HF 3918

as introduced - 89th Legislature (2015 - 2016) Posted on 04/14/2016 12:47pm

A bill for an act
relating to higher education; establishing deferment, forbearance,
income-contingent repayment, and loan forgiveness programs; appropriating
money; proposing coding for new law in Minnesota Statutes, chapter 136A.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

new text begin [136A.1705] DEFERMENT AND FORBEARANCE
new text end

new text begin Subdivision 1. new text end

new text begin Definitions. new text end

new text begin (a) For the purposes of this section, the terms defined in
this subdivision have the meanings given them.
new text end

new text begin (b) "Deferment" means a temporary cessation of a borrower's monthly payments
during which interest does accrue and is either capitalized or paid by the borrower.
new text end

new text begin (c) "Forbearance" means the temporary cessation of a borrower's monthly payments,
allowing an extension of time for making one or more monthly payments, or temporarily
accepting smaller monthly payments than previously scheduled.
new text end

new text begin (d) "Monthly payments" means the regular payments of principal and interest made
by a borrower in a student loan program under sections 136A.15 to 136A.1787.
new text end

new text begin Subd. 2. new text end

new text begin Deferment and forbearance permitted. new text end

new text begin (a) Upon the request of a
borrower, the commissioner must offer deferment and forbearance to an eligible borrower
participating in a student loan program under sections 136A.15 to 136A.1787, as provided
in this section.
new text end

new text begin (b) A borrower may choose which form of forbearance to enter. Interest must be
capitalized on the loans of a borrower who is granted forbearance and does not make
payments of interest.
new text end

new text begin (c) The commissioner must adopt rules to:
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new text begin (1) establish and clarify eligibility criteria for deferment and forbearance;
new text end

new text begin (2) set limits on the length of time for which a borrower may remain in deferment
and forbearance;
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new text begin (3) establish procedures for verifying a borrower's eligibility for deferment and
forbearance;
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new text begin (4) establish a process to apply for deferment and forbearance; and
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new text begin (5) define alternate payment plans for a borrower who is granted forbearance.
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new text begin (d) Notwithstanding any other part of this section, the commissioner must adopt
rules to offer deferment and forbearance to a borrower who would be eligible for
deferment and forbearance if the borrower had instead borrowed through a federal lending
program. To the extent possible:
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new text begin (1) the eligibility criteria for deferment and the length of time a borrower may
remain in deferment must be comparable to those in the deferment program under Code of
Federal Regulations, title 34, section 685.204; and
new text end

new text begin (2) the eligibility criteria for forbearance and the length of time a borrower may
remain in forbearance must be comparable to those in the forbearance program under
Code of Federal Regulations, title 34, section 685.205.
new text end

new text begin Subd. 3. new text end

new text begin Eligibility for deferment. new text end

new text begin A borrower is eligible for deferment under
this section under the following conditions:
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new text begin (1) the borrower is enrolled in an eligible postsecondary education program at least
half time, as determined by the school the borrower is attending;
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new text begin (2) the borrower is pursuing a course of study pursuant to an eligible graduate
fellowship program;
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new text begin (3) the borrower is pursuing an eligible rehabilitation training program for
individuals with disabilities;
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new text begin (4) the borrower is seeking and unable to find full-time employment;
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new text begin (5) the borrower is experiencing an economic hardship;
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new text begin (6) the borrower is serving on active duty during war or other military operation or
national emergency;
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new text begin (7) the borrower is performing qualifying National Guard duty during a war or other
military operation or national emergency; or
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new text begin (8) the borrower is a member of the National Guard or other reserve component
of the armed forces or a member of such forces in retired status, and the borrower was
enrolled at least half time in a program of instruction at an eligible institution at the time,
or within six months prior to the time, the borrower was called to active duty.
new text end

new text begin Subd. 4. new text end

new text begin Eligibility for forbearance. new text end

new text begin A borrower is eligible for forbearance under
this section under the following conditions:
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new text begin (1) the borrower is unable to make scheduled payments due to poor health;
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new text begin (2) the borrower is in a medical or dental internship or residency;
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new text begin (3) the borrower is serving in a national service position under title I of the National
and Community Service Act of 1990, United States Code, title 42, chapter 129, subchapter
I;
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new text begin (4) the borrower is employed in a teaching profession that would qualify the
borrower for loan forgiveness under Code of Federal Regulations, title 34, section 685.217;
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new text begin (5) the sum of the borrower's monthly student loan payments is equal to or greater
than 20 percent of the borrower's total monthly gross income;
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new text begin (6) the borrower is a member of the National Guard who qualifies for post-active
duty deferment but does not qualify for military service or other deferment, and is engaged
in state active duty for a period of more than 30 consecutive days;
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new text begin (7) the borrower wishes to resume honoring an agreement to repay the borrower's
debt after default; or
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new text begin (8) the borrower is performing the type of service that would qualify the borrower
for a partial repayment of his or her loan under a student loan repayment program
administered by the federal Department of Defense.
new text end

new text begin Subd. 5. new text end

new text begin Financial disclosure. new text end

new text begin Prior to permitting a borrower to enter deferment
or forbearance, the commissioner must provide information to assist the borrower in
understanding the financial impact of changing payment plans. The commissioner must
explain to the borrower the impact of capitalization of accrued, unpaid interest on the
borrower's loan principal and on the total amount of interest to be paid over the life of a loan.
new text end

Sec. 2.

new text begin [136A.1706] INCOME-CONTINGENT PAYMENTS FOR REFINANCED
LOANS.
new text end

new text begin Subdivision 1. new text end

new text begin Income-contingent repayment plans authorized. new text end

new text begin A borrower who
refinances a loan under section 136A.1704 may apply for an income-contingent repayment
plan, in a form and manner specified by the commissioner. For the year that a borrower
initially selects an income-contingent repayment plan, and each subsequent year that the
borrower remains on the repayment plan, the borrower must provide documentation to
the commissioner of the borrower's eligibility for the plan.
new text end

new text begin Subd. 2. new text end

new text begin Repayment plans. new text end

new text begin (a) At a minimum, the commissioner must offer plans
with eligibility criteria, repayment schedules, and other terms comparable to the following
repayment plans offered under federal law:
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new text begin (1) the Pay As You Earn repayment plan under Code of Federal Regulations, title 34,
section 685.209, paragraph (a);
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new text begin (2) the income-contingent repayment plan under Code of Federal Regulations,
title 34, section 685.209, paragraph (b);
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new text begin (3) the revised Pay As You Earn repayment plan under Code of Federal Regulations,
title 34, section 685.209, paragraph (c); and
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new text begin (4) the income-based repayment plan under Code of Federal Regulations, title 34,
section 685.221.
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new text begin (b) All loans refinanced under section 136A.1704 are eligible for payment plans
under this section.
new text end

Sec. 3.

new text begin [136A.1707] FORGIVENESS OF REFINANCED LOANS.
new text end

new text begin Subdivision 1. new text end

new text begin Loan forgiveness authorized. new text end

new text begin (a) As provided in this section, the
commissioner must offer loan forgiveness programs to a borrower who refinanced loans
under section 136A.1704 by canceling part or all of a borrower's outstanding balance of
principal and accrued interest on the refinanced loans.
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new text begin (b) The commissioner must adopt rules to ensure that the programs offered under
subdivisions 4, 5, and 6 are comparable to those available under the sections of federal
law referenced.
new text end

new text begin Subd. 2. new text end

new text begin Applying for loan forgiveness. new text end

new text begin A borrower must apply for loan
forgiveness in a form and manner specified by the commissioner. Prior to forgiving part
or all of a loan balance, the commissioner must verify the borrower's eligibility for a
loan forgiveness program.
new text end

new text begin Subd. 3. new text end

new text begin Eligibility. new text end

new text begin (a) The commissioner must offer a borrower who refinances
a loan under this section comparable loan forgiveness programs as are available to a
borrower from a federal student lending program in Code of Federal Regulations, title
34, part 685. At a minimum, the commissioner must offer the loan forgiveness programs
described in subdivisions 4, 5, and 6. All loans refinanced under section 136A.1704 are
eligible for forgiveness under this section.
new text end

new text begin (b) When determining whether an applicant has made a sufficient number of monthly
payments to qualify for a loan forgiveness program under this section, the commissioner
must include in the borrower's total number of monthly payments the payments a borrower
made prior to refinancing the loan under section 136A.1704.
new text end

new text begin Subd. 4. new text end

new text begin Income-contingent repayment plan loan forgiveness. new text end

new text begin (a) The
commissioner must offer the following loan forgiveness programs for participants in
repayment plans under section 136A.1706.
new text end

new text begin (b) The commissioner must provide loan forgiveness to a borrower who participated
in the income-contingent repayment program in section 136A.1706, subdivision 2,
paragraph (a), clause (1), and made monthly payments each year for a 20-year period.
Eligibility standards and loan forgiveness amounts for the program under section
136A.1706, subdivision 2, paragraph (a), clause (1), must be comparable to those in Code
of Federal Regulations, title 34, section 685.209, paragraph (a), subparagraph (6).
new text end

new text begin (c) The commissioner must provide loan forgiveness to a borrower who participated
in the income-contingent repayment program in section 136A.1706, subdivision 2,
paragraph (a), clause (3). For a borrower who only refinanced loans received as an
undergraduate student, the commissioner must forgive the loans after the borrower
has made monthly payments for 20 years. For a borrower who refinanced any loans
received as a graduate student, the commissioner must forgive the borrower's loans after
the borrower has made monthly payments for 25 years. Eligibility standards and loan
forgiveness amounts for the program under section 136A.1706, subdivision 2, paragraph
(a), clause (3), must be comparable to those established in Code of Federal Regulations,
title 34, section 685.209, paragraph (c), subparagraph (5).
new text end

new text begin (d) The commissioner must provide loan forgiveness to a borrower who participated
in the income-contingent repayment program in section 136A.1706, subdivision 2,
paragraph (a), clause (4), and has made monthly payments each year for a 20-year
period. Eligibility standards and loan forgiveness amounts for the program under section
136A.1706, subdivision 2, paragraph (a), clause (4), must be comparable to those
established in Code of Federal Regulations, title 34, section 685.221, paragraph (f).
new text end

new text begin Subd. 5. new text end

new text begin Teacher loan forgiveness. new text end

new text begin The commissioner must offer a loan forgiveness
program to a borrower who works as an elementary or secondary school teacher for five
consecutive years in a qualifying educational position that serves low-income families.
The commissioner must establish loan forgiveness amounts and eligibility criteria for the
program under this subdivision that are comparable to the Teacher Loan Forgiveness
program in Code of Federal Regulations, title 34, section 685.217.
new text end

new text begin Subd. 6. new text end

new text begin Public service loan forgiveness. new text end

new text begin The commissioner must offer a loan
forgiveness program to a borrower who enters and continues in full-time public service
employment and makes 120 monthly payments on loans refinanced under this section.
The commissioner must establish loan forgiveness amounts and eligibility criteria for
the program under this subdivision that are comparable to the Public Service Loan
Forgiveness Program in Code of Federal Regulations, title 34, section 685.219.
new text end

Sec. 4. new text begin APPROPRIATIONS; STUDENT LOAN REFINANCING.
new text end

new text begin $....... in fiscal year 2017 is appropriated from the general fund to the commissioner
of higher education for deposit in the loan capital fund under Minnesota Statutes, section
136A.1785, to provide additional funding for the student loan refinancing program
authorized under Minnesota Statutes, section 136A.1704. The commissioner shall use
the appropriation under this section to expand the student loan refinancing program by
reducing the credit score and debt-to-income ratio required to participate in the program,
to the extent that the commissioner can do so without raising interest rates for borrowers
who refinance. This appropriation is available until expended.
new text end