This bill would add a new program to the Higher Education Act that lets a college or university choose to cosign all new federal Direct Loans made to students enrolled at that institution for an academic year. The program would begin July 1, 2026. The Department of Education would change the master promissory note to include an institutional cosigner field, the loan interest rate set for cosigned loans, and the cosigner and borrower liability terms.
Under the bill, an institution that cosigns a loan must repay the outstanding principal and interest on that loan if the borrower defaults, 90 days pass after the loan enters default, and the loan is not rehabilitated. An obligated institution must make payments under a standard 10-year repayment schedule. Borrowers on loans the institution is repaying remain in default for credit-reporting and collection purposes. Any amounts recovered from the borrower while the institution is making payments are subtracted from the loan balance. The Secretary must set a reduced interest rate for cosigned loans that is lower than the standard rate and proportionate to the reduced risk. The Department must publish an annual list of participating institutions. The bill defines eligible direct loans as loans made on or after July 1, 2026.
The bill also amends the cohort default rate rules so that the threshold used in determinations is 40 percent for institutions participating in the institutional cosigner program and 30 percent for institutions not participating. This change takes effect July 1, 2026.
No publicly available information on federal budgetary costs or savings is included in the bill text. The bill does require institutions that cosign loans to assume repayment obligations for defaulted loans under the conditions specified, which would be an expense for those institutions as described in the bill.
No publicly available information.
No publicly available information.