Financial Aid for Skill Enhancement Act of 2000

Summary: Amends the Internal Revenue Code with respect to employer-provided educational assistance programs to exclude from an employee's gross income any employer payments on such student loans.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Financial Aid for Skill Enhancement 
Act of 2000''.

SEC. 2. FINDINGS.

    The Congress finds the following:
            (1) Approximately 3,500,000 students (18 percent of all 
        undergraduate students) attend institutions on a less than 
        half-time basis.
            (2) Currently, students who are not in a degree-seeking 
        program, or attend school less than half-time, are not eligible 
        for federal financial aid.
            (3) Individuals in the 21st century workforce will be 
        expected to enhance their skills on a regular basis in order to 
        keep up with constantly changing technology.
            (4) Time and cost are the most frequently reported barriers 
        to participation in work-related courses.
            (5) Access to financial aid must be more widely available 
        to people who have family or work responsibilities, or both.
            (6) Employers will require that workers in the 21st century 
        economy have training beyond high school.
            (7) Job security and success in the 21st century economy 
        will be dependent on workers access to lifelong learning 
        skills.
            (8) Approximately 20 percent of United States workers are 
        landing jobs with employers that offer job security, training, 
        and opportunities for lifelong learning.
            (9) Approximately 40 percent of American workers are not 
        receiving education after high school. These workers may not be 
        able to compete for the best jobs in the 21st century economy.
            (10) As America is forced to compete increasingly in a 
        global marketplace, employers must have the best trained 
        workforce in the world.
            (11) Employers must have the domestic capacity to fill the 
        jobs of the 21st century economy.

SEC. 3. ESTABLISHMENT OF PROGRAM.

    Part D of title IV of the Higher Education Act of 1965 is amended 
by inserting after section 460 (20 U.S.C. 1087j) the following new 
section:

``SEC. 460A. DIRECT LOANS FOR LESS-THAN-HALF-TIME STUDENTS.

    ``(a) Purpose.--It is the purpose of this section to establish a 
direct loan program at qualifying public institutions to provide loans 
to less-than-half-time students to cover the costs of programs 
providing instruction to enable those students to acquire or improve 
job skills.
    ``(b) Program Authority.--From the funds appropriated under 
subsection (g), the Secretary shall provide funds to qualifying public 
institutions, or consortia thereof, that have entered into agreements 
with the Secretary under subsection (c), or to alternative originators 
designated by the Secretary, to make loans to eligible part-time 
students at those institutions in accordance with the requirements of 
this section.
    ``(c) Participation Agreements.--
            ``(1) Eligibility of institutions; consortia.--The 
        Secretary shall enter into a participation agreement under this 
        subsection with any qualifying public institution, or consortia 
        thereof, that submits to the Secretary a request for 
        participation and a demonstration of its status as a qualifying 
        public institution. Subject to such requirements as the 
        Secretary may prescribe, two or more qualifying public 
        institutions may apply to the Secretary as consortia to enter 
        into agreements with the Secretary to originate loans under 
        this section for students in attendance at such institutions.
            ``(2) Alternative originators.--The Secretary shall, by 
        regulation, establish qualifications for an organization to 
        enter into an agreement with the Secretary as an alternative 
        originator.
            ``(3) Terms of agreements.--An agreement under this section 
        shall--
                    ``(A) provide for the establishment and maintenance 
                of a direct student loan program at the institution 
                under which the institution will--
                            ``(i) identify eligible part-time students 
                        who seek student financial assistance at such 
                        institution;
                            ``(ii) determine the amount of eligible 
                        education expenses of such students;
                            ``(iii) provide a statement that certifies 
                        the eligibility of any student to receive a 
                        loan under this section that is not in excess 
                        of such eligible educational expenses;
                            ``(iv) provide timely and accurate 
                        information--
                                    ``(I) concerning the status of 
                                student borrowers while such students 
                                are in attendance at the institution 
                                and concerning any new information of 
                                which the institution becomes aware for 
                                such students after such borrowers 
                                leave the institution, to the Secretary 
                                for the servicing and collecting of 
                                loans made under this part; and
                                    ``(II) if the institution does not 
                                have an agreement with the Secretary 
                                under this subsection, concerning 
                                student eligibility and eligible 
                                educational expenses to the Secretary 
                                as needed for the alternative 
                                origination of loans to eligible part-
                                time students;
                    ``(B) provide assurances that the institution will 
                comply with requirements established by the Secretary 
                relating to student loan information with respect to 
                loans made under this section;
                    ``(C) provide that the institution accepts 
                responsibility and financial liability stemming from 
                its failure to perform its functions pursuant to the 
                agreement;
                    ``(D) provide that the institution will not charge 
                any fees of any kind, however described, to student 
                borrowers for origination activities or the provision 
                of any information necessary for a student to receive a 
                loan under this section, or any benefits associated 
                with such loan;
                    ``(E) provide that the institution or consortium 
                will originate loans to eligible part-time students in 
                accordance with this section, and that such origination 
                may include the acceptance of applications by means of 
                the Internet or other electronic means;
                    ``(F) provide that the note or evidence of 
                obligation on the loan shall be the property of the 
                Secretary; and
                    ``(G) include such other provisions as the 
                Secretary determines are necessary to protect the 
                interests of the United States and to promote the 
                purposes of this section, except that the Secretary 
                shall not require any institution to perform any needs 
                analysis of any applicant for a loan under this 
                section.
            ``(3) Withdrawal and termination procedures.--The Secretary 
        shall establish procedures by which institutions or consortia 
        may withdraw or be terminated from the program under this 
        section.
    ``(d) Terms and Conditions of Loans.--
            ``(1) In general.--A note or other evidence of a loan under 
        this section shall--
                    ``(A) require the borrower to repay the loan, 
                together with interest thereon, in installments 
                beginning not less than one month after the conclusion 
                of the period of enrollment for which the loan was made 
                and ending not later than one year thereafter, except 
                that the borrower shall be entitled to accelerate, 
                without penalty, repayment on the borrower's loans 
                under this section;
                    ``(B) obligate the borrower to pay interest on the 
                outstanding balance of the loan at a rate prescribed by 
                the Secretary taking into account the purposes of this 
                section;
                    ``(C) require the borrower to participate in exit 
                counseling under section 485(b); and
                    ``(D) contain such additional terms and conditions 
                as the Secretary may require to protect the interests 
                of the United States and to promote the purposes of 
                this section.
            ``(2) Deferment.--A borrower of a loan under this section 
        who meets the requirements of section 455(f)(2) shall be 
        eligible for a deferment, during which periodic installments of 
        principal need not be paid, and interest shall accrue and be 
        capitalized or paid by the borrower.
            ``(3) Simple application.--The common financial reporting 
        form required in section 483(a)(1) shall not be required for an 
application for a loan under this section. The Secretary shall 
prescribe by regulation a simple form for determining eligibility for 
and the amount of loans under this section.
            ``(4) Loan disbursement.--Proceeds of loans to students 
        under this part shall be applied to the student's account for 
        tuition and fees. The Secretary shall establish periods for the 
        payments of such proceeds in a manner consistent with payment 
        of Federal Pell Grants under subpart 1 of part A of this title.
    ``(e) Fiscal Control and Fund Accountability.--Section 454(k) shall 
apply to funds provided under this section.
    ``(f) Contracts for Origination, Servicing, and Data Systems.--The 
Secretary may enter into contracts for--
            ``(1) the alternative origination of loans to eligible 
        part-time students attending qualifying public institutions 
        with agreements to participate in the program under this part, 
        if such institutions do not have agreements with the Secretary 
        under subsection (c); and
            ``(2) the servicing and collection of loans made under this 
        section.
    ``(g) Authorization of Appropriations.--There are authorized to be 
appropriated to provide funds for loans under this section such sums as 
may be necessary for fiscal year 2001 and for each of the 4 succeeding 
fiscal years.
    ``(h) Definitions.--As used in this section:
            ``(1) Qualifying public institutions.--The term `qualifying 
        public institution' means an institution that--
                    ``(A) is an eligible institution under section 
                435(a); and
                    ``(B) is a public institution that provides an 
                educational program for which the institution awards a 
                bachelor's degree or provides not less than a 2-year 
                program that is acceptable for full credit toward such 
                a degree.
            ``(2) Eligible part-time student.--The term `eligible part-
        time student' means a student that is an eligible student as 
        determined under section 484, except that--
                    ``(A) the student does not meet the requirements of 
                section 484(a)(1), but is enrolled or accepted for 
                enrollment in a program of instruction the expenses for 
                which are eligible education expenses;
                    ``(B) the student is not required to meet the 
                requirements of section 484(a)(2), but the Secretary 
                may by regulation prescribe limitations to prevent 
                abuse;
                    ``(C) the institution may require students to 
                establish credit worthiness a condition of obtaining a 
                loan under this section;
                    ``(D) a student who has obtained a loan or loans to 
                cover eligible education expenses for 4 courses of 
                instruction shall not be an eligible part-time student 
                until such loan or loans are repaid.
            ``(3) Eligible education expenses.--The term `eligible 
        education expenses' means the tuition and fees, and the cost of 
        any books, required with respect to any course of instruction 
        at a qualifying public institution to acquire or improve job 
        skills of an individual.''.

SEC. 4. EMPLOYER PAYMENTS ON DIRECT LOANS FOR LESS-THAN-HALF-TIME 
              STUDENTS EXCLUDABLE FROM GROSS INCOME.

    (a) In General.--Subparagraph (A) of section 127(c)(1) of the 
Internal Revenue Code of 1986 (relating to employer-provided 
educational assistance programs) is amended by striking ``and 
equipment)'' and inserting ``and equipment, and payments on loans made 
under section 468A of the Higher Education Act of 1965 (relating to 
direct loans for less-than-half-time students))''.
    (b) Effective Date.--The amendment made by this section shall apply 
to payments made after the date of the enactment of this Act.