FEDERAL PAYMENTS TO REDUCE STUDENT INTEREST COSTS.

SEC. 422. FEDERAL PAYMENTS TO REDUCE STUDENT INTEREST COSTS.(a) Definitions.—(1) Amendments.—Subparagraph (C) of section 428(a)(2) (20 U.S.C. 1078(a)(2)) is amended to read as follows:“(C) For the purpose of this paragraph—“(i) a student’s cost of attendance shall be determined under section 472;“(ii) a student’s estimated financial assistance means, for the period for which the loan is sought—“(I) the amount of assistance such student will receive under subpart 1 of part A (as determined in accordance with section 484(b)), subpart 3 of part A, and parts C and E; plus“(II) other scholarship, grant, or loan assistance, but excluding—122 STAT. 3228“(aa) any national service education award or post-service benefit under title I of the National and Community Service Act of 1990; and“(bb) any veterans’ education benefits as defined in section 480(c); and“(iii) the determination of need and of the amount of a loan by an eligible institution under subparagraph (B) with respect to a student shall be calculated in accordance with part F.”.(2) Effective date.—The amendments made by paragraph (1) shall take effect on July 1, 2010.(b) Duration of Authority To Make Interest Subsidized Loans.—Section 428(a)(5) (20 U.S.C. 1078(a)(5)) is amended—(1) by striking “2012” and inserting “2014”; and(2) by striking “2016” and inserting “2018”.(c) Insurance Program Agreements.—(1) Deferment information requirements.—Section 428(b)(1)(Y) (20 U.S.C. 1078(b)(1)(Y)) is amended—(A) by striking clause (i) and inserting the following:“(i) the lender shall determine the eligibility of a borrower for a deferment described in subparagraph (M)(i) based on—“(I) receipt of a request for deferment from the borrower and documentation of the borrower’s eligibility for the deferment;“(II) receipt of a newly completed loan application that documents the borrower’s eligibility for a deferment;“(III) receipt of student status information documenting that the borrower is enrolled on at least a half-time basis; or“(IV) the lender’s confirmation of the borrower’s half-time enrollment status through use of the National Student Loan Data System, if the confirmation is requested by the institution of higher education;”;(B) in clause (ii), by striking the period at the end and inserting “; and”; and(C) by adding at the end the following:“(iii) the lender shall, at the time the lender grants a deferment to a borrower who received a loan under section 428H and is eligible for a deferment under subparagraph (M) of this paragraph, provide information to the borrower to assist the borrower in understanding the impact of the capitalization of interest on the borrower’s loan principal and on the total amount of interest to be paid during the life of the loan.”.(2) Transfer information requirements.—Section 428(b)(2)(F)(i) (20 U.S.C. 1078(b)(2)(F)(i)) is amended—(A) in subclause (III), by striking “and” after the semicolon;(B) in subclause (IV), by striking “and” after the semicolon; and(C) by adding at the end the following:“(V) the effective date of the transfer;122 STAT. 3229“(VI) the date on which the current servicer (as of the date of the notice) will stop accepting payments; and“(VII) the date on which the new servicer will begin accepting payments; and”.(d) Restrictions on Inducements, Payments, Mailings, and Advertising.—Paragraph (3) of section 428(b) (20 U.S.C. 1078(b)(3)) is amended to read as follows:“(3) Restrictions on inducements, payments, mailings, and advertising.—A guaranty agency shall not—“(A) offer, directly or indirectly, premiums, payments, stock or other securities, prizes, travel, entertainment expenses, tuition payment or reimbursement, or other inducements to—“(i) any institution of higher education or the employees of an institution of higher education in order to secure applicants for loans made under this part; or“(ii) any lender, or any agent, employee, or independent contractor of any lender or guaranty agency, in order to administer or market loans made under this part (other than a loan made as part of the guaranty agency’s lender-of-last-resort program pursuant to section 428(j)), for the purpose of securing the designation of the guaranty agency as the insurer of such loans;“(B) conduct unsolicited mailings, by postal or electronic means, of student loan application forms to students enrolled in secondary schools or postsecondary educational institutions, or to the families of such students, except that applications may be mailed, by postal or electronic means, to students or borrowers who have previously received loans guaranteed under this part by the guaranty agency;“(C) perform, for an institution of higher education participating in a program under this title, any function that such institution is required to perform under this title, except that the guaranty agency may perform functions on behalf of such institution in accordance with section 485(b);“(D) pay, on behalf of an institution of higher education, another person to perform any function that such institution is required to perform under this title, except that the guaranty agency may perform functions on behalf of such institution in accordance with section 485(b); or“(E) conduct fraudulent or misleading advertising concerning loan availability, terms, or conditions.It shall not be a violation of this paragraph for a guaranty agency to provide technical assistance to institutions of higher education comparable to the technical assistance provided to institutions of higher education by the Department.”.(e) Information Regarding Income-Based Repayment Plans.—(1) In general.—Section 428(b)(9)(A) (20 U.S.C. 1078(b)(9)(A)) is amended—(A) in clause (iii), by striking “and” after the semicolon;122 STAT. 3230(B) in clause (iv), by striking the period at the end and inserting “; and”; and(C) by adding at the end the following:“(v) beginning July 1, 2009, an income-based repayment plan that enables a borrower who has a partial financial hardship to make a lower monthly payment in accordance with section 493C, except that the plan described in this clause shall not be available to a borrower for a loan under section 428B made on behalf of a dependent student or for a consolidation loan under section 428C, if the proceeds of such loan were used to discharge the liability of a loan under section 428B made on behalf of a dependent student.”.(2) Conforming amendment.—Section 428(b)(1)(L)(i) (20 U.S.C. 1078(b)(1)(L)(i)) is amended by striking “clause (ii) or (iii)” and inserting “clause (ii), (iii), or (v)”.(f) Forbearance Information Requirements in Guaranty Agreements.—Section 428(c) (20 U.S.C. 1078(c)) is amended—(1) in paragraph (2)(H)(i), by striking “preclaims” and inserting “default aversion”; and(2) in paragraph (3)(C)—(A) in clause (i), by striking “and” after the semicolon;(B) in clause (ii), by striking “and” after the semicolon; and(C) by inserting after clause (ii) the following:“(iii) the lender shall, at the time of granting a borrower forbearance, provide information to the borrower to assist the borrower in understanding the impact of capitalization of interest on the borrower’s loan principal and total amount of interest to be paid during the life of the loan; and“(iv) the lender shall contact the borrower not less often than once every 180 days during the period of forbearance to inform the borrower of—“(I) the amount of unpaid principal and the amount of interest that has accrued since the last statement of such amounts provided to the borrower by the lender;“(II) the fact that interest will accrue on the loan for the period of forbearance;“(III) the amount of interest that will be capitalized, and the date on which capitalization will occur;“(IV) the option of the borrower to pay the interest that has accrued before the interest is capitalized; and“(V) the borrower’s option to discontinue the forbearance at any time; and”.(g) Applicability of Usury Laws.—(1) Amendment.—Section 428(d) (20 U.S.C. 1078(d)) is amended by inserting “and section 207 of the Servicemembers Civil Relief Act (50 U.S.C. App. 527)” after “this Act”.(2) Conforming amendment.—Section 438 (20 U.S.C. 1087–1) is amended by adding at the end the following new subsection:“(g) Special Rule.—With respect to any loan made under this part for which the interest rate is determined under the 122 STAT. 3231 Servicemembers Civil Relief Act (50 U.S.C. App. 527), the applicable interest rate to be subtracted in calculating the special allowance for such loan under this section shall be the interest rate determined under that Act for such loan.”.(3) Effective dates.—The amendment made by paragraph (1) shall take effect on the date of enactment of this Act, and the amendment made by paragraph (2) shall take effect for loans for which the first disbursement is made on or after July 1, 2008.(h) Repeal of Duplicative Notice Requirement.—Subsection (e) of section 428 (20 U.S.C. 1078(e)) is repealed.(i) Information on Defaults.—Section 428(k) (20 U.S.C. 1078(k)) is amended by adding at the end the following:“(4) Provision of information to borrowers in default.—Each guaranty agency that has received a default claim from a lender regarding a borrower, shall provide the borrower in default, on not less than two separate occasions, with a notice, in simple and understandable terms, of not less than the following information:“(A) The options available to the borrower to remove the borrower’s loan from default.“(B) The relevant fees and conditions associated with each option.”.(j) Authority to Require Income-Based Repayment.—Section 428(m) (20 U.S.C. 1078(m)) is amended—(1) in the subsection heading, by inserting “and Income-Based” after “Income Contingent”;(2) in paragraph (1)—(A) by inserting “or income-based repayment plan” before “, the terms and conditions”; and(B) by inserting “or an income-based repayment plan under section 493C, as the case may be” before the period at the end; and(3) in the paragraph heading of paragraph (2), by inserting “or income-based” after “income contingent”.