SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Supporting America's Young 
Entrepreneurs Act of 2016''.

SEC. 2. SMALL BUSINESS START-UP EMPLOYEE LOAN DEFERMENT AND 
              CANCELLATION.

    (a) Deferment.--Section 455(f) of the Higher Education Act of 1965 
(20 U.S.C. 1087e(f)) is amended--
            (1) in paragraph (1), by striking ``A borrower of a loan'' 
        and inserting ``Except as provided in paragraph (5), a borrower 
        of a loan''; and
            (2) by adding at the end the following:
            ``(5) No interest deferment eligibility for founders of 
        small business start-ups.--A borrower of a loan made under this 
        part shall be eligible for a deferment, during which periodic 
        installments of principal and interest need not be paid, during 
        any period not in excess of 3 years during which the borrower 
        is employed as a founder of a small business start-up (as 
        defined in subsection (r)(3)).''.
    (b) Loan Cancellation.--Section 455 of the Higher Education Act of 
1965 (20 U.S.C. 1087e) is amended by adding at the end the following:
    ``(r) Loan Cancellation for Certain Small Business Start-Up 
Employees.--
            ``(1) Founder of a small business start-up in a distressed 
        area.--
                    ``(A) In general.--The Secretary shall cancel 
                $20,000 of the balance of interest and principal due, 
                in accordance with subparagraph (B), on any eligible 
                Federal Direct Loan not in default for a borrower who--
                            ``(i) has made 24 monthly payments on the 
                        eligible Federal Direct Loan after the date of 
                        the enactment of this subsection pursuant to 
                        any one or a combination of payments under a 
                        repayment plan under subsection (d)(1) or (g);
                            ``(ii) has been employed as a founder of a 
                        small business start-up in a distressed area 
                        during the period in which the borrower makes 
                        each of the 24 payments;
                            ``(iii) is employed as a founder of a small 
                        business start-up in a distressed area at the 
                        time of such cancellation; and
                            ``(iv) is approved for loan cancellation by 
                        the young entrepreneurs business center under 
                        section 47 of the Small Business Act (16 U.S.C. 
                        631 et seq.).
                    ``(B) Loan cancellation amount.--
                            ``(i) In general.--After the conclusion of 
                        the employment period described in subparagraph 
                        (A), the Secretary shall cancel the obligation 
                        to repay $20,000 of the balance of interest and 
                        principal due as of the time of such 
                        cancellation, on the eligible Federal Direct 
                        Loans made to the borrower under this part.
                            ``(ii) Limitation.--A borrower may not 
                        receive an aggregate amount of more than 
                        $20,000 under this subparagraph.
                    ``(C) Ineligibility for double benefits.--No 
                borrower may, for the same service, receive a reduction 
                of loan obligations under both this paragraph and--
                            ``(i) paragraph (2);
                            ``(ii) subsection (m); or
                            ``(iii) section 428J, 428K, 428L, or 460.
            ``(2) Employee of a small business start-up.--
                    ``(A) In general.--The Secretary shall cancel 
                $3,000 of the balance of interest and principal due, in 
                accordance with subparagraph (B), on any eligible 
                Federal Direct Loan not in default for a borrower who--
                            ``(i) has made 12 monthly payments on the 
                        eligible Federal Direct Loan after the date of 
                        the enactment of this subsection pursuant to 
                        any one or a combination of payments under a 
                        repayment plan under subsection (d)(1) or (g);
                            ``(ii) has been employed in a small 
                        business start-up job during the period in 
                        which the borrower makes each of the 12 
                        payments; and
                            ``(iii) is employed in a small business 
                        start-up job at the time of such cancellation.
                    ``(B) Loan cancellation amount.--
                            ``(i) In general.--After the conclusion of 
                        the employment period described in subparagraph 
                        (A), the Secretary shall cancel the obligation 
                        to repay $3,000 of the balance of interest and 
                        principal due as of the time of such 
                        cancellation, on the eligible Federal Direct 
                        Loans made to the borrower under this part.
                            ``(ii) Limitation.--A borrower may not 
                        receive an aggregate amount of more than 
                        $15,000 under this subparagraph.
                    ``(C) Ineligibility for double benefits.--No 
                borrower may, for the same service, receive a reduction 
                of loan obligations under both this paragraph and--
                            ``(i) paragraph (1);
                            ``(ii) subsection (m); or
                            ``(iii) section 428J, 428K, 428L, or 460.
            ``(3) Definitions.--In this subsection:
                    ``(A) Distressed area.--The term `distressed area' 
                means an area identified under section 47 of the Small 
                Business Act (16 U.S.C. 631 et seq.).
                    ``(B) Eligible federal direct loan.--The term 
                `eligible Federal Direct Loan' means a Federal Direct 
                Stafford Loan, Federal Direct PLUS Loan, or Federal 
                Direct Unsubsidized Stafford Loan, or a Federal Direct 
                Consolidation Loan.
                    ``(C) Founder.--The term `founder' shall have the 
                meaning given such term by the Administrator of the 
                Small Business Administration under this paragraph.
                    ``(D) Small business start-up.--The term `small 
                business start-up' means a business that is certified 
                by the young entrepreneurs business center under 
                section 47 of the Small Business Act (16 U.S.C. 631 et 
                seq.).
                    ``(E) Small business start-up job.--The term `small 
                business start-up job' means a full-time job as an 
                employee of a small business start-up.''.

SEC. 3. LOAN REFINANCING.

    (a) In General.--Part D of title IV of the Higher Education Act of 
1965 is amended by adding at the end the following:

``SEC. 460. FEDERAL DIRECT REFINANCED PRIVATE LOAN PROGRAM.

    ``(a) Definitions.--In this section:
            ``(1) Eligible private education loan.--The term `eligible 
        private education loan' means a private education loan, as 
        defined in section 140(a) of the Truth in Lending Act (15 
        U.S.C. 1650(a)), that was for the borrower's own postsecondary 
        educational expenses for an eligible program at an institution 
        of higher education participating in the loan program under 
        this part, as of the date that the loan was disbursed.
            ``(2) Federal direct refinanced private loan.--The term 
        `Federal Direct Refinanced Private Loan' means a loan issued 
        under subsection (b)(1).
            ``(3) Private educational lender.--The term `private 
        educational lender' has the meaning given the term in section 
        140(a) of the Truth in Lending Act (15 U.S.C. 1650(a)).
            ``(4) Qualified borrower.--The term `qualified borrower' 
        means an individual who--
                    ``(A) has an eligible private education loan;
                    ``(B) has been current on payments on the eligible 
                private education loan for the 6 months prior to the 
                date of the qualified borrower's application for 
                refinancing under this section, and is in good standing 
                on the loan at the time of such application;
                    ``(C) is not in default on the eligible private 
                education loan or on any loan made, insured, or 
                guaranteed under this part or part B or E; and
                    ``(D) meets the eligibility requirements described 
                in subsection (b)(2).
    ``(b) Program Authorized.--
            ``(1) In general.--The Secretary, in consultation with the 
        Secretary of the Treasury, shall carry out a program under 
        which the Secretary, upon application by a qualified borrower 
        who has an eligible private education loan, shall issue such 
        borrower a loan under this part in accordance with the 
        following:
                    ``(A) The loan issued under this program shall be 
                in an amount equal to the sum of the unpaid principal, 
                accrued unpaid interest, and late charges of the 
                private education loan.
                    ``(B) The Secretary shall pay the proceeds of the 
                loan issued under this program to the private 
                educational lender of the private education loan, in 
                order to discharge the qualified borrower from any 
                remaining obligation to the private educational lender 
                with respect to the original private education loan.
                    ``(C) The Secretary shall require that the 
                qualified borrower undergo loan counseling that 
                provides all of the information and counseling required 
                under clauses (i) through (viii) of section 
                485(b)(1)(A) before the loan is refinanced in 
                accordance with this section, and before the proceeds 
                of such loan are paid to the private educational 
                lender.
                    ``(D) The Secretary shall issue the loan as a 
                Federal Direct Refinanced Private Loan, which shall 
                have the same terms, conditions, and benefits as a 
                Federal Direct Subsidized Loan, except as otherwise 
                provided in this section.
            ``(2) Borrower eligibility.--Not later than 180 days after 
        the date of the enactment of this section, the Secretary, in 
        consultation with the Secretary of the Treasury and the 
        Director of the Bureau of Consumer Financial Protection, shall 
        establish eligibility requirements--
                    ``(A) to ensure eligibility only for qualified 
                borrowers in good standing;
                    ``(B) to minimize inequities between Federal Direct 
                Refinanced Private Loans and other Federal student 
                loans;
                    ``(C) to preclude windfall profits for private 
                educational lenders; and
                    ``(D) to ensure full access to the program 
                authorized in this subsection for borrowers with 
                private loans who otherwise meet the criteria 
                established in accordance with subparagraphs (A) and 
                (B).
    ``(c) Interest Rate.--
            ``(1) In general.--The interest rate for a Federal Direct 
        Refinanced Private Loan is, in the case a private education 
        loan originally issued for undergraduate, graduate, or 
        professional degree postsecondary educational expenses, a rate 
        equal to the rate for Federal Direct Subsidized Stafford Loans 
        issued to undergraduate students for the 12-month period 
        beginning on July 1, 2016, and ending on June 30, 2017.
            ``(2) Fixed rate.--The applicable rate of interest 
        determined under this subsection for a Federal Direct 
        Refinanced Private Loan shall be fixed for the period of the 
        loan.
    ``(d) Treatment of Loans.--Nothing in this section shall affect the 
ability of a borrower to qualify for loan repayment under a repayment 
plan under subsection (d)(1) or (g) of section 455.''.
    (b) Notice of Potential Eligibility.--Section 128(e) of the Truth 
in Lending Act (15 U.S.C. 1638(e)) is amended by adding at the end the 
following new paragraph:
            ``(12) Notice required along with billing statements.--
        Along with each billing statement sent to the borrower, the 
        private educational lender shall include a statement informing 
        the borrower that the borrower may be eligible for the Federal 
        Direct Refinanced Private Loan program established under 
        section 460 of the Higher Education Act of 1965.''.

SEC. 4. YOUNG ENTREPRENEURS BUSINESS CENTER.

    The Small Business Act (15 U.S.C. 631 et seq.) is amended--
            (1) by redesignating section 47 as section 48; and
            (2) by inserting after section 46 the following:

``SEC. 47. YOUNG ENTREPRENEURS BUSINESS CENTER.

    ``(a) Establishment.--There is established within the 
Administration a young entrepreneurs business center that shall, for 
purposes of loan cancellation for start-up employees established under 
subsection (r) of section 455 of the Higher Education Act of 1965 (20 
U.S.C. 1087e)--
            ``(1) certify small business start-ups under subsection 
        (b);
            ``(2) identify distressed areas under subsection (c); and
            ``(3) approve loan cancellation for founders of small 
        business start-ups in distressed areas under subsection (d).
    ``(b) Certification.--
            ``(1) Application.--To be certified by the young 
        entrepreneurs business center, a small business start-up shall 
        submit an application to the Administrator that includes--
                    ``(A) a 5-year business plan for such small 
                business start-up; and
                    ``(B) the number of employees the small business 
                start-up intends to employ on a yearly basis.
            ``(2) Requirements.--The young entrepreneurs business 
        center may not certify a small business start-up unless such 
        small business start-up, on the date the application is 
        submitted under paragraph (1)--
                    ``(A) has a founder who is a recent graduate of a 
                4-year institution of higher education;
                    ``(B) is a start-up for which at least 50 percent 
                of the employees of the start-up are recent graduates 
                of such an institution.
    ``(c) Distressed Area.--
            ``(1) In general.--Not less than once every 3 years after 
        the date of the enactment of this section, the young 
        entrepreneurs business center shall identify and make 
        publically available on the website of the Administration a 
        list of distressed areas.
            ``(2) Requirements.--A distressed area identified under 
        paragraph (1) shall be a county or equivalent division of local 
        government of a State in which the small business concern is 
        located that--
                    ``(A) has, for the most recent 24-month period for 
                which statistics are available--
                            ``(i) a per capita income of 80 percent or 
                        less of the national average; or
                            ``(ii) an unemployment rate that is 1 
                        percent greater than the national average; and
                    ``(B) the young entrepreneurs business center 
                determines would economically benefit from having small 
                business start-ups established in such area.
    ``(d) Loan Cancellation for Founders of a Small Business Start-Up 
in a Distressed Area.--For purposes of loan cancellation under 
subsection (r)(1) of section 455 of the Higher Education Act of 1965 
(20 U.S.C. 1087e) the young entrepreneurs business center shall approve 
a founder of a small business start-up in a distressed area if such 
founder--
            ``(1) established a small business start-up that--
                    ``(A) on the date such small business start-up was 
                established, was located in a distressed area 
                identified by the young entrepreneurs business center 
                under subsection (c) not more than 3 years before such 
                date of establishment;
                    ``(B) was certified under subsection (b); and
                    ``(C) on the date of approval under this 
                subsection, has been operating continuously for not 
                less than 5 years; and
            ``(2) was employed as a founder of a small business start-
        up in a distressed area during the period in which such founder 
        made the 24 payments described in subsection (r)(1)(A) of such 
        section 455.
    ``(e) Definitions.--In this section:
            ``(1) Institution of higher education.--The term 
        `institution of higher education' has the meaning given such 
        term in section 102 of the Higher Education Act (20 U.S.C. 
        1002).
            ``(2) Small business start-up.--The term `small business 
        start-up' means a small business concern that--
                    ``(A) is not yet in existence; or
                    ``(B) has been in existence for not more than 3 
                years.''.

SEC. 5. TREATMENT OF LOAN CANCELLATION.

    (a) In General.--Section 108(f) of the Internal Revenue Code of 
1986 is amended by adding at the end the following new paragraph:
            ``(5) Cancellation of certain federal student loans.--In 
        the case of an individual, gross income shall not include the 
        discharge (in whole or in part) of any student loan pursuant to 
        the cancellation (in whole or in part) of such loan by the 
        Secretary of Education under subsection (r) of section 455 of 
        the Higher Education Act of 1965 (20 U.S.C. 1087e).''.
    (b) Effective Date.--The amendment made by this section shall apply 
to discharges of indebtedness occurring after the date of the enactment 
of this Act.
Supporting America's Young Entrepreneurs Act of 2016 This bill amends title IV (Student Assistance) of the Higher Education Act of 1965 to make eligible for deferment and cancellation under the Federal Direct Loan program a borrower who is an employee or founder of a small business start-up in a distressed area. It also amends the Internal Revenue Code to exclude from an individual's gross income the amount of such canceled student loan debt.  The bill establishes a Federal Direct Refinanced Private Loan program to refinance private education loans. Finally, it establishes a young entrepreneurs business center within the Small Business Administration to certify small business start-ups, identify distressed areas, and approve loan cancelation for founders of small business start-ups.
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