DEFAULT REDUCTION PROGRAMS.

SEC. 420. DEFAULT REDUCTION PROGRAMS. Section 428F of the Act (20 U.S.C. 1078–6) is amended— (1) by striking subsection (a); (2) in subsection (b)— (A) in paragraph (1)(A)— (i) by striking “Upon” and inserting “Each guaranty agency shall enter into an agreement with the Secretary which shall provide that upon”; and (ii) by adding at the end the following new sentence: “Neither the guaranty agency nor the Secretary shall demand from a borrower as monthly payment amounts referred to in this paragraph more than is reasonable and affordable based upon the borrower’s total financial circumstances.”; and (B) in paragraph (3), by inserting “or grants” after “loans”: (3) by redesignating subsection (b) (as amended in paragraph (2)) as subsection (a); and (4) by adding at the end the following new subsection: “(b) Special Rule.— Each guaranty agency shall establish a program which allows a borrower with a defaulted loan or loans to renew eligibility for all title IV student financial assistance (regardless of whether the defaulted loan has been sold to an eligible lender) upon the borrower’s payment of 6 consecutive monthly payments. The guaranty agency 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 circumstances.”.