Breakdown
H.R. 1089 (Formerly H.R. 2504). – The least helpful bill. The stated purpose of H.R. 1089 is to amend the Higher Education Act to improve the opportunity for Federal borrowers to consolidate their loans at reasonable rates.
Section 1 – Title – Student Loan Fairness Consolidation Act of 2005.
Section 2 – This section allows for refinancing of Federal Family Education Loans and Federal Direct Loans by adding a provision stating that a borrower who consolidated at a fixed rate may obtain a subsequent consolidation loan to refinance the earlier loan at a variable interest rate. This section expressly excludes 428B loans and PLUS loans.
Section 3 – This section applies to Federal Family Education Loans and Federal Direct Loans. It adds a provision to the Higher Education Act stating the variable rate as the market rate + 2.3%, and leaves the cap interest rate at 8.25%. It also credits the excess interest to the government, states the amount of the adjustment, and expressly excludes 428B loans and PLUS loans.
H.R. 1089 expressly excludes PLUS loans, and further seems only to apply to Federal Family Education Loans and Federal Direct Loans, which may exclude Stafford Loans. It contains no provisions to benefit current students. It allows borrowers to refinance at variable rate, not a new fixed rate, which would give borrowers less security about their interest rate. The language of H.R. 1089 is a bit ambiguous, and may only allow for one refinance.