II 

110TH CONGRESS 

1ST SESSION S. 572 

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

in order to provide more grant aid to students. 

IN THE SENATE OF THE UNITED STATES 

FEBRUARY 13, 2007 

Mr. KENNEDY (for himself, Mr. SMITH, and Mr. DURBIN) introduced the following bill; which was read twice and referred to the Committee on 

Health, Education, Labor, and Pensions 

A BILL 

To ensure that Federal student loans are delivered as efficiently as possible in order to provide more grant aid 

to 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 2007’’. 

6 SEC. 2. STUDENT AID REWARD PROGRAM. 

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

8 1965 (20 U.S.C. 1088 et seq.) is amended by inserting 

9 after section 489 the following: 

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

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

3 carry out a Student Aid Reward Program to encourage 

4 institutions of higher education to participate in the stu5 dent loan program under this title that is most cost-effec6 tive for taxpayers. 

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

8 Student Aid Reward Program, the Secretary shall— 

9 ‘‘(1) provide to each institution of higher edu10 cation participating in the student loan program 

11 under this title that is most cost-effective for tax12 payers, a Student Aid Reward Payment, in an 

13 amount determined in accordance with subsection 

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

15 that student loan program; 

16 ‘‘(2) require each institution of higher edu17 cation receiving a payment under this section to pro18 vide student loans under such student loan program 

19 for a period of 5 years after the date the first pay20 ment is made under this section; 

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

22 to institutions of higher education under this section 

23 be used to award students a supplement to such stu24 dents’ Federal Pell Grants under subpart 1 of part 

25 A; 

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

2 need-based grants to lower- and middle-income grad3 uate students; and 

4 ‘‘(5) encourage all institutions of higher edu5 cation to participate in the Student Aid Reward Pro6 gram under this section. 

7 ‘‘(c) AMOUNT.—The amount of a Student Aid Re8 ward Payment under this section shall be not less than 

9 50 percent of the savings to the Federal Government gen10 erated by the institution of higher education’s participa11 tion in the student loan program under this title that is 

12 most cost-effective for taxpayers instead of the institu13 tion’s participation in the student loan program that is 

14 not most cost-effective for taxpayers. 

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

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

17 Notwithstanding subsection (c), the Secretary shall 

18 not distribute Student Aid Reward Payments under 

19 the Student Aid Reward Program that, in the aggre20 gate, exceed the Federal savings resulting from the 

21 implementation of the Student Aid Reward Pro22 gram. 

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 in the student loan program under this title 

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

4 the date of enactment of this section, participated in 

5 the student loan program that is not most cost-effec6 tive for taxpayers, resulting from the difference of— 

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

8 under the student loan program under this title 

9 that is most cost-effective for taxpayers; and 

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

11 and amount of loan volume made, insured, or 

12 guaranteed under the student loan program 

13 under this title that is not most cost-effective 

14 for taxpayers. 

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

16 savings determined under paragraph (2) is not suffi17 cient to distribute full Student Aid Reward Pay18 ments under the Student Aid Reward Program, the 

19 Secretary shall— 

20 ‘‘(A) first make Student Aid Reward Pay21 ments to those institutions of higher education 

22 that participated in the student loan program 

23 under this title that is not most cost-effective 

24 for taxpayers on the date of enactment of this 

25 section; and 

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1 ‘‘(B) with any remaining Federal savings 

2 after making Student Aid Reward Payments 

3 under subparagraph (A), make Student Aid Re4 ward Payments to the institutions of higher 

5 education eligible for a Student Aid Reward 

6 Payment and not described in subparagraph 

7 (A) on a pro-rata basis. 

8 ‘‘(4) DISTRIBUTION TO STUDENTS.—Any insti9 tution of higher education that receives a Student 

10 Aid Reward Payment under this section— 

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

12 part or all of such payment among the students 

13 of such institution who are Federal Pell Grant 

14 recipients by awarding such students a supple15 mental grant; and 

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

17 as a supplemental grant to graduate students in 

18 financial need. 

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

20 OVER.— 

21 ‘‘(A) ESTIMATES AND ADJUSTMENTS.— 

22 The Secretary shall make Student Aid Reward 

23 Payments to institutions of higher education on 

24 the basis of estimates, using the best data avail25 able at the beginning of an academic or fiscal 

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1 year. If the Secretary determines thereafter 

2 that loan program costs for that academic or 

3 fiscal year were different than such estimate, 

4 the Secretary shall adjust by reducing or in5 creasing subsequent Student Aid Reward Pay6 ments paid to such institutions of higher edu7 cation to reflect such difference. 

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

9 higher education that receives a reduced Stu10 dent Aid Reward Payment under paragraph 

11 (3)(B), shall remain eligible for the unpaid por12 tion of such institution’s financial reward pay13 ment, as well as any additional financial reward 

14 payments for which the institution is otherwise 

15 eligible, in subsequent academic or fiscal years. 

16 ‘‘(e) DEFINITIONS.—In this section: 

17 ‘‘(1) The term ‘student loan program under this 

18 title that is most cost-effective for taxpayers’ means 

19 the loan program under part B or D of this title 

20 that has the lowest overall cost to the Federal Gov21 ernment (including administrative costs) for the 

22 loans authorized by such parts. 

23 ‘‘(2) The term ‘student loan program under this 

24 title that is not most cost-effective for taxpayers’ 

25 means the loan program under part B or D of this 

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1 title that does not have the lowest overall cost to the 

2 Federal Government (including administrative costs) 

3 for the loans authorized by such parts.’’. 

Æ 

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