Student Loan Refinancing Act of 2026

Section 451(a) of the Higher Education Act of 1965 (20 U.S.C. 1087a(a)) is amended—

(1) by striking and (2) and inserting (2);

(2) by inserting; and (3) to make refinanced loans under section 460A after section 459A; and

(3) by inserting, except for refinanced loans made under section 460A, after Loans made under this part.

Part D of title IV of the Higher Education Act of 1965 (20 U.S.C. 1087a et seq.) is amended by adding at the end the following:

Beginning not later than 30 days after the date of enactment of the Student Loan Refinancing Act of 2026, the Secretary shall establish a program under which the Secretary, upon the receipt of an application from a borrower, makes a refinanced loan under this part, in accordance with the provisions of this section, in order to permit the borrower to obtain the interest rate provided under subsection (c).

Upon application of a borrower, the Secretary shall repay a Federal Direct Stafford Loan, a Federal Direct Unsubsidized Stafford Loan, a Federal Direct PLUS Loan, or a Federal Direct Consolidation Loan of the borrower, with the proceeds of a refinanced Federal Direct Stafford Loan, a refinanced Federal Direct Unsubsidized Stafford Loan, a refinanced Federal Direct PLUS Loan, or a refinanced Federal Direct Consolidation Loan, respectively, issued to the borrower in an amount equal to the sum of the unpaid principal, accrued unpaid interest, and late charges of the original loan.

Upon application of a borrower with respect to a loan with an outstanding balance that was made, insured, or guaranteed under part B, the Secretary shall make a loan under this part, in an amount equal to the sum of the unpaid principal, accrued unpaid interest, and late charges of the original loan to the borrower in accordance with the following:

(A) The Secretary shall pay the proceeds of such loan to the eligible lender of the loan made, insured, or guaranteed under part B, in order to discharge the borrower from any remaining obligation to the lender with respect to the original loan.

(B) A loan made under this section that was originally a loan made, insured, or guaranteed—

(i) under section 428 shall be a refinanced Federal Direct Stafford Loan;

(ii) under section 428B shall be a refinanced Federal Direct PLUS Loan;

(iii) under section 428H shall be a refinanced Federal Direct Unsubsidized Stafford Loan; and

(iv) under section 428C shall be a refinanced Federal Direct Consolidation Loan.

The interest rate for refinanced Federal Direct Stafford Loans, refinanced Federal Direct Unsubsidized Stafford Loans, refinanced Federal Direct PLUS Loans, and refinanced Federal Direct Consolidation Loans, shall be a rate equal to the following:

In the case of a refinanced Federal Direct Stafford Loan for which the original loan was a loan made under section 428 or a Federal Direct Stafford Loan made under this part to an undergraduate student, the rate of interest on such refinanced Federal Direct Stafford Loan shall be equal to the rate of interest for a Federal Direct Stafford Loan made to an undergraduate student for which the first disbursement is made on the date on which the refinanced Federal Direct Stafford Loan is made under this section.

In the case of a refinanced Federal Direct Stafford Loan for which the original loan was a loan made under section 428 or a Federal Direct Stafford Loan made under this part to a graduate or professional student, the rate of interest on such refinanced Federal Direct Stafford Loan shall be equal to the rate of interest for a Federal Direct Stafford Loan made to a graduate or professional student, as applicable, for which the first disbursement is made on the date on which the refinanced Federal Direct Stafford Loan is made under this section.

In the case of a refinanced Federal Direct Unsubsidized Stafford Loan for which the original loan was a loan made under section 428H or a Federal Direct Unsubsidized Stafford Loan made under this part an undergraduate student, the rate of interest on such refinanced Federal Direct Unsubsidized Stafford Loan shall be equal to the rate of interest for a Federal Direct Unsubsidized Stafford Loan made to an undergraduate student for which the first disbursement is made on the date on which the refinanced Federal Direct Unsubsidized Stafford Loan is made under this section.

In the case of a refinanced Federal Direct Unsubsidized Stafford Loan for which the original loan was a loan made under section 428H or a Federal Direct Unsubsidized Stafford Loan made under this part to a graduate or professional student, the rate of interest on such refinanced Federal Direct Unsubsidized Stafford Loan shall be equal to the rate of interest for a Federal Direct Unsubsidized Stafford Loan made to a graduate or professional student, as applicable, for which the first disbursement is made on the date on which the refinanced Federal Direct Unsubsidized Stafford Loan is made under this section.

In the case of a refinanced Federal Direct PLUS Loan for which the original loan was a loan made under section 428B or a Federal Direct PLUS Loan made under this part, the rate of interest on such refinanced Federal Direct PLUS loan shall be equal to the rate of interest for a Federal Direct PLUS loan for which the first disbursement is made on the date on which the refinanced Federal Direct PLUS loan is made under this section.

In the case of a refinanced Federal Direct Consolidation Loan for which the original loan was a loan under section 428C or a Federal Direct Consolidation Loan under this part, the rate of interest of such refinanced Federal Direct Consolidation Loan shall be equal to the rate calculated in accordance with paragraph (2).

In order to determine the interest rate for any refinanced Federal Direct Consolidation Loan under paragraph (1)(D), the Secretary shall—

(i) determine each of the component loans that were originally consolidated in the loan under section 428C or the Federal Direct Consolidation Loan, and calculate the proportion of the unpaid principal balance of the loan under section 428C or the Federal Direct Consolidation Loan that each component loan represents;

(ii) use the proportions determined in accordance with clause (i) and the interest rate applicable for each component loan, as determined under subparagraph (B), to calculate the weighted average of the interest rates on the loans consolidated into the loan under section 428C or the Federal Direct Consolidation Loan; and

(iii) apply the weighted average calculated under clause (ii) as the interest rate for the refinanced Federal Direct Consolidation Loan.

The interest rates for the component loans of a loan made under section 428C or a Federal Direct Consolidation Loan shall be the following:

The interest rate for any component loan that is a loan under section 428 or a Federal Direct Stafford Loan made to an undergraduate student shall be a rate equal to the lesser of—

(aa) the rate of interest for a refinanced Federal Direct Stafford Loan determined under paragraph (1)(A)(i) if such loan were made on the date on which the refinanced Federal Direct Consolidation Loan is made under this section; or

(bb) the original interest rate of the component loan.

The interest rate for any component loan that is a loan under section 428 or a Federal Direct Stafford Loan made to a graduate or professional student shall be a rate equal to the lesser of—

(aa) the rate of interest for a refinanced Federal Direct Stafford Loan determined under paragraph (1)(A)(ii) if such loan were made on the date on which the refinanced Federal Direct Consolidation Loan is made under this section; or

(bb) the original interest rate of the component loan.

The interest rate for any component loan that is a loan under section 428H or a Federal Direct Unsubsidized Stafford Loan made to an undergraduate student shall be a rate equal to the lesser of—

(aa) the rate of interest for a refinanced Federal Direct Unsubsidized Stafford Loan determined under paragraph (1)(B)(i) if such loan were made on the date on which the refinanced Federal Direct Consolidation Loan is made under this section; or

(bb) the original interest rate of the component loan.

The interest rate for any component loan that is a loan under section 428H or a Federal Direct Unsubsidized Stafford Loan made to a graduate or professional student shall be a rate equal to the lesser of—

(aa) the rate of interest for a refinanced Federal Direct Unsubsidized Stafford Loan determined under paragraph (1)(B)(ii) if such loan were made on the date on which the refinanced Federal Direct Consolidation Loan is made under this section; or

(bb) the original interest rate of the component loan.

The interest rate for any component loan that is a loan under section 428B or a Federal Direct PLUS Loan shall be a rate equal to the lesser of—

(I) the rate of interest for a refinanced Federal Direct PLUS loan determined under paragraph (1)(C) if such loan were made on the date on which the refinanced Federal Direct Consolidation Loan is made under this section; or

(II) the original interest rate of the component loan.

The interest rate for any component loan that is a loan under section 428C or a Federal Direct Consolidation Loan shall be the weighted average of the interest rates that would apply under this subparagraph for each loan comprising the component consolidation loan.

The interest rate for any eligible loan that is a component of a loan made under section 428C or a Federal Direct Consolidation Loan and is not described in clauses (i) through (iv) shall be the interest rate on the original component loan.

The applicable rate of interest determined under paragraph (1) for a refinanced loan under this section shall be fixed for the period of the loan.

Except as otherwise provided in this section, a loan that is refinanced under this section—

(A) shall, with respect to the application of terms and conditions under this title, be considered to be a loan made, insured, or guaranteed under this title on the date of the original loan and shall not be considered to be a new loan made on the date of refinancing; and

(B) shall have the same terms and conditions as the original loan, including any suspensions of payments or interest accrual under section 3513 of the Coronavirus Aid, Relief, and Economic Security Act (20 U.S.C. 1001 note), or any extensions of such suspensions, except that in the case of an original loan made, insured, or guaranteed under part B that is refinanced under this section, such refinanced loan shall be considered a Federal Direct loan and shall have the same terms and conditions as a Federal Direct loan under part D that corresponds to the type of the original part B loan and that was made on the same date as such original part B loan.

Refinancing a loan under this section shall not result in the extension of the duration of the repayment period of the loan, and the borrower shall retain the same repayment term and plan that was in effect on the original loan on the day before the date the loan is refinanced. Nothing in this paragraph shall be construed to prevent a borrower from electing a different repayment plan at any time in accordance with section 455(d)(3) or section 455(d)(7)(D), as applicable based on the date of the original loan.

Refinancing a loan under this section shall not result in the application of an origination fee under section 455(c), and the refinanced loan amount shall not be subject to any annual, aggregate, or lifetime aggregate maximum loan limit under part B or this part.

A loan made, insured, or guaranteed under this title may not be refinanced under this section more than twice during a 10-year period.

The Secretary, in coordination with the Director of the Bureau of Consumer Financial Protection, shall undertake a campaign to alert borrowers of loans that are eligible for refinancing under this section that the borrowers are eligible to apply for such refinancing. The campaign shall include the following activities:

(1) Developing consumer information materials about the availability of Federal student loan refinancing.

(2) Requiring servicers of loans under this part and part B to provide such consumer information to borrowers in a manner determined appropriate by the Secretary, in consultation with the Director of the Bureau of Consumer Financial Protection.

Section 455(e) of the Higher Education Act of 1965 (20 U.S.C. 1087e(e)) is amended by adding at the end the following:

In calculating the period of time during which a borrower of a loan that is refinanced under section 460A before July 1, 2028, has made monthly payments for purposes of paragraph (7), the Secretary shall deem the period to include all monthly payments made for the original loan, and all monthly payments made for the refinanced loan, that otherwise meet the requirements of this subsection.

Section 455(m) of the Higher Education Act of 1965 (20 U.S.C. 1087e(m)) is amended—

(1) by redesignating paragraphs (3) and (4) as paragraphs (4) and (5), respectively;

(2) by inserting after paragraph (2) the following:

Notwithstanding paragraph (1), in determining the number of monthly payments that meet the requirements of such paragraph for an eligible Federal Direct Loan refinanced under section 460A that was originally a loan under this part, the Secretary shall include all monthly payments made on the original loan that meet the requirements of such paragraph.

In the case of an eligible Federal Direct Loan refinanced under section 460A that was originally a loan under part B, only monthly payments made after the date on which the loan was refinanced may be included for purposes of paragraph (1).; and

(3) in paragraph (4)(A) (as redesignated by paragraph (1)), by inserting (including any Federal Direct Stafford Loan, Federal Direct PLUS Loan, Federal Direct Unsubsidized Stafford Loan, or Federal Direct Consolidation Loan refinanced under section 460A) before the period at the end.

Section 493C of the Higher Education Act of 1965 (20 U.S.C. 1098e) is amended by adding at the end the following:

In calculating the period of time during which a borrower of a loan that is refinanced under section 460A has made monthly payments for purposes of subsection (b)(7), the Secretary shall deem the period to include all monthly payments made for the original loan, and all monthly payments made for the refinanced loan, that otherwise meet the requirements of this section.