements are made under section #dcj;,a4 #dii;,a-#e4 ,purchase of loans sold in secondary market 7a7 ,in ,general ,loans under this part may be sold in the secondary market to another eligible lender4 7b7 ,servicing and liquidation ,when an eligible lender has sold the guaranteed portion of a loan in the secondary market1 the loan holder must perform all necessary servicing and liquidation actions for such loan4 7c7 ,status report ,in the event that the ,secretary purchases its guaranteed portion of such a loan from the holder of the loan1 the loan holder shall provide the ,secretary with a loan status report within #ae business days of such purchase4 ,this report shall include a status report on the borrower and plans for any type of loan workout or loan restructuring4 ,the report shall accompany requested documentation that the ,secretary determines is sufficient to be able to review the loan holder's administration of the loan4 ,failure to provide requested documentation to the ,secretary may lead to initiation of an action for recovery from the loan holder of all or some of the amounts the ,secretary paid to the holder of the loan on a guarantee4 7d7 ,further evaluation ,the ,secretary shall evaluate the eligible lender's continued participation in the secondary market and may restrict further sale of guaranteed portions into the secondary market until the ,secretary determines that the eligible lender has provided sufficient documentation for purchases4 #dii;,a-#f4 ,default reduction program 7a7 ,other repayment incentives 7#a7 ,sale or assignment of loan 7,a7 ,in general ,the ,secretary1 upon securing #i payments made within #bj days of the due date during #aj consecutive months of amounts owed on a loan for which the ,secretary has made a payment under this section1 shall1 if practicable1 sell the loan to another eligible lender4 7,b7 ,monthly payments ,the ,secretary shall not demand from a borrower as monthly payment amounts described in subparagraph 7,a7 more than is reasonable and affordable based on the borrower's total financial circumstances1 except such monthly payment amount shall not be less than #e4 7,c7 ,consumer reporting agencies ,upon the sale or assignment of the loan1 the ,secretary shall request any consumer reporting agency to which the ,secretary or holder1 as applicable1 reported the default of the loan1 to remove the record of the default from the borrower's credit history4 7,d7 ,eligible lender limitation ,a loan shall not be sold to an eligible lender under subparagraph 7,a7 if such lender has been found by the ,secretary to have substantially failed to exercise the due diligence required of lenders under this part4 7,e7 ,default due to error ,a loan that does not meet the requirements of subparagraph 7,a7 may also be eligible for sale or assignment under this paragraph upon a determination that the loan was in default due to clerical or data processing error and would not1 in the absence of such error1 be in a delinquent status4 7#b7 ,borrower eligibility ,any borrower whose loan is sold under paragraph 7#a77;,a7 shall not be precluded by section #dhd from receiving additional loans or grants under this title 7for which he or she is otherwise eligible7 on the basis of defaulting on the loan prior to such loan sale4 7#c7 ,applicability of general loan conditions ,a loan that is sold under paragraph 7#a77;,a7 shall1 so long as the borrower continues to make scheduled repayments thereon1 be subject to the same terms and conditions and qualify for the same benefits and privileges as other loans made under this part4 7#d7 ,limitation ,a borrower may obtain the benefits available under this subsection with respect to rehabilitating a loan 7whether by loan sale or assignment7 not more than #b times per loan4 7b7 ,satisfactory repayment arrangements ,to renew eligibility ,the ,secretary shall establish a program which allows a borrower with a defaulted loan or loans to renew eligibility for all title ,,iv student financial assistance 7regardless of whether the defaulted loan has been sold to an eligible lender or assigned to the ,secretary7 upon the borrower's payment of #f consecutive monthly payments4 ,the loan holder shall not demand from a borrower as a monthly payment amount under this subsection more than is reasonable and affordable based upon the borrower's total financial circumstances4 ,a borrower may only obtain the benefit of this subsection with respect to renewed eligibility once4 7c7 ,financial and economic literacy ,each program described in subsection 7b7 shall include making available financial and economic education materials for a borrower who has rehabilitated a loan4 #dii;,a-#g4 ,terms and conditions of loans 7a7 ,eligibility2 ,maximum aid 7#a7 ,eligibility ,a student's amount of need for a loan under this part shall be based solely on the student's estimated cost of attendance and estimated financial assistance1 including other assistance through a ,federal ,pell ,grant or a ,federal ,direct ,loan under this title or any ,state or institutional grant or scholarship funds awarded to the student4 ,an expected family contribution or student aid index shall not be considered4 7#b7 ,maximum aid 7,a7 ,in ,general ,subject to subparagraph 7,b71 the maximum dollar amount of financial assistance provided annually under this part to a student shall not exceed an amount equal to-- 7i7 the cost of attendance for such student2 minus 7ii7 the total amount of-- 7,i7 other financial assistance not received under this title 7as defined in section #dhj7;i772 and 7,,ii7 other financial assistance received under this title1 including a ,federal ,pell ,grant or a ,federal ,direct ,loan4 7,b7 ,limitation ,a loan under this part shall not exceed an amount equal to-- 7i7 #ai1jjj adjusted annually according to the estimated percentage change in the ,consumer ,price ,index 7as determined by the ,secretary1 using the definition in section #dgh7;f77 for the most recent calendar year ending prior to the beginning of that award year2 minus 7ii7 the amount described in subclause 7,,ii7 of subparagraph 7,a77ii74 7b7 ,interest rate 7#a7 ,rates for ,borrowers not in repayment status ,in the case of a borrower who is not in repayment status1 for an ,affordable ,future ,loan for which the first disbursement is made on or after ,july #a1 #bjbe1 the applicable rate of interest shall1 during any #ab-month period beginning on ,july #a and ending on ,june #cj1 be determined on the preceding ,june #a and be equal to the lesser of-- 7,a7 a rate equal to the high yield of the #aj-year ,treasury note auctioned at the final auction held prior to such ,june #a plus #a percent2 or 7,b7 #f4bh percent4 7#b7 ,rates for ,borrowers in repayment status ,in the case of a borrower who is in repayment status1 for an ,affordable ,future ,loan for which the first disbursement is made on or after ,july #a1 #bjbe1 the applicable rate of interest shall1 during any #ab-month period beginning on ,july #a and ending on ,june #cj1 be determined on the preceding ,june #a and be equal to the lesser of-- 7,a7 a rate equal to the high yield of the #aj-year ,treasury note auctioned at the final auction held prior to such ,june #a plus #b percent2 or 7,b7 #f4bh percent4 7#c7 ,publication ,the ,secretary shall determine the applicable rates of interest under this subsection after consultation with the ,secretary of the ,treasury and shall publish such rate in the ,federal ,register as soon as practicable after the date of determination1 but before ,june #a preceding the award year4 7#d7 ,subsidized interest ,the amount of interest for a loan under this part shall be paid by the ,secretary to the eligible lender on behalf of the borrower only during the period of time that the borrower is not in repayment status4 7#e7 ,not in repayment status ,in this section the term not in repayment status means any period of time described in subparagraphs 7,a71 7,c71 or 7,d7 of subsection 7e77#b74 7c7 ,loan fee ,each eligible lender under this part may charge the borrower an origination fee in an amount not to exceed #a4j percent of the principal amount of the loan1 to be deducted proportionately from each installment payment of the proceeds of the loan prior to payment to the borrower4 ,a lender that charges an origination fee under this paragraph shall assess the same fee to all student borrowers4 7d7 ,repayment plans 7#a7 ,design and selection ,consistent with criteria established by the ,secretary1 a borrower of a loan made under this part shall be offered #b repayment plans for such loan4 ,the borrower shall be entitled to accelerate1 without penalty1 repayment on the borrower's loans under this part4 ,the borrower may choose-- 7,a7 a #ae-year fixed installment repayment plan2 or 7,b7 the income driven repayment plan described in paragraph 7#b74 7#b7 ,income driven repayment plan 7,a7 ,in ,general ,under the income-driven repayment plan under this subsection the borrower's aggregate monthly payment for loans under this part shall be equal to the income-driven calculation1 divided by #ab4 7,b7 ,discretionary income ,the term discretionary income means the amount by which a borrower's 7and the borrower's spouse1 if applicable7 annual adjusted gross income exceeds #aej percent of the poverty line applicable to the borrower's family size4 7,c7 ,discretionary income bend point ,the term discretionary income bend point means #be1jjj1 adjusted annually for inflation as determined by the ,consumer ,price ,index 7as such term is defined in section #dgh7;f77 for the previous calendar year4 7,d7 ,income-driven calculation 7i7 ,in general ,the term income-driven calculation1 when used with respect to a borrower1 means the annual amount due on the total amount of loans under this part1 which annual amount is equivalent to-- 7,i7 #aj percent of the borrower's discretionary income that is less than the discretionary income bend point1 plus 7,,ii7 #ae percent of the borrower's discretionary income that is equal to or greater than the discretionary income bend point4 7ii7 ,annual calculation ,the calculation under clause 7i7 shall be determined on an annual basis for the duration of the repayment period4 7#c7 ,selection by lender ,if a borrower of a loan made under this part does not select a repayment plan described in paragraph 7#a71 the eligible lender shall provide the borrower with a repayment plan described in subparagraph 7,a7 of paragraph 7#a74 7#d7 ,changes in selections ,the borrower of a loan made under this part may change the borrower's selection of a repayment plan under paragraph 7#a71 or the eligible lender's selection of the plan for the borrower under paragraph 7#c71 as the case may be1 without penalty or subject to additional fees1 except that such borrower shall remain in a selected repayment plan for not less than #f months4 7#e7 ,alternative repayment plans ,the lender may provide1 on a case by case basis1 an alternative repayment plan to a borrower of a loan made under this part who demonstrates to the satisfaction of the lender that the terms and conditions of the repayment plans available under paragraph 7#a7 are not adequate to accommodate the borrower's exceptional circumstances4 ,in designing such alternative repayment plans1 the lender shall ensure that such plans do not exceed the cost to the ,federal ,government1 as determined on the basis of the present value of future payments by such borrowers1 of loans made using the plans available under paragraph 7#a74 7#f7 ,repayment after default 7,a7 ,lender costs ,the eligible lender may require any borrower who has defaulted on a loan made under this part to pay all reasonable collection costs associated with such loan4 7,b7 ,payment to ,secretary ,the ,secretary may require any borrower who has defaulted on a loan made under this part to repay the loan pursuant to the income driven repayment plan described in paragraph 7#a77;,b74 7e7 ,deferment 7#a7 ,in ,general ,a borrower of a loan made under this part who meets any of the requirements described in subparagraphs 7,a7 through 7,d7 of paragraph 7#b7 shall be eligible for a deferment1 during which periodic installments of principal and interest need not be paid4 7#b7 ,eligibility ,a borrower of a loan made under this part shall be eligible for a deferment during any period-- 7,a7 during which the borrower is carrying at least a normal full-time work load for the course of study that the borrower is pursuing1 as determined by the eligible institution 7as such term is defined in section #dce7;a77 the borrower is attending2 or 7,b7 for #f months following the date on which the borrower ceases to carry the normal full-time work load as described in subparagraph 7,a72 7,c7 during which the borrower-- 7i7 is serving on active duty during a war or other military operation or national emergency2 or 7ii7 is performing qualifying ,national ,guard duty during a war or other military operation or national emergency1 and for the #ahj-;day period following the demobilization date for the service described in clause 7i7 or 7ii72 or 7,d7 during-- 7i7 any period in which such borrower is receiving treatment for cancer2 and 7ii7 the #f months after such period4 7#c7 ,interest accrual ,during periods described in subparagraphs 7,a71 7,c71 and 7,d7 of paragraph 7#b7 interest shall be subsidized in accordance with subsection 7b77#d74 7f7 ,loan application and promissory note ,the common financial reporting form required in section #dhc7;a77#a7 shall constitute the application for loans made under this part4 ,the ,secretary shall develop1 print1 and distribute to participating eligible lenders a standard promissory note and loan disclosure form4 7g7 ,loan disbursement ,loans shall be disbursed in accordance with section #dii;,a-#c4 7h7 ,disclosures ,with respect to loans under this part and in accordance with such regulations as the ,secretary shall prescribe1 each eligible lender participating in this part shall comply with each of the requirements under section #dcc that apply to a lender with respect to a loan under part ,b4 7i7 ,enrollment period limitations ,in order to continue to be eligible for a loan under this part1 a borrower shall complete the program of study not more than #e years after the date the borrower first enters the program of study4 #dii;,a-#h4 ,relationship to other ,federal ,loans 7a7 ,in general ,a borrower may borrow loans both under part ,d and under this part for the same period of study4 ,if a borrower is borrowing loans under both part ,d and this part for the same period of study1 the eligible lender shall ensure that the ,secretary has made determinations about the amount of loans awarded under part ,d for such period prior to determining the amount of loans under this part that the borrower is eligible to borrow1 in accordance with section #dii;,a-#b7;b74 7b7 ,rule of construction ,nothing in this ,act shall be construed to require a borrower who borrows loans under this part to also borrow loans under part ,d4 7c7 ,prohibition on combining loans ,the ,secretary may not combine or otherwise consolidate a loan made under this part with a loan made under part ,d1 unless the borrower of such loans elects to consolidate such loans4 4