104TH CONGRESS

2D SESSION H. R. 3863

AN ACT

To amend the Higher Education Act of 1965 to

tion fees on behalf of borrowers.Family Education Loan program to pay originapermit lenders under the unsubsidized Federal
104TH CONGRESS

2D SESSION H. R. 3863

AN ACT

To amend the Higher Education Act of 1965 to permit

lenders under the unsubsidized Federal Family Education Loan program to pay origination fees on behalf

of borrowers.

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

2 This Act may be cited as the ‘‘Student Debt Reduc3 tion Act of 1996’’.

4 SEC. 2. UNSUBSIDIZED STUDENT LOANS.

5 (a) AMENDMENT.—Paragraph (1) of section 428H(f)

6 of the Higher Education Act of 1965 (20 U.S.C. 1078–

7 8(f)(1)) is amended to read as follows:

8 ‘‘(1) AMOUNT OF ORIGINATION FEE.—Except

9 as provided in paragraph (5), an origination fee

10 shall be paid to the Secretary with respect to each

11 loan under this section in the amount of 3.0 percent

12 of the principal amount of the loan. Each lender

13 under this section is authorized to charge the bor14 rower for such origination fee, provided that the

15 lender assesses the same fee to all student borrow16 ers. Any such fee charged to the borrower shall be

17 deducted proportionately from each installment pay18 ment of the proceeds of the loan prior to payment

19 to the borrower.’’.

20 (b) CONFORMING AMENDMENTS.—Section 428H(f)

21 of such Act is further amended—

22 (1) in paragraph (3), by striking ‘‘the origina23 tion fee’’ and inserting ‘‘any origination fee that is

24 charged to the borrower’’;

25 (2) in paragraph (4), by striking ‘‘origination

26 fees authorized to be collected from borrowers’’ and
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1 inserting ‘‘origination fees required under paragraph

2 (1)’’; and

3 (3) by adding at the end the following new

4 paragraph:

5 ‘‘(6) EXCEPTION.—Notwithstanding paragraph

6 (1), a lender may assess a lesser origination fee for

7 a borrower demonstrating greater financial need as

8 determined by such borrower’s adjusted gross family

9 income.’’.

10 (c) REPORT ON COMPETITIVE ALLOCATION.—Within

11 60 days after the date of enactment of this Act, the Sec12 retary of Education shall submit to each House of the

13 Congress a legislative proposal that would permit the Sec14 retary to allocate the right to make subsidized and

15 unsubsidized student loans on the basis of competitive bid16 ding. Such proposal shall include provision to ensure that

17 any payments received from such competitive bidding are

18 equally allocated to deficit reduction and to pro rata re19 duction of origination fees in both guaranteed and direct

20 student loans.

21 SEC. 3. STUDY OF LOAN FEES.

22 (a) STUDY REQUIRED.—The Secretary of Education

23 shall conduct a statistical analysis of the subsidized and

24 unsubsidized student loan programs under part B of title

25 IV of the Higher Education Act of 1965 to gather data
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1 on lenders’ use of loan fees and to determine if there are

2 any anomalies that would indicate any institutional, pro3 grammatic or socioeconomic discrimination in the assess4 ing or waiving such fees.

5 (b) REPORT.—The Secretary of Education shall sub6 mit to each House of the Congress a report on the study

7 required by subsection (a) within 2 years after the date

8 of enactment of this Act.

9 (c) STATISTICAL CHARACTERISTICS TO BE STUD10 IED.—In conducting the study required by subsection (a),

11 the Secretary of Education shall compare recipients of

12 loans on the basis of income, residence location, type and

13 location of higher education, program of instruction and

14 type of lender.

Passed the House of Representatives September 11,

1996.

Attest:

Clerk.