II 

109TH CONGRESS 

1ST SESSION S. 754 

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

possible, so that there is more grant aid for students. 

IN THE SENATE OF THE UNITED STATES 

APRIL 11, 2005 

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 the Federal student loans are delivered as 

efficiently as possible, so that there is more grant aid 

for 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 2005’’. 

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 the Student Aid Reward 

5 Act of 2005, participated in the student loan pro6 gram that is not most cost-effective for taxpayers, 

7 resulting from the difference of— 

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

9 under the student loan program under this title 

10 that is most cost-effective for taxpayers; and 

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

12 and amount of loan volume made, insured, or 

13 guaranteed under the student loan program 

14 under this title that is not most cost-effective 

15 for taxpayers. 

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

17 savings determined under paragraph (2) is not suffi18 cient to distribute full Student Aid Reward Pay19 ments under the Student Aid Reward Program, the 

20 Secretary shall— 

21 ‘‘(A) first make Student Aid Reward Pay22 ments to those institutions of higher education 

23 that participated in the student loan program 

24 under this title that is not most cost-effective 
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1 for taxpayers on the date of enactment of the 

2 Student Aid Reward Act of 2005; and 

3 ‘‘(B) with any remaining Federal savings 

4 after making Student Aid Reward Payments 

5 under subparagraph (A), make Student Aid Re6 ward Payments to the institutions of higher 

7 education eligible for a Student Aid Reward 

8 Payment and not described in subparagraph 

9 (A) on a pro-rata basis. 

10 ‘‘(4) DISTRIBUTION TO STUDENTS.—Any insti11 tution of higher education that receives a Student 

12 Aid Reward Payment under this section— 

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

14 part or all of such payment among the students 

15 of such institution who are Federal Pell Grant 

16 recipients by awarding such students a supple17 mental grant; and 

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

19 as a supplemental grant to graduate students in 

20 financial need. 

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

22 OVER.— 

23 ‘‘(A) ESTIMATES AND ADJUSTMENTS.— 

24 The Secretary shall make Student Aid Reward 

25 Payments to institutions of higher education on 
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1 the basis of estimates, using the best data avail2 able at the beginning of an academic or fiscal 

3 year. If the Secretary determines thereafter 

4 that loan program costs for that academic or 

5 fiscal year were different than such estimate, 

6 the Secretary shall adjust by reducing or in7 creasing subsequent Student Aid Reward Pay8 ments rewards paid to such institutions of high9 er education to reflect such difference. 

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

11 higher education that receives a reduced Stu12 dent Aid Reward Payment under paragraph 

13 (3)(B), shall remain eligible for the unpaid por14 tion of such institution’s financial reward pay15 ment, as well as any additional financial reward 

16 payments for which the institution is otherwise 

17 eligible, in subsequent academic or fiscal years. 

18 ‘‘(e) DEFINITION.—In this section: 

19 ‘‘(1) STUDENT LOAN PROGRAM UNDER THIS

20 TITLE THAT IS MOST COST-EFFECTIVE FOR TAX21 PAYERS.—The term ‘student loan program under 

22 this title that is most cost-effective for taxpayers’ 

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

24 title that has the lowest overall cost to the Federal 
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1 Government (including administrative costs) for the 

2 loans authorized by such parts. 

3 ‘‘(2) STUDENT LOAN PROGRAM UNDER THIS

4 TITLE THAT IS NOT MOST COST-EFFECTIVE FOR

5 TAXPAYERS.—The term ‘student loan program 

6 under this title that is not most cost-effective for 

7 taxpayers’ means the loan program under part B or 

8 D of this title that does not have the lowest overall 

9 cost to the Federal Government (including adminis10 trative costs) for the loans authorized by such 

11 parts.’’. 

Æ