H.R. 2829 — SERVICE Act

This section revises the Public Service Loan Forgiveness (PSLF) program for eligible Federal Direct Loans by reducing the required number of qualifying monthly payments to 96 after October 1, 2007 (from 120), requiring full-time public service employment during each of those payments, and authorizing loan cancellation without regard to the borrower's employment status at the time of forgiveness. (PSLF cancels the remaining balance on Direct Loans for public service workers after 120 such payments under an income-driven repayment plan.) The section further defines qualifying monthly payments to include (1) amounts paid under an income-based repayment plan, standard 10-year repayment plan, other plans with payments at least equal to the 10-year standard amount, or income-contingent repayment plan; or (2) months in specified deferments or forbearances (e.g., for cancer treatment, military service, economic hardship, Peace Corps, AmeriCorps, or administrative forbearance). Additionally, the section establishes rules for prepayments exceeding the monthly amount due, allowing excess amounts to count as payments for up to three subsequent months (with any remainder applied to principal) or, if the due amount is $0, applied to principal.

This section modifies the Public Service Loan Forgiveness (PSLF) program by (1) treating work as an independent contractor as "employment" for qualifying for forgiveness of Direct Loans after 120 qualifying payments; and (2) defining, in new subparagraphs (D) and (E) of section 455(m)(6)—"full-time," as a minimum average of 30 hours per week (or 30 hours per week for at least 8 months in a 12-month period, or the equivalent for nontenure-track higher education faculty based on credit or contact hours multiplied by a factor set by the Secretary); and "independent contractor," as a non-employee providing public service that applicable state law prohibits employees from performing. (As background, PSLF forgives the remaining balance on a borrower's Direct Loans after 120 qualifying monthly payments made while employed full-time by a qualifying public service employer, such as a government agency or nonprofit organization.)

This section establishes an online portal and a publicly searchable database of public service jobs under the Public Service Loan Forgiveness (PSLF) program. (As background, PSLF cancels the remaining balance on a borrower's Direct Loans after 120 qualifying monthly payments made under an income-driven repayment plan or the 10-year standard plan while employed full-time in a public service job, such as for federal, state, or local government or certain tax-exempt nonprofits.) The online portal, accessible to borrowers of eligible Direct Loans, provides (1) instructions for using the database to verify public service employment; (2) identification of the borrower's eligible loans and qualifying repayment plans; (3) for each eligible loan, the number of qualifying payments made and estimated remaining before cancellation; (4) for ineligible loans, an explanation and instructions to become eligible; (5) electronic submission of cancellation forms; (6) for denied applications, denial notices, reconsideration forms with forbearance extensions, and reconsideration decisions; (7) buyback payment process explanations and request forms; and (8) consolidation impact information. The portal also enables employer contacts to electronically submit verification forms, with all information required to be up-to-date. The database, developed by the Secretary of Education in consultation with the Secretary of Labor and regularly updated, lists public service jobs and is available on the Department's website.

This section revises deferment and forbearance rules for loans under the William D. Ford Federal Direct Loan Program (i.e., Federal Direct Stafford Loans, Federal Direct PLUS Loans, Federal Direct Consolidation Loans, and Federal Direct Unsubsidized Stafford Loans) by (1) striking authorization to capitalize interest during deferment, (2) prohibiting capitalization of interest after forbearance periods, and (3) updating the subsection heading to include forbearance. The changes apply to any such periods in effect on the date of enactment or beginning thereafter. (Thus, accrued interest will not be added to loan principal at the end of these periods, reducing borrowers' total repayment amounts.)

This section directs the Secretary of Education, for Public Service Loan Forgiveness purposes, to determine the number of qualifying monthly payments for a borrower who consolidates one or more Direct Loans—including a Direct PLUS Loan made to a parent borrower—into a Direct Consolidation Loan by using the weighted average of qualifying payments previously made on those underlying Direct Loans. (Thus, such borrowers receive credit toward the required 120 qualifying payments based on prior payments on the consolidated loans.)

This section strikes subparagraph (B) from the list of eligibility exclusions applicable to the teacher loan forgiveness program for Federal Family Education Loan (FFEL) Program loans and the teacher loan cancellation provision for Federal Perkins Loans (redesignating subparagraph (C) as (B) in each case). It also amends the Public Service Loan Forgiveness (PSLF) program to remove prior receipt of FFEL or Perkins teacher loan forgiveness from the list of disqualifying prior benefits.

This section directs the Comptroller General of the United States to conduct a study on the feasibility of data matching agreements for the Public Service Loan Forgiveness (PSLF) program (i.e., loan forgiveness after 120 qualifying payments for full-time public service employment) that would allow borrowers to forego requesting employment certification from public service employers, including an examination of the Department of Education and Department of Defense's progress on automatic data matching for military and veteran borrowers. The Comptroller General must submit a report with findings and recommendations to the House Committee on Education and Workforce and the Senate Committee on Health, Education, Labor, and Pensions within one year of enactment, with required cooperation from relevant federal agencies including the Departments of Education and Defense and the Internal Revenue Service.