1. Short title
This Act may be cited as the “End Capitalization for Struggling Borrowers Act”.
End Capitalization for Struggling Borrowers Act
A BILL
To amend the Higher Education Act of 1965 to terminate capitalization of interest after forbearance and certain deferment periods.
2. Termination of capitalization of interest after deferment or forbearance
Part B amendments—
Subsidized loans— Section 428(c)(3)(C) of the Higher Education Act of 1965 (20 U.S.C. 1078(c)(3)(C)) is amended—
in clause (iii), by inserting before the semicolon the following: “, and with respect to a forbearance granted to a borrower on or after the date of enactment of the End Capitalization for Struggling Borrowers Act on a loan made, insured or guaranteed under this section or on a Federal Direct Stafford Loan, provide information to the borrower to assist the borrower in understanding that interest shall accrue on the loan but not be capitalized at the expiration of such period of forbearance”; and
in clause (iv)—
in subclause (III), by inserting before the semicolon at the end the following: “, except that this subclause shall not apply with respect to any period of forbearance beginning on or after the date of enactment of the End Capitalization for Struggling Borrowers Act”; and
in subclause (IV), by inserting before the semicolon at the end the following: “except that this subclause shall not apply with respect to any period of forbearance beginning on or after the date of enactment of the End Capitalization for Struggling Borrowers Act”.
Unsubsidized loans— Section 428H(e)(2)(A)(ii)(III) of the Higher Education Act of 1965 (20 U.S.C. 1078–8(e)(2)(A)(ii)(III)) is amended by inserting before the semicolon the following: “, except that with respect to a deferment during a period described in clauses (ii) through (iv) of section 427(a)(2)(C) or clauses (ii) through (v) of section 428(b)(1)(M), or any period of forbearance beginning on or after the date of enactment of the End Capitalization for Struggling Borrowers Act, on a loan made, insured, or guaranteed under this section or on a Federal Direct Unsubsidized Stafford Loan, interest shall not be added to the principal amount of the loan at the expiration of such period”.
Part D amendments— Subparagraph (B) of section 455(f)(1) of the Higher Education Act of 1965 (20 U.S.C. 1087e(f)(1)) is amended to read as follows:
“(B) in the case of a Federal Direct PLUS Loan, a Federal Direct Unsubsidized Stafford Loan, or a Federal Direct Consolidation Loan not described in subparagraph (A)(ii)—
“(i) for a deferment during a period described in paragraph (2)(A), shall accrue and be capitalized or paid by the borrower; and
“(ii) for a deferment during a period described in subparagraphs (B) through (D) of paragraph (2), shall accrue but not be capitalized.”