`[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2669 Enrolled Bill (ENR)]

        H.R.2669

                       One Hundred Tenth Congress

                                 of the

                        United States of America




          Begun and held at the City of Washington on Thursday,
            the fourth day of January, two thousand and seven


                                 An Act


 
To provide for reconciliation pursuant to section 601 of the concurrent 
             resolution on the budget for fiscal year 2008.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,
SECTION 1. SHORT TITLE; REFERENCES.
    (a) Short Title.--This Act may be cited as the ``College Cost 
Reduction and Access Act''.
    (b) References.--Except as otherwise expressly provided, whenever 
in this Act an amendment or repeal is expressed in terms of an 
amendment to, or repeal of, a section or other provision, the reference 
shall be considered to be made to a section or other provision of the 
Higher Education Act of 1965 (20 U.S.C. 1001 et seq.).
    (c) Effective Date.--Except as otherwise expressly provided, the 
amendments made by this Act shall be effective on October 1, 2007.

  TITLE I--GRANTS TO STUDENTS IN ATTENDANCE AT INSTITUTIONS OF HIGHER 
                               EDUCATION

    SEC. 101. TUITION SENSITIVITY.
    (a) Amendment.--Section 401(b) (20 U.S.C. 1070a(b)) is amended--
        (1) by striking paragraph (3); and
        (2) by redesignating paragraphs (4) through (9) as paragraphs 
    (3) through (8), respectively.
    (b) Effective Date.--The amendments made by subsection (a) shall be 
effective with respect to determinations of Federal Pell Grant amounts 
for award years beginning on or after July 1, 2007.
    (c) Authorization and Appropriation of Funds.--There is authorized 
to be appropriated, and there is appropriated, out of any money in the 
Treasury not otherwise appropriated, for the Department of Education to 
carry out the amendment made by subsection (a), $11,000,000 for fiscal 
year 2008.
    SEC. 102. MANDATORY PELL GRANT INCREASES.
    (a) Extension of Authority.--Section 401(a) (20 U.S.C. 1070a(a)) is 
amended by striking ``fiscal year 2004'' and inserting ``fiscal year 
2017''.
    (b) Funding for Increases.--Section 401(b) (20 U.S.C. 1070a(b)) is 
amended by adding at the end the following new paragraph:
        ``(9) Additional funds.--
            ``(A) In general.--There are authorized to be appropriated, 
        and there are appropriated, to carry out subparagraph (B) of 
        this paragraph (in addition to any other amounts appropriated 
        to carry out this section and out of any money in the Treasury 
        not otherwise appropriated) the following amounts--
                ``(i) $2,030,000,000 for fiscal year 2008;
                ``(ii) $2,090,000,000 for fiscal year 2009;
                ``(iii) $3,030,000,000 for fiscal year 2010;
                ``(iv) $3,090,000,000 for fiscal year 2011;
                ``(v) $5,050,000,000 for fiscal year 2012;
                ``(vi) $105,000,000 for fiscal year 2013;
                ``(vii) $4,305,000,000 for fiscal year 2014;
                ``(viii) $4,400,000,000 for fiscal year 2015;
                ``(ix) $4,600,000,000 for fiscal year 2016; and
                ``(x) $4,900,000,000 for fiscal year 2017.
            ``(B) Increase in federal pell grants.--The amounts made 
        available pursuant to subparagraph (A) of this paragraph shall 
        be used to increase the amount of the maximum Federal Pell 
        Grant for which a student shall be eligible during an award 
        year, as specified in the last enacted appropriation Act 
        applicable to that award year, by--
                ``(i) $490 for each of the award years 2008-2009 and 
            2009-2010;
                ``(ii) $690 for each of the award years 2010-2011 and 
            2011-2012; and
                ``(iii) $1,090 for award year 2012-2013.
            ``(C) Eligibility.--The Secretary shall only award an 
        increased amount of a Federal Pell Grant under this section for 
        any award year pursuant to the provisions of this paragraph to 
        students who qualify for a Federal Pell Grant award under the 
        maximum grant award enacted in the annual appropriation Act for 
        such award year without regard to the provisions of this 
        paragraph.
            ``(D) Formula otherwise unaffected.--Except as provided in 
        subparagraphs (B) and (C), nothing in this paragraph shall be 
        construed to alter the requirements of this section, or 
        authorize the imposition of additional requirements, for the 
        determination and allocation of Federal Pell Grants under this 
        section.
            ``(E) Ratable increases and decreases.--The amounts 
        specified in subparagraph (B) shall be ratably increased or 
        decreased to the extent that funds available under subparagraph 
        (A) exceed or are less than (respectively) the amount required 
        to provide the amounts specified in subparagraph (B).
            ``(F) Use of fiscal year funds for award years.--The 
        amounts made available by subparagraph (A) for any fiscal year 
        shall be available and remain available for use under 
        subparagraph (B) for the award year that begins in such fiscal 
        year.''.
    SEC. 103. UPWARD BOUND.
    Section 402C is further amended by adding at the end the following 
new subsection:
    ``(f) Additional Funds.--
        ``(1) Authorization and appropriation.--There are authorized to 
    be appropriated, and there are appropriated to the Secretary, from 
    funds not otherwise appropriated, $57,000,000 for each of the 
    fiscal years 2008 through 2011 to carry out paragraph (2), except 
    that any amounts that remain unexpended for such purpose for each 
    of such fiscal years may be available for technical assistance and 
    administration costs for the Upward Bound program. The authority to 
    award grants under this subsection shall expire at the end of 
    fiscal year 2011.
        ``(2) Use of funds.--The amounts made available by paragraph 
    (1) shall be available to provide assistance to all Upward Bound 
    projects that did not receive assistance in fiscal year 2007 and 
    that have a grant score above 70. Such assistance shall be made 
    available in the form of 4-year grants.''.
    SEC. 104. TEACH GRANTS.
    Part A of title IV (20 U.S.C. 1070 et seq.) is amended by adding at 
the end the following new subpart:

                       ``Subpart 9--TEACH Grants

``SEC. 420L. DEFINITIONS.
    ``For the purposes of this subpart:
        ``(1) Eligible institution.--The term `eligible institution' 
    means an institution of higher education, as defined in section 
    102, that the Secretary determines--
            ``(A) provides high quality teacher preparation and 
        professional development services, including extensive clinical 
        experience as a part of pre-service preparation;
            ``(B) is financially sound;
            ``(C) provides pedagogical course work, or assistance in 
        the provision of such coursework, including the monitoring of 
        student performance, and formal instruction related to the 
        theory and practices of teaching; and
            ``(D) provides supervision and support services to 
        teachers, or assistance in the provision of such services, 
        including mentoring focused on developing effective teaching 
        skills and strategies.
        ``(2) Post-baccalaureate.--The term `post-baccalaureate' means 
    a program of instruction for individuals who have completed a 
    baccalaureate degree, that does not lead to a graduate degree, and 
    that consists of courses required by a State in order for a teacher 
    candidate to receive a professional certification or licensing 
    credential that is required for employment as a teacher in an 
    elementary school or secondary school in that State, except that 
    such term shall not include any program of instruction offered by 
    an eligible institution that offers a baccalaureate degree in 
    education.
        ``(3) Teacher candidate.--The term `teacher candidate' means a 
    student or teacher described in subparagraph (A) or (B) of section 
    420N(a)(2).
``SEC. 420M. PROGRAM ESTABLISHED.
    ``(a) Program Authority.--
        ``(1) Payments required.--The Secretary shall pay to each 
    eligible institution such sums as may be necessary to pay to each 
    teacher candidate who files an application and agreement in 
    accordance with section 420N, and who qualifies under paragraph (2) 
    of section 420N(a), a TEACH Grant in the amount of $4,000 for each 
    academic year during which that teacher candidate is in attendance 
    at the institution.
        ``(2) References.--Grants made under paragraph (1) shall be 
    known as `Teacher Education Assistance for College and Higher 
    Education Grants' or `TEACH Grants'.
    ``(b) Payment Methodology.--
        ``(1) Prepayment.--Not less than 85 percent of any funds 
    provided to an eligible institution under subsection (a) shall be 
    advanced to the eligible institution prior to the start of each 
    payment period and shall be based upon an amount requested by the 
    institution as needed to pay teacher candidates until such time as 
    the Secretary determines and publishes in the Federal Register with 
    an opportunity for comment, an alternative payment system that 
    provides payments to institutions in an accurate and timely manner, 
    except that this sentence shall not be construed to limit the 
    authority of the Secretary to place an institution on a 
    reimbursement system of payment.
        ``(2) Direct payment.--Nothing in this section shall be 
    interpreted to prohibit the Secretary from paying directly to 
    teacher candidates, in advance of the beginning of the academic 
    term, an amount for which teacher candidates are eligible, in cases 
    where the eligible institution elects not to participate in the 
    disbursement system required by paragraph (1).
        ``(3) Distribution of grants to teacher candidates.--Payments 
    under this subpart shall be made, in accordance with regulations 
    promulgated by the Secretary for such purpose, in such manner as 
    will best accomplish the purposes of this subpart. Any disbursement 
    allowed to be made by crediting the teacher candidate's account 
    shall be limited to tuition and fees and, in the case of 
    institutionally-owned housing, room and board. The teacher 
    candidate may elect to have the institution provide other such 
    goods and services by crediting the teacher candidate's account.
    ``(c) Reductions in Amount.--
        ``(1) Part-time students.--In any case where a teacher 
    candidate attends an eligible institution on less than a full-time 
    basis (including a teacher candidate who attends an eligible 
    institution on less than a half-time basis) during any academic 
    year, the amount of a grant under this subpart for which that 
    teacher candidate is eligible shall be reduced in proportion to the 
    degree to which that teacher candidate is not attending on a full-
    time basis, in accordance with a schedule of reductions established 
    by the Secretary for the purposes of this subpart, computed in 
    accordance with this subpart. Such schedule of reductions shall be 
    established by regulation and published in the Federal Register in 
    accordance with section 482 of this Act.
        ``(2) No exceeding cost.--The amount of a grant awarded under 
    this subpart, in combination with Federal assistance and other 
    student assistance, shall not exceed the cost of attendance (as 
    defined in section 472) at the eligible institution at which that 
    teacher candidate is in attendance. If, with respect to any teacher 
    candidate for any academic year, it is determined that the amount 
    of a TEACH Grant exceeds the cost of attendance for that year, the 
    amount of the TEACH Grant shall be reduced until such grant does 
    not exceed the cost of attendance at the eligible institution.
    ``(d) Period of Eligibility for Grants.--
        ``(1) Undergraduate and post-baccalaureate students.--The 
    period during which an undergraduate or post-baccalaureate student 
    may receive grants under this subpart shall be the period required 
    for the completion of the first undergraduate baccalaureate or 
    post-baccalaureate course of study being pursued by the teacher 
    candidate at the eligible institution at which the teacher 
    candidate is in attendance, except that--
            ``(A) any period during which the teacher candidate is 
        enrolled in a noncredit or remedial course of study as 
        described in paragraph (3) shall not be counted for the purpose 
        of this paragraph; and
            ``(B) the total amount that a teacher candidate may receive 
        under this subpart for undergraduate or post-baccalaureate 
        study shall not exceed $16,000.
        ``(2) Graduate students.--The period during which a graduate 
    student may receive grants under this subpart shall be the period 
    required for the completion of a master's degree course of study 
    pursued by the teacher candidate at the eligible institution at 
    which the teacher candidate is in attendance, except that the total 
    amount that a teacher candidate may receive under this subpart for 
    graduate study shall not exceed $8,000.
        ``(3) Remedial course; study abroad.--Nothing in this section 
    shall be construed to exclude from eligibility courses of study 
    which are noncredit or remedial in nature (including courses in 
    English language acquisition) which are determined by the eligible 
    institution to be necessary to help the teacher candidate be 
    prepared for the pursuit of a first undergraduate baccalaureate or 
    post-baccalaureate degree or certificate or, in the case of courses 
    in English language instruction, to be necessary to enable the 
    teacher candidate to utilize already existing knowledge, training, 
    or skills. Nothing in this section shall be construed to exclude 
    from eligibility programs of study abroad that are approved for 
    credit by the home institution at which the teacher candidate is 
    enrolled.
``SEC. 420N. APPLICATIONS; ELIGIBILITY.
    ``(a) Applications; Demonstration of Eligibility.--
        ``(1) Filing required.--The Secretary shall periodically set 
    dates by which teacher candidates shall file applications for 
    grants under this subpart. Each teacher candidate desiring a grant 
    under this subpart for any year shall file an application 
    containing such information and assurances as the Secretary may 
    determine necessary to enable the Secretary to carry out the 
    functions and responsibilities of this subpart.
        ``(2) Demonstration of teach grant eligibility.--Each 
    application submitted under paragraph (1) shall contain such 
    information as is necessary to demonstrate that--
            ``(A) if the applicant is an enrolled student--
                ``(i) the student is an eligible student for purposes 
            of section 484;
                ``(ii) the student--

                    ``(I) has a grade point average that is determined, 
                under standards prescribed by the Secretary, to be 
                comparable to a 3.25 average on a zero to 4.0 scale, 
                except that, if the student is in the first year of a 
                program of undergraduate education, such grade point 
                average shall be determined on the basis of the 
                student's cumulative secondary school grade point 
                average; or
                    ``(II) displayed high academic aptitude by 
                receiving a score above the 75th percentile on at least 
                one of the batteries in an undergraduate, post-
                baccalaureate, or graduate school admissions test; and

                ``(iii) the student is completing coursework and other 
            requirements necessary to begin a career in teaching, or 
            plans to complete such coursework and requirements prior to 
            graduating; or
            ``(B) if the applicant is a current or prospective teacher 
        applying for a grant to obtain a graduate degree--
                ``(i) the applicant is a teacher or a retiree from 
            another occupation with expertise in a field in which there 
            is a shortage of teachers, such as mathematics, science, 
            special education, English language acquisition, or another 
            high-need subject; or
                ``(ii) the applicant is or was a teacher who is using 
            high-quality alternative certification routes, such as 
            Teach for America, to get certified.
    ``(b) Agreements to Serve.--Each application under subsection (a) 
shall contain or be accompanied by an agreement by the applicant that--
        ``(1) the applicant will--
            ``(A) serve as a full-time teacher for a total of not less 
        than 4 academic years within 8 years after completing the 
        course of study for which the applicant received a TEACH Grant 
        under this subpart;
            ``(B) teach in a school described in section 465(a)(2)(A);
            ``(C) teach in any of the following fields--
                ``(i) mathematics;
                ``(ii) science;
                ``(iii) a foreign language;
                ``(iv) bilingual education;
                ``(v) special education;
                ``(vi) as a reading specialist; or
                ``(vii) another field documented as high-need by the 
            Federal Government, State government, or local educational 
            agency, and approved by the Secretary;
            ``(D) submit evidence of such employment in the form of a 
        certification by the chief administrative officer of the school 
        upon completion of each year of such service; and
            ``(E) comply with the requirements for being a highly 
        qualified teacher as defined in section 9101 of the Elementary 
        and Secondary Education Act of 1965; and
        ``(2) in the event that the applicant is determined to have 
    failed or refused to carry out such service obligation, the sum of 
    the amounts of any TEACH Grants received by such applicant will be 
    treated as a loan and collected from the applicant in accordance 
    with subsection (c) and the regulations thereunder.
    ``(c) Repayment for Failure to Complete Service.--In the event that 
any recipient of a grant under this subpart fails or refuses to comply 
with the service obligation in the agreement under subsection (b), the 
sum of the amounts of any TEACH Grants received by such recipient 
shall, upon a determination of such a failure or refusal in such 
service obligation, be treated as a Federal Direct Unsubsidized 
Stafford Loan under part D of title IV, and shall be subject to 
repayment, together with interest thereon accruing from the date of the 
grant award, in accordance with terms and conditions specified by the 
Secretary in regulations under this subpart.
``SEC. 420O. PROGRAM PERIOD AND FUNDING.
    ``Beginning on July 1, 2008, there shall be available to the 
Secretary to carry out this subpart, from funds not otherwise 
appropriated, such sums as may be necessary to provide TEACH Grants in 
accordance with this subpart to each eligible applicant.''.

         TITLE II--STUDENT LOAN BENEFITS, TERMS, AND CONDITIONS

    SEC. 201. INTEREST RATE REDUCTIONS.
    (a) FFEL Interest Rates.--
        (1) Section 427A(l) (20 U.S.C. 1077a(l)) is amended by adding 
    at the end the following new paragraph:
        ``(4) Reduced rates for undergraduate subsidized loans.--
    Notwithstanding subsection (h) and paragraph (1) of this 
    subsection, with respect to any loan to an undergraduate student 
    made, insured, or guaranteed under this part (other than a loan 
    made pursuant to section 428B, 428C, or 428H) for which the first 
    disbursement is made on or after July 1, 2006, and before July 1, 
    2012, the applicable rate of interest shall be as follows:
            ``(A) For a loan for which the first disbursement is made 
        on or after July 1, 2006, and before July 1, 2008, 6.8 percent 
        on the unpaid principal balance of the loan.
            ``(B) For a loan for which the first disbursement is made 
        on or after July 1, 2008, and before July 1, 2009, 6.0 percent 
        on the unpaid principal balance of the loan.
            ``(C) For a loan for which the first disbursement is made 
        on or after July 1, 2009, and before July 1, 2010, 5.6 percent 
        on the unpaid principal balance of the loan.
            ``(D) For a loan for which the first disbursement is made 
        on or after July 1, 2010, and before July 1, 2011, 4.5 percent 
        on the unpaid principal balance of the loan.
            ``(E) For a loan for which the first disbursement is made 
        on or after July 1, 2011, and before July 1, 2012, 3.4 percent 
        on the unpaid principal balance of the loan.''.
        (2) Special allowance cross reference.--Section 
    438(b)(2)(I)(ii)(II) (20 U.S.C. 1087-1(b)(2)(I)(ii)(II)) is amended 
    by striking ``section 427A(l)(1)'' and inserting ``section 
    427A(l)(1) or (l)(4)''.
    (b) Direct Loan Interest Rates.--Section 455(b)(7) (20 U.S.C. 
1087e(b)(7)) is amended by adding at the end the following new 
subparagraph:
            ``(D) Reduced rates for undergraduate fdsl.--
        Notwithstanding the preceding paragraphs of this subsection and 
        subparagraph (A) of this paragraph, for Federal Direct Stafford 
        Loans made to undergraduate students for which the first 
        disbursement is made on or after July 1, 2006, and before July 
        1, 2012, the applicable rate of interest shall be as follows:
                ``(i) For a loan for which the first disbursement is 
            made on or after July 1, 2006, and before July 1, 2008, 6.8 
            percent on the unpaid principal balance of the loan.
                ``(ii) For a loan for which the first disbursement is 
            made on or after July 1, 2008, and before July 1, 2009, 6.0 
            percent on the unpaid principal balance of the loan.
                ``(iii) For a loan for which the first disbursement is 
            made on or after July 1, 2009, and before July 1, 2010, 5.6 
            percent on the unpaid principal balance of the loan.
                ``(iv) For a loan for which the first disbursement is 
            made on or after July 1, 2010, and before July 1, 2011, 4.5 
            percent on the unpaid principal balance of the loan.
                ``(v) For a loan for which the first disbursement is 
            made on or after July 1, 2011, and before July 1, 2012, 3.4 
            percent on the unpaid principal balance of the loan.''.
    SEC. 202. STUDENT LOAN DEFERMENT FOR CERTAIN MEMBERS OF THE ARMED 
      FORCES.
    (a) Federal Family Education Loans.--Section 428(b)(1)(M)(iii) (20 
U.S.C. 1078(b)(1)(M)(iii)) is amended--
        (1) in the matter preceding subclause (I), by striking ``not in 
    excess of 3 years'';
        (2) in subclause (II), by striking ``; or'' and inserting a 
    comma; and
        (3) by adding at the end the following:
            ``and for the 180-day period following the demobilization 
            date for the service described in subclause (I) or (II); 
            or''.
    (b) Direct Loans.--Section 455(f)(2)(C) (20 U.S.C. 1087e(f)(2)(C)) 
is amended--
        (1) in the matter preceding clause (i), by striking ``not in 
    excess of 3 years'';
        (2) in clause (ii), by striking ``; or'' and inserting a comma; 
    and
        (3) by adding at the end the following:
        ``and for the 180-day period following the demobilization date 
        for the service described in clause (i) or (ii); or''.
    (c) Perkins Loans.--Section 464(c)(2)(A)(iii) (20 U.S.C. 
1087dd(c)(2)(A)(iii)) is amended--
        (1) in the matter preceding subclause (I), by striking ``not in 
    excess of 3 years'';
        (2) in subclause (II), by striking the semicolon and inserting 
    a comma; and
        (3) by adding at the end the following:
``and for the 180-day period following the demobilization date for the 
service described in subclause (I) or (II);''.
    (d) Applicability.--Section 8007(f) of the Higher Education 
Reconciliation Act of 2005 (20 U.S.C. 1078 note) is amended by striking 
``loans for which'' and all that follows through the period at the end 
and inserting ``all loans under title IV of the Higher Education Act of 
1965.''.
    SEC. 203. INCOME-BASED REPAYMENT.
    (a) Amendment.--Part G of title IV (20 U.S.C. 1088 et seq.) is 
amended by adding at the end the following:
``SEC. 493C. INCOME-BASED REPAYMENT.
    ``(a) Definitions.--In this section:
        ``(1) Excepted plus loan.--The term `excepted PLUS loan' means 
    a loan under section 428B, or a Federal Direct PLUS Loan, that is 
    made, insured, or guaranteed on behalf of a dependent student.
        ``(2) Excepted consolidation loan.--The term `excepted 
    consolidation loan' means a consolidation loan under section 428C, 
    or a Federal Direct Consolidation Loan, if the proceeds of such 
    loan were used to the discharge the liability on an excepted PLUS 
    loan.
        ``(3) Partial financial hardship.--The term `partial financial 
    hardship', when used with respect to a borrower, means that for 
    such borrower--
            ``(A) the annual amount due on the total amount of loans 
        made, insured, or guaranteed under part B or D (other than an 
        excepted PLUS loan or excepted consolidation loan) to a 
        borrower as calculated under the standard repayment plan under 
        section 428(b)(9)(A)(i) or 455(d)(1)(A), based on a 10-year 
        repayment period; exceeds
            ``(B) 15 percent of the result obtained by calculating, on 
        at least an annual basis, the amount by which--
                ``(i) the borrower's, and the borrower's spouse's (if 
            applicable), adjusted gross income; exceeds
                ``(ii) 150 percent of the poverty line applicable to 
            the borrower's family size as determined under section 
            673(2) of the Community Services Block Grant Act (42 U.S.C. 
            9902(2)).
    ``(b) Income-Based Repayment Program Authorized.--Notwithstanding 
any other provision of this Act, the Secretary shall carry out a 
program under which--
        ``(1) a borrower of any loan made, insured, or guaranteed under 
    part B or D (other than an excepted PLUS loan or excepted 
    consolidation loan) who has a partial financial hardship (whether 
    or not the borrower's loan has been submitted to a guaranty agency 
    for default aversion or is already in default) may elect, during 
    any period the borrower has the partial financial hardship, to have 
    the borrower's aggregate monthly payment for all such loans not 
    exceed the result described in subsection (a)(3)(B) divided by 12;
        ``(2) the holder of such a loan shall apply the borrower's 
    monthly payment under this subsection first toward interest due on 
    the loan, next toward any fees due on the loan, and then toward the 
    principal of the loan;
        ``(3) any interest due and not paid under paragraph (2)--
            ``(A) shall, on subsidized loans, be paid by the Secretary 
        for a period of not more than 3 years after the date of the 
        borrower's election under paragraph (1), except that such 
        period shall not include any period during which the borrower 
        is in deferment due to an economic hardship described in 
        section 435(o); and
            ``(B) be capitalized--
                ``(i) in the case of a subsidized loan, subject to 
            subparagraph (A), at the time the borrower--

                    ``(I) ends the election to make income-based 
                repayment under this subsection; or
                    ``(II) begins making payments of not less than the 
                amount specified in paragraph (6)(A); or

                ``(ii) in the case of an unsubsidized loan, at the time 
            the borrower--

                    ``(I) ends the election to make income-based 
                repayment under this subsection; or
                    ``(II) begins making payments of not less than the 
                amount specified in paragraph (6)(A);

        ``(4) any principal due and not paid under paragraph (2) shall 
    be deferred;
        ``(5) the amount of time the borrower makes monthly payments 
    under paragraph (1) may exceed 10 years;
        ``(6) if the borrower no longer has a partial financial 
    hardship or no longer wishes to continue the election under this 
    subsection, then--
            ``(A) the maximum monthly payment required to be paid for 
        all loans made to the borrower under part B or D (other than an 
        excepted PLUS loan or excepted consolidation loan) shall not 
        exceed the monthly amount calculated under section 
        428(b)(9)(A)(i) or 455(d)(1)(A), based on a 10-year repayment 
        period, when the borrower first made the election described in 
        this subsection; and
            ``(B) the amount of time the borrower is permitted to repay 
        such loans may exceed 10 years;
        ``(7) the Secretary shall repay or cancel any outstanding 
    balance of principal and interest due on all loans made under part 
    B or D (other than a loan under section 428B or a Federal Direct 
    PLUS Loan) to a borrower who--
            ``(A) at any time, elected to participate in income-based 
        repayment under paragraph (1); and
            ``(B) for a period of time prescribed by the Secretary, not 
        to exceed 25 years, meets 1 or more of the following 
        requirements--
                ``(i) has made reduced monthly payments under paragraph 
            (1) or paragraph (6);
                ``(ii) has made monthly payments of not less than the 
            monthly amount calculated under section 428(b)(9)(A)(i) or 
            455(d)(1)(A), based on a 10-year repayment period, when the 
            borrower first made the election described in this 
            subsection;
                ``(iii) has made payments of not less than the payments 
            required under a standard repayment plan under section 
            428(b)(9)(A)(i) or 455(d)(1)(A) with a repayment period of 
            10 years;
                ``(iv) has made payments under an income-contingent 
            repayment plan under section 455(d)(1)(D); or
                ``(v) has been in deferment due to an economic hardship 
            described in section 435(o);
        ``(8) a borrower who is repaying a loan made under part B or D 
    pursuant to income-based repayment may elect, at any time, to 
    terminate repayment pursuant to income-based repayment and repay 
    such loan under the standard repayment plan; and
        ``(9) the special allowance payment to a lender calculated 
    under section 438(b)(2)(I), when calculated for a loan in repayment 
    under this section, shall be calculated on the principal balance of 
    the loan and on any accrued interest unpaid by the borrower in 
    accordance with this section.
    ``(c) Eligibility Determinations.--The Secretary shall establish 
procedures for annually determining the borrower's eligibility for 
income-based repayment, including verification of a borrower's annual 
income and the annual amount due on the total amount of loans made, 
insured, or guaranteed under part B or D (other than an excepted PLUS 
loan or excepted consolidation loan), and such other procedures as are 
necessary to effectively implement income-based repayment under this 
section. The Secretary shall consider, but is not limited to, the 
procedures established in accordance with section 455(e)(1) or in 
connection with income sensitive repayment schedules under section 
428(b)(9)(A)(iii) or 428C(b)(1)(E).''.
    (b) Conforming Amendments.--
        (1) Section 428C (20 U.S.C. 1078-3) is amended--
            (A) in subsection (a)(3)(B)(i), by amending subclause (V) 
        to read as follows:

                    ``(V) an individual may obtain a subsequent 
                consolidation loan under section 455(g) only--

                        ``(aa) for the purposes of obtaining an income 
                    contingent repayment plan, and only if the loan has 
                    been submitted to the guaranty agency for default 
                    aversion; or
                        ``(bb) for the purposes of using the public 
                    service loan forgiveness program under section 
                    455(m).'';
            (B) in the first sentence of subsection (b)(5), by 
        inserting ``or chooses to obtain a consolidation loan for the 
        purposes of using the public service loan forgiveness program 
        offered under section 455(m),'' after ``from such a lender,''; 
        and
            (C) in the second sentence of such subsection, by inserting 
        before the period the following: ``, except that if a borrower 
        intends to be eligible to use the public service loan 
        forgiveness program under section 455(m), such loan shall be 
        repaid using one of the repayment options described in section 
        455(m)(1)(A)''.
        (2) Section 428C (20 U.S.C. 1078-3) (as amended by paragraph 
    (1) of this subsection) is amended--
            (A) in subsection (a)(3)(B)(i)(V)(aa)--
                (i) by striking ``an income contingent repayment 
            plan,'' and inserting ``income contingent repayment or 
            income-based repayment,''; and
                (ii) by inserting ``or if the loan is already in 
            default'' before the semicolon;
            (B) in the first sentence of subsection (b)(5), by 
        inserting ``or income-based repayment terms'' after ``income-
        sensitive repayment terms''; and
            (C) in the second sentence of such subsection, by inserting 
        ``, pursuant to income-based repayment under section 493C,'' 
        after ``part D of this title''.
        (3) Section 455(d)(1)(D) (20 U.S.C. 1087e(d)(1)(D)) is amended 
    by inserting ``made on behalf of a dependent student'' after ``PLUS 
    loan''.
    (c) Effective Date.--
        (1) In general.--Except as provided in paragraph (2), the 
    amendments made by this section shall be effective on July 1, 2009.
        (2) Exception.--The amendments made by subsection (b)(1) shall 
    be effective on July 1, 2008.
    SEC. 204. DEFERRAL OF LOAN REPAYMENT FOLLOWING ACTIVE DUTY.
    Part G of title IV is further amended by adding after section 493C 
(as added by section 203 of this Act) the following new section:
``SEC. 493D. DEFERRAL OF LOAN REPAYMENT FOLLOWING ACTIVE DUTY.
    ``(a) Deferral of Loan Repayment Following Active Duty.--In 
addition to any deferral of repayment of a loan made under this title 
pursuant to section 428(b)(1)(M)(iii), 455(f)(2)(C), or 
464(c)(2)(A)(iii), a borrower of a loan under this title who is a 
member of the National Guard or other reserve component of the Armed 
Forces of the United States, or a member of such Armed Forces in a 
retired status, is called or ordered to active duty, and is enrolled, 
or was enrolled within six months prior to the activation, in a program 
of instruction at an eligible institution, shall be eligible for a 
deferment during the 13 months following the conclusion of such 
service, except that a deferment under this subsection shall expire 
upon the borrower's return to enrolled student status.
    ``(b) Active Duty.--Notwithstanding section 481(d), in this 
section, the term `active duty' has the meaning given such term in 
section 101(d)(1) of title 10, United States Code, except that such 
term--
        ``(1) does not include active duty for training or attendance 
    at a service school; but
        ``(2) includes, in the case of members of the National Guard, 
    active State duty.''.
    SEC. 205. MAXIMUM REPAYMENT PERIOD.
    Section 455(e) (20 U.S.C. 1087e(e)) is amended by adding at the end 
the following:
        ``(7) Maximum repayment period.--In calculating the extended 
    period of time for which an income contingent repayment plan under 
    this subsection may be in effect for a borrower, the Secretary 
    shall include all time periods during which a borrower of loans 
    under part B, part D, or part E--
            ``(A) is not in default on any loan that is included in the 
        income contingent repayment plan; and
            ``(B)(i) is in deferment due to an economic hardship 
        described in section 435(o);
            ``(ii) makes monthly payments under paragraph (1) or (6) of 
        section 493C(b);
            ``(iii) makes monthly payments of not less than the monthly 
        amount calculated under section 428(b)(9)(A)(i) or subsection 
        (d)(1)(A), based on a 10-year repayment period, when the 
        borrower first made the election described in section 
        493C(b)(1);
            ``(iv) makes payments of not less than the payments 
        required under a standard repayment plan under section 
        428(b)(9)(A)(i) or subsection (d)(1)(A) with a repayment period 
        of 10 years; or
            ``(v) makes payments under an income contingent repayment 
        plan under subsection (d)(1)(D).''.

            TITLE III--FEDERAL FAMILY EDUCATION LOAN PROGRAM

    SEC. 301. GUARANTY AGENCY COLLECTION RETENTION.
    Clause (ii) of section 428(c)(6)(A) (20 U.S.C. 1078(c)(6)(A)(ii)) 
is amended to read as follows:
                ``(ii) an amount equal to 24 percent of such payments 
            for use in accordance with section 422B, except that--

                    ``(I) beginning October 1, 2003 and ending 
                September 30, 2007, this clause shall be applied by 
                substituting `23 percent' for `24 percent'; and
                    ``(II) beginning October 1, 2007, this clause shall 
                be applied by substituting `16 percent' for `24 
                percent'.''.

    SEC. 302. ELIMINATION OF EXCEPTIONAL PERFORMER STATUS FOR LENDERS.
    (a) Elimination of Status.--Part B of title IV (20 U.S.C. 1071 et 
seq.) is amended by striking section 428I (20 U.S.C. 1078-9).
    (b) Conforming Amendments.--Part B of title IV is further amended--
        (1) in section 428(c)(1) (20 U.S.C. 1078(c)(1))--
            (A) by striking subparagraph (D); and
            (B) by redesignating subparagraphs (E) through (H) as 
        subparagraphs (D) through (G), respectively; and
        (2) in section 438(b)(5) (20 U.S.C. 1087-1(b)(5)), by striking 
    the matter following subparagraph (B).
    (c) Effective Date.--The amendments made by subsections (a) and (b) 
shall be effective on October 1, 2007, except that section 428I of the 
Higher Education Act of 1965 (as in effect on the day before the date 
of enactment of this Act) shall apply to eligible lenders that received 
a designation under subsection (a) of such section prior to October 1, 
2007, for the remainder of the year for which the designation was made.
    SEC. 303. REDUCTION OF LENDER INSURANCE PERCENTAGE.
    (a) Amendment.--Subparagraph (G) of section 428(b)(1) (20 U.S.C. 
1078(b)(1)(G)) is amended to read as follows:
            ``(G) insures 95 percent of the unpaid principal of loans 
        insured under the program, except that--
                ``(i) such program shall insure 100 percent of the 
            unpaid principal of loans made with funds advanced pursuant 
            to section 428(j) or 439(q); and
                ``(ii) notwithstanding the preceding provisions of this 
            subparagraph, such program shall insure 100 percent of the 
            unpaid principal amount of exempt claims as defined in 
            subsection (c)(1)(G);''.
    (b) Effective Date.--The amendment made by subsection (a) shall be 
effective on October 1, 2012, and shall apply with respect to loans 
made on or after such date.
    SEC. 304. DEFINITIONS.
    Section 435 (20 U.S.C. 1085) is amended--
        (1) in subsection (o)(1)--
            (A) in subparagraph (A)(ii)--
                (i) by striking ``100 percent of the poverty line for a 
            family of 2'' and inserting ``150 percent of the poverty 
            line applicable to the borrower's family size''; and
                (ii) by inserting ``or'' after the semicolon;
            (B) by striking subparagraph (B); and
            (C) by redesignating subparagraph (C) as subparagraph (B);
        (2) in subsection (o)(2), by striking ``(1)(C)'' and inserting 
    ``(1)(B)''; and
        (3) by adding at the end the following:
    ``(p) Eligible Not-for-Profit Holder.--
        ``(1) Definition.--Subject to the limitations in paragraph (2) 
    and the prohibition in paragraph (3), the term `eligible not-for-
    profit holder' means an eligible lender under subsection (d) 
    (except for an eligible lender described in subsection (d)(1)(E)) 
    that requests a special allowance payment under section 
    438(b)(2)(I)(vi)(II) or a payment under section 771 and that is--
            ``(A) a State, or a political subdivision, authority, 
        agency, or other instrumentality thereof, including such 
        entities that are eligible to issue bonds described in section 
        1.103-1 of title 26, Code of Federal Regulations, or section 
        144(b) of the Internal Revenue Code of 1986;
            ``(B) an entity described in section 150(d)(2) of such Code 
        that has not made the election described in section 150(d)(3) 
        of such Code;
            ``(C) an entity described in section 501(c)(3) of such 
        Code; or
            ``(D) a trustee acting as an eligible lender on behalf of a 
        State, political subdivision, authority, agency, 
        instrumentality, or other entity described in subparagraph (A), 
        (B), or (C).
        ``(2) Limitations.--
            ``(A) Existing on date of enactment.--
                ``(i) In general.--An eligible lender shall not be an 
            eligible not-for-profit holder under this Act unless such 
            lender--

                    ``(I) was a State, political subdivision, 
                authority, agency, instrumentality, or other entity 
                described in paragraph (1)(A), (B), or (C) that was, on 
                the date of the enactment of the College Cost Reduction 
                and Access Act, acting as an eligible lender under 
                subsection (d) (other than an eligible lender described 
                in subsection (d)(1)(E)); or
                    ``(II) is a trustee acting as an eligible lender 
                under this Act on behalf of such a State, political 
                subdivision, authority, agency, instrumentality, or 
                other entity described in subclause (I) of this clause.

                ``(ii) Exception.--Notwithstanding clause (i), a State 
            may elect, in accordance with regulations of the Secretary, 
            to waive the requirements this subparagraph for a new not-
            for-profit holder determined by the State to be necessary 
            to carry out a public purpose of such State, except that a 
            State may not make such election with respect the 
            requirements of clause (i)(II).
            ``(B) No for-profit ownership or control.--No political 
        subdivision, authority, agency, instrumentality, or other 
        entity described in paragraph (1)(A), (B), or (C) shall be an 
        eligible not-for-profit holder under this Act if such entity is 
        owned or controlled, in whole or in part, by a for-profit 
        entity.
            ``(C) Sole ownership of loans and income.--No State, 
        political subdivision, authority, agency, instrumentality, or 
        other entity described in paragraph (1)(A), (B), or (C) shall 
        be an eligible not-for-profit holder under this Act with 
        respect to any loan, or income from any loan, unless the State, 
        political subdivision, authority, agency, instrumentality, or 
        other entity described in paragraph (1)(A), (B), or (C) is the 
        sole owner of the beneficial interest in such loan and the 
        income from such loan.
            ``(D) Trustee compensation limitations.--A trustee 
        described in paragraph (1)(D) shall not receive compensation as 
        consideration for acting as an eligible lender on behalf of an 
        entity described in described in paragraph (1)(A), (B), or (C) 
        in excess of reasonable and customary fees.
            ``(E) Rule of construction.--For purposes of subparagraphs 
        (B), (C), and (D) of this paragraph, a State, political 
        subdivision, authority, agency, instrumentality, or other 
        entity described in paragraph (1)(A), (B), or (C) shall not--
                ``(i) be deemed to be owned or controlled, in whole or 
            in part, by a for-profit entity, or
                ``(ii) lose its status as the sole owner of a 
            beneficial interest in a loan and the income from a loan by 
            that political subdivision, authority, agency, 
            instrumentality, or other entity,
        by granting a security interest in, or otherwise pledging as 
        collateral, such loan, or the income from such loan, to secure 
        a debt obligation in the operation of an arrangement described 
        in paragraph (1)(D).
        ``(3) Prohibition.--In the case of a loan for which the special 
    allowance payment is calculated under section 438(b)(2)(I)(vi)(II) 
    and that is sold by the eligible not-for-profit holder holding the 
    loan to an entity that is not an eligible not-for-profit holder 
    under this Act, the special allowance payment for such loan shall, 
    beginning on the date of the sale, no longer be calculated under 
    section 438(b)(2)(I)(vi)(II) and shall be calculated under section 
    438(b)(2)(I)(vi)(I) instead.
        ``(4) Regulations.--Not later than 1 year after the date of 
    enactment of the College Cost Reduction and Access Act, the 
    Secretary shall promulgate regulations in accordance with the 
    provisions of this subsection.''.
    SEC. 305. SPECIAL ALLOWANCES.
    (a) Reduction of Lender Special Allowance Payments.--Section 
438(b)(2)(I) (20 U.S.C. 1087-1(b)(2)(I)) is amended--
        (1) in clause (i), by striking ``clauses (ii), (iii), and 
    (iv)'' and inserting ``the following clauses'';
        (2) in clause (v)(III), by striking ``clauses (ii), (iii), and 
    (iv)'' and inserting ``clauses (ii), (iii), (iv), and (vi)''; and
        (3) by adding at the end the following:
                ``(vi) Reduction for loans disbursed on or after 
            october 1, 2007.--With respect to a loan on which the 
            applicable interest rate is determined under section 
            427A(l) and for which the first disbursement of principal 
            is made on or after October 1, 2007, the special allowance 
            payment computed pursuant to this subparagraph shall be 
            computed--

                    ``(I) for loans held by an eligible lender not 
                described in subclause (II)--

                        ``(aa) by substituting `1.79 percent' for `2.34 
                    percent' each place the term appears in this 
                    subparagraph;
                        ``(bb) by substituting `1.19 percent' for `1.74 
                    percent' in clause (ii);
                        ``(cc) by substituting `1.79 percent' for `2.64 
                    percent' in clause (iii); and
                        ``(dd) by substituting `2.09 percent' for `2.64 
                    percent' in clause (iv); and

                    ``(II) for loans held by an eligible not-for-profit 
                holder--

                        ``(aa) by substituting `1.94 percent' for `2.34 
                    percent' each place the term appears in this 
                    subparagraph;
                        ``(bb) by substituting `1.34 percent' for `1.74 
                    percent' in clause (ii);
                        ``(cc) by substituting `1.94 percent' for `2.64 
                    percent' in clause (iii); and
                        ``(dd) by substituting `2.24 percent' for `2.64 
                    percent' in clause (iv).''.
    (b) Increased Loan Fees From Lenders.--Paragraph (2) of section 
438(d) (20 U.S.C. 1087-1(d)(2)) is amended to read as follows:
        ``(2) Amount of loan fees.--The amount of the loan fee which 
    shall be deducted under paragraph (1), but which may not be 
    collected from the borrower, shall be equal to--
            ``(A) except as provided in subparagraph (B), 0.50 percent 
        of the principal amount of the loan with respect to any loan 
        under this part for which the first disbursement was made on or 
        after October 1, 1993; and
            ``(B) 1.0 percent of the principal amount of the loan with 
        respect to any loan under this part for which the first 
        disbursement was made on or after October 1, 2007.''.
    SEC. 306. ACCOUNT MAINTENANCE FEES.
    Section 458(b) (20 U.S.C. 1087h(b)) is amended by striking ``0.10 
percent'' and inserting ``0.06 percent''.

                       TITLE IV--LOAN FORGIVENESS

    SEC. 401. LOAN FORGIVENESS FOR PUBLIC SERVICE EMPLOYEES.
    Section 455 (20 U.S.C. 1087e) is further amended by adding at the 
end the following:
    ``(m) Repayment Plan for Public Service Employees.--
        ``(1) In general.--The Secretary shall cancel the balance of 
    interest and principal due, in accordance with paragraph (2), on 
    any eligible Federal Direct Loan not in default for a borrower 
    who--
            ``(A) has made 120 monthly payments on the eligible Federal 
        Direct Loan after October 1, 2007, pursuant to any one or a 
        combination of the following--
                ``(i) payments under an income-based repayment plan 
            under section 493C;
                ``(ii) payments under a standard repayment plan under 
            subsection (d)(1)(A), based on a 10-year repayment period;
                ``(iii) monthly payments under a repayment plan under 
            subsection (d)(1) or (g) of not less than the monthly 
            amount calculated under subsection (d)(1)(A), based on a 
            10-year repayment period; or
                ``(iv) payments under an income contingent repayment 
            plan under subsection (d)(1)(D); and
            ``(B)(i) is employed in a public service job at the time of 
        such forgiveness; and
            ``(ii) has been employed in a public service job during the 
        period in which the borrower makes each of the 120 payments 
        described in subparagraph (A).
        ``(2) Loan cancellation amount.--After the conclusion of the 
    employment period described in paragraph (1), the Secretary shall 
    cancel the obligation to repay the balance of principal and 
    interest due as of the time of such cancellation, on the eligible 
    Federal Direct Loans made to the borrower under this part.
        ``(3) Definitions.--In this subsection:
            ``(A) 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.
            ``(B) Public service job.--The term `public service job' 
        means--
                ``(i) a full-time job in emergency management, 
            government, military service, public safety, law 
            enforcement, public health, public education (including 
            early childhood education), social work in a public child 
            or family service agency, public interest law services 
            (including prosecution or public defense or legal advocacy 
            in low-income communities at a nonprofit organization), 
            public child care, public service for individuals with 
            disabilities, public service for the elderly, public 
            library sciences, school-based library sciences and other 
            school-based services, or at an organization that is 
            described in section 501(c)(3) of the Internal Revenue Code 
            of 1986 and exempt from taxation under section 501(a) of 
            such Code; or
                ``(ii) teaching as a full-time faculty member at a 
            Tribal College or University as defined in section 316(b) 
            and other faculty teaching in high-needs areas, as 
            determined by the Secretary.''.

                     TITLE V--FEDERAL PERKINS LOANS

    SEC. 501. DISTRIBUTION OF LATE COLLECTIONS.
    Section 466(b) (20 U.S.C. 1087ff(b)) is amended by striking ``March 
31, 2012'' and inserting ``October 1, 2012''.

                        TITLE VI--NEED ANALYSIS

    SEC. 601. SUPPORT FOR WORKING STUDENTS.
    (a) Dependent Students.--Subparagraph (D) of section 475(g)(2) (20 
U.S.C. 1087oo(g)(2)(D)) is amended to read as follows:
            ``(D) an income protection allowance of the following 
        amount (or a successor amount prescribed by the Secretary under 
        section 478)--
                ``(i) for academic year 2009-2010, $3,750;
                ``(ii) for academic year 2010-2011, $4,500;
                ``(iii) for academic year 2011-2012, $5,250; and
                ``(iv) for academic year 2012-2013, $6,000;''.
    (b) Independent Students Without Dependents Other Than a Spouse.--
Clause (iv) of section 476(b)(1)(A) (20 U.S.C. 1087pp(b)(1)(A)) is 
amended to read as follows:
                ``(iv) an income protection allowance of the following 
            amount (or a successor amount prescribed by the Secretary 
            under section 478)--

                    ``(I) for single or separated students, or married 
                students where both are enrolled pursuant to subsection 
                (a)(2)--

                        ``(aa) for academic year 2009-2010, $7,000;
                        ``(bb) for academic year 2010-2011, $7,780;
                        ``(cc) for academic year 2011-2012, $8,550; and
                        ``(dd) for academic year 2012-2013, $9,330; and

                    ``(II) for married students where 1 is enrolled 
                pursuant to subsection (a)(2)--

                        ``(aa) for academic year 2009-2010, $11,220;
                        ``(bb) for academic year 2010-2011, $12,460;
                        ``(cc) for academic year 2011-2012, $13,710; 
                    and
                        ``(dd) for academic year 2012-2013, $14,960;''.
    (c) Independent Students With Dependents Other Than a Spouse.--
Paragraph (4) of section 477(b) (20 U.S.C. 1087qq(b)) is amended to 
read as follows:
        ``(4) Income protection allowance.--The income protection 
    allowance is determined by the tables described in subparagraphs 
    (A) through (D) (or a successor table prescribed by the Secretary 
    under section 478).
            ``(A) Academic year 2009-2010.--For academic year 2009-
        2010, the income protection allowance is determined by the 
        following table:

                                          ``Income Protection Allowance
----------------------------------------------------------------------------------------------------------------
                Family Size                                           Number in College
----------------------------------------------------------------------------------------------------------------
                                                                                                       For each
            (including student)                  1          2          3           4           5      additional
                                                                                                       subtract:
----------------------------------------------------------------------------------------------------------------
                     2                         $17,720    $14,690
                     3                          22,060     19,050    $16,020
                     4                          27,250     24,220     21,210     $18,170
                     5                          32,150     29,120     26,100      23,070     $20,060
                     6                          37,600     34,570     31,570      28,520      25,520      $3,020
For each
additional
  add:                                           4,240      4,240      4,240       4,240       4,240
----------------------------------------------------------------------------------------------------------------


            ``(B) Academic year 2010-2011.--For academic year 2010-
        2011, the income protection allowance is determined by the 
        following table:

                                          ``Income Protection Allowance
----------------------------------------------------------------------------------------------------------------
                Family Size                                           Number in College
----------------------------------------------------------------------------------------------------------------
                                                                                                       For each
            (including student)                  1          2          3           4           5      additional
                                                                                                       subtract:
----------------------------------------------------------------------------------------------------------------
                     2                         $19,690    $16,330
                     3                          24,510     21,160    $17,800
                     4                          30,280     26,910     23,560     $20,190
                     5                          35,730     32,350     29,000      25,640     $22,290
                     6                          41,780     38,410     35,080      31,690      28,350      $3,350
For each
additional
  add:                                           4,710      4,710      4,710       4,710       4,710
----------------------------------------------------------------------------------------------------------------


            ``(C) Academic year 2011-2012.--For academic year 2011-
        2012, the income protection allowance is determined by the 
        following table:

                                          ``Income Protection Allowance
----------------------------------------------------------------------------------------------------------------
                Family Size                                           Number in College
----------------------------------------------------------------------------------------------------------------
                                                                                                       For each
            (including student)                  1          2          3           4           5      additional
                                                                                                       subtract:
----------------------------------------------------------------------------------------------------------------
                     2                         $21,660    $17,960
                     3                          26,960     23,280    $19,580
                     4                          33,300     29,600     25,920     $22,210
                     5                          39,300     35,590     31,900      28,200     $24,520
                     6                          45,950     42,250     38,580      34,860      31,190      $3,690
For each
additional
  add:                                           5,180      5,180      5,180       5,180       5,180
----------------------------------------------------------------------------------------------------------------


            ``(D) Academic year 2012-2013.--For academic year 2012-
        2013, the income protection allowance is determined by the 
        following table:

                                          ``Income Protection Allowance
----------------------------------------------------------------------------------------------------------------
                Family Size                                           Number in College
----------------------------------------------------------------------------------------------------------------
                                                                                                       For each
            (including student)                  1          2          3           4           5      additional
                                                                                                       subtract:
----------------------------------------------------------------------------------------------------------------
                     2                         $23,630    $19,590
                     3                          29,420     25,400    $21,360
                     4                          36,330     32,300     28,280     $24,230
                     5                          42,870     38,820     34,800      30,770     $26,750
                     6                          50,130     46,100     42,090      38,030      34,020      $4,020
For each
additional
  add:                                           5,660      5,660      5,660       5,660       5,660         ''.
----------------------------------------------------------------------------------------------------------------


''.    (d) Updated Tables and Amounts.--Section 478(b) (20 U.S.C. 
1087rr(b)) is amended--
        (1) by striking paragraph (1) and inserting the following:
        ``(1) Revised tables.--
            ``(A) In general.--For each academic year after academic 
        year 2008-2009, the Secretary shall publish in the Federal 
        Register a revised table of income protection allowances for 
        the purpose of sections 475(c)(4) and 477(b)(4), subject to 
        subparagraphs (B) and (C).
            ``(B) Table for independent students.--
                ``(i) Academic years 2009-2010 through 2012-2013.--For 
            each of the academic years 2009-2010 through 2012-2013, the 
            Secretary shall not develop a revised table of income 
            protection allowances under section 477(b)(4) and the table 
            specified for such academic year under subparagraphs (A) 
            through (D) of such section shall apply.
                ``(ii) Other academic years.--For each academic year 
            after academic year 2012-2013, the Secretary shall develop 
            the revised table of income protection allowances by 
            increasing each of the dollar amounts contained in the 
            table of income protection allowances under section 
            477(b)(4)(D) by a percentage equal to the estimated 
            percentage increase in the Consumer Price Index (as 
            determined by the Secretary) between December 2011 and the 
            December next preceding the beginning of such academic 
            year, and rounding the result to the nearest $10.
            ``(C) Table for parents.--For each academic year after 
        academic year 2008-2009, the Secretary shall develop the 
        revised table of income protection allowances under section 
        475(c)(4) by increasing each of the dollar amounts contained in 
        the table by a percentage equal to the estimated percentage 
        increase in the Consumer Price Index (as determined by the 
        Secretary) between December 1992 and the December next 
        preceding the beginning of such academic year, and rounding the 
        result to the nearest $10.''; and
        (2) in paragraph (2), by striking ``shall be developed'' and 
    all that follows through the period at the end and inserting 
    ``shall be developed for each academic year after academic year 
    2012-2013, by increasing each of the dollar amounts contained in 
    such section for academic year 2012-2013 by a percentage equal to 
    the estimated percentage increase in the Consumer Price Index (as 
    determined by the Secretary) between December 2011 and the December 
    next preceding the beginning of such academic year, and rounding 
    the result to the nearest $10.''.
    (e) Effective Date.--The amendments made by this section shall be 
effective on July 1, 2009.
    SEC. 602. SIMPLIFIED NEEDS TEST AND AUTOMATIC ZERO IMPROVEMENTS.
    (a) Simplified Needs Test.--Section 479 (20 U.S.C. 1087ss) is 
amended--
        (1) in subsection (b)--
            (A) in paragraph (1)(A)(i)--
                (i) in subclause (II), by striking ``or'' after the 
            semicolon;
                (ii) by redesignating subclause (III) as subclause 
            (IV);
                (iii) by inserting after subclause (II) the following:

                    ``(III) 1 of whom is a dislocated worker; or''; and

                (iv) in subclause (IV) (as redesignated by clause 
            (ii)), by striking ``12-month'' and inserting ``24-month''; 
            and
            (B) in paragraph (1)(B)(i)--
                (i) in subclause (II), by striking ``or'' after the 
            semicolon;
                (ii) by redesignating subclause (III) as subclause 
            (IV);
                (iii) by inserting after subclause (II) the following:

                    ``(III) 1 of whom is a dislocated worker; or''; and

                (iv) in subclause (IV) (as redesignated by clause 
            (ii)), by striking ``12-month'' and inserting ``24-month'';
        (2) in subsection (c)--
            (A) in paragraph (1)--
                (i) in subparagraph (A)--

                    (I) in clause (ii), by striking ``or'' after the 
                semicolon;
                    (II) by redesignating clause (iii) as clause (iv);
                    (III) by inserting after clause (ii) the following:

                ``(iii) 1 of whom is a dislocated worker; or''; and

                    (IV) in clause (iv) (as redesignated by subclause 
                (II)), by striking ``12-month'' and inserting ``24-
                month''; and

                (ii) in subparagraph (B), by striking ``$20,000'' and 
            inserting ``$30,000''; and
            (B) in paragraph (2)--
                (i) in subparagraph (A)--

                    (I) in clause (ii), by striking ``or'' after the 
                semicolon;
                    (II) by redesignating clause (iii) as clause (iv);
                    (III) by inserting after clause (ii) the following:

                ``(iii) 1 of whom is a dislocated worker; or''; and

                    (IV) in clause (iv) (as redesignated by subclause 
                (II)), by striking ``12-month'' and inserting ``24-
                month''; and

                (ii) in subparagraph (B), by striking ``$20,000'' and 
            inserting ``$30,000''; and
            (C) in the flush matter following paragraph (2)(B), by 
        adding at the end the following: ``The Secretary shall annually 
        adjust the income level necessary to qualify an applicant for 
        the zero expected family contribution. The income level shall 
        be adjusted according to increases in the Consumer Price Index, 
        as defined in section 478(f).''; and
        (3) in subsection (d)--
            (A) by redesignating paragraphs (1) through (6) as 
        subparagraphs (A) through (F), respectively and moving the 
        margins of such subparagraphs 2 ems to the right; and
            (B) by striking ``(d) Definition'' and all that follows 
        through ``the term'' and inserting the following:
    ``(d) Definitions.--In this section:
        ``(1) Dislocated worker.--The term `dislocated worker' has the 
    meaning given the term in section 101 of the Workforce Investment 
    Act of 1998 (29 U.S.C. 2801).
        ``(2) Means-tested federal benefit program.--The term''.
    (b) Effective Date.--The amendments made by this section shall be 
effective on July 1, 2009.
    SEC. 603. DISCRETION OF STUDENT FINANCIAL AID ADMINISTRATORS.
    (a) Amendments.--The third sentence of section 479A(a) (20 U.S.C. 
1087tt(a)) is amended--
        (1) by inserting ``or an independent student'' after ``family 
    member'';
        (2) by inserting ``a family member who is a dislocated worker 
    (as defined in section 101 of the Workforce Investment Act of 
    1998),'' before ``the number of parents''; and
        (3) by inserting ``a change in housing status that results in 
    an individual being homeless (as defined in section 103 of the 
    McKinney-Vento Homeless Assistance Act),'' after ``under section 
    487,''.
    (b) Effective Date.--The amendments made by this section shall take 
effect on July 1, 2009.
    SEC. 604. DEFINITIONS.
    (a) In General.--Section 480 (20 U.S.C. 1087vv) is amended--
        (1) in subsection (a)(2)--
            (A) by striking ``and no portion'' and inserting ``no 
        portion''; and
            (B) by inserting ``and no distribution from any qualified 
        education benefit described in subsection (f)(3) that is not 
        subject to Federal income tax,'' after ``1986,'';
        (2) by striking subsection (b) and inserting the following:
    ``(b) Untaxed Income and Benefits.--
        ``(1) The term `untaxed income and benefits' means--
            ``(A) child support received;
            ``(B) workman's compensation;
            ``(C) veteran's benefits such as death pension, dependency, 
        and indemnity compensation, but excluding veterans' education 
        benefits as defined in subsection (c);
            ``(D) interest on tax-free bonds;
            ``(E) housing, food, and other allowances (excluding rent 
        subsidies for low-income housing) for military, clergy, and 
        others (including cash payments and cash value of benefits);
            ``(F) cash support or any money paid on the student`s 
        behalf, except, for dependent students, funds provided by the 
        student's parents;
            ``(G) untaxed portion of pensions;
            ``(H) payments to individual retirement accounts and Keogh 
        accounts excluded from income for Federal income tax purposes; 
        and
            ``(I) any other untaxed income and benefits, such as Black 
        Lung Benefits, Refugee Assistance, or railroad retirement 
        benefits, or benefits received through participation in 
        employment and training activities under title I of the 
        Workforce Investment Act of 1998 (29 U.S.C. 2801 et seq.).
        ``(2) The term `untaxed income and benefits' shall not include 
    the amount of additional child tax credit claimed for Federal 
    income tax purposes.'';
        (3) in subsection (d)--
            (A) by redesignating paragraphs (1), (2), (3) through (6), 
        and (7) as subparagraphs (A), (B), (D) through (G), and (I), 
        respectively, and indenting appropriately;
            (B) by striking ``The term'' and inserting the following:
        ``(1) Definition.--The term'';
            (C) by striking subparagraph (B) (as redesignated by 
        subparagraph (A)) and inserting the following:
            ``(B) is an orphan, in foster care, or a ward of the court, 
        at any time when the individual is 13 years of age or older;
            ``(C) is an emancipated minor or is in legal guardianship 
        as determined by a court of competent jurisdiction in the 
        individual's State of legal residence;'';
            (D) in subparagraph (G) (as redesignated by subparagraph 
        (A)), by striking ``or'' after the semicolon;
            (E) by inserting after subparagraph (G) (as redesignated by 
        subparagraph (A)) the following:
            ``(H) has been verified during the school year in which the 
        application is submitted as either an unaccompanied youth who 
        is a homeless child or youth (as such terms are defined in 
        section 725 of the McKinney-Vento Homeless Assistance Act), or 
        as unaccompanied, at risk of homelessness, and self-supporting, 
        by--
                ``(i) a local educational agency homeless liaison, 
            designated pursuant to section 722(g)(1)(J)(ii) of the 
            McKinney-Vento Homeless Assistance Act;
                ``(ii) the director of a program funded under the 
            Runaway and Homeless Youth Act or a designee of the 
            director;
                ``(iii) the director of a program funded under subtitle 
            B of title IV of the McKinney-Vento Homeless Assistance Act 
            (relating to emergency shelter grants) or a designee of the 
            director; or
                ``(iv) a financial aid administrator; or''; and
            (F) by adding at the end the following:
        ``(2) Simplifying the dependency override process.--A financial 
    aid administrator may make a determination of independence under 
    paragraph (1)(I) based upon a documented determination of 
    independence that was previously made by another financial aid 
    administrator under such paragraph in the same award year.'';
        (4) in subsection (e)--
            (A) in paragraph (3), by striking ``and'' after the 
        semicolon;
            (B) in paragraph (4), by striking the period at the end and 
        inserting ``; and''; and
            (C) by adding at the end the following:
        ``(5) special combat pay.'';
        (5) in subsection (f), by striking paragraph (3) and inserting 
    the following:
        ``(3) A qualified education benefit shall be considered an 
    asset of--
            ``(A) the student if the student is an independent student; 
        or
            ``(B) the parent if the student is a dependent student, 
        regardless of whether the owner of the account is the student 
        or the parent.'';
        (6) in subsection (j)--
            (A) in paragraph (2), by inserting ``, or a distribution 
        that is not includable in gross income under section 529 of 
        such Code, under another prepaid tuition plan offered by a 
        State, or under a Coverdell education savings account under 
        section 530 of such Code,'' after ``1986''; and
            (B) by adding at the end the following:
        ``(4) Notwithstanding paragraph (1), special combat pay shall 
    not be treated as estimated financial assistance for purposes of 
    section 471(3).''; and
        (7) by adding at the end the following:
    ``(n) Special Combat Pay.--The term `special combat pay' means pay 
received by a member of the Armed Forces because of exposure to a 
hazardous situation.''.
    (b) Effective Date.--The amendments made by this section shall be 
effective on July 1, 2009.

           TITLE VII--COMPETITIVE LOAN AUCTION PILOT PROGRAM

    SEC. 701. COMPETITIVE LOAN AUCTION PILOT PROGRAM.
    Title IV (20 U.S.C. 1070 et seq.) is further amended by adding at 
the end the following:

            ``PART I--COMPETITIVE LOAN AUCTION PILOT PROGRAM

    ``SEC. 499. COMPETITIVE LOAN AUCTION PILOT PROGRAM.
    ``(a) Definitions.--In this section:
        ``(1) Eligible federal plus loan.--The term `eligible Federal 
    PLUS Loan' means a loan described in section 428B made to a parent 
    of a dependent student who is a new borrower on or after July 1, 
    2009.
        ``(2) Eligible lender.--The term `eligible lender' has the 
    meaning given the term in section 435.
    ``(b) Pilot Program.--The Secretary shall carry out a pilot program 
under which the Secretary establishes a mechanism for an auction of 
eligible Federal PLUS Loans in accordance with this subsection. The 
pilot program shall meet the following requirements:
        ``(1) Planning and implementation.--During the period beginning 
    on the date of enactment of this section and ending on June 30, 
    2009, the Secretary shall plan and implement the pilot program 
    under this subsection. During the planning and implementation, the 
    Secretary shall consult with other Federal agencies with knowledge 
    of, and experience with, auction programs, including the Federal 
    Communication Commission and the Department of the Treasury.
        ``(2) Origination and disbursement; applicability of section 
    428b.--Beginning on July 1, 2009, the Secretary shall arrange for 
    the origination and disbursement of all eligible Federal PLUS Loans 
    in accordance with the provisions of this subsection and the 
    provisions of section 428B that are not inconsistent with this 
    subsection.
        ``(3) Loan origination mechanism.--The Secretary shall 
    establish a loan origination auction mechanism that meets the 
    following requirements:
            ``(A) Auction for each state.--The Secretary administers an 
        auction under this paragraph for each State, under which 
        eligible lenders compete to originate eligible Federal PLUS 
        Loans under this paragraph at all institutions of higher 
        education within such State.
            ``(B) Prequalification process.--The Secretary establishes 
        a prequalification process for eligible lenders desiring to 
        participate in an auction under this paragraph that contains, 
        at a minimum--
                ``(i) a set of borrower benefits and servicing 
            requirements each eligible lender shall meet in order to 
            participate in such an auction; and
                ``(ii) an assessment of each such eligible lender's 
            capacity, including capital capacity, to participate 
            effectively.
            ``(C) Timing and origination.--Each State auction takes 
        place every 2 years, and the eligible lenders with the winning 
        bids for the State are the only eligible lenders permitted to 
        originate eligible Federal PLUS Loans made under this paragraph 
        for the cohort of students at the institutions of higher 
        education within the State until the students graduate from or 
        leave the institutions of higher education.
            ``(D) Bids.--Each eligible lender's bid consists of the 
        amount of the special allowance payment (after the application 
        of section 438(b)(2)(I)(v)) the eligible lender proposes to 
        accept from the Secretary with respect to the eligible Federal 
        PLUS Loans made under this paragraph in lieu of the amount 
        determined under section 438(b)(2)(I).
            ``(E) Maximum bid.--The maximum bid allowable under this 
        paragraph shall not exceed the amount of the special allowance 
        payable on eligible Federal PLUS Loans made under this 
        paragraph computed under section 438(b)(2)(I) (other than 
        clauses (ii), (iii), (iv), and (vi) of such section), except 
        that for purposes of the computation under this subparagraph, 
        section 438(b)(2)(I)(i)(III) shall be applied by substituting 
        `1.79 percent' for `2.34 percent'.
            ``(F) Winning bids.--The winning bids for each State 
        auction shall be the 2 bids containing the lowest and the 
        second lowest proposed special allowance payments, subject to 
        subparagraph (E).
            ``(G) Agreement with secretary.--Each eligible lender 
        having a winning bid under subparagraph (F) enters into an 
        agreement with the Secretary under which the eligible lender--
                ``(i) agrees to originate eligible Federal PLUS Loans 
            under this paragraph to each borrower who--

                    ``(I) seeks an eligible Federal PLUS Loan under 
                this paragraph to enable a dependent student to attend 
                an institution of higher education within the State;
                    ``(II) is eligible for an eligible Federal PLUS 
                Loan; and
                    ``(III) elects to borrow from the eligible lender; 
                and

                ``(ii) agrees to accept a special allowance payment 
            (after the application of section 438(b)(2)(I)(v)) from the 
            Secretary with respect to the eligible Federal PLUS Loans 
            originated under clause (i) in the amount proposed in the 
            second lowest winning bid described in subparagraph (F) for 
            the applicable State auction.
            ``(H) Sealed bids; confidentiality.--All bids are sealed 
        and the Secretary keeps the bids confidential, including 
        following the announcement of the winning bids.
            ``(I) Eligible lender of last resort.--
                ``(i) In general.--In the event that there is no 
            winning bid under subparagraph (F), the students at the 
            institutions of higher education within the State that was 
            the subject of the auction shall be served by an eligible 
            lender of last resort, as determined by the Secretary.
                ``(ii) Determination of eligible lender of last 
            resort.--Prior to the start of any auction under this 
            paragraph, eligible lenders that desire to serve as an 
            eligible lender of last resort shall submit an application 
            to the Secretary at such time and in such manner as the 
            Secretary may determine. Such application shall include an 
            assurance that the eligible lender will meet the 
            prequalification requirements described in subparagraph 
            (B).
                ``(iii) Geographic location.--The Secretary shall 
            identify an eligible lender of last resort for each State.
                ``(iv) Notification timing.--The Secretary shall not 
            identify any eligible lender of last resort until after the 
            announcement of all the winning bids for a State auction 
            for any year.
                ``(v) Maximum special allowance.--The Secretary is 
            authorized to set a special allowance payment that shall be 
            payable to a lender of last resort for a State under this 
            subparagraph, which special allowance payment shall be kept 
            confidential, including following the announcement of 
            winning bids. The Secretary shall set such special 
            allowance payment so that it incurs the lowest possible 
            cost to the Federal Government, taking into consideration 
            the lowest bid that was submitted in an auction for such 
            State and the lowest bid submitted in a similar State, as 
            determined by the Secretary.
            ``(J) Guarantee against losses.--The Secretary guarantees 
        the eligible Federal PLUS Loans made under this paragraph 
        against losses resulting from the default of a parent borrower 
        in an amount equal to 99 percent of the unpaid principal and 
        interest due on the loan.
            ``(K) Loan fees.--The Secretary shall not collect a loan 
        fee under section 438(d) with respect to an eligible Federal 
        Plus Loan originated under this paragraph.
            ``(L) Consolidation.--
                ``(i) In general.--An eligible lender who is permitted 
            to originate eligible Federal PLUS Loans for a borrower 
            under this paragraph shall have the option to consolidate 
            such loans into 1 loan.
                ``(ii) Notification.--In the event a borrower with 
            eligible Federal PLUS Loans made under this paragraph 
            wishes to consolidate the loans, the borrower shall notify 
            the eligible lender who originated the loans under this 
            paragraph.
                ``(iii) Limitation on eligible lender option to 
            consolidate.--The option described in clause (i) shall not 
            apply if--

                    ``(I) the borrower includes in the notification in 
                clause (ii) verification of consolidation terms and 
                conditions offered by an eligible lender other than the 
                eligible lender described in clause (i); and
                    ``(II) not later than 10 days after receiving such 
                notification from the borrower, the eligible lender 
                described in clause (i) does not agree to match such 
                terms and conditions, or provide more favorable terms 
                and conditions to such borrower than the offered terms 
                and conditions described in subclause (I).

                ``(iv) Consolidation of additional loans.--If a 
            borrower has a Federal Direct PLUS Loan or a loan made on 
            behalf of a dependent student under section 428B and seeks 
            to consolidate such loan with an eligible Federal PLUS Loan 
            made under this paragraph, then the eligible lender that 
            originated the borrower's loan under this paragraph may 
            include in the consolidation under this subparagraph a 
            Federal Direct PLUS Loan or a loan made on behalf of a 
            dependent student under section 428B, but only if--

                    ``(I) in the case of a Federal Direct PLUS Loan, 
                the eligible lender agrees, not later than 10 days 
                after the borrower requests such consolidation from the 
                lender, to match the consolidation terms and conditions 
                that would otherwise be available to the borrower if 
                the borrower consolidated such loans in the loan 
                program under part D; or
                    ``(II) in the case of a loan made on behalf of a 
                dependent student under section 428B, the eligible 
                lender agrees, not later than 10 days after the 
                borrower requests such consolidation from the lender, 
                to match the consolidation terms and conditions offered 
                by an eligible lender other than the eligible lender 
                that originated the borrower's loans under this 
                paragraph.

                ``(v) Special allowance on consolidation loans that 
            include loans made under this paragraph.--The applicable 
            special allowance payment for loans consolidated under this 
            paragraph shall be equal to the lesser of--

                    ``(I) the weighted average of the special allowance 
                payment on such loans, except that in calculating such 
                weighted average the Secretary shall exclude any 
                Federal Direct PLUS Loan included in the consolidation; 
                or
                    ``(II) the result of--

                        ``(aa) the average of the bond equivalent rates 
                    of the quotes of the 3-month commercial paper 
                    (financial) rates in effect for each of the days in 
                    such quarter as reported by the Federal Reserve in 
                    Publication H-15 (or its successor) for such 3-
                    month period; plus
                        ``(bb) 1.59 percent.
                ``(vi) Interest payment rebate fee.--Any loan under 
            section 428C consolidated under this paragraph shall not be 
            subject to the interest payment rebate fee under section 
            428C(f).''.

                     TITLE VIII--PARTNERSHIP GRANTS

    SEC. 801. COLLEGE ACCESS CHALLENGE GRANT PROGRAM.
    Title VII (20 U.S.C. 1133 et seq.) is amended by adding at the end 
the following new part:

            ``PART E--COLLEGE ACCESS CHALLENGE GRANT PROGRAM

    ``SEC. 771. COLLEGE ACCESS CHALLENGE GRANT PROGRAM.
    ``(a) Authorization and Appropriation.--There are authorized to be 
appropriated, and there are appropriated, to carry out this section 
$66,000,000 for each of the fiscal years 2008 and 2009. The authority 
to award grants under this section shall expire at the end of fiscal 
year 2009.
    ``(b) Program Authorized.--
        ``(1) Grants authorized.--From amounts appropriated under 
    subsection (a), the Secretary shall award grants, from allotments 
    under subsection (c), to States (and to philanthropic organization, 
    as appropriate under paragraph (3)) having applications approved 
    under subsection (d), to enable the State (or philanthropic 
    organization) to pay the Federal share of the costs of carrying out 
    the activities and services described in subsection (f).
        ``(2) Federal share; non-federal share.--
            ``(A) Federal share.--The amount of the Federal share under 
        this section for a fiscal year shall be equal to \2/3\ of the 
        costs of the activities and services described in subsection 
        (f) that are carried out under the grant.
            ``(B) Non-federal share.--The amount of the non-Federal 
        share under this section shall be equal to \1/3\ of the costs 
        of the activities and services described in subsection (f). The 
        non-Federal share may be in cash or in-kind, and may be 
        provided from State resources, contributions from private 
        organizations, or both.
        ``(3) Reduction for failure to pay non-federal share.--If a 
    State fails to provide the full non-Federal share required under 
    this subsection, the Secretary shall reduce the amount of the grant 
    payment under this section proportionately, and may award the 
    proportionate reduction amount of the grant directly to a 
    philanthropic organization, as defined in subsection (i), to carry 
    out this section.
        ``(4) Temporary ineligibility for subsequent payments.--
            ``(A) In general.--The Secretary shall determine a grantee 
        to be temporarily ineligible to receive a grant payment under 
        this section for a fiscal year if--
                ``(i) the grantee fails to submit an annual report 
            pursuant to subsection (h) for the preceding fiscal year; 
            or
                ``(ii) the Secretary determines, based on information 
            in such annual report, that the grantee is not effectively 
            meeting the conditions described under subsection (g) and 
            the goals of the application under subsection (d).
            ``(B) Reinstatement.--If the Secretary determines that a 
        grantee is ineligible under subparagraph (A), the Secretary may 
        enter into an agreement with the grantee setting forth the 
        terms and conditions under which the grantee may regain 
        eligibility to receive payments under this section.
    ``(c) Determination of Allotment.--
        ``(1) Amount of allotment.--Subject to paragraph (2), in making 
    grant payments to grantees under this section, the allotment to 
    each grantee for a fiscal year shall be equal to the sum of--
            ``(A) the amount that bears the same relation to 50 percent 
        of the amount appropriated under subsection (a) for such fiscal 
        year as the number of residents in the State aged 5 through 17 
        who are living below the poverty line applicable to the 
        resident's family size (as determined under section 673(2) of 
        the Community Service Block Grant Act) bears to the total 
        number of such residents in all States; and
            ``(B) the amount that bears the same relation to 50 percent 
        of the amount appropriated under subsection (a) for such fiscal 
        year as the number of residents in the State aged 15 through 44 
        who are living below the poverty line applicable to the 
        individual's family size (as determined under section 673(2) of 
        the Community Service Block Grant Act) bears to the total 
        number of such residents in all States.
        ``(2) Minimum amount.--The allotment for each State under this 
    section for a fiscal year shall not be an amount that is less than 
    0.5 percent of the total amount appropriated under subsection (a) 
    for such fiscal year.
    ``(d) Submission and Contents of Application.--
        ``(1) In general.--For each fiscal year for which a grantee 
    desires a grant payment under subsection (b), the State agency with 
    jurisdiction over higher education, or another agency designated by 
    the Governor or chief executive of the State to administer the 
    program under this section, or a philanthropic organization, in 
    accordance with subsection (b)(3), shall submit an application to 
    the Secretary at such time, in such manner, and containing the 
    information described in paragraph (2).
        ``(2) Application.--An application submitted under paragraph 
    (1) shall include the following:
            ``(A) A description of the grantee's capacity to administer 
        the grant under this section and report annually to the 
        Secretary on the activities and services described in 
        subsection (f).
            ``(B) A description of the grantee's plan for using the 
        grant funds to meet the requirements of subsections (f) and 
        (g), including plans for how the grantee will make special 
        efforts to--
                ``(i) provide such benefits to students in the State 
            that are underrepresented in postsecondary education; or
                ``(ii) in the case of a philanthropic organization that 
            operates in more than one State, provide benefits to such 
            students in each such State for which the philanthropic 
            organization is receiving grant funds under this section.
            ``(C) A description of how the grantee will provide or 
        coordinate the provision of the non-Federal share from State 
        resources or private contributions.
            ``(D) A description of--
                ``(i) the structure that the grantee has in place to 
            administer the activities and services described in 
            subsection (f); or
                ``(ii) the plan to develop such administrative 
            capacity.
    ``(e) Subgrants to Nonprofit Organizations.--A State receiving a 
payment under this section may elect to make a subgrant to one or more 
nonprofit organizations in the State, including an eligible not-for-
profit holder (as defined in section 435(p) of the Higher Education Act 
of 1965, as amended by section 303 of this Act), or a partnership of 
such organizations, to carry out activities or services described in 
subsection (f), if the nonprofit organization or partnership--
        ``(1) was in existence on the day before the date of the 
    enactment of this Act; and
        ``(2) as of such day, was participating in activities and 
    services related to increasing access to higher education, such as 
    those activities and services described in subsection (f).
    ``(f) Allowable Uses.--
        ``(1) In general.--Subject to paragraph (3), a grantee may use 
    a grant payment under this section only for the following 
    activities and services, pursuant to the conditions under 
    subsection (g):
            ``(A) Information for students and families regarding--
                ``(i) the benefits of a postsecondary education;
                ``(ii) postsecondary education opportunities;
                ``(iii) planning for postsecondary education; and
                ``(iv) career preparation.
            ``(B) Information on financing options for postsecondary 
        education and activities that promote financial literacy and 
        debt management among students and families.
            ``(C) Outreach activities for students who may be at risk 
        of not enrolling in or completing postsecondary education.
            ``(D) Assistance in completion of the Free Application for 
        Federal Student Aid or other common financial reporting form 
        under section 483(a) of the Higher Education Act of 1965.
            ``(E) Need-based grant aid for students.
            ``(F) Professional development for guidance counselors at 
        middle schools and secondary schools, and financial aid 
        administrators and college admissions counselors at 
        institutions of higher education, to improve such individuals' 
        capacity to assist students and parents with--
                ``(i) understanding--

                    ``(I) entrance requirements for admission to 
                institutions of higher education; and
                    ``(II) State eligibility requirements for Academic 
                Competitiveness Grants or National SMART Grants under 
                section 401A, and other financial assistance that is 
                dependent upon a student's coursework;

                ``(ii) applying to institutions of higher education;
                ``(iii) applying for Federal student financial 
            assistance and other State, local, and private student 
            financial assistance and scholarships;
                ``(iv) activities that increase students' ability to 
            successfully complete the coursework required for a 
            postsecondary degree, including activities such as tutoring 
            or mentoring; and
                ``(v) activities to improve secondary school students' 
            preparedness for postsecondary entrance examinations.
            ``(G) Student loan cancellation or repayment (as 
        applicable), or interest rate reductions, for borrowers who are 
        employed in a high-need geographical area or a high-need 
        profession in the State, as determined by the State.
        ``(2) Prohibited uses.--Funds made available under this section 
    shall not be used to promote any lender's loans.
        ``(3) Use of funds for administrative purposes.--A grantee may 
    use not more than 6 percent of the total amount of the sum of the 
    Federal share provided under this section and the non-Federal share 
    required under this section for administrative purposes relating to 
    the grant under this section.
    ``(g) Special Conditions.--
        ``(1) Availability to students and families.--A grantee 
    receiving a grant payment under this section shall--
            ``(A) make the activities and services described in 
        subparagraphs (A) through (F) of subsection (f)(1) that are 
        funded under the payment available to all qualifying students 
        and families in the State;
            ``(B) allow students and families to participate in the 
        activities and services without regard to--
                ``(i) the postsecondary institution in which the 
            student enrolls;
                ``(ii) the type of student loan the student receives;
                ``(iii) the servicer of such loan; or
                ``(iv) the student's academic performance;
            ``(C) not charge any student or parent a fee or additional 
        charge to participate in the activities or services; and
            ``(D) in the case of an activity providing grant aid, not 
        require a student to meet any condition other than eligibility 
        for Federal financial assistance under title IV of the Higher 
        Education Act of 1965, except as provided for in the loan 
        cancellation or repayment or interest rate reductions described 
        in subsection (f)(1)(G).
        ``(2) Priority.--A grantee receiving a grant payment under this 
    section shall, in carrying out any activity or service described in 
    subsection (f)(1) with the grant funds, prioritize students and 
    families who are living below the poverty line applicable to the 
    individual's family size (as determined under section 673(2) of the 
    Community Service Block Grant Act).
        ``(3) Disclosures.--
            ``(A) Organizational disclosures.--In the case of a State 
        that has chosen to make a payment to an eligible not-for-profit 
        holder in the State in accordance with subsection (e), the 
        holder shall clearly and prominently indicate the name of the 
        holder and the nature of the holder's work in connection with 
        any of the activities carried out, or any information or 
        services provided, with such funds.
            ``(B) Informational disclosures.--Any information about 
        financing options for higher education provided through an 
        activity or service funded under this section shall--
                ``(i) include information to students and the students' 
            parents of the availability of Federal, State, local, 
            institutional, and other grants and loans for postsecondary 
            education; and
                ``(ii) present information on financial assistance for 
            postsecondary education that is not provided under title IV 
            of the Higher Education Act of 1965 in a manner that is 
            clearly distinct from information on student financial 
            assistance under such title.
        ``(4) Coordination.--A grantee receiving a grant payment under 
    this section shall attempt to coordinate the activities carried out 
    with the grant payment with any existing activities that are 
    similar to such activities, and with any other entities that 
    support the existing activities in the State.
    ``(h) Report.--A grantee receiving a payment under this section 
shall prepare and submit an annual report to the Secretary on the 
activities and services carried out under this section, and on the 
implementation of such activities and services. The report shall 
include--
        ``(1) each activity or service that was provided to students 
    and families over the course of the year;
        ``(2) the cost of providing each activity or service;
        ``(3) the number, and percentage, if feasible and applicable, 
    of students who received each activity or service; and
        ``(4) the total contributions from private organizations 
    included in the grantee's non-Federal share for the fiscal year.
    ``(i) Definitions.--In this section:
        ``(1) Philanthropic organization.--The term `philanthropic 
    organization' means a non-profit organization--
            ``(A) that does not receive funds under title IV of the 
        Higher Education Act of 1965 or under the Elementary and 
        Secondary Education Act of 1965;
            ``(B) that is not a local educational agency or an 
        institution of higher education;
            ``(C) that has a demonstrated record of dispersing grant 
        aid to underserved populations to ensure access to, and 
        participation in, higher education;
            ``(D) that is affiliated with an eligible consortia (as 
        defined in paragraph (2)) to carry out this section; and
            ``(E) the primary purpose of which is to provide financial 
        aid and support services to students from underrepresented 
        populations to increase the number of such students who enter 
        and remain in college.
        ``(2) Eligible consortia.--The term `eligible consortia' means 
    a partnership of 2 or more entities that have agreed to work 
    together to carry out this section that--
            ``(A) includes--
                ``(i) a philanthropic organization, which serves as the 
            manager of the consortia;
                ``(ii) a State that demonstrates a commitment to 
            ensuring the creation of a Statewide system to address the 
            issues of early intervention and financial support for 
            eligible students to enter and remain in college; and
                ``(iii) at the discretion of the philanthropic 
            organization described in clause (i), additional partners, 
            including other non-profit organizations, government 
            entities (including local municipalities, school districts, 
            cities, and counties), institutions of higher education, 
            and other public or private programs that provide mentoring 
            or outreach programs; and
            ``(B) conducts activities to assist students with entering 
        and remaining in college, which may include--
                ``(i) providing need-based grants to students;
                ``(ii) providing early notification to low-income 
            students of their potential eligibility for Federal 
            financial aid (which may include assisting students and 
            families with filling out FAFSA forms), as well as other 
            financial aid and other support available from the eligible 
            consortia;
                ``(iii) encouraging increased student participation in 
            higher education through mentoring or outreach programs; 
            and
                ``(iv) conducting marketing and outreach efforts that 
            are designed to--

                    ``(I) encourage full participation of students in 
                the activities of the consortia that carry out this 
                section; and
                    ``(II) provide the communities impacted by the 
                activities of the consortia with a general knowledge 
                about the efforts of the consortia.

        ``(3) Grantee.--The term `grantee' means--
            ``(A) a State awarded a grant under this section; or
            ``(B) with respect to such a State that has failed to meet 
        the non-Federal share requirement of subsection (b), a 
        philanthropic organization awarded the proportionate reduction 
        amount of such a grant under subsection (b)(3).''.
    SEC. 802. INVESTMENT IN HISTORICALLY BLACK COLLEGES AND 
      UNIVERSITIES AND MINORITY-SERVING INSTITUTIONS.
    Title IV (20 U.S.C. 1070 et seq.) is further amended by adding 
after part I (as added by section 701 of this Act) the following new 
part:

 ``PART J--STRENGTHENING HISTORICALLY BLACK COLLEGES AND UNIVERSITIES 
                AND OTHER MINORITY-SERVING INSTITUTIONS

``SEC. 499A. INVESTMENT IN HISTORICALLY BLACK COLLEGES AND UNIVERSITIES 
AND OTHER MINORITY-SERVING INSTITUTIONS.
    ``(a) Eligible Institution.--An institution of higher education is 
eligible to receive funds from the amounts made available under this 
section if such institution is--
        ``(1) a part B institution (as defined in section 322 (20 
    U.S.C. 1061));
        ``(2) a Hispanic-serving institution (as defined in section 502 
    (20 U.S.C. 1101a));
        ``(3) a Tribal College or University (as defined in section 316 
    (20 U.S.C. 1059c));
        ``(4) an Alaska Native-serving institution or a Native 
    Hawaiian-serving institution (as defined in section 317(b) (20 
    U.S.C. 1059d(b)));
        ``(5) a Predominantly Black Institution (as defined in 
    subsection (c));
        ``(6) an Asian American and Native American Pacific Islander-
    serving institution (as defined in subsection (c)); or
        ``(7) a Native American-serving nontribal institution (as 
    defined in subsection (c)).
    ``(b) New Investment of Funds.--
        ``(1) In general.--There shall be available to the Secretary to 
    carry out this section, from funds not otherwise appropriated, 
    $255,000,000 for each of the fiscal years 2008 and 2009. The 
    authority to award grants under this section shall expire at the 
    end of fiscal year 2009.
        ``(2) Allocation and allotment.--
            ``(A) In general.--Of the amounts made available under 
        paragraph (1) for each fiscal year--
                ``(i) $100,000,000 shall be available for allocation 
            under subparagraph (B);
                ``(ii) $100,000,000 shall be available for allocation 
            under subparagraph (C); and
                ``(iii) $55,000,000 shall be available for allocation 
            under subparagraph (D).
            ``(B) HSI stem and articulation programs.--The amount made 
        available for allocation under this subparagraph by 
        subparagraph (A)(i) for any fiscal year shall be available for 
        Hispanic-serving Institutions for activities described in 
        section 503, with a priority given to applications that 
        propose--
                ``(i) to increase the number of Hispanic and other low 
            income students attaining degrees in the fields of science, 
            technology, engineering, or mathematics; and
                ``(ii) to develop model transfer and articulation 
            agreements between 2-year Hispanic-serving institutions and 
            4-year institutions in such fields.
            ``(C) Allocation and allotment hbcus and pbis.--From the 
        amount made available for allocation under this subparagraph by 
        subparagraph (A)(ii) for any fiscal year--
                ``(i) 85 percent shall be available to eligible 
            institutions described in subsection (a)(1) and shall be 
            made available as grants under section 323 and allotted 
            among such institutions under section 324, treating such 
            amount, plus the amount appropriated for such fiscal year 
            in a regular or supplemental appropriation Act to carry out 
            part B of title III, as the amount appropriated to carry 
            out part B of title III for purposes of allotments under 
            section 324, for use by such institutions with a priority 
            for--

                    ``(I) activities described in paragraphs (1), (2), 
                (4), (5), and (10) of section 323(a); and
                    ``(II) other activities, consistent with the 
                institution's comprehensive plan and designed to 
                increase the institution's capacity to prepare students 
                for careers in the physical or natural sciences, 
                mathematics, computer science or information technology 
                or sciences, engineering, language instruction in the 
                less-commonly taught languages or international 
                affairs, or nursing or allied health professions; and

                ``(ii) 15 percent shall be available to eligible 
            institutions described in subsection (a)(5) and shall be 
            available for a competitive grant program to award 25 
            grants of $600,000 annually for programs in any of the 
            following areas:

                    ``(I) science, technology, engineering, or 
                mathematics (STEM);
                    ``(II) health education;
                    ``(III) internationalization or globalization;
                    ``(IV) teacher preparation; or
                    ``(V) improving educational outcomes of African 
                American males.

            ``(D) Allocation and allotment to other minority-serving 
        institutions.--From the amount made available for allocation 
        under this subparagraph by subparagraph (A)(iii) for any fiscal 
        year--
                ``(i) $30,000,000 for such fiscal year shall be 
            available to eligible institutions described in subsection 
            (a)(3) and shall be made available as grants under section 
            316, treating such $30,000,000 as part of the amount 
            appropriated for such fiscal year in a regular or 
            supplemental appropriation Act to carry out such section, 
            and using such $30,000,000 for purposes described in 
            subsection (c) of such section;
                ``(ii) $15,000,000 for such fiscal year shall be 
            available to eligible institutions described in subsection 
            (a)(4) and shall be made available as grants under section 
            317, treating such $15,000,000 as part of the amount 
            appropriated for such fiscal year in a regular or 
            supplemental appropriation Act to carry out such section 
            and using such $15,000,000 for purposes described in 
            subsection (c) of such section;
                ``(iii) $5,000,000 for such fiscal year shall be 
            available to eligible institutions described in subsection 
            (a)(6) for activities described in section 311(c); and
                ``(iv) $5,000,000 for such fiscal year shall be 
            available to eligible institutions described in subsection 
            (a)(7)--

                    ``(I) to plan, develop, undertake, and carry out 
                activities to improve and expand such institutions' 
                capacity to serve Native Americans, which may include--

                        ``(aa) the purchase, rental, or lease of 
                    scientific or laboratory equipment for educational 
                    purposes, including instructional and research 
                    purposes;
                        ``(bb) renovation and improvement in classroom, 
                    library, laboratory, and other instructional 
                    facilities;
                        ``(cc) support of faculty exchanges, faculty 
                    development, and faculty fellowships to assist 
                    faculty in attaining advanced degrees in the 
                    faculty's field of instruction;
                        ``(dd) curriculum development and academic 
                    instruction;
                        ``(ee) the purchase of library books, 
                    periodicals, microfilm, and other educational 
                    materials;
                        ``(ff) funds and administrative management, and 
                    acquisition of equipment for use in strengthening 
                    funds management;
                        ``(gg) the joint use of facilities such as 
                    laboratories and libraries; and
                        ``(hh) academic tutoring and counseling 
                    programs and student support services; and

                    ``(II) to which the Secretary, to the extent 
                possible and consistent with a competitive process 
                under which such grants are awarded, allocates funds 
                under this clause to ensure maximum and equitable 
                distribution among all such eligible institutions.

    ``(c) Definitions.--
        ``(1) Asian american.--The term `Asian American' has the 
    meaning given the term `Asian' in the Office of Management and 
    Budget's Standards for Maintaining, Collecting, and Presenting 
    Federal Data on Race and Ethnicity as published on October 30, 1997 
    (62 Fed. Reg. 58789).
        ``(2) Asian american and native american pacific islander-
    serving institution.--The term `Asian American and Native American 
    Pacific Islander-serving institution' means an institution of 
    higher education that--
            ``(A) is an eligible institution under section 312(b); and
            ``(B) at the time of application, has an enrollment of 
        undergraduate students that is at least 10 percent Asian 
        American and Native American Pacific Islander students.
        ``(3) Enrollment of needy students.--The term `enrollment of 
    needy students' means the enrollment at an institution of higher 
    education with respect to which not less than 50 percent of the 
    undergraduate students enrolled in an academic program leading to a 
    degree--
            ``(A) in the second fiscal year preceding the fiscal year 
        for which the determination is made, were Federal Pell Grant 
        recipients for such year;
            ``(B) come from families that receive benefits under a 
        means-tested Federal benefit program (as defined in paragraph 
        (5));
            ``(C) attended a public or nonprofit private secondary 
        school--
                ``(i) that is in the school district of a local 
            educational agency that was eligible for assistance under 
            part A of title I of the Elementary and Secondary Education 
            Act of 1965 for any year during which the student attended 
            such secondary school; and
                ``(ii) which for the purpose of this paragraph and for 
            that year was determined by the Secretary (pursuant to 
            regulations and after consultation with the State 
            educational agency of the State in which the school is 
            located) to be a school in which the enrollment of children 
            counted under a measure of poverty described in section 
            1113(a)(5) of such Act exceeds 30 percent of the total 
            enrollment of such school; or
            ``(D) are first-generation college students (as that term 
        is defined in section 402A(g)), and a majority of such first-
        generation college students are low-income individuals.
        ``(4) Low-income individual.--The term `low-income individual' 
    has the meaning given such term in section 402A(g).
        ``(5) Means-tested federal benefit program.--The term `means-
    tested Federal benefit program' means a program of the Federal 
    Government, other than a program under title IV, in which 
    eligibility for the programs' benefits or the amount of such 
    benefits are determined on the basis of income or resources of the 
    individual or family seeking the benefit.
        ``(6) Native american.--The term `Native American' means an 
    individual who is of a tribe, people, or culture that is indigenous 
    to the United States.
        ``(7) Native american pacific islander.--The term `Native 
    American Pacific Islander' means any descendant of the aboriginal 
    people of any island in the Pacific Ocean that is a territory or 
    possession of the United States.
        ``(8) Native american-serving nontribal institution.--The term 
    `Native American-serving nontribal institution' means an 
    institution of higher education that--
            ``(A) at the time of application--
                ``(i) has an enrollment of undergraduate students that 
            is not less than 10 percent Native American students; and
                ``(ii) is not a Tribal College or University (as 
            defined in section 316); and
            ``(B) submits to the Secretary such enrollment data as may 
        be necessary to demonstrate that the institution is described 
        in subparagraph (A), along with such other information and data 
        as the Secretary may by regulation require.
        ``(9) Predominantly black institution.--The term `Predominantly 
    Black institution' means an institution of higher education that--
            ``(A) has an enrollment of needy students as defined by 
        paragraph (3);
            ``(B) has an average educational and general expenditure 
        which is low, per full-time equivalent undergraduate student in 
        comparison with the average educational and general expenditure 
        per full-time equivalent undergraduate student of institutions 
        of higher education that offer similar instruction, except that 
        the Secretary may apply the waiver requirements described in 
        section 392(b) to this subparagraph in the same manner as the 
        Secretary applies the waiver requirements to section 
        312(b)(1)(B);
            ``(C) has an enrollment of undergraduate students--
                ``(i) that is at least 40 percent Black American 
            students;
                ``(ii) that is at least 1,000 undergraduate students;
                ``(iii) of which not less than 50 percent of the 
            undergraduate students enrolled at the institution are low-
            income individuals or first-generation college students (as 
            that term is defined in section 402A(g)); and
                ``(iv) of which not less than 50 percent of the 
            undergraduate students are enrolled in an educational 
            program leading to a bachelor's or associate's degree that 
            the institution is licensed to award by the State in which 
            the institution is located;
            ``(D) is legally authorized to provide, and provides within 
        the State, an educational program for which the institution of 
        higher education awards a bachelor's degree, or in the case of 
        a junior or community college, an associate's degree;
            ``(E) is accredited by a nationally recognized accrediting 
        agency or association determined by the Secretary to be a 
        reliable authority as to the quality of training offered, or 
        is, according to such an agency or association, making 
        reasonable progress toward accreditation; and
            ``(F) is not receiving assistance under part B of title 
        III.''.

                               Speaker of the House of Representatives.

                            Vice President of the United States and    
                                               President of the Senate.`