II 

108TH CONGRESS 

1ST SESSION S. 1742

To amend title IV of the Higher Education Act of 1965 to provide for 

variable interest rates on student loans. 

IN THE SENATE OF THE UNITED STATES 

OCTOBER 16, 2003

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

referred to the Committee on Health, Education, Labor, and Pensions 

A BILL

To amend title IV of the Higher Education Act of 1965 

to provide for variable interest rates on student loans.

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 ‘‘Higher Education 

5 Loan Plan Act of 2003’’. 

6 SEC. 2. INTEREST RATES ON STUDENT LOANS. 

7 (a) INTEREST RATE CHANGES.—Section 427A of the 

8 Higher Education Act of 1965 (20 U.S.C. 1077a) is 

9 amended by striking subsections (k) and (l) and inserting 

10 the following: 
2

•S 1742 IS 

1 ‘‘(k) INTEREST RATES FOR NEW LOANS ON OR

2 AFTER OCTOBER 1, 1998, AND BEFORE THE DATE OF

3 ENACTMENT OF THE HIGHER EDUCATION LOAN PLAN

4 ACT OF 2003.—

5 ‘‘(1) IN GENERAL.—Notwithstanding subsection 

6 (h) and subject to paragraph (2), with respect to 

7 any loan made, insured, or guaranteed under this 

8 part (other than a loan made pursuant to section 

9 428B or 428C) for which the first disbursement is 

10 made on or after October 1, 1998, and before the 

11 date of enactment of the Higher Education Loan 

12 Plan Act of 2003, the applicable rate of interest 

13 shall, during any 12-month period beginning on July 

14 1 and ending on June 30, be determined on the pre15 ceding June 1 and be equal to—

16 ‘‘(A) the bond equivalent rate of 91-day 

17 Treasury bills auctioned at the final auction 

18 held prior to such June 1; plus 

19 ‘‘(B) 2.3 percent, 

20 except that such rate shall not exceed 8.25 percent. 

21 ‘‘(2) IN SCHOOL AND GRACE PERIOD RULES.—

22 Notwithstanding subsection (h), with respect to any 

23 loan under this part (other than a loan made pursu24 ant to section 428B or 428C) for which the first dis25 bursement is made on or after October 1, 1998, and 
3

•S 1742 IS 

1 before the date of enactment of the Higher Edu2 cation Loan Plan Act of 2003, the applicable rate of 

3 interest for interest which accrues—

4 ‘‘(A) prior to the beginning of the repay5 ment period of the loan; or 

6 ‘‘(B) during the period in which principal 

7 need not be paid (whether or not such principal 

8 is in fact paid) by reason of a provision de9 scribed in section 427(a)(2)(C) or 

10 428(b)(1)(M), 

11 shall be determined under paragraph (1) by sub12 stituting ‘1.7 percent’ for ‘2.3 percent’. 

13 ‘‘(3) PLUS LOANS.—Notwithstanding sub14 section (h), with respect to any loan under section 

15 428B for which the first disbursement is made on or 

16 after October 1, 1998, and before the date of enact17 ment of the Higher Education Loan Plan Act of 

18 2003, the applicable rate of interest shall be deter19 mined under paragraph (1)—

20 ‘‘(A) by substituting ‘3.1 percent’ for ‘2.3 

21 percent’; and 

22 ‘‘(B) by substituting ‘9.0 percent’ for ‘8.25 

23 percent’. 

24 ‘‘(4) CONSOLIDATION LOANS.—With respect to 

25 any consolidation loan under section 428C for which 
4

•S 1742 IS 

1 the application is received by an eligible lender on or 

2 after October 1, 1998, and before the date of enact3 ment of the Higher Education Loan Plan Act of 

4 2003, the applicable rate of interest shall be at an 

5 annual rate on the unpaid principal balance of the 

6 loan that is equal to the lesser of—

7 ‘‘(A) the weighted average of the interest 

8 rates on the loans consolidated, rounded to the 

9 nearest higher one-eighth of 1 percent; or 

10 ‘‘(B) 8.25 percent. 

11 ‘‘(5) CONSULTATION.—The Secretary shall de12 termine the applicable rate of interest under this 

13 subsection after consultation with the Secretary of 

14 the Treasury and shall publish such rate in the Fed15 eral Register as soon as practicable after the date of 

16 determination. 

17 ‘‘(l) INTEREST RATES FOR NEW LOANS ON OR

18 AFTER THE DATE OF ENACTMENT OF THE HIGHER EDU19 CATION LOAN PLAN ACT OF 2003.—

20 ‘‘(1) IN GENERAL.—Notwithstanding subsection 

21 (h) and subject to paragraph (2), with respect to 

22 any loan made, insured, or guaranteed under this 

23 part (other than a loan made pursuant to section 

24 428B or 428C) for which the first disbursement is 

25 made on or after the date of enactment of the High-
5

•S 1742 IS 

1 er Education Loan Plan Act of 2003, the applicable 

2 rate of interest shall, during any 12-month period 

3 beginning on July 1 and ending on June 30, be de4 termined on the preceding June 1 and be equal to—

5 ‘‘(A) the bond equivalent rate of 91-day 

6 Treasury bills auctioned at the final auction 

7 held prior to such June 1; plus 

8 ‘‘(B) 2.3 percent, 

9 except that such rate shall not exceed 7.75 percent. 

10 ‘‘(2) IN SCHOOL AND GRACE PERIOD RULES.—

11 Notwithstanding subsection (h), with respect to any 

12 loan under this part (other than a loan made pursu13 ant to section 428B or 428C) for which the first dis14 bursement is made on or after the date of enactment 

15 of the Higher Education Loan Plan Act of 2003, the 

16 applicable rate of interest for interest which ac17 crues—

18 ‘‘(A) prior to the beginning of the repay19 ment period of the loan; or 

20 ‘‘(B) during the period in which principal 

21 need not be paid (whether or not such principal 

22 is in fact paid) by reason of a provision de23 scribed in section 427(a)(2)(C) or 

24 428(b)(1)(M), 
6

•S 1742 IS 

1 shall be determined under paragraph (1) by sub2 stituting ‘1.7 percent’ for ‘2.3 percent’. 

3 ‘‘(3) PLUS LOANS.—Notwithstanding sub4 section (h), with respect to any loan under section 

5 428B for which the first disbursement is made on or 

6 after the date of enactment of the Higher Education 

7 Loan Plan Act of 2003, the applicable rate of inter8 est shall be determined under paragraph (1)—

9 ‘‘(A) by substituting ‘3.1 percent’ for ‘2.3 

10 percent’; and 

11 ‘‘(B) by substituting ‘8.5 percent’ for ‘7.75 

12 percent’. 

13 ‘‘(4) CONSOLIDATION LOANS.—With respect to 

14 any consolidation loan under section 428C for which 

15 the application is received by an eligible lender on or 

16 after the date of enactment of the Higher Education 

17 Loan Plan Act of 2003, the applicable rate of inter18 est shall, during any 12-month period beginning on 

19 July 1 and ending on June 30, be determined on the 

20 preceding June 1 and be equal to—

21 ‘‘(A) the bond equivalent rate of 91-day 

22 Treasury bills auctioned at the final auction 

23 held prior to such June 1; plus 

24 ‘‘(B) 2.3 percent, 
7

•S 1742 IS 

1 except that such rate shall not exceed 7.75 per2 cent.’’. 

3 (b) SPECIAL ALLOWANCE CONFORMING CHANGES.—

4 Section 438(b)(2) of the Higher Education Act of 1965 

5 (20 U.S.C. 1087–1(b)(2)) is amended by striking ‘‘July 

6 1, 2006’’ each place it appears in clauses (ii), (v), and 

7 (vii) of subparagraph (I), including in the headings of such 

8 clauses, and inserting ‘‘the date of enactment of the High9 er Education Loan Plan Act of 2003’’. 

10 (c) ADDITIONAL CONFORMING AMENDMENTS.—Sec11 tion 428C(c)(1) of the Higher Education Act of 1965 (20 

12 U.S.C. 1078–3(c)(1)) is amended by striking ‘‘July 1, 

13 2006’’ each place it appears and inserting ‘‘the date of 

14 enactment of the Higher Education Loan Plan Act of 

15 2003’’.

Æ