Breakdown
H.R. 1029 (Formerly H.R. 2711). – The complicated yet comprehensive bill. The stated purpose of H.R. 1029 is to permit refinancing of Federal student consolidation loans, and to permit students freedom to select a student loan consolidator.
Section 1 – Title – Student Loan Fairness Act of 2005.
Section 2 – This section removes the prohibition against refinancing in the Higher Education Act by changing the definition of "eligible borrower." It strikes the provision, and all references to that provision, which states that a person's status as an eligible borrower terminates upon receipt of a consolidation loan.
Section 3 – This section allows for a choice of loan consolidator by striking a provision which requires loan agreements to state that the lender is to make the loan to the borrower only if the lender holds an outstanding loan to the borrower, or if the borrower certifies he or she has sought and was unable to obtain a consolidation loan from his or her loan holder. This section also adds provisions requiring lenders and institutions to provide borrowers with clear and conspicuous notice of information regarding the effects of the consolidation loan on interest rates, amount of payments, interest accrued, repayment term, ability to pay, and the differences between variable and fixed rates.
Section 4 – This section deals with interest rates applicable to July of 2006. It changes the general rates to the market rate + 2.3% and lowers the cap interest rate from 8.25% to 6.8%, changes PLUS rates to the market rate + 3.1%, not to exceed 7.5%, and changes the consolidation rates to the market rate + 2.3% and lowers the cap interest rate from 8.25% to 6.8%, and offsets origination fees.
H.R. 1029 allows for refinancing and choice of lender, as well as lowering the cap interest rate and providing more information to borrowers. It contains no provisions for current students, and doesn't seem to help with PLUS loans.