From: The Honorable Susan A. Davis
Sent By:
Bill: H.R. 4236
Date: 4/11/2014

The Student Loan Fair Prepayment Act

Recognized by U.S. News and World Report

Susan Davis’s Student Loan Fair Prepayment Act was recognized by the U.S. News & World Report as one of the top five bills that could potentially affect student loan borrowers of yesterday, today and tomorrow.

One of the chief complaints made by borrowers is about the way their extra student loan payments are processed. Instead of applying the entire prepayment amount to the loan principal, loan-servicers often credit it towards future monthly payments unless the borrower requests otherwise. Unfortunately, this way of applying prepayments hurts borrowers – it makes it harder for them to pay off their loans and leads to higher interest payments over the long-run.

Responsible borrowers who make extra student loan payments should be properly rewarded. That’s why I am proudly introducing the Student Loan Fair Prepayment Act to reverse this backwards practice. My bill would ensure that extra payments are immediately applied to the principal of the highest interest-rate loan, unless the borrower requests otherwise. This technical change would save borrowers a significant amount and help them pay off their loans more quickly.

To qualify, all borrowers must be in current status (no outstanding collection fees/interest due) and hold either public or private student loans. Such a basic consumer protection, outlining the way payments are processed, should be applied uniformly. It’s important to note that borrowers in interest-based repayment plans, such as Pay As You Earn, would be excluded by design.

This bill has been endorsed by Education Trust, Young Invincibles, Center for Responsible Lending and the American Council on Education.

Student borrowers who pay ahead should get ahead. The Student Loan Fair Prepayment Act would help make that happen by correcting the way prepayments are processed, keeping the best interest of the borrower in mind. If you would like to become a cosponsor or have any questions, please contact my staffer Michelle Basile at 202-225-2040 or