I 
109TH CONGRESS 
1ST SESSION H. R. 1425 
To ensure that the Federal student loans are delivered as efficiently as 
possible, so that there is more grant aid for students. 
IN THE HOUSE OF REPRESENTATIVES 
MARCH 17, 2005 
Mr. PETRI (for himself, Mr. GEORGE MILLER of California, Mr. DOGGETT, 
Mr. BROWN of Ohio, Mr. SANDERS, Mr. BISHOP of New York, Mr. FIL-
NER, Mr. MCDERMOTT, Ms. KILPATRICK of Michigan, Ms. LEE, Mr. 
GRIJALVA, Mr. HINCHEY, Mr. KUCINICH, Mr. WU, Mr. VAN HOLLEN, 
Ms. WATSON, Mr. ETHERIDGE, Ms. MOORE
of Wisconsin, Mr. 
CUMMINGS, Ms. MCCOLLUM of Minnesota, Mr. ISRAEL, Mrs. JONES of 
Ohio, Ms. BORDALLO, Mr. CROWLEY, Ms. SCHAKOWSKY, Mr. HASTINGS 
of Florida, Mr. TIERNEY, Mr. KILDEE, Mr. BROWN of South Carolina, 
Ms. PELOSI, and Mr. ALEXANDER) introduced the following bill; which 
was referred to the Committee on Education and the Workforce 
A BILL 
To ensure that the Federal student loans are delivered as 
efficiently as possible, so that there is more grant aid 
for students. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Student Aid Reward 
Act of 2005’’.
SEC. 2. STUDENT AID REWARD PROGRAM. 
Part G of title IV of the Higher Education Act of 
1965 is amended by inserting after section 489 (20 U.S.C. 
1096) the end the following: 
‘‘SEC. 489A. STUDENT AID REWARD PROGRAM. 
‘‘(a) PROGRAM AUTHORIZED.—The Secretary shall 
carry out a Student Aid Reward Program to encourage 
institutions of higher education to participate in the stu-
dent loan program under this title that is most cost-effec-
tive for taxpayers. 
‘‘(b) PROGRAM REQUIREMENTS.—In carrying out the 
Student Aid Reward Program, the Secretary shall— 
‘‘(1) provide to each institution of higher edu-
cation participating in the student loan program 
under this title that is most cost-effective for tax-
payers a Student Aid Reward Payment, in an 
amount determined in accordance with subsection 
(c), to encourage the institution to participate in 
that student loan program; 
‘‘(2) require each institution of higher edu-
cation receiving a payment under this section to pro-
vide student loans under that student loan program 
for a period of 5 years from the date the payment 
is made; 
‘‘(3) where appropriate, require that funds paid 
to institutions of higher education under this section
be used to award students a supplement to such stu-
dents’ Pell Grants under subpart 1 of part A; 
‘‘(4) permit such funds to also be used to award 
lower and middle income graduate students need- 
based grants; and 
‘‘(5) encourage all institutions of higher edu-
cation to participate in the Student Aid Reward Pro-
gram. 
‘‘(c) AMOUNT.—The amount of a Student Aid Re-
ward Payment under this section shall be not less than 
50 percent of the savings to the Federal Government gen-
erated by the institution’s participation in the student loan 
program under this title that is most cost-effective for tax-
payers instead of the institution’s participation in the stu-
dent loan program not cost-effective for taxpayers. 
‘‘(d) TRIGGER TO ENSURE COST NEUTRALITY.— 
‘‘(1) LIMIT TO ENSURE COST NEUTRALITY.— 
Notwithstanding subsection (c), the Secretary shall 
not distribute Student Aid Reward Payments under 
the Student Aid Reward Program that, in the aggre-
gate, exceed the Federal savings resulting from im-
plementation of the Student Aid Reward Program. 
‘‘(2) FEDERAL SAVINGS.—In calculating Fed-
eral savings, as used in paragraph (1), the Secretary 
shall determine Federal savings on loans made to
students at institutions of higher education that par-
ticipate the student loan program under this title 
that is most cost-effective for taxpayers and that, on 
the date of enactment of the Student Aid Reward 
Program, participated in the student loan program 
that is not the most cost-effective for taxpayers, re-
sulting from the difference of— 
‘‘(A) the Federal cost of loan volume made 
under the student loan program under this title 
that is most cost-effective for taxpayers; and 
‘‘(B) the Federal cost of an equivalent type 
and amount of loan volume made, insured, or 
guaranteed under the student loan program 
under this title that is not the most cost-effec-
tive for taxpayers. 
‘‘(3) DISTRIBUTION
RULES.—If the Federal 
savings determined under paragraph (2) is not suffi-
cient to distribute full Student Aid Reward Pay-
ments under the Student Aid Reward Program, the 
Secretary shall— 
‘‘(A) first make Student Aid Reward Pay-
ments to those institutions of higher education 
that participated in the student loan program 
under this title that is not the most cost-effec-
tive for taxpayers on the date of enactment of 
the Student Aid Reward Program; and 
‘‘(B) with any remaining Federal savings 
after making Payments under subparagraph 
(A), make Student Aid Reward Payments to 
the institutions of higher education not de-
scribed in subparagraph (A) on a pro-rata 
basis. 
‘‘(4) DISTRIBUTION TO STUDENTS.—Any insti-
tution of higher education that receives a Student 
Aid Reward Payment under this section— 
‘‘(A) shall distribute, where appropriate, 
part or all of such payment among the students 
of such institution who are Pell Grant recipi-
ents by awarding such students a supplemental 
grant; and 
‘‘(B) may distribute part of such payment 
as a supplemental grant to graduate students in 
financial need. 
‘‘(5) ESTIMATES, ADJUSTMENTS, AND
CARRY 
OVER.— 
‘‘(A) ESTIMATES
AND
ADJUSTMENTS.— 
The Secretary may make Student Aid Reward 
Payments to institutions of higher education on 
the basis of estimates, using the best data avail-
able at the beginning of an academic/fiscal year. 
If the Secretary determines thereafter that loan 
program costs for that academic/fiscal year 
were different than such estimate, the Secretary 
shall adjust (reduce or increase) subsequent 
Student Aid Reward Payments rewards paid to 
such institutions of higher education to reflect 
such difference. 
‘‘(B) CARRY
OVER.—Any institution of 
higher education that receives a reduced Stu-
dent Aid Reward Payment under paragraph 
(3)(B), shall remain eligible for the unpaid por-
tion of such institution’s financial reward pay-
ment, as well as any additional financial reward 
payments for which the institution is otherwise 
eligible, in subsequent academic or fiscal years. 
‘‘(e) DEFINITION.—For purposes of this section— 
‘‘(1) the student loan program under this title 
that is most cost-effective for taxpayers is the loan 
program under part B or D of this title that has the 
lowest overall cost to the Federal Government (in-
cluding administrative costs) for the loans author-
ized by such parts; and 
‘‘(2) the student loan program under this title 
that is not most cost-effective for taxpayers is the
loan program under part B or D of this title that 
does not have the lowest overall cost to the Federal 
Government (including administrative costs) for the 
loans authorized by such parts.’’. 
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