FEDERAL CONSOLIDATION LOANS.

SEC. 425. FEDERAL CONSOLIDATION LOANS.(a) Eligible Borrower.—Section 428C(a)(3)(B)(i)(V) (20 U.S.C. 1078–3(a)(3)(B)(i)(V)) is amended—(1) in item (aa), by striking “or” after the semicolon;(2) in item (bb), by striking the period and inserting “; or”; and(3) by adding at the end the following:“(cc) for the purpose of using the no accrual of interest for active duty service members benefit offered under section 455(o).”.(b) Consolidation Loan Lender Agreements.—(1) In general.—Section 428C(b)(1) (20 U.S.C. 1078–3(b)(1)) is amended—(A) in subparagraph (E), by striking “and” after the semicolon;(B) by redesignating subparagraph (F) as subparagraph (G); and(C) by inserting after subparagraph (E) the following:“(F) that the lender shall disclose to a prospective borrower, in simple and understandable terms, at the time the lender provides an application for a consolidation loan—“(i) whether consolidation would result in a loss of loan benefits under this part or part D, including loan forgiveness, cancellation, and deferment;“(ii) with respect to Federal Perkins Loans under part E—“(I) that if a borrower includes a Federal Perkins Loan under part E in the consolidation loan, the borrower will lose all interest-free periods that would have been available for the Federal Perkins Loan, such as—122 STAT. 3234“(aa) the periods during which no interest accrues on such loan while the borrower is enrolled in school at least half-time;“(bb) the grace period under section 464(c)(1)(A); and“(cc) the periods during which the borrower’s student loan repayments are deferred under section 464(c)(2);“(II) that if a borrower includes a Federal Perkins Loan in the consolidation loan, the borrower will no longer be eligible for cancellation of part or all of the Federal Perkins Loan under section 465(a); and“(III) the occupations listed in section 465 that qualify for Federal Perkins Loan cancellation under section 465(a);“(iii) the repayment plans that are available to the borrower;“(iv) the options of the borrower to prepay the consolidation loan, to pay such loan on a shorter schedule, and to change repayment plans;“(v) that borrower benefit programs for a consolidation loan may vary among different lenders;“(vi) the consequences of default on the consolidation loan; and“(vii) that by applying for a consolidation loan, the borrower is not obligated to agree to take the consolidation loan; and”.(2) Consolidation loans.—Section 428C(b)(5) (20 U.S.C. 1078–3(b)(5)) is amended—(A) by inserting after the first sentence the following: “In addition, in the event that a borrower chooses to obtain a consolidation loan for the purposes of using the no accrual of interest for active duty service members program offered under section 455(o), the Secretary shall offer a Federal Direct Consolidation loan to any such borrower who applies for participation in such program.”; and(B) by striking “Such direct consolidation loan” and inserting “A direct consolidation loan offered under this paragraph”.(3) Conforming amendment.—Section 455(g) (20 U.S.C. 1087e(g)) is amended by striking “section 428C(b)(1)(F)” and inserting “section 428C(b)(1)(G)”.(c) Technical Amendment.—Section 203(b)(2)(C) of the College Cost Reduction and Access Act (121 Stat. 794) is amended by striking “the second sentence” and inserting “the third sentence”.(d) Income-Based Repayment.—(1) Amendments.—Section 428C(c) (20 U.S.C. 1078–3(c)) is amended—(A) in the matter preceding clause (i) of paragraph (2)(A)—(i) by striking “or income-sensitive” and inserting “income-sensitive, or income-based”; and(ii) by inserting “or income-based” after “such income-sensitive”; and(B) in paragraph (3)—(i) in subparagraph (A)—122 STAT. 3235(I) by inserting “except in the case of an income-based repayment schedule under section 493C”, before “a repayment”; and(II) by striking “and” after the semicolon;(ii) in subparagraph (B), by striking the period at the end and inserting “; and”; and(iii) by adding at the end the following:“(C) an income-based repayment schedule under section 493C shall not be available to a consolidation loan borrower who used the proceeds of the loan to discharge the liability on a loan under section 428B, or a Federal Direct PLUS loan, made on behalf of a dependent student.”.(2) Effective date.—The amendments made by this subsection shall take effect on July 1, 2009.(e) Extension of Consolidation Loan Authority.—Section 428C(e) (20 U.S.C. 1078–3(e)) is amended by striking “2012” and inserting “2014”.