[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2219 Introduced in House (IH)]
103d CONGRESS
1st Session
H. R. 2219
To amend the Higher Education Act of 1965 to achieve savings in the
operation of the student loan programs under part B of title IV of that
Act, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
May 20, 1993
Mr. Gordon (for himself and Mr. Goodling) introduced the following
bill; which was referred to the Committee on Education and Labor
_______________________________________________________________________
A BILL
To amend the Higher Education Act of 1965 to achieve savings in the
operation of the student loan programs under part B of title IV of that
Act, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. FINDINGS.
The Congress finds the following:
(1) The current public/private partnership has succeeded in
fulfilling the mission set for it by Congress--delivering loans
to students reliably and in a timely fashion--and as such
should be preserved.
(2) The current Federal Family Education Loan (FFEL)
program is, however, in need of reform. Many important positive
changes were made during the reauthorization of the Higher
Education Act in the 102d Congress, but further changes are
needed to make the FFEL program more efficient.
(3) It would be preferable to improve on a public/private
partnership that is known to work rather than dismantle it in
favor of an unproved direct Government lending program, which
would increase the Federal debt, further enlarge the Federal
bureaucracy, add major new financial oversight activities to
the already overburdened Department of Education, and force the
Congress to depend on estimated savings which may prove
illusory.
(4) The large Direct Lending Demonstration Program that was
begun by the Higher Education Amendments of 1992 is only now
getting started. It would be better to allow this Demonstration
Program to proceed and show some results before expanding it to
cover the entire federally insured student lending system.
(5) Reforming the FFEL system with the immediate savings
and efficiencies that are contained in this bill will in no way
prevent the passage and implementation of legislation that
would begin a National Service Program, as proposed by the
President.
(6) Reforming the current FFEL system will produce
immediate savings without increasing the size and debt of the
Federal Government. It will also assure students and their
parents that they will continue to receive the funds they need
for higher education when they need them.
SEC. 2. INTEREST RATES.
Section 427A of the Act (20 U.S.C. 1077a) is amended--
(1) by redesignating subsection (h) as subsection (i); and
(2) by inserting after subsection (g) the following new
subsection:
``(h) In-School and Grace Period Interest Rates.--
``(1) Applicable rate.--Notwithstanding any other provision
of this section, with respect to any loan for which the first
disbursement is made on or after October 1, 1993, the
applicable rate of interest for interest which accrues--
``(A) prior to the beginning of the repayment
period of the loan, or
``(B) during the period in which principal need not
be paid (whether or not such principal is in fact paid)
by reason of a provision described in section
428(b)(1)(M) or 427(a)(2)(C),
shall not exceed the rate determined under paragraph (2).
``(2) Method of calculation.--For purposes of paragraph (1)
the rate determined under this paragraph shall, during any 12-
month period beginning on July 1 and ending on June 30, be
determined on the preceding June 1 and be equal to--
``(A) the bond equivalent rate of 91-day Treasury
bills auctioned at the final auction prior to such June
1; plus
``(B) 2.6 percent.''.
SEC. 3. LOAN TRANSFER FEES.
Section 428(b)(2) of the Act (20 U.S.C. 1078(b)(2)) is amended--
(1) by striking ``and'' at the end of subparagraph (E);
(2) by striking the period at the end of subparagraph (F)
and inserting ``; and''; and
(3) by adding at the end thereof the following new
subparagraph:
``(G) provide that, if a lender or holder, on or
after October 1, 1993, sells, transfers, or assigns a
loan under this part, then the transferee shall pay to
the Secretary a transfer fee in an amount equal to 0.25
percent the principal and accrued unpaid interest of
the loan.''.
SEC. 4. RISK SHARING.
(a) Guaranty Agency Reinsurance Percentage.--Section 428(c)(1) of
the Act (20 U.S.C. 1078(c)(1)) is amended--
(1) in subparagraph (A), by striking ``100 percent'' and
inserting ``96 percent'';
(2) in subparagraph (B)(i), by striking ``90 percent'' and
inserting ``86 percent''; and
(3) in subparagraph (B), by striking ``80 percent'' and
inserting ``76 percent''.
(b) Risk Sharing by the Student Loan Marketing Association.--
(1) GSL program.--Section 428(b)(1)(G) of the Act is
amended by inserting before the semicolon at the end thereof
the following: ``, except that for loans held by the Student
Loan Marketing Association (other than loans made pursuant to
section 439(q)) such percentage shall be 90 percent''.
(2) FISL program.--Section 425(b)(1) of the Act is amended
by inserting after ``interest'' in the matter preceding clause
(i) the following: ``, except that for loans held by the
Student Loan Marketing Association (other than loans made
pursuant to section 439(q)) such liability shall be 90 percent
of such unpaid balance, and''.
(c) Effective Date.--The amendments made by this section shall
apply to any loan on which a default (as defined in section 435 of the
Act) occurs on or after the date of enactment of this Act.
SEC. 5. SHARES OF POST-DEFAULT COLLECTIONS.
Section 428(c)(6) of the Act (20 U.S.C. 1078(c)(6)(A) is amended by
adding at the end the following new subparagraph:
``(D) Subparagraph (A)(ii) shall be applied with respect to
determinations of the Secretary's equitable share of payments
made by borrowers--
``(i) during fiscal years 1994 and 1995, by
substituting `27 percent' for `30 percent'; and
``(ii) during fiscal year 1996 and succeeding
fiscal years, by substituting `26 percent' for `30
percent'.''.
SEC. 6. FEDERAL ADMINISTRATIVE EXPENSES.
(a) Administrative Cost Allowances.--Section 428(f)(1)(B) of the
Higher Education Act of 1965 (20 U.S.C. 1078(f)(1)(B)) is amended by
striking ``1 percent'' and inserting ``0.50 percent''.
(b) Reinsurance Fees.--Section 428(c) of the Act is amended--
(1) by striking paragraph (9); and
(2) by redesignating paragraph (10) as paragraph (9).
(c) Effective Date.--The amendments made by this section shall
apply to loans made on or after October 1, 1993.
SEC. 7. PLUS LOAN AMOUNTS AND DISBURSEMENTS.
(a) Loan Amounts.--Section 428B(b) of the Act (20 U.S.C. 1078-2(b))
is amended to read as follows:
``(b) Limitations on Amounts of Loans.--
``(1) Annual limit.--Subject to paragraph (2), the maximum
amount parents may borrow for one student in any academic year
or its equivalent (as defined by regulation of the Secretary)
is $10,000.
``(2) Limitation based on need.--Any loan under this
section may be counted as part of the expected family
contribution in the determination of need under this title, but
no loan may be made to any parent under this section for any
academic year in excess of (A) the student's estimated cost of
attendance, minus (B) other financial aid as certified by the
eligible institution under section 428(a)(2)(A). The annual
insurable limit on account of any student shall not be deemed
to be exceeded by a line of credit under which actual payments
to the borrower will not be made in any year in excess of the
annual limit.''.
(b) Multiple Disbursement Required.--
(1) Amendment.--Section 428B(c) of the Act is amended by
inserting after ``under this section'' the following: ``shall
be disbursed in accordance with the requirements of section
428G and''.
(2) Conforming amendments.--Section 428G(e) of the Act (20
U.S.C. 1078-7(e) is amended--
(A) by striking ``PLUS, Consolidation,'' and
inserting ``Consolidation''; and
(B) by striking ``section 428B or 428C'' and
inserting ``section 428C''.
(3) FISL amendment.--Section 427(b)(2) of the Act (20
U.S.C. 1077(b)(2)) is amended by striking ``section 428B or
428C'' and inserting ``section 428B''.
SEC. 8. CONSOLIDATION LOAN SAVINGS.
(a) Interest Rates.--
(1) Reduction of rates.--Section 428C(c)(1)(B) of the Act
(20 U.S.C. 1078-3(c)(1)(B)) is amended to read as follows:
``(B) Except as provided in subparagraph (C), a
consolidation loan shall bear interest at an annual rate on the
unpaid principal balance of the loan that is equal to the
lesser of--
``(i) the weighted average of the interest rates on
the loans consolidated, rounded to the nearest whole
percent; or
``(ii) for any 12-month period beginning on July 1
and ending on June 30, determined on the preceding June
1 that is a rate equal to--
``(I) the bond equivalent rate of 52-week
Treasury bills auctioned at the final auction
before such June 1; plus
``(II) 3.10 percent.''.
(2) 9 percent ceiling.--Section 428C(c)(1)(C) of the Act is
amended by striking out ``not less'' and inserting ``not
more''.
(b) Limitation of Interest Subsidy During Deferment.--Section
428C(c)(4)(C) of the Act is amended to read as follows:
``(C)(i) provides that periodic installments of
principal need not be paid, but interest shall accrue
and be paid in accordance with clause (ii), during any
period for which the borrower would be eligible for a
deferral under section 428(b)(1)(M), and that any such
period shall not be included in determining the
repayment period pursuant to subsection (c)(2) of this
section; and
``(ii) provides that interest shall accrue and be
paid--
``(I) by the Secretary, in the case of a
consolidation loan that consolidated only
Federal Stafford Loans for which the student
borrower received an interest subsidy under
section 428; or
``(II) by the borrower, or capitalized, in
the case of a consolidation loan other than one
described in subclause (I);''.
(c) Lender Fees.--Section 428C(c) of the Act is amended by adding
at the end the following new paragraph:
``(6) Insurance fee from lenders.--Each lender shall pay to
the Secretary, by quarterly installments, an annual amount
equal to 0.5 percent of the average principal amount
outstanding on loans under this section held by the lender, as
determined in accordance with such regulations as the Secretary
shall prescribe.''.
(d) Effective Date.--The amendments made by this section shall
apply to loans for which the first disbursement is made on or after
October 1, 1993.
SEC. 9. DATE OF DEFAULT DETERMINATIONS.
(a) Amendments.--Section 435(l) of the Act (20 U.S.C. 1085(l)) is
amended--
(1) by striking ``180 days'' and inserting ``270 days'';
and
(2) by striking ``240 days'' and inserting ``330 days''.
(b) Conforming Amendment.--Section 428(c)(1)(A) of the Act (20
U.S.C. 1078(c)(1)(A)) is amended by striking the last sentence and
inserting the following: ``A guaranty agency shall file a claim for
reimbursement under this subsection within 45 days after the agency's
discharge of its insurance obligation, except that when a guaranty
agency discharges its insurance obligation prior to 360 days after a
loan becomes delinquent with respect to any installment thereon, the
guaranty agency shall file a claim under this subsection within 45 days
after the loan becomes 360 days delinquent with respect to any such
installment.''.
(c) Effective Date.--The amendments made by this section shall
apply on and after October 1, 1993.
SEC. 10. SPECIAL ALLOWANCES ON TAX EXEMPT FUNDS.
(a) Special Allowance Amendment.--Section 438(b)(2)(B) of the Act
(20 U.S.C. 1087-1(b)(2)(B)) is amended--
(1) by striking the first sentence of division (i) and
inserting the following: ``The quarterly rate of the special
allowance for holders of loans which were made or purchased
with funds obtained by the holder from the issuance of
obligations, the income from which is exempt from taxation
under the Internal Revenue Code of 1986, shall be 85 percent of
the quarterly rate of the special allowance established under
subparagraph (A).'';
(2) by striking division (ii); and
(3) by redesignating division (iii) as division (ii).
(b) Purchase Premiums.--Section 438(d)(2) of the Act is amended--
(1) by striking subparagraph (C); and
(2) by redesignating subparagraphs (D), (E), and (F) as
subparagraphs (C), (D), and (E), respectively.
(c) Effective Date.--The amendment made by this section shall apply
to loans made on and after October 1, 1993.
SEC. 11. LENDER ORIGINATION FEES.
Section 438 of the Act (20 U.S.C. 1087-1) is amended--
(1) in the heading of subsection (c) by inserting ``From
Students'' after ``Origination Fees'';
(2) by redesignating subsections (d) and (e) as subsections
(e) and (f), respectively; and
(3) by inserting after subsection (c) the following new
subsection:
``(d) Origination Fees From Lenders.--
``(1) Deduction from interest and special allowance
subsidies.--Notwithstanding subsection (b), the total amount of
interest and special allowance payable under section
428(a)(3)(A) and subsection (b) of this section, respectively,
to any holder shall be reduced by the Secretary by an
origination fee in an amount determined in accordance with
paragraph (2) of this subsection. If the total amount of
interest and special allowance payable under section
428(a)(3)(A) and subsection (b) of this section, respectively,
is less than the amount of such origination fee, the Secretary
shall deduct such excess amount from subsequent quarters'
payments until the total amount has been deducted.
``(2) Amount of origination fees.--Subject to paragraph (3)
of this subsection, with respect to any loan (other than loans
made under sections 428A, 428B, 428C, and 428H) for which a
completed note or other written evidence of the loan was sent
or delivered to the borrower for signing on or after July 1,
1993, the amount of the origination fee which shall be deducted
under paragraph (1) shall be equal to 1 percent of the
principal amount of the loan.
``(3) SLS, plus, consolidation, and undsubsidized loans.--
With respect to any loans made under section 428A, 428B, 428C,
and 428H and disbursed on or after October 1, 1993, each
eligible lender under this part shall pay to the Secretary an
origination fee of 1 percent of the principal amount of the
loan.
``(4) Distribution of origination fees.--All origination
fees collected pursuant to this section on loans authorized
under section 428A, 428B, 428C, or 428H shall be paid to the
Secretary by the lender and deposited in the fund authorized
under section 431 of this part.''.
SEC. 12. LENDER-OF-LAST-RESORT REQUIREMENT.
Section 439(q)(1)(A) of the Act (20 U.S.C. 1087-2) is amended by
``may begin'' and inserting ``shall begin''.
SEC. 13. STUDENT LOAN MARKETING ASSOCIATION STUDY.
Section 439 of the Act is further amended by adding at the end
thereof the following new subsection:
``(s) Transition Study and Activities.--(1) The Secretaries of
Education and the Treasury, in consultation with the Association, shall
prepare a study, to be completed within 6 months of the enactment of
this provision, which shall examine alternatives concerning the status,
operations, and purposes of the Association. Such alternatives shall
include providing for an orderly transition of the Association from a
Government-Sponsored Enterprise to a private corporation. Such study
shall--
``(A) consider how best to meet the needs of students and
taxpayers for financing for postsecondary education;
``(B) reflect the need for the Association to maintain
liquidity and perform other functions for the Federal Education
Loan program;
``(C) consider any appropriate changes to part D of title
VII, relating to the College Construction Loan Insurance
Association; and
``(D) be considered by the Secretaries of Education and the
Treasury in developing any legislative proposals concerning any
changes to the status of the Association as a Government-
Sponsored Enterprise or its duties under the Federal Family
Education Loan program.
``(2) The Secretaries of Education and the Treasury are directed to
work with the Association to ensure that any changes in the
Association's status, operations, or purposes are carried out
efficiently and effectively.''.
SEC. 14. REPAYMENT OPTIONS.
(a) Regulations Required.--The Secretary of Education shall, not
later than 60 days after the date of enactment of this Act--
(1) prescribe the regulations required for the
implementation of the income sensitive repayment options
pursuant to section 428(b)(1)(E)(i) and 428(m) of the Act;
(2) take such steps as may be necessary--
(A) to inform borrowers under part B of title IV of
the Act of the availability of standard, graduated, and
income sensitive repayment options for student loans;
and
(B) to ensure that lenders under such part permit
borrowers to fully exercise such options.
(b) Conforming Amendments.--Section 428(b)(1) of the Act (20 U.S.C.
1078(b)(1)) is amended--
(1) in subparagraph (D)(ii), by inserting ``except as
permitted pursuant to subparagraph (E),'';
(2) in subparagraph (E)--
(A) by striking ``subparagraphs (D) and (L)'' and
inserting ``subparagraph (L)'';
(B) by inserting ``or 428H'' after ``section
428A'';
(C) by inserting ``under subsection (m)'' after
``regulations of the Secretary''; and
(D) by striking ``nor more than 10 years''.
<all>
HR 2219 IH----2