Student Loan Reform Act

This Act may be cited as the Student Loan Reform Act.
Part D of title IV of the Higher Education Act of 1965 (20 U.S.C. 1087a et seq.) is amended by inserting after section 454 the following:
Beginning on July 1, 2026, the Secretary shall carry out a program under which an institution of higher education may elect to cosign all eligible direct loans made to students enrolled at the institution for an academic year.
To be eligible to participate in the program under this section for an academic year, an institution of higher education shall enter into an agreement with the Secretary under which the institution agrees to the following:
The institution will cosign all new eligible direct loans made to students enrolled at the institution for such academic year.
With respect to each such loan, the institution will abide by the terms and conditions of cosigner liability described in subsection (d).
As part of the program under this section, the Secretary shall—
revise the master promissory note applicable to each eligible direct loan to include—
the terms and conditions of cosigner and borrower liability described in subsection (d);
the interest rate for the loan, as determined under subsection (e); and
a field in which an authorized representative of an institution participating in the program may cosign the note on behalf of the institution; and
ensure that each institution participating in the program signs the note applicable to each new eligible direct loan made to a student at the institution for the academic year concerned.
Notwithstanding any other provision of law, an institution of higher education that is a cosigner of an eligible direct loan of a borrower shall assume the obligation to repay, in accordance with paragraph (2), the outstanding balance of principal and interest due on the loan if—
the borrower defaulted on the loan;
a period of 90 days has elapsed since the date on which the loan entered default; and
the loan has not been rehabilitated.
An institution that is obligated to repay an eligible direct loan under paragraph (1) shall make payments on the loan pursuant to a standard repayment plan under section 455(d)(1)(A) with a repayment period of 10 years.
The obligation of an institution to repay an eligible direct loan under paragraph (1) shall terminate on the earlier of—
the date on which the loan is rehabilitated; or
the date on which the total outstanding balance of principal and interest due on the loan has been repaid.
A borrower who has defaulted on an eligible direct loan on which an institution is making payments under paragraph (1) shall be considered in default on such loan for purposes of adverse credit reporting and delinquent debt collection procedures under Federal law.
Any amounts recovered from the borrower of an eligible direct loan during a period in which an institution is making payments on the loan under paragraph (1) shall be subtracted from the total outstanding balance of principal and interest due on the loan.
Nothing in this subsection shall be construed to limit the remedies available under this part against the borrower of an eligible Federal student loan.
Notwithstanding any other provision of law, the interest rate applicable to an eligible direct loan cosigned by an institution participating in the program under this section shall be a rate determined by the Secretary that is—
lower than the standard rate applicable to the loan under section 455(b); and
reduced below such standard rate by a percentage that is proportionate to the reduced risk posed by the loan, as determined by the Secretary.
On an annual basis, the Secretary shall publish, on a publicly accessible website of the Department of Education, a list that identifies each institution participating in the program under this section for an academic year.
In this section, the term eligible direct loan means a loan made under this part on or after July 1, 2026.
Section 435(a) of the Higher Education Act of 1965 (20 U.S.C. 1085(a)) is amended—
in paragraph (2)—
by striking subparagraphs (B) and (C) and inserting the following:
For purposes of determinations under subparagraph (A), the threshold percentage is—
40 percent, in the case of an institution that is participating in the institutional cosigner program under section 454A in the year in which the cohort default rate is determined; or
30 percent, in the case of an institution that is not participating in such program in the year in which the cohort default rate is determined.
by redesignating subparagraph (D) as subparagraph (C);
in paragraph (3), by striking paragraph (2)(B)(iv) and inserting paragraph (2)(B); and
in paragraph (7), by striking paragraph (2)(B)(iv) each place it appears and inserting paragraph (2)(B).
The amendments made by subsection (a) shall take effect on July 1, 2026.