I 

108TH CONGRESS 

2D SESSION H. R. 4370 

To ensure that the Direct Loan Program is a competitive alternative to 

the Federal Family Education Loan Program for schools and students. 

IN THE HOUSE OF REPRESENTATIVES 

MAY 17, 2004 

Mr. PETRI (for himself and Mr. GEORGE MILLER of California) introduced 

the following bill; which was referred to the Committee on Education and 

the Workforce 

A BILL 

To ensure that the Direct Loan Program is a competitive 

alternative to the Federal Family Education Loan Program for schools and 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 ‘‘Direct Loan Reward 

5 Act of 2004’’. 

6 SEC. 2. DIRECT LOAN REWARD PROGRAM. 

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

8 1965 (20 U.S.C. 1087a et seq.) is amended by adding at 

9 the end the following: 
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1 ‘‘SEC. 460A. DIRECT LOAN REWARD PROGRAM. 

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

3 carry out a Direct Loan Reward Program to encourage 

4 institutions of higher education to participate in the stu5 dent loan program under this part. 

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

7 Direct Loan Reward Program, the Secretary shall— 

8 ‘‘(1) provide to each institution of higher edu9 cation participating in the student loan program 

10 under this part a financial reward payment, in an 

11 amount determined in accordance with subsection 

12 (c), to encourage the institution to provide student 

13 loans under this part; 

14 ‘‘(2) require each institution of higher edu15 cation receiving a payment under this section to pro16 vide student loans under this part for a period of 5 

17 years from the date the payment is made; 

18 ‘‘(3) require that funds paid to institutions of 

19 higher education under this section be used to award 

20 students a supplement to such students’ Pell Grants 

21 under subpart 1 of part A; and 

22 ‘‘(4) for a period of 2 years beginning on the 

23 date of enactment of this section, encourage all insti24 tutions of higher education to participate in the Di25 rect Loan Reward Program. 
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1 ‘‘(c) AMOUNT.—The amount of a financial reward 

2 payment under this section shall be an amount equal to 

3 50 percent of the savings to the Federal Government gen4 erated by the institution’s participation in the student loan 

5 program under this part instead of the institution’s par6 ticipation in the student loan program under part B. 

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

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

9 Notwithstanding subsection (c), the Secretary shall 

10 not distribute financial reward payments under the 

11 Direct Loan Reward Program that, in the aggre12 gate, exceed the Federal savings resulting from im13 plementation of the Direct Loan Reward Program. 

14 ‘‘(2) FEDERAL SAVINGS.—In calculating Fed15 eral savings, as used in paragraph (1), the Secretary 

16 shall determine any Federal savings on loans made 

17 to students at institutions of higher education that 

18 participate in the Direct Loan Reward Program and 

19 that, on the date of enactment of the Direct Loan 

20 Reward Program, participated in the student loan 

21 program under part B, resulting from the difference 

22 of— 

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

24 under this part; and 
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1 ‘‘(B) the Federal cost of an equivalent type 

2 and amount of loan volume made, insured, or 

3 guaranteed under part B. 

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

5 savings determined under paragraph (2) is not suffi6 cient to distribute full financial reward payments 

7 under the Direct Loan Reward Program, the Sec8 retary shall— 

9 ‘‘(A) first make financial reward payments 

10 to those institutions of higher education that 

11 participated in the student loan program under 

12 part B on the date of enactment of the Direct 

13 Loan Reward Program; and 

14 ‘‘(B) with any remaining Federal savings 

15 after making payments under subparagraph 

16 (A), make financial reward payments to the in17 stitutions of higher education not described in 

18 subparagraph (A) on a pro-rata basis. 

19 ‘‘(4) DISTRIBUTION TO STUDENTS.—Any insti20 tution of higher education that receives a financial 

21 reward payment under this section shall distribute 

22 such payment among the students of such institu23 tion who are Pell Grant recipients by awarding each 

24 such student an equal supplemental grant. Such 
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1 supplemental grant shall be known as a ‘Pell Re2 ward’. 

3 ‘‘(5) CARRY OVER.—Any institution of higher 

4 education that receives a reduced financial reward 

5 payment under paragraph (3)(B), shall remain eligi6 ble for the unpaid portion of such institution’s finan7 cial reward payment, as well as any additional finan8 cial reward payments for which the institution is 

9 otherwise eligible, in subsequent fiscal years.’’. 

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