Calendar No. 235

105TH CONGRESS

1ST SESSION S. 1294

[Report No. 105–122]

A BILL

To amend the Higher Education Act of 1965 to

rect Loan Program.the Federal Family Loan Program and the Diallow the consolidation of student loans under

OCTOBER 29, 1997

Reported with an amendment
II

Calendar No. 235

105TH CONGRESS

1ST SESSION S. 1294

[Report No. 105–122]

To amend the Higher Education Act of 1965 to allow the consolidation

of student loans under the Federal Family Loan Program and the

Direct Loan Program.

IN THE SENATE OF THE UNITED STATES

OCTOBER 9, 1997

Mr. JEFFORDS introduced the following bill; which was read twice and

referred to the Committee on Labor and Human Resources

OCTOBER 29, 1997

Reported by Mr. JEFFORDS, with an amendment

[Strike out all after the enacting clause and insert the part printed in italic]

A BILL

To amend the Higher Education Act of 1965 to allow the

consolidation of student loans under the Federal Family

Loan Program and the Direct Loan Program.

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; REFERENCE.

4 (a) SHORT TITLE.—This Act may be cited as the

5 ‘‘Emergency Student Loan Consolidation Act of 1997’’.
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1 (b) REFERENCES.—Except as otherwise expressly

2 provided, whenever in this Act an amendment or repeal

3 is expressed in terms of an amendment to, or repeal of,

4 a section or other provision, the reference shall be consid5 ered to be made to a section or other provision of the

6 Higher Education Act of 1965 (20 U.S.C. 1001 et seq.).

7 SEC. 2. LOAN CONSOLIDATION PROVISIONS.

8 (a) DEFINITION OF LOANS ELIGIBLE FOR CONSOLI9 DATION.—Section 428C(a)(4) (20 U.S.C. 1078–3(a)(4))

10 is amended—

11 (1) by redesignating subparagraphs (C) and

12 (D) as subparagraphs (D) and (E), respectively; and

13 (2) by inserting after subparagraph (B) the fol14 lowing new subparagraph:

15 ‘‘(C) made under part D of this title, ex16 cept that loans made under such part shall be

17 eligible student loans only for consolidation

18 loans for which the application is received by an

19 eligible lender during the period beginning on

20 the date of enactment of the Emergency Stu21 dent Loan Consolidation Act of 1997 and end22 ing on October 1, 1998;’’.

23 (b) TERMS OF CONSOLIDATION LOANS.—Section

24 428C(b)(4)(C)(ii) is amended—
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1 (1) in subclause (I), by inserting after ‘‘consoli2 dation loan’’ the following: ‘‘for which the applica3 tion is received by an eligible lender before the date

4 of enactment of the Emergency Student Loan Con5 solidation Act of 1997, or on or after October 1,

6 1998,’’ ;

7 (2) by striking ‘‘or’’ at the end of subclause (I);

8 (3) by inserting ‘‘or (II)’’ before the semicolon

9 at the end of subclause (II);

10 (4) by redesignating subclause (II) as subclause

11 (III); and

12 (5) by inserting after subclause (I) the follow13 ing new subclause:

14 ‘‘(II) by the Secretary, in the case of

15 a consolidation loan for which the applica16 tion is received by an eligible lender on or

17 after the date of enactment of the Emer18 gency Student Loan Consolidation Act of

19 1997 and before October 1, 1998, except

20 that the Secretary shall pay such interest

21 only on that portion of the loan that re22 pays Federal Stafford Loans for which the

23 student borrower received an interest sub24 sidy under section 428 or Federal Direct

25 Stafford Loans for which the borrower re-
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1 ceived an interest subsidy under section

2 455; or’’.

3 (c) INTEREST RATE.—Section 428C(c)(1) is amend4 ed by adding at the end the following new subparagraph:

5 ‘‘(D) A consolidation loan for which the applica6 tion is received by an eligible lender on or after the

7 date of enactment of the Emergency Student Loan

8 Consolidation Act of 1997 and before October 1,

9 1998, shall bear interest at an annual rate on the

10 unpaid principal balance of the loan that is equal to

11 the rate specified in section 427A(f).’’.

12 (d) AMENDMENTS EFFECTIVE FOR PENDING APPLI13 CANTS.—The consolidation loans authorized by the

14 amendments made by this section shall be available not15 withstanding any pending application by a student for a

16 consolidation loan under part D of title IV of the Higher

17 Education Act of 1965, upon withdrawal of such applica18 tion by the student at any time prior to receipt of such

19 a consolidation loan.

20 SEC. 3. ADMINISTRATIVE EXPENSE REDUCTIONS.

21 Section 458(a)(1) (20 U.S.C. 1087h(a)(1)) is amend22 ed by striking ‘‘$532,000,000’’ and inserting

23 ‘‘$507,000,000’’.
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1 SEC. 4. TREATMENT OF TAX BENEFITS.

2 (a) FAMILY CONTRIBUTION FOR DEPENDENT STU3 DENTS.—

4 (1) PARENTS’ AVAILABLE INCOME.—Section

5 475(c)(1) is amended—

6 (A) by striking ‘‘and’’ at the end of sub7 paragraph (D);

8 (B) by striking the period at the end of

9 subparagraph (E) and inserting ‘‘; and’’; and

10 (C) by adding at the end the following new

11 subparagraph:

12 ‘‘(F) the amount of any tax credit taken

13 by the parents under section 25A of the Inter14 nal Revenue Code of 1986.’’.

15 (2) STUDENT CONTRIBUTION FROM AVAILABLE

16 INCOME.—Section 475(g)(2) is amended—

17 (A) by striking ‘‘and’’ at the end of sub18 paragraph (C);

19 (B) by striking the period at the end of

20 subparagraph (D) and inserting ‘‘; and’’; and

21 (C) by inserting after subparagraph (D)

22 the following new subparagraph:

23 ‘‘(E) the amount of any tax credit taken

24 by the student under section 25A of the Inter25 nal Revenue Code of 1986.’’.
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1 (b) FAMILY CONTRIBUTION FOR INDEPENDENT STU2 DENTS WITHOUT DEPENDENTS OTHER THAN A

3 SPOUSE.—Section 476(b)(1)(A) (20 U.S.C.

4 1087pp(b)(1)(A)) is amended—

5 (1) by striking ‘‘and’’ at the end of clause (iv);

6 and

7 (2) by inserting after clause (v) the following

8 new clause:

9 ‘‘(vi) the amount of any tax credit

10 taken under section 25A of the Internal

11 Revenue Code of 1986; and’’.

12 (c) FAMILY CONTRIBUTION FOR INDEPENDENT STU13 DENTS WITH DEPENDENTS OTHER THAN A SPOUSE.—

14 Section 477(b)(1) (20 U.S.C. 1087qq(b)(1)) is amended—

15 (1) by striking ‘‘and’’ at the end of subpara16 graph (D);

17 (2) by striking the period at the end of sub18 paragraph (E) and inserting ‘‘; and’’; and

19 (3) by adding at the end the following new sub20 paragraph:

21 ‘‘(F) the amount of any tax credit taken

22 under section 25A of the Internal Revenue

23 Code of 1986.’’.

24 (d) TOTAL INCOME.—Section 480(a)(2) (20 U.S.C.

25 1087vv(a)(2)) is amended—
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1 (1) by striking ‘‘individual, and’’ and inserting

2 ‘‘individual,’’; and

3 (2) by inserting ‘‘and no portion of any tax

4 credit taken under section 25A of the Internal Reve5 nue Code of 1986,’’ before ‘‘shall be included’’.

6 (e) OTHER FINANCIAL ASSISTANCE.—Section 480(j)

7 is amended by adding at the end the following new para8 graph:

9 ‘‘(4) Notwithstanding paragraph (1), a tax credit

10 taken under section 25A of the Internal Revenue Code of

11 1986 shall not be treated as estimated financial assistance

12 for purposes of section 471(3).’’.

13 SECTION 1. SHORT TITLE; REFERENCE.

14 (a) SHORT TITLE.—This Act may be cited as the

15 ‘‘Emergency Student Loan Consolidation Act of 1997’’.

16 (b) REFERENCES.—Except as otherwise expressly pro17 vided, whenever in this Act an amendment or repeal is ex18 pressed in terms of an amendment to, or repeal of, a section

19 or other provision, the reference shall be considered to be

20 made to a section or other provision of the Higher Edu21 cation Act of 1965 (20 U.S.C. 1001 et seq.).

22 SEC. 2. LOAN CONSOLIDATION PROVISIONS.

23 (a) DEFINITION OF LOANS ELIGIBLE FOR CONSOLIDA24 TION.—Section 428C(a)(4) (20 U.S.C. 1078–3(a)(4)) is

25 amended—
8

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1 (1) by redesignating subparagraphs (C) and (D)

2 as subparagraphs (D) and (E), respectively; and

3 (2) by inserting after subparagraph (B) the fol4 lowing new subparagraph:

5 ‘‘(C) made under part D of this title, except

6 that loans made under such part shall be eligible

7 student loans only for consolidation loans for

8 which the application is received by an eligible

9 lender during the period beginning on the date

10 of enactment of the Emergency Student Loan

11 Consolidation Act of 1997 and ending on October

12 1, 1998;’’.

13 (b) TERMS OF CONSOLIDATION LOANS.—Section

14 428C(b)(4)(C)(ii) is amended—

15 (1) in subclause (I), by inserting after ‘‘consoli16 dation loan’’ the following: ‘‘for which the application

17 is received by an eligible lender before the date of en18 actment of the Emergency Student Loan Consolida19 tion Act of 1997, or on or after October 1, 1998,’’ ;

20 (2) by striking ‘‘or’’ at the end of subclause (I);

21 (3) by inserting ‘‘or (II)’’ before the semicolon at

22 the end of subclause (II);

23 (4) by redesignating subclause (II) as subclause

24 (III); and
9

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1 (5) by inserting after subclause (I) the following

2 new subclause:

3 ‘‘(II) by the Secretary, in the case of a

4 consolidation loan for which the application

5 is received by an eligible lender on or after

6 the date of enactment of the Emergency Stu7 dent Loan Consolidation Act of 1997 and

8 before October 1, 1998, except that the Sec9 retary shall pay such interest only on that

10 portion of the loan that repays Federal

11 Stafford Loans for which the student bor12 rower received an interest subsidy under

13 section 428 or Federal Direct Stafford

14 Loans for which the borrower received an

15 interest subsidy under section 455; or’’.

16 (c) NONDISCRIMINATION IN LOAN CONSOLIDATION.—

17 Section 428C(b) is amended by adding at the end the follow18 ing new paragraph:

19 ‘‘(6) NONDISCRIMINATION IN LOAN CONSOLIDA20 TION.—An eligible lender that makes consolidation

21 loans under this section shall not discriminate

22 against any borrower seeking such a loan—

23 ‘‘(A) based on the number or type of eligible

24 student loans the borrower seeks to consolidate;
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1 ‘‘(B) based on the type or category of insti2 tution of higher education that the borrower at3 tended;

4 ‘‘(C) based on the interest rate that is au5 thorized to be collected with respect to the con6 solidation loan; or

7 ‘‘(D) with respect to the types of repayment

8 schedules offered to such borrower.’’.

9 (d) INTEREST RATE.—Section 428C(c)(1) is amend10 ed—

11 (1) in the first sentence of subparagraph (A), by

12 striking ‘‘(B) or (C)’’ and inserting ‘‘(B), (C), or

13 (D)’’; and

14 (2) by adding at the end the following new sub15 paragraph:

16 ‘‘(D) A consolidation loan for which the applica17 tion is received by an eligible lender on or after the

18 date of enactment of the Emergency Student Loan

19 Consolidation Act of 1997 and before October 1, 1998,

20 shall bear interest at an annual rate on the unpaid

21 principal balance of the loan that is equal to the rate

22 specified in section 427A(f), except that the eligible

23 lender may continue to calculate interest on such a

24 loan at the rate previously in effect and defer, until

25 not later than April 1, 1998, the recalculation of the
11

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1 interest on such a loan at the rate required by this

2 subparagraph if the recalculation is applied retro3 actively to the date on which the loan is made.’’.

4 (e) AMENDMENTS EFFECTIVE FOR PENDING APPLI5 CANTS.—The consolidation loans authorized by the amend6 ments made by this section shall be available notwithstand7 ing any pending application by a student for a consolida8 tion loan under part D of title IV of the Higher Education

9 Act of 1965, upon withdrawal of such application by the

10 student at any time prior to receipt of such a consolidation

11 loan.

12 SEC. 3. ADMINISTRATIVE EXPENSE REDUCTIONS.

13 Section 458(a)(1) (20 U.S.C. 1087h(a)(1)) is amended

14 by striking ‘‘$532,000,000’’ and inserting ‘‘$507,000,000’’.

15 SEC. 4. TREATMENT OF TAX BENEFITS.

16 (a) FAMILY CONTRIBUTION FOR DEPENDENT STU17 DENTS.—

18 (1) PARENTS’ AVAILABLE INCOME.—Section

19 475(c)(1) is amended—

20 (A) by striking ‘‘and’’ at the end of sub21 paragraph (D);

22 (B) by striking the period at the end of sub23 paragraph (E) and inserting ‘‘; and’’; and

24 (C) by adding at the end the following new

25 subparagraph:
12

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1 ‘‘(F) the amount of any tax credit taken by

2 the parents under section 25A of the Internal

3 Revenue Code of 1986.’’.

4 (2) STUDENT CONTRIBUTION FROM AVAILABLE

5 INCOME.—Section 475(g)(2) is amended—

6 (A) by striking ‘‘and’’ at the end of sub7 paragraph (C);

8 (B) by striking the period at the end of sub9 paragraph (D) and inserting ‘‘; and’’; and

10 (C) by inserting after subparagraph (D) the

11 following new subparagraph:

12 ‘‘(E) the amount of any tax credit taken by

13 the student under section 25A of the Internal

14 Revenue Code of 1986.’’.

15 (b) FAMILY CONTRIBUTION FOR INDEPENDENT STU16 DENTS WITHOUT DEPENDENTS OTHER THAN A SPOUSE.—

17 Section 476(b)(1)(A) (20 U.S.C. 1087pp(b)(1)(A)) is

18 amended—

19 (1) by striking ‘‘and’’ at the end of clause (iv);

20 and

21 (2) by inserting after clause (v) the following

22 new clause:

23 ‘‘(vi) the amount of any tax credit

24 taken under section 25A of the Internal

25 Revenue Code of 1986; and’’.
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1 (c) FAMILY CONTRIBUTION FOR INDEPENDENT STU2 DENTS WITH DEPENDENTS OTHER THAN A SPOUSE.—Sec3 tion 477(b)(1) (20 U.S.C. 1087qq(b)(1)) is amended—

4 (1) by striking ‘‘and’’ at the end of subpara5 graph (D);

6 (2) by striking the period at the end of subpara7 graph (E) and inserting ‘‘; and’’; and

8 (3) by adding at the end the following new sub9 paragraph:

10 ‘‘(F) the amount of any tax credit taken

11 under section 25A of the Internal Revenue Code

12 of 1986.’’.

13 (d) TOTAL INCOME.—Section 480(a)(2) (20 U.S.C.

14 1087vv(a)(2)) is amended—

15 (1) by striking ‘‘individual, and’’ and inserting

16 ‘‘individual,’’; and

17 (2) by inserting ‘‘and no portion of any tax

18 credit taken under section 25A of the Internal Reve19 nue Code of 1986,’’ before ‘‘shall be included’’.

20 (e) OTHER FINANCIAL ASSISTANCE.—Section 480(j) is

21 amended by adding at the end the following new paragraph:

22 ‘‘(4) Notwithstanding paragraph (1), a tax credit

23 taken under section 25A of the Internal Revenue Code of

24 1986 shall not be treated as estimated financial assistance

25 for purposes of section 471(3).’’.