I 

109TH CONGRESS 

1ST SESSION H. R. 1425 

To ensure that the Federal student loans are delivered as efficiently as 

possible, so that there is more grant aid for students. 

IN THE HOUSE OF REPRESENTATIVES 

MARCH 17, 2005 

Mr. PETRI (for himself, Mr. GEORGE MILLER of California, Mr. DOGGETT, 

Mr. BROWN of Ohio, Mr. SANDERS, Mr. BISHOP of New York, Mr. FILNER, Mr. MCDERMOTT, Ms. KILPATRICK of Michigan, Ms. LEE, Mr. 

GRIJALVA, Mr. HINCHEY, Mr. KUCINICH, Mr. WU, Mr. VAN HOLLEN, 

Ms. WATSON, Mr. ETHERIDGE, Ms. MOORE of Wisconsin, Mr. 

CUMMINGS, Ms. MCCOLLUM of Minnesota, Mr. ISRAEL, Mrs. JONES of 

Ohio, Ms. BORDALLO, Mr. CROWLEY, Ms. SCHAKOWSKY, Mr. HASTINGS

of Florida, Mr. TIERNEY, Mr. KILDEE, Mr. BROWN of South Carolina, 

Ms. PELOSI, and Mr. ALEXANDER) introduced the following bill; which 

was referred to the Committee on Education and the Workforce 

A BILL 

To ensure that the Federal student loans are delivered as 

efficiently as possible, so that there is more grant aid 

for students. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Student Aid Reward 

5 Act of 2005’’. 
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1 SEC. 2. STUDENT AID REWARD PROGRAM. 

2 Part G of title IV of the Higher Education Act of 

3 1965 is amended by inserting after section 489 (20 U.S.C. 

4 1096) the end the following: 

5 ‘‘SEC. 489A. STUDENT AID REWARD PROGRAM. 

6 ‘‘(a) PROGRAM AUTHORIZED.—The Secretary shall 

7 carry out a Student Aid Reward Program to encourage 

8 institutions of higher education to participate in the stu9 dent loan program under this title that is most cost-effec10 tive for taxpayers. 

11 ‘‘(b) PROGRAM REQUIREMENTS.—In carrying out the 

12 Student Aid Reward Program, the Secretary shall— 

13 ‘‘(1) provide to each institution of higher edu14 cation participating in the student loan program 

15 under this title that is most cost-effective for tax16 payers a Student Aid Reward Payment, in an 

17 amount determined in accordance with subsection 

18 (c), to encourage the institution to participate in 

19 that student loan program; 

20 ‘‘(2) require each institution of higher edu21 cation receiving a payment under this section to pro22 vide student loans under that student loan program 

23 for a period of 5 years from the date the payment 

24 is made; 

25 ‘‘(3) where appropriate, require that funds paid 

26 to institutions of higher education under this section 
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1 be used to award students a supplement to such stu2 dents’ Pell Grants under subpart 1 of part A; 

3 ‘‘(4) permit such funds to also be used to award 

4 lower and middle income graduate students need5 based grants; and 

6 ‘‘(5) encourage all institutions of higher edu7 cation to participate in the Student Aid Reward Pro8 gram. 

9 ‘‘(c) AMOUNT.—The amount of a Student Aid Re10 ward Payment under this section shall be not less than 

11 50 percent of the savings to the Federal Government gen12 erated by the institution’s participation in the student loan 

13 program under this title that is most cost-effective for tax14 payers instead of the institution’s participation in the stu15 dent loan program not cost-effective for taxpayers. 

16 ‘‘(d) TRIGGER TO ENSURE COST NEUTRALITY.— 

17 ‘‘(1) LIMIT TO ENSURE COST NEUTRALITY.— 

18 Notwithstanding subsection (c), the Secretary shall 

19 not distribute Student Aid Reward Payments under 

20 the Student Aid Reward Program that, in the aggre21 gate, exceed the Federal savings resulting from im22 plementation of the Student Aid Reward Program. 

23 ‘‘(2) FEDERAL SAVINGS.—In calculating Fed24 eral savings, as used in paragraph (1), the Secretary 

25 shall determine Federal savings on loans made to 
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1 students at institutions of higher education that par2 ticipate the student loan program under this title 

3 that is most cost-effective for taxpayers and that, on 

4 the date of enactment of the Student Aid Reward 

5 Program, participated in the student loan program 

6 that is not the most cost-effective for taxpayers, re7 sulting from the difference of— 

8 ‘‘(A) the Federal cost of loan volume made 

9 under the student loan program under this title 

10 that is most cost-effective for taxpayers; and 

11 ‘‘(B) the Federal cost of an equivalent type 

12 and amount of loan volume made, insured, or 

13 guaranteed under the student loan program 

14 under this title that is not the most cost-effec15 tive for taxpayers. 

16 ‘‘(3) DISTRIBUTION RULES.—If the Federal 

17 savings determined under paragraph (2) is not suffi18 cient to distribute full Student Aid Reward Pay19 ments under the Student Aid Reward Program, the 

20 Secretary shall— 

21 ‘‘(A) first make Student Aid Reward Pay22 ments to those institutions of higher education 

23 that participated in the student loan program 

24 under this title that is not the most cost-effec-
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1 tive for taxpayers on the date of enactment of 

2 the Student Aid Reward Program; and 

3 ‘‘(B) with any remaining Federal savings 

4 after making Payments under subparagraph 

5 (A), make Student Aid Reward Payments to 

6 the institutions of higher education not de7 scribed in subparagraph (A) on a pro-rata 

8 basis. 

9 ‘‘(4) DISTRIBUTION TO STUDENTS.—Any insti10 tution of higher education that receives a Student 

11 Aid Reward Payment under this section— 

12 ‘‘(A) shall distribute, where appropriate, 

13 part or all of such payment among the students 

14 of such institution who are Pell Grant recipi15 ents by awarding such students a supplemental 

16 grant; and 

17 ‘‘(B) may distribute part of such payment 

18 as a supplemental grant to graduate students in 

19 financial need. 

20 ‘‘(5) ESTIMATES, ADJUSTMENTS, AND CARRY

21 OVER.— 

22 ‘‘(A) ESTIMATES AND ADJUSTMENTS.— 

23 The Secretary may make Student Aid Reward 

24 Payments to institutions of higher education on 

25 the basis of estimates, using the best data avail-
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1 able at the beginning of an academic/fiscal year. 

2 If the Secretary determines thereafter that loan 

3 program costs for that academic/fiscal year 

4 were different than such estimate, the Secretary 

5 shall adjust (reduce or increase) subsequent 

6 Student Aid Reward Payments rewards paid to 

7 such institutions of higher education to reflect 

8 such difference. 

9 ‘‘(B) CARRY OVER.—Any institution of 

10 higher education that receives a reduced Stu11 dent Aid Reward Payment under paragraph 

12 (3)(B), shall remain eligible for the unpaid por13 tion of such institution’s financial reward pay14 ment, as well as any additional financial reward 

15 payments for which the institution is otherwise 

16 eligible, in subsequent academic or fiscal years. 

17 ‘‘(e) DEFINITION.—For purposes of this section— 

18 ‘‘(1) the student loan program under this title 

19 that is most cost-effective for taxpayers is the loan 

20 program under part B or D of this title that has the 

21 lowest overall cost to the Federal Government (in22 cluding administrative costs) for the loans author23 ized by such parts; and 

24 ‘‘(2) the student loan program under this title 

25 that is not most cost-effective for taxpayers is the 
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1 loan program under part B or D of this title that 

2 does not have the lowest overall cost to the Federal 

3 Government (including administrative costs) for the 

4 loans authorized by such parts.’’. 

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