Service Act of 1990 (42 U.S.C. 12604(g)) is amended
by striking ‘‘section 481(a) of the Higher Education
Act of 1965 (20 U.S.C. 1088(a))’’ and inserting ‘‘sec-
tion 101(a)(2) of the Higher Education Act of 1965’’.
SEC. 102. DEFINITIONS.
(a) INSTITUTION OF HIGHER EDUCATION.—Section
101 (as redesignated by section 101(a)(3) of this Act) is
amended by striking subsections (a) and (b) and inserting
the following:
‘‘(a) INSTITUTION OF HIGHER EDUCATION.—
‘‘(1) IN GENERAL.—Subject to paragraphs (2)
through (4) of this subsection:
‘‘(A) PRINCIPAL CRITERIA.—The term ‘in-
stitution of higher education’ means an edu-
cational institution in any State that—
‘‘(i) admits as regular students only
persons having a certificate of graduation
from a school providing secondary edu-
cation, or the recognized equivalent of such
a certificate;
‘‘(ii) is legally authorized within such
State to provide a program of education be-
yond secondary education;
‘‘(iii) provides an educational program
for which it awards a bachelor’s degree or
provides not less than a two-year program
that is acceptable for full credit toward such
a degree;
‘‘(iv) is a public or other nonprofit in-
stitution; and
‘‘(v) is accredited by a nationally rec-
ognized accrediting agency or association,
or if not so accredited, is an institution that
has been granted preaccreditation status by
such an agency or association that has been
recognized by the Secretary for the granting
of preaccreditation status, and the Sec-
retary has determined that there is satisfac-
tory assurance that the institution will meet
the accreditation standards of such an agen-
cy or association within a reasonable time.
‘‘(B) 
ADDITIONAL
INSTITUTIONS
IN-
CLUDED.—The term ‘institution of higher edu-
cation’ also includes—
‘‘(i) any school that provides not less
than a one-year program of training to pre-
pare students for gainful employment in a
recognized occupation and that meets the
provision of clauses (i), (ii), (iv), and (v) of
subparagraph (A); and
‘‘(ii) a public or nonprofit private edu-
cational institution in any State that, in
lieu of the requirement in subparagraph
(A)(i), admits as regular students persons
who are beyond the age of compulsory school
attendance in the State in which the insti-
tution is located.
‘‘(C) LIST OF ACCREDITING AGENCIES.—For
purposes of this subsection, the Secretary shall
publish a list of nationally recognized accredit-
ing agencies or associations that he determines,
pursuant to subpart 2 of part H of title IV of
this Act, to be reliable authority as to the quality
of the education or training offered.
‘‘(2) DEFINITION FOR PURPOSES OF TITLE IV
PROGRAMS.—
‘‘(A) INCLUSION OF ADDITIONAL INSTITU-
TIONS.—Subject to subparagraphs (B) through
(D) of this paragraph, the term ‘institution of
higher education’ for purposes of title IV of this
Act includes, in addition to the institutions cov-
ered by the definition in paragraph (1) of this
subsection—
‘‘(i) a proprietary institution of higher
education;
‘‘(ii) a postsecondary vocational insti-
tution; and
‘‘(iii) only for the purposes of part B
of title IV, an institution outside the United
States that is comparable to an institution
of higher education as defined in paragraph
(1) of this subsection and that has been ap-
proved by the Secretary for the purpose of
part B of title IV.
‘‘(B) INSTITUTIONS OUTSIDE THE UNITED
STATES.—
‘‘(i) For the purpose of qualifying as
an institution under subparagraph (A)(iii)
of this paragraph, the Secretary shall estab-
lish criteria by regulation for the approval
of institutions outside the United States
and for the determination that such institu-
tions are comparable to an institution of
higher education as defined in paragraph
(1) of this subsection. In the case of a grad-
uate medical school outside the United
States, such criteria shall include a require-
ment that a student attending a graduate
medical school outside the United States is
ineligible for loans made, insured, or guar-
anteed under part B of this title unless—
‘‘(I)(aa) at least 60 percent of
those enrolled and at least 60 percent
of the graduates of the graduate medi-
cal school outside the United States
were not persons described in section
484(a)(5) in the year preceding the
year for which a student is seeking a
loan under part B of title IV; and
‘‘(bb) at least 60 percent of the in-
dividuals who were students or grad-
uates of the graduate medical school
outside the United States (both nation-
als of the United States and others)
taking the examinations administered
by the Educational Commission for
Foreign Medical Graduates received a
passing score in the year preceding the
year for which a student is seeking a
loan under part B of title IV; or
‘‘(II) the institution’s clinical
training program was approved by a
State as of January 1, 1992.
‘‘(ii) For the purpose of qualifying as
an institution under subparagraph (A)(iii)
of this paragraph, the Secretary shall estab-
lish an advisory panel of medical experts
that shall—
‘‘(I) evaluate the standards of ac-
creditation applied to applicant for-
eign medical schools; and
‘‘(II) determine the comparability
of those standards to standards for ac-
creditation applied to United States
medical schools.
If such accreditation standards are deter-
mined not to be comparable, the foreign
medical school shall be required to meet the
requirements of paragraph (1) of this sub-
section.
‘‘(iii) The failure of an institution out-
side the United States to provide, release, or
authorize release to the Secretary of such in-
formation as may be required by clause (i)
of this subparagraph shall render such in-
stitution ineligible for the purpose of part B
of title IV.
‘‘(iv) If, pursuant to this subpara-
graph, an institution loses eligibility to
participate in the programs under title IV,
then a student enrolled at such institution
may, notwithstanding such loss of eligi-
bility, continue to be eligible to receive a
loan under part B while attending such in-
stitution for the academic year succeeding
the academic year in which such loss of eli-
gibility occurred.
‘‘(C) LIMITATIONS BASED ON COURSE OF
STUDY OR ENROLLMENT.—An institution shall
not be considered to meet the definition of an in-
stitution of higher education in subparagraph
(A) of this paragraph if such institution—
‘‘(i) offers more than 50 percent of such
institution’s courses by correspondence, un-
less the institution is an institution that
meets the definition in section 521(4)(C) of
the Carl D. Perkins Vocational and Applied
Technology Education Act;
‘‘(ii) enrolls 50 percent or more of its
students in correspondence courses, unless
the institution is an institution that meets
the definition in such section, except that
the Secretary, at the request of such institu-
tion, may waive the applicability of this
clause to such institution for good cause, as
determined by the Secretary in the case of
an institution of higher education that pro-
vides a 2-year or 4-year program of instruc-
tion for which the institution awards an as-
sociate or baccalaureate degree;
‘‘(iii) has a student enrollment in
which more than 25 percent of the students
are incarcerated, except that the Secretary
may waive the prohibition of this clause for
a nonprofit institution that provides a 4-
year or a 2-year program of instruction (or
both) for which it awards a bachelor’s or as-
sociate’s degree or diploma, respectively; or
‘‘(iv) has a student enrollment in
which more than 50 percent of the students
do not have a high school diploma or its
recognized equivalent and does not provide
a 4-year or a 2-year program of instruction
(or both) for which it awards a bachelor’s or
associate’s degree, respectively, except that
the Secretary may waive the limitation con-
tained in this clause if a nonprofit institu-
tion demonstrates to the satisfaction of the
Secretary that it exceeds such limitation be-
cause it serves, through contracts with Fed-
eral, State, or local government agencies,
significant numbers of students who do not
have a high school diploma or its recognized
equivalent.
‘‘(D) LIMITATIONS
BASED
ON
MANAGE-
MENT.—An institution shall not be considered to
meet the definition of an institution of higher
education in subparagraph (A) of this para-
graph if—
‘‘(i) the institution, or an affiliate of
the institution that has the power, by con-
tract or ownership interest, to direct or
cause the direction of the management or
policies of the institution, has filed for
bankruptcy; or
‘‘(ii) the institution, its owner, or its
chief executive officer has been convicted of,
or has pled nolo contendere or guilty to, a
crime involving the acquisition, use, or ex-
penditure of funds under title IV, or has
been judicially determined to have commit-
ted fraud involving funds under title IV.
‘‘(E) CERTIFICATION.—The Secretary shall
certify an institution’s qualification as an insti-
tution of higher education in accordance with the
requirements of subpart 2 of part H.
‘‘(F) LOSS OF ELIGIBILITY.—An institution
of higher education shall not be considered to
meet the definition of an institution of higher
education in subparagraph (A) of this para-
graph if such institution is removed from eligi-
bility for funds under title IV as a result of an
action pursuant to part H of title IV.
‘‘(3) PROPRIETARY
INSTITUTION
OF
HIGHER
EDUCATION.—
‘‘(A) PRINCIPAL
CRITERIA.—For the pur-
pose of this subsection, the term ‘proprietary in-
stitution of higher education’ means a school
that—
‘‘(i) provides an eligible program of
training to prepare students for gainful em-
ployment in a recognized occupation;
‘‘(ii) meets the requirements of clauses
(i) and (ii) of paragraph (1)(A) of this sub-
section;
‘‘(iii) does not meet the requirement of
clause (iv) of paragraph (1)(A) of this sub-
section;
‘‘(iv) is accredited by a nationally rec-
ognized accrediting agency or association
approved by the Secretary pursuant to part
H of title IV;
‘‘(v) has been in existence for at least
2 years; and
‘‘(vi) has at least 15 percent of its reve-
nues from sources that are not derived from
funds provided under title IV, as deter-
mined in accordance with regulations pre-
scribed by the Secretary.
In determining such 15 percent of revenues for
purposes of clause (vi), funds from programs of
education and training that do not meet the defi-
nition of an eligible program in section 481(b),
but are provided on a contractual basis under
Federal, State, or local training programs, or
under specialized business and industry training
requests, shall be counted.
‘‘(B) ADDITIONAL INSTITUTIONS.—The term
‘proprietary institution of higher education’ also
includes a proprietary educational institution in
any State that, in lieu of the requirement in
clause (i) of paragraph (1)(A) of this subsection,
admits as regular students persons who are be-
yond the age of compulsory school attendance in
the State in which the institution is located.
‘‘(4) 
POSTSECONDARY
VOCATIONAL
INSTITU-
TION.—
‘‘(A) PRINCIPAL
CRITERIA.—For the pur-
pose of this subsection, the term ‘postsecondary
vocational institution’ means a school that—
‘‘(i) provides an eligible program of
training to prepare students for gainful em-
ployment in a recognized occupation;
‘‘(ii) meets the requirements of clauses
(i), (ii), (iv), and (v) of paragraph (1)(A)
of this subsection; and
‘‘(iii) has been in existence for at least
2 years.
‘‘(B) ADDITIONAL INSTITUTIONS.—The term
‘postsecondary vocational institution also in-
cludes an educational institution in any State
that, in lieu of the requirement in clause (i) of
paragraph (1)(A) of this subsection, admits as
regular students persons who are beyond the age
of compulsory school attendance in the State in
which the institution is located.
‘‘(b) STATE; FREELY ASSOCIATED STATES.—
‘‘(1) STATE.—The term ‘State’ includes, in addi-
tion to the several States of the Union, the Common-
wealth of Puerto Rico, the District of Columbia,
Guam, American Samoa, the Virgin Islands, the
Commonwealth of the Northern Mariana Islands, and
the Freely Associated States.
‘‘(2) FREELY
ASSOCIATED
STATES.—The term
‘Freely Associated States’ means the Republic of the
Marshall Islands, the Republic of Palau, and the Fed-
erated States of Micronesia.’’.
(b) CONFORMING AMENDMENTS.—
(1) Section 481 (20 U.S.C. 1088) is amended—
(A) by striking subsections (a), (b), and (c);
and
(B) by redesignating subsections (d) through
(f) as subsections (a) through (c), respectively.
(2) Each of the following provisions are amended
by striking ‘‘section 481’’ and inserting ‘‘section
101(a)(2)’’: sections 435(a)(1), 487(d), and 496(j) and
(k).
(3) Section 498(i) (20 U.S.C. 1099c) is amended
by striking ‘‘section 481 (other than the requirements
in subsections (b)(5) and (c)(3))’’ and inserting ‘‘sec-
tion 101(a) (other than the requirements in para-
graphs (3)(A)(v) and (4)(A)(iii))’’.
(4) Section 498(j) is amended by striking ‘‘sec-
tions 481(b)(5) and 481(c)(3)’’ and inserting ‘‘para-
graphs (3)(A)(v) and (4)(A)(iii) of section 101(a)’’.
(5) Section 105(b) (as redesignated by section
101(a)(3)(D)) is amended by adding at the end the
following new sentence: ‘‘This subsection shall cease to
be effective on October 1, 2001.’’.
SEC. 103. REGULATORY REFORM.
Title I is amended by adding at the end the following
new section:
‘‘SEC. 112. REGULATORY REFORM.
‘‘(a) BIENNIAL REVIEW OF REGULATIONS.—In every
even-numbered year (beginning with 1998), the Secretary—
‘‘(1) shall review all regulations issued under
title IV of the Higher Education Act of 1965 in effect
at the time of the review that apply to the operations
or activities of any participant in those programs;
and
‘‘(2) shall determine whether any such regulation
is no longer necessary in the public interest.
‘‘(b) EFFECT
OF DETERMINATION.—The Secretary
shall repeal, consolidate, simplify, or otherwise modify any
regulation the Secretary determines to be no longer nec-
essary in the public interest.
‘‘(c) REPORT TO CONGRESS.—The Secretary shall re-
port to the Congress any legislative changes necessary to
permit regulatory simplification under this section.’’.
PART B—PERFORMANCE-BASED ORGANIZATION
FOR THE DELIVERY OF FEDERAL STUDENT
FINANCIAL ASSISTANCE.
SEC. 111. PERFORMANCE-BASED ORGANIZATION FOR THE
DELIVERY OF FEDERAL STUDENT FINANCIAL
ASSISTANCE.
Title I (as amended by part A of this title) is amend-
ed—
(1) by striking the heading of such title and in-
serting the following:
‘‘TITLE I—GENERAL AND
ADMINISTRATIVE PROVISIONS
‘‘PART A—GENERAL PROVISIONS’’;
and
(2) by adding at the end the following new part:
‘‘PART B—ADMINISTRATIVE PROVISIONS FOR
DELIVERY OF STUDENT FINANCIAL ASSISTANCE
‘‘SEC. 131. PERFORMANCE-BASED ORGANIZATION FOR THE
DELIVERY OF FEDERAL STUDENT FINANCIAL
ASSISTANCE.
‘‘(a) ESTABLISHMENT AND PURPOSE.—
‘‘(1) ESTABLISHMENT.—There is established in
the Department a Performance-Based Organization
(hereafter referred to as the ‘PBO’) which shall be a
discrete management unit responsible for managing
the information systems supporting the programs au-
thorized under title IV of this Act, as specified in sub-
section (b).
‘‘(2) PURPOSES.—The purposes of the PBO
are—
‘‘(A) to improve the level of service to stu-
dents and participants in the programs;
‘‘(B) to reduce the costs of administering the
Federal student financial assistance programs
authorized under title IV;
‘‘(C) to increase the accountability of the of-
ficials responsible for administering the oper-
ational aspects of these programs;
‘‘(D) to provide greater flexibility in the
management of the operational functions of the
Federal student financial assistance programs;
‘‘(E) to integrate the information systems
supporting the Federal student financial assist-
ance programs; and
‘‘(F) to implement an open, common, inte-
grated system for the delivery of student finan-
cial assistance under title IV.
‘‘(b) AUTHORITY.—
‘‘(1) AUTHORITY
OF
SECRETARY.— Notwith-
standing any other provision of this Act, the Sec-
retary shall maintain responsibility for the develop-
ment and promulgation of policy relating to the pro-
grams of student financial assistance under title IV.
In the exercise of its functions, the PBO shall be sub-
ject to the direction of the Secretary. The Secretary
shall—
‘‘(A) request the advice of, and work in co-
operation with, the Chief Operating Officer in
developing regulations, policies, administrative
guidance, or procedures affecting the information
systems administered by the PBO, and other
functions performed by the PBO;
‘‘(B) request cost estimates from the Chief
Operating Officer for system changes required by
specific policies proposed by the Secretary;
‘‘(C) consider the Chief Operating Officer’s
comments and estimates prior to finalizing such
regulations, policies, administrative guidance, or
procedures;
‘‘(D) assist the Chief Operating Officer in
identifying goals for the administration and
modernization of the delivery system for student
financial assistance under title IV; and
‘‘(E) if necessary, arrange for additional
funding to ensure that the PBO can efficiently
perform its functions.
‘‘(2) FUNCTIONS.—The PBO shall carry out the
following functions:
‘‘(A) All aspects of contracting for the data
and information systems supporting student fi-
nancial assistance under title IV, including the
operational administration of the William D.
Ford Federal Direct Loan Program, but not in-
cluding the development of policy relating to
such programs.
‘‘(B) The administrative, accounting, and
financial management functions of the delivery
system for Federal student assistance, includ-
ing—
‘‘(D) Annual development of goals, in con-
sultation with the Secretary, for the administra-
tion and modernization of the system for deliv-
ery of student financial assistance under title IV.
‘‘(E) Other functions proposed by the Sec-
retary, and agreed to by the Chief Operating Of-
ficer as are not inconsistent with the functions of
the PBO.
‘‘(3) INDEPENDENCE.—In carrying out its func-
tions, the PBO shall exercise independent control of
its budget allocations and expenditures, personnel de-
cisions and processes, procurements, and other admin-
istrative and management functions.
‘‘(4) REVIEW OF PBO.—The PBO shall be subject
to the usual and customary Federal audit procedures,
and be subject to review by the Inspector General of
the Department.
‘‘(c) AUTHORIZATION OF APPROPRIATIONS.—For the
purpose of funding the administrative costs incurred by the
PBO in administering systems supporting programs under
this part, there are authorized to be appropriated such sums
as may be necessary for fiscal year 1999 and each of the
4 succeeding fiscal years, except that funds authorized
under section 458 shall be made available to the PBO by
the Secretary for administrative costs authorized to be fund-
ed under that section.
‘‘(d) ORGANIZATIONAL REPORTS.—
‘‘(1) PERFORMANCE PLAN.—Within 6 months of
the hiring of the Chief Operating Officer, and every
12 months thereafter, the Secretary and the Chief Op-
erating Officer of the Department shall develop a per-
formance plan for the PBO that establishes measur-
able goals and objectives for the organization. In de-
veloping this performance plan, the Secretary and the
Chief Operating Officer shall consult with the Com-
mittee on Education and the Workforce of the House
of Representatives, the Committee on Labor and
Human Resources of the Senate, and the Advisory
Committee on Student Financial Assistance. The per-
formance plan shall include a concise statement of
goals for a modernized system for the delivery of stu-
dent financial assistance under title IV and identify
action steps necessary to achieve such goals. Such
goals shall be used in evaluating the performance of
the Chief Operating Officer and the PBO pursuant to
paragraph (2).
‘‘(2) ANNUAL
ACCOUNTABILITY
REPORT.—The
Chief Operating Officer shall prepare and submit an
annual accountability report to the Secretary and the
Committee on Education and the Workforce of the
House of Representatives and the Committee on Labor
and Human Resources of the Senate. The accountabil-
ity report shall include—
‘‘(A) an independent financial audit of the
expenditures of both the PBO and programs ad-
ministered by it;
‘‘(B) financial and performance require-
ments applicable to the PBO under the Chief Fi-
nancial Officer Act of 1990 and the Government
Performance and Results Act of 1993;
‘‘(C) the results achieved by the PBO during
the year relative to the goals established in the
organization’s performance plan;
‘‘(D) the results of the evaluations of per-
formance of the Chief Operating Officer and sen-
ior managers under subsections (e)(2) and (f)(2),
including the amounts of bonus compensation
awarded to these individuals;
‘‘(E) a discussion of the effectiveness of co-
ordination between the PBO and the Secretary;
‘‘(F) recommendations for legislative and
regulatory changes to improve service to students
and their families, and to improve program effi-
ciency and integrity; and
‘‘(G) other such information as the Director
of the Office of Management and Budget shall
prescribe for performance based organizations.
‘‘(e) CHIEF OPERATING OFFICER.—
‘‘(1) IN GENERAL.—The management of the PBO
shall be vested in a Chief Operating Officer who shall
be appointed by the Secretary to a 5-year term and
compensated without regard to chapters 33, 51, and
53 of title 5, United States Code. The Secretary shall
appoint the Chief Operating Officer within 6 months
of the date of enactment of this part. The Secretary
shall consult with the Chairmen of the Committee on
Education and the Workforce of the House of Rep-
resentatives and the Committee on Labor and Human
Resources of the Senate prior to making an appoint-
ment. The appointment shall be made on the basis
of demonstrated management ability and expertise in
information technology, including extensive experience
in the financial services industry, and without regard
to political affiliation or activity. The Secretary may
reappoint the Chief Operating Officer to subsequent
terms so long as the performance of the Chief Operat-
ing Officer, as set forth in the performance agreement,
is satisfactory or better. The Chief Operating Officer
may be removed by—
‘‘(A) the President; or
‘‘(B) the Secretary, for misconduct or fail-
ure to meet performance goals set forth in the
performance agreement in paragraph (2).
The President or Secretary shall communicate the
reasons for any such removal to the appropriate com-
mittees of Congress.
‘‘(2) PERFORMANCE
AGREEMENT.—The Sec-
retary and the Chief Operating Officer shall enter
into an annual performance agreement which shall
set forth measurable organization and individual
goals for the Chief Operating Officer in key oper-
ational areas. The agreement shall be subject to re-
view and renegotiation at the end of each term. The
final agreement shall be transmitted to the Committee
on Education and the Workforce of the House of Rep-
resentatives and the Committee on Labor and Human
Resources of the Senate, and made publicly available.
‘‘(3) COMPENSATION.—The Chief Operating Offi-
cer is authorized to be paid at an annual rate of
basic pay not to exceed the maximum rate of basic
pay for the Senior Executive Service under section
5382 of title 5, United States Code, including any ap-
plicable locality-based comparability payment that
may be authorized under section 5304(h)(2)(B) of
such title 5. In addition, the Chief Operating Officer
may receive a bonus in an amount up to, but not in
excess of, 50 percent of such annual rate of basic pay,
based upon the Secretary’s evaluation of the Chief Op-
erating Officer’s performance in relation to the per-
formance goals set forth in the performance agreement
described in paragraph (2). Payment of a bonus
under this paragraph may be made to the Chief Oper-
ating Officer only to the extent that such payment
does not cause the Chief Operating Officer’s total ag-
gregate compensation in a calendar year to equal or
exceed the amount of the President’s salary under sec-
tion 102 of title 3, United States Code.
‘‘(f) SENIOR MANAGEMENT.—
‘‘(1) IN GENERAL.—The Chief Operating Officer
may appoint up to 5 senior managers as may be nec-
essary without regard to the provisions of title 5,
United States Code, governing appointments in the
competitive service, and who may be paid without re-
gard to the provisions of chapter 51 and subchapter
III of chapter 53 of such title relating to classification
and General Schedule pay rates.
‘‘(2) PERFORMANCE
AGREEMENT.—The Chief
Operating Officer shall enter into an annual perform-
ance agreement with each senior manager appointed
under this subsection which shall set forth measurable
organization and individual goals in key operational
areas. The agreement shall be subject to review and
renegotiation at the end of each term.
‘‘(3) COMPENSATION.—The Chief Operating Offi-
cer is authorized to pay senior managers at an an-
nual rate of basic pay not to exceed 75 percent of the
maximum rate of basic pay for the Senior Executive
Service under section 5382 of title 5, United States
Code, including any applicable locality-based com-
parability payment that may be authorized under
section 5304(h)(2)(C) of such title 5. In addition, a
senior manager may receive a bonus in an amount
up to, but not in excess of, 50 percent of such annual
rate of basic pay, based upon the Chief Operating Of-
ficer’s evaluation of the manager’s performance in re-
lation to the performance goals set forth in the per-
formance agreement described in paragraph (2).
‘‘(g) PERSONNEL FLEXIBILITY.—
‘‘(1) PERSONNEL CEILINGS.—The PBO shall not
be subject to any ceiling relating to the number or
grade of employees.
‘‘(2) ADMINISTRATIVE FLEXIBILITY.—The Chief
Operating Officer shall work with the Office of Per-
sonnel Management to develop and implement person-
nel flexibilities in staffing, classification, and pay
that meet the needs of the PBO, subject to compliance
with title 5, United States Code.
‘‘(h) ESTABLISHMENT OF A FAIR AND EQUITABLE
SYSTEM
FOR MEASURING STAFF PERFORMANCE.—The
PBO shall establish an annual performance management
system, subject to compliance with title 5, United States
Code and consistent with applicable provisions of law and
regulations, which strengthens the organizational effective-
ness of the PBO by providing for establishing goals or objec-
tives for individual, group, or organizational performance
(or any combination thereof), consistent with the perform-
ance plan of the PBO and its performance planning proce-
dures, including those established under the Government
Performance and Results Act of 1993, and communicating
such goals or objectives to employees.
‘‘(i) PROCUREMENT FLEXIBILITY.—
‘‘(1) IN GENERAL.—Except as provided in this
subsection, the PBO shall abide by all applicable Fed-
eral procurement laws and regulations when procur-
ing property and services. The PBO shall—
‘‘(A) enter into contracts for information
systems supporting the programs authorized
under title IV to carry out the functions set forth
in subsection (b)(2); and
‘‘(B) obtain the services of experts and con-
sultants without regard to section 3109 of title 5,
United States Code and set pay in accordance
with such section.
‘‘(2) PERFORMANCE
BASED
SERVICING
CON-
TRACTS.—The Chief Operating Officer shall, to the ex-
tent practicable, maximize the use of performance
based servicing contracts, consistent with guidelines
for such contracts published by the Office of Federal
Procurement Policy, to achieve cost savings and im-
prove service.
‘‘(3) FEE
FOR
SERVICE
ARRANGEMENTS.—The
Chief Operating Officer shall, to the extent practicable
and consistent with the purpose of the PBO, utilize
services available outside of the Federal Government
in the delivery of Federal student financial assistance.
To achieve this purpose, the PBO is authorized to pay
fees to an organization that are equivalent to those
paid by other entities for such services, if the Chief
Operating Officer determines that such organization
currently provides an information system or service
that meets the requirements of the PBO.
‘‘(j) FOCUS GROUPS.—To facilitate information shar-
ing and customer involvement, the Chief Operating Officer
may establish focus groups composed of students, institu-
tions, and other participants in the programs authorized
by title IV to provide advice on student aid delivery mat-
ters.
‘‘SEC. 132. ADMINISTRATIVE SIMPLIFICATION OF STUDENT
AID DELIVERY.
‘‘(a) IN GENERAL.—The Secretary, and the Chief Op-
erating Officer shall improve the efficiency and effectiveness
of the student aid delivery system by encouraging and par-
ticipating in the establishment of voluntary consensus
standards and requirements for the electronic transmission
of information necessary for the administration of pro-
grams under title IV.
‘‘(b) ADOPTION OF VOLUNTARY CONSENSUS STAND-
ARDS.—Except with respect to the common financial re-
porting form under section 483(a), the Secretary shall
adopt voluntary consensus standards for transactions re-
quired under title IV, and common data elements for such
transactions, to enable information to be exchanged elec-
tronically between systems administered by the Department
and among participants in the Federal student aid delivery
system.
‘‘(c) REQUIREMENTS FOR ADOPTION OF VOLUNTARY
CONSENSUS STANDARDS.—Any voluntary consensus stand-
ard adopted under this section shall—
‘‘(1) be a standard that has been developed,
adopted, or modified by a standard setting organiza-
tion that is open to the participation of the various
entities engaged in the delivery of Federal student fi-
nancial assistance; and
‘‘(2) be consistent with the objective of reducing
the administrative costs of delivering student finan-
cial assistance under title IV.
‘‘(d) PARTICIPATION IN STANDARD SETTING ORGANI-
ZATIONS.—
‘‘(1) The Chief Operating Officer shall partici-
pate in the activities of standard setting organiza-
tions in carrying out the provisions of this section.
‘‘(2) The Chief Operating Officer shall encourage
higher education groups seeking to develop common
forms, standards, and procedures in support of the de-
livery of Federal student financial assistance to con-
duct these activities within a standard setting organi-
zation.
‘‘(3) The Chief Operating Officer may pay nec-
essary dues and fees associated with participating in
standard setting organizations pursuant to this sub-
section from funds available under subsection (j).
‘‘(e) PROCEDURES FOR ADOPTION AND IMPLEMENTA-
TION OF VOLUNTARY CONSENSUS STANDARDS.—In adopt-
ing voluntary consensus standards and implementation
timetables under this section, including modifications of ex-
isting standards, the Secretary shall follow the procedures
for negotiated rulemaking in section 492.
‘‘(f) INITIAL VOLUNTARY CONSENSUS STANDARDS TO
BE ADOPTED.—Through coordinated participation between
the Chief Operating Officer and standard setting organiza-
tions, the initial standards adopted by the Secretary shall
include the following:
‘‘(1) ELECTRONIC PERSONAL IDENTIFIER NUM-
BER.—The Secretary shall adopt standards for a sin-
gle electronic personal identifier number for students
receiving assistance under title IV.
‘‘(2) ELECTRONIC
SIGNATURE.—The Secretary,
in coordination with the Secretary of Commerce, shall
adopt standards specifying procedures for the elec-
tronic transmission and authentication of signatures
with respect to transactions requiring a signature
under title IV.
‘‘(3) SINGLE INSTITUTIONAL IDENTIFIER.—The
Secretary shall adopt standards for a single identifier
for eligible institutions under title IV.
‘‘(g) USE OF CLEARINGHOUSES.—Nothing in this sec-
tion shall restrict the ability of participating institutions
and lenders from using a clearinghouse to comply with the
standards for the exchange of information established under
this section.
‘‘(h) APPLICABILITY TO CURRENT SYSTEMS.—
‘‘(1) GENERAL
RULE.—Except as provided in
paragraph (2) and (3), this section shall apply to all
Department of Education information systems sup-
porting the delivery of programs under title IV no
later than 12 months from the date of enactment of
this part.
‘‘(2) NATIONAL STUDENT LOAN DATA SYSTEM.—
This section shall apply to sections 485B(e) and (f)
no later than 18 months after the date of enactment
of this part.
‘‘(3) INTEGRATED
POSTSECONDARY
EDUCATION
DATA
SYSTEM.—The Secretary shall coordinate the
adoption of voluntary consensus standards under this
section to ensure that standards are compatible with
the integrated postsecondary education data system
(IPEDS).
‘‘(i) DATA SECURITY.—Any entity that maintains or
transmits information under a transaction covered by this
section shall maintain reasonable and appropriate admin-
istrative, technical, and physical safeguards—
‘‘(1) to ensure the integrity and confidentiality
of the information; and
‘‘(2) to protect against any reasonably antici-
pated security threats, or unauthorized uses or disclo-
sures of the information.
‘‘(j) AUTHORIZATION OF APPROPRIATIONS.—There are
authorized to be appropriated in any fiscal year or made
available from funds appropriated to carry out activities
in this section in any fiscal year such sums as may be nec-
essary to carry out the provisions of this section, except that
if no funds are appropriated pursuant to this subsection,
the Secretary shall make funds available to carry out this
section from amounts appropriated for the operations and
expenses of the Department of Education.
‘‘(k) DEFINITIONS.—For purposes of this section:
‘‘(1) The term ‘voluntary consensus standard’
means a standard developed or used by a standard
setting organization accredited by the American Na-
tional Standards Institute.
‘‘(2) The term ‘standard setting organization’
means a standard setting organization accredited by
the American National Standards Institute that de-
velops standards for information transactions, data
elements, or any other standard that is necessary to,
or will facilitate, the implementation of this section.
‘‘(3) For purposes of this section, the term ‘clear-
inghouse’ means a public or private entity that proc-
esses or facilitates the processing of nonstandard data
elements into data elements conforming to standards
adopted under this section.’’.
TITLE II—POSTSECONDARY EDU-
CATION IMPROVEMENT PRO-
GRAMS
SEC. 201. URBAN COMMUNITY SERVICE.
(a) DESIGNATION OF TITLE.—The Higher Education
Act of 1965 is amended by inserting at the end of title I
(20 U.S.C. 1001 et seq.) the following:
‘‘TITLE 
II—POSTSECONDARY
EDUCATION 
IMPROVEMENT
PROGRAMS’’.
(b) REDESIGNATION AND TRANSFER OF URBAN COM-
MUNITY SERVICE PROGRAM.—
(1) INTERNAL CROSS-REFERENCES.—Part A of
title XI is amended—
(A) in section 1102(b), by striking ‘‘section
1104’’ and inserting ‘‘section 204’’;
(B) in section 1104(12), by striking ‘‘section
1103(a)(2)(B)’’ 
and 
inserting 
‘‘section
203(a)(2)(B)’’; and
(C) in section 1108(1), by striking ‘‘section
1103’’ and inserting ‘‘section 203’’.
(2) REDESIGNATION.—Part A of title XI (20
U.S.C. 1136 et seq.) is redesignated as part A of title
II, and sections 1101 through 1109 are redesignated
as sections 201 through 209.
(3) TRANSFER.—Part A of title II (including
sections 201 through 209), as redesignated by para-
graph (2), is transferred to immediately follow the
heading inserted by subsection (a) of this section.
(4) REPEAL.—Part B of title XI (20 U.S.C.
1137 et seq.) and the heading of title XI are repealed.
(c) ALLOWABLE ACTIVITIES.—Section 204 (as redesig-
nated by subsection (b)(2)) is amended by adding at the
end the following new paragraph:
‘‘(14) Improving access to technology in local
communities.’’.
(d) DESIGNATION OF URBAN GRANT INSTITUTIONS.—
Section 207 (as redesignated by subsection (b)(2)) is amend-
ed by adding at the end the following new sentence: ‘‘The
information developed as a result of this section shall be
made available to Urban Grant Institutions and to any
other interested institution of higher education by any ap-
propriate means, including the Internet.’’.
(e) AUTHORIZATION
OF APPROPRIATIONS.—Section
209 (as redesignated by subsection (b)(2)) is amended by
striking ‘‘1993’’ and inserting ‘‘1999’’.
SEC. 202. FUND FOR THE IMPROVEMENT OF POSTSECOND-
ARY EDUCATION.
(a) REDESIGNATION AND TRANSFER OF PROGRAMS.—
(1) REDESIGNATION.—Part A of title X (20
U.S.C. 1135 et seq.) is redesignated as part B of title
II (as amended by section 201) and—
(A) sections 1001 through 1003 (20 U.S.C.
1135 et seq.) are redesignated as sections 221
through 223; and
(B) section 1011 (20 U.S.C. 1135a–11) is
redesignated as section 224.
(2) TRANSFER.—Part B of title II (including
sections 221 through 224), as redesignated by para-
graph (1), is transferred to follow part A of title II.
(3) REPEAL.—Section 1004 and parts B, C, and
D of title X (20 U.S.C. 1135a–3, 1135e et seq.) and
the heading of title X are repealed.
(b) ENDOWMENT GRANTS.—Section 221(a) (as redesig-
nated by subsection (a)(2)) is amended—
(1) by striking ‘‘and’’ at the end of paragraph
(7);
(2) by striking the period at the end of para-
graph (8) and inserting ‘‘; and’’; and
(3) by adding at the end the following new para-
graph:
‘‘(9) awarding an endowment grant, on a com-
petitive basis, to a national organization to enable
such organization to support the establishment or on-
going work of area program centers that foster the de-
velopment of local affiliated chapters in high-poverty
areas to improve graduation rates and postsecondary
attendance through the provision of academic support
services and scholarship assistance for the pursuit of
postsecondary education.’’.
(c) SPECIAL PROJECTS.—Section 224 (as redesignated
by subsection (a)(2)(B)) is amended—
(1) by striking paragraphs (1), (2), and (3) of
subsection (c) and inserting the following:
‘‘(1) institutional restructuring to improve
learning and promote productivity, efficiency, quality
improvement, and cost and price control;
‘‘(2) articulation agreements between two-year
and four-year institutions;
‘‘(3) evaluation and dissemination of model pro-
grams; and
‘‘(4) international cooperation and student ex-
change among postsecondary educational institu-
tions.’’; and
(2) by striking subsection (d).
(d) AUTHORIZATION OF APPROPRIATIONS.—
(1) COMBINATION OF SUBPARTS.—Part B of title
II (as redesignated by subsection (a)) is amended by
striking the subpart designations and headings.
(2) AUTHORIZATION.—Part B of title II (as so
redesignated) is amended by adding at the end the
following:
‘‘SEC. 225. AUTHORIZATION OF APPROPRIATIONS.
‘‘There are authorized to be appropriated to carry out
this part $30,000,000 for fiscal year 1999 and such sums
as may be necessary for each of the 4 succeeding fiscal
years.’’.
SEC. 203. GRANTS TO STATES FOR WORKPLACE AND COM-
MUNITY TRANSITION TRAINING FOR INCAR-
CERATED YOUTH OFFENDERS.
(a) REDESIGNATION AND TRANSFER OF PROGRAMS.—
(1) REDESIGNATION.—Part E of title X (20
U.S.C. 1135g) is redesignated as part C of title II
and section 1091 is redesignated as section 231.
(2) TRANSFER.—Part C of title II (including
section 231), as redesignated by paragraph (1), is
transferred to follow part B of title II (as amended
by section 202 of this Act).
(b) REAUTHORIZATION.—Section 231(j) (as so redesig-
nated) is amended to read as follows:
‘‘(j) AUTHORIZATION OF APPROPRIATIONS.—There are
authorized to be appropriated to carry out this section
$5,000,000 for fiscal year 1999 and such sums as may be
necessary for each of the four succeeding fiscal years.’’.
SEC. 204. ADVANCED PLACEMENT FEE PAYMENT PROGRAM.
(a) REDESIGNATION AND TRANSFER OF PROGRAMS.—
(1) REDESIGNATION.—Part G of title XV of the
Higher Education Amendments of 1992 (20 U.S.C.
1170) is redesignated as part D of title II and section
1545 of such Act is redesignated as section 241.
(2) TRANSFER.—Part D of title II (including
section 241), as redesignated by paragraph (1), is
transferred to follow part C of title II (as amended
by section 203 of this Act).
(b) REAUTHORIZATION.—Section 241(f) (as so redesig-
nated) is amended by striking ‘‘1993’’ and inserting
‘‘1999’’.
SEC. 205. TEACHER QUALITY ENHANCEMENT GRANTS.
Title II is further amended by adding at the end the
following new part:
‘‘PART E—TEACHER QUALITY ENHANCEMENT
GRANTS
‘‘SEC. 271. PURPOSE.
‘‘The purposes of this part are—
‘‘(1) to provide competitive grants to States for
assistance in strengthening the quality of the teaching
force by improving the academic knowledge of teach-
ers in the subject areas in which they teach;
‘‘(2) to hold institutions of higher education with
teacher preparation programs accountable for prepar-
ing teachers who are highly competent in the aca-
demic content areas in which they plan to teach, in-
cluding training in the effective uses of technologies in
the classroom; and
‘‘(3) to recruit high quality individuals, includ-
ing individuals from other occupation, into the teach-
ing force.
‘‘SEC. 272. ELIGIBILITY.
‘‘(a) APPLICATIONS.—To be eligible to receive a grant
under this part, a Governor shall, at the time of the initial
grant application, submit an application to the Secretary
that meets the requirements of this part.
‘‘(b) CONTENTS OF APPLICATION.—Such application
shall include a description of how the State intends to use
funds provided under this part and such other information
and assurances as the Secretary may require.
‘‘(c) STATE AUTHORITY.—Nothing under this part
shall be construed to negate or supersede the legal authority,
under State law of any State agency, State entity, or State
public official over programs that are under the jurisdiction
of the agency, entity, or official.
‘‘SEC. 273. USE OF FUNDS.
‘‘The Governor of a State that receives a grant under
this subpart shall—
‘‘(1) use a portion of such grant to carry out one
or more of the following activities:
‘‘(A) reforming State teacher certification
requirements to ensure that current and future
teachers possess the necessary academic content
knowledge in the subject areas in which they are
certified and assigned to teach;
‘‘(B) providing prospective teachers alter-
natives to schools of education through programs
at colleges of arts and sciences or at nonprofit
organizations;
‘‘(C) funding programs which establish or
expand alternative routes to State certification
for highly qualified individuals from other occu-
pations;
‘‘(D) developing and implementing effective
mechanisms to expeditiously remove incompetent
or unqualified teachers; and
‘‘(E) implementing reforms which hold in-
stitutions of higher education with teacher prep-
aration programs accountable for preparing
teachers who are highly competent in the aca-
demic content areas in which they plan to teach;
and
‘‘(2) use a portion of such grant to establish a
lighthouse partnership consisting of the Governor, an
exemplary institution of higher education which pre-
pares teachers, and a local educational agency and
which may also consist of other institutions of higher
education, public charter schools, and public and pri-
vate nonprofit elementary and secondary schools, for
the purpose of carrying out one or more of the follow-
ing activities:
‘‘(A) creating opportunities for enhance and
ongoing professional development which im-
proves the academic content knowledge of teach-
ers in the subject areas in which they are cer-
tified to teach or in which they are working to-
ward certification to teach;
‘‘(B) providing programs designed to imple-
ment the successful integration of technology into
teaching and learning;
‘‘(C) implementing reforms which hold in-
stitutions of higher education with teacher prep-
aration programs accountable for preparing
teachers who are highly competent in the aca-
demic content areas in which they plan to teach;
‘‘(D) reforming State certification require-
ments to ensure that current and future teachers
possess the necessary academic content knowledge
in the subject areas in which they are certified
to teach; and
‘‘(E) recruiting minorities, and others, into
the teaching and counseling profession, including
education paraprofessionals, former military
personnel, and mid-career professionals, by pro-
viding financial and other assistance related to
instruction, induction, mentoring and support
services.
‘‘SEC. 274. COMPETITIVE AWARDS.
‘‘(a) COMPETITIVE BASIS
FOR AWARDS.—The Sec-
retary shall make annual grants under this part on a com-
petitive basis.
‘‘(b) PEER REVIEW PANEL.—The Secretary shall pro-
vide the applications submitted by Governors under section
272 to a peer review panel for evaluation. With respect to
each application, the peer review panel shall initially rec-
ommend the application for funding or for disapproval.
‘‘(c) PRIORITY.—In recommending applications to the
Secretary, the panel shall give priority to applications from
States with proposals which promise initiatives to reform
State teacher certification requirements which are designed
to ensure that current and future teachers possess the nec-
essary academic content knowledge in the subject areas in
which they are certified to teach or which include innova-
tive reforms to hold institutions of higher education with
teacher preparation programs accountable for preparing
teachers who are highly competent in the academic content
areas in which they plan to teach.
‘‘(d) RANKING
OF APPLICATIONS.—With respect to
each application recommended for funding, the panel shall
assign the application a rank, relative to other rec-
ommended applications, based on the priority described in
subsection (c), the extent to which the application furthers
the purposes of this part, and the overall quality of the ap-
plication, based on the quality and scope of State-supported
strategies to improve quality of teacher preparation and
their teaching force.
‘‘(e) RECOMMENDATION OF AMOUNT.—With respect to
each application recommended for funding, the panel shall
make a recommendation to the Secretary with respect to
the amount of the grant that should be made.
‘‘(f) SECRETARIAL SELECTION.—
‘‘(1) IN GENERAL.—Subject to paragraph (2), the
Secretary shall determine, based on the peer review
panel’s recommendations, which applications shall re-
ceive funding and the amounts of such grants. In de-
termining grant amounts, the Secretary shall take
into account the total amount of funds available for
all grants under this part and the types of activities
proposed to be carried out.
‘‘(2) EFFECT OF RANKING BY PANEL.—In mak-
ing grants under this part, the Secretary shall select
applications according to the ranking of the applica-
tions by the peer review panel, except in cases where
the Secretary determines, for good cause, that a vari-
ation from that order is appropriate.
‘‘(g) MATCHING REQUIREMENT.—Each State receiving
funds under this part shall provide, from non-Federal
sources, an amount equal to 1/2 of the amount of the grant
in cash or in kind to carry out the activities supported by
the grant.
‘‘(h) LIMITATION ON ADMINISTRATIVE EXPENSES.—A
State that receives a grant under this part may use not
more than 2 percent of the grant funds for administrative
costs.
‘‘(i) REPORTING.—
‘‘(1) IN GENERAL.—A Governor that receives a
grant under this section shall submit an accountabil-
ity report to the Secretary and the Committee on
Education and the Workforce of the House of Rep-
resentatives and the Committee on Labor and Human
Resources of the Senate. Such reports shall include a
description of the degree to which the State, in using
these funds, has made substantial progress in meeting
the following goals:
‘‘(A) Raising the State academic standards
required to enter the teaching profession.
‘‘(B) Increasing the percentage of classes
taught in core academic subject areas by teachers
fully certified by the State to teach in those sub-
ject areas.
‘‘(C) Decreasing shortages of qualified
teachers in poor urban and rural areas.
‘‘(D) Increasing opportunities for enhanced
and ongoing professional development which im-
proves the academic content knowledge of teach-
ers in the subject areas in which they are cer-
tified to teach or in which they are working to-
ward certification to teach.
‘‘(2) ACCOUNTABILITY OF STATE INSTITUTION OF
HIGHER EDUCATION.—Prior to receiving funds under
this part, a State shall demonstrate that at least 80
percent of graduates of each of the exemplary institu-
tions of higher education in any partnership de-
scribed in section 273(a)(2) who enter the field of
teaching pass all applicable State qualification assess-
ments of new teachers, which must include assess-
ments of each prospective teacher’s subject matter
knowledge in the content area or areas in which the
teacher provides instruction. Prior to each subsequent
receipt of funds under this part, such State shall dem-
onstrate that 70 percent of the graduates of each insti-
tution of higher education in the State have met such
goal and continue to progress to exceed such goal.
Such assessment shall be at least as rigorous as those
in place on the date of enactment of this Act and
shall have qualifying scores no lower than those in
place on date of enactment of this Act.
‘‘(3) PROVISION TO PEER REVIEW PANEL.—The
Secretary shall provide the reports submitted under
paragraph (1) to the peer review panel convened
under subsection (b). The panel shall use such ac-
countability report in recommending applications for
subsequent funding under this section.
‘‘(j) TEACHERS QUALIFICATIONS PROVIDED TO PAR-
ENT UPON REQUEST.—Any local educational agency that
participates as an eligible applicant or partner under this
part shall make available, upon request and in an under-
standable and uniform format, to any parent of a student
attending any school in the local educational agency, infor-
mation regarding the qualifications of the students class-
room teacher, both generally and with regard to the subject
matter in which the teacher provides instruction.
‘‘SEC. 275. LIMITATIONS.
‘‘(a) FEDERAL CONTROL PROHIBITED.—Nothing in
this part shall be construed to permit, allow, encourage, or
authorize any Federal control over any aspect of any pri-
vate, religious, or home school, whether or not a home school
is treated as a private school or home school under State
law. This section shall not be construed to bar private, reli-
gious, or home schools from participation in programs or
services under this part.
‘‘(b) NO CHANGE IN STATE CONTROL ENCOURAGED OR
REQUIRED.—Nothing in this part shall be construed to en-
courage or require any change in a State’s treatment of any
private, religious, or home school, whether or not a home
school is treated as a private school or home school under
State law.
‘‘(c) NATIONAL SYSTEM OF TEACHER CERTIFICATION
PROHIBITED.—Nothing in this part shall be construed to
permit, allow, encourage, or authorize any national system
of teacher certification.
‘‘SEC. 276. AUTHORIZATION OF APPROPRIATIONS.
‘‘(a) AUTHORIZATION.—There are authorized to be ap-
propriated to carry out this part, $18,500,000 for fiscal
years 1999 and such sums as may be necessary for each
of the 4 succeeding fiscal years.
‘‘(b) TRANSITION.—Notwithstanding any other provi-
sion of law, the Secretary may use funds appropriated
under subsection (a) to complete awards under the original
grant period for projects that were funded under subpart
2 of part E of title V of this Act, as in effect prior to enact-
ment of the Higher Education Amendments of 1998.’’.
SEC. 206. ADDITIONAL REPEAL.
Title VIII (20 U.S.C. 1133 et seq.), relating to coopera-
tive education, is repealed.
TITLE III—INSTITUTIONAL AID
SEC. 301. STRENGTHENING INSTITUTIONS.
(a) PROGRAM PURPOSE; USE OF FUNDS.—Section 311
(20 U.S.C. 1057) is amended—
(1) in subsection (b)(2), by striking ‘‘or’’ at the
end of subparagraph (A) and inserting ‘‘and’’;
(2) by amending paragraph (3) of subsection (b)
to read as follows:
‘‘(3) Special consideration shall be given to applica-
tions which propose, pursuant to the institution’s plan, the
use of funds for integrating computer technology into insti-
tutional facilities to create smart buildings.’’; and
(3) by adding at the end the following new sub-
sections:
‘‘(c) AUTHORIZED
ACTIVITIES.—Grants awarded
under this section shall be used for one or more of the follow-
ing activities:
‘‘(1) purchase, rental, or lease of scientific or lab-
oratory equipment for educational purposes, includ-
ing instructional and research purposes;
‘‘(2) construction, maintenance, renovation, and
improvement in classrooms, libraries, laboratories,
and other instructional facilities;
‘‘(3) support of faculty exchanges, faculty devel-
opment, and faculty fellowships to assist in attaining
advanced degrees in their field of instruction;
‘‘(4) purchase of library books, periodicals, and
other educational materials, including telecommuni-
cations program material;
‘‘(5) tutoring, counseling, and student service
programs designed to improve academic success;
‘‘(6) funds management, administrative manage-
ment, and acquisition of equipment for use in
strengthening funds management;
‘‘(7) joint use of facilities, such as laboratories
and libraries;
‘‘(8) establishing or improving a development of-
fice to strengthen or improve contributions from
alumni and the private sector;
‘‘(9) establishing or improving an endowment
fund;
‘‘(10) creating or improving facilities for Inter-
net or other distance learning academic instruction
capabilities, including purchase or rental of tele-
communications technology equipment or services;
and
‘‘(11) other activities proposed in the application
submitted pursuant to subsection (c) that—
‘‘(A) contribute to carrying out the purposes
of this section; and
‘‘(B) are approved by the Secretary as part
of the review and acceptance of such application.
‘‘(d) ENDOWMENT FUND LIMITATIONS.—
‘‘(1) PORTION OF GRANT.—An institution may
not use more than 20 percent of its grant under this
part for any fiscal year for establishing or improving
an endowment fund.
‘‘(2) MATCHING REQUIRED.—An institution that
uses any portion of its grant under this part for any
fiscal year for establishing or improving an endow-
ment fund shall provide an equal or greater amount
for such purposes from non-Federal funds.
‘‘(3) REGULATIONS.—The Secretary shall publish
rules and regulations specifically governing the use of
funds for establishing or improving an endowment
fund.’’.
(b) ENDOWMENT FUND DEFINITION.—Section 312 (20
U.S.C. 1058) is amended by adding at the end the following
new subsection:
‘‘(g) ENDOWMENT FUND.—For the purpose of this
part, the term ‘endowment fund’ means a fund that—
‘‘(1) is established by State law, by an institu-
tion of higher education, or by a foundation that is
exempt from Federal income taxation;
‘‘(2) is maintained for the purpose of generating
income for the support of the institution; and
‘‘(3) does not include real estate.’’.
(c) DURATION OF GRANT.—Section 313 (20 U.S.C.
1059) is amended—
(1) in subsection (a), by inserting before the pe-
riod at the end the following: ‘‘, except that no insti-
tution shall be eligible to secure a subsequent 5-year
grant award under this part until two calendar years
have elapsed since the expiration of its most recent 5-
year grant award’’; and
(2) in subsection (b), by inserting ‘‘subsection (c)
and a grant under’’ before ‘‘section 354(a)(1)’’.
(d) APPLICATIONS.—Title III is amended by striking
section 314 (20 U.S.C. 1059a) and inserting the following:
‘‘SEC. 314. APPLICATIONS.
‘‘Each eligible institution desiring to receive assistance
under this part shall submit an application in accordance
with the requirements of section 351.’’.
(e) PROGRAM FOR TRIBALLY CONTROLLED COLLEGES
AND UNIVERSITIES.—Section 316 (20 U.S.C. 1059c) is
amended to read as follows:
‘‘SEC. 316. AMERICAN INDIAN TRIBALLY CONTROLLED COL-
LEGES AND UNIVERSITIES.
‘‘(a) PROGRAM AUTHORIZED.—The Secretary shall
provide grants and related assistance to American Indian
Tribal Colleges and Universities to enable such institutions
to improve and expand their capacity to serve Indian stu-
dents.
‘‘(b) DEFINITIONS.—For the purposes of this section:
‘‘(1) The term ‘Indian’ has the same meaning as
in section 2 of the Tribally Controlled Community
Colleges Act of 1978.
‘‘(2) The term ‘Indian tribe’ has the same mean-
ing as in section 2 of such Act.
‘‘(3) The term ‘Tribal College or University’ has
the meaning given the term ‘tribally controlled college
or university’ in section 2 of such Act, and includes
an institution listed in the Equity in Educational
Land Grant Status Act of 1994.
‘‘(4) The term ‘institution of higher education’
means an institution of higher education as defined
by section 101(a)(1) of this Act, except that subpara-
graph (A)(ii) of such section shall not be applicable.
‘‘(c) AUTHORIZED
ACTIVITIES.—Grants awarded
under this section shall be used by Tribal Colleges or Uni-
versities to assist such institutions to plan, develop, under-
take, and carry out authorized activities. Such authorized
activities may include—
‘‘(1) purchase, rental, or lease of scientific or lab-
oratory equipment for educational purposes, includ-
ing instructional and research purposes;
‘‘(2) construction, maintenance, renovation, and
improvement in classrooms, libraries, laboratories,
and other instructional facilities, including purchase
or rental of telecommunications technology equipment
or services;
‘‘(3) support of faculty exchanges, faculty devel-
opment, and faculty fellowships to assist in attaining
advanced degrees in their field of instruction;
‘‘(4) academic instruction in disciplines in
which American Indians are underrepresented;
‘‘(5) purchase of library books, periodicals, and
other educational materials, including telecommuni-
cations program material;
‘‘(6) tutoring, counseling, and student service
programs designed to improve academic success;
‘‘(7) funds management, administrative manage-
ment, and acquisition of equipment for use in
strengthening funds management;
‘‘(8) joint use of facilities, such as laboratories
and libraries;
‘‘(9) establishing or improving a development of-
fice to strengthen or improve contributions from
alumni and the private sector;
‘‘(10) establishing or enhancing a program of
teacher education designed to qualify students to teach
in elementary or secondary schools, with a particular
emphasis on teaching American Indian children and
youth, that shall include, as part of such program,
preparation for teacher certification;
‘‘(11) establishing community outreach programs
which will encourage American Indian elementary
and secondary students to develop the academic skills
and the interest to pursue postsecondary education;
‘‘(12) establishing or improving an endowment
fund; and
‘‘(13) other activities proposed in the application
submitted pursuant to this subsection that—
‘‘(A) contribute to carrying out the purposes
of this section; and
‘‘(B) are approved by the Secretary as part
of the review and acceptance of such application.
‘‘(d) APPLICATION PROCESS.—
‘‘(1) INSTITUTIONAL ELIGIBILITY.—To be eligible
to receive assistance under this section, an institution
shall be an institution which—
‘‘(A) is an eligible institution under section
312(b);
‘‘(B) is eligible to receive assistance under
the Tribally Controlled Community College As-
sistance Act of 1978 (Public Law 95–471); or
‘‘(C) is eligible to receive funds under the
Equity in Educational Land Grant Status Act
of 1994.
‘‘(2) APPLICATION.—Any institution desiring to
receive assistance under this section shall submit an
application to the Secretary at such time, and in
such manner, as the Secretary may by regulation rea-
sonably require. Each such application shall in-
clude—
‘‘(A) a 5-year plan for improving the assist-
ance provided by the Tribal College or university
to Indian students, increasing the rates at which
Indian high school students enroll in higher edu-
cation, and increasing overall postsecondary re-
tention rates for Indian students; and
‘‘(B) such enrollment data and other infor-
mation and assurances as the Secretary may re-
quire to demonstrate compliance with subpara-
graphs (A) and (B) of paragraph (1).
‘‘(3) SPECIAL RULE.—For the purposes of this
part, no Tribal College or University which is eligible
for and receives funds under this section may concur-
rently receive other funds under this part or part B.’’.
SEC. 302. HISTORICALLY BLACK COLLEGES AND UNIVER-
SITIES.
(a) USES
OF FUNDS.—Section 323(a) (20 U.S.C.
1062(a)) is amended—
(1) by redesignating paragraph (12) as para-
graph (13); and
(2) by inserting after paragraph (11) the follow-
ing new paragraph:
‘‘(12) Establishing or improving an endowment
fund.’’.
(b) LIMITATIONS.—Section 323(b) is amended by
striking paragraph (3) and inserting the following:
‘‘(3)(A) An institution may not use more than 20 per-
cent of its grant under this part for any fiscal year for
establishing or improving an endowment fund.
‘‘(B) An institution that uses any portion of its grant
under this part for any fiscal year for establishing or im-
proving an endowment fund shall provide an equal or
greater amount for such purposes from non-Federal funds.
‘‘(C) The Secretary shall publish rules and regulations
specifically governing the use of funds for establishing or
improving an endowment fund.’’.
(c) PROFESSIONAL OR GRADUATE INSTITUTIONS.—
(1) GENERAL AUTHORIZATION.—Section 326(a)
(20 U.S.C. 1063b(a)) is amended—
(A) in paragraph (1), by inserting ‘‘in
mathematics or the physical or natural sciences’’
after ‘‘graduate education opportunities’’; and
(B) in paragraph (2), by striking ‘‘except
that’’ and all that follows and inserting the fol-
lowing: ‘‘, except that no institution shall be re-
quired to match any portion of the first
$500,000 of its award from the Secretary. After
allocations are made to each eligible institution
under the funding rules provided in subsection
(f), the Secretary shall reallocate, on a pro rata
basis, any amounts which remain unallocated
(by reason of the failure of an institution to
comply with the matching requirements of this
paragraph) among the institutions that have
complied with such matching requirement.’’.
(2) USE OF FUNDS.—Section 326(c) (20 U.S.C.
1063b(c)) is amended by striking paragraphs (1)
through (3) and inserting the following:
‘‘(1) purchase, rental or lease of scientific or lab-
oratory equipment for educational purposes, includ-
ing instructional and research purposes;
‘‘(2) construction, maintenance, renovation, and
improvement in classroom, library, laboratory, and
other instructional facilities used exclusively for the
purposes of this section, including purchase or rental
of telecommunications technology equipment or serv-
ices;
‘‘(3) purchase of library books, periodicals, tech-
nical and other scientific journals, microfilm, micro-
fiche, and other educational materials, including tele-
communications program materials;
‘‘(4) scholarships, fellowships, and other finan-
cial assistance for needy graduate and professional
students to permit their enrollment in and completion
of the doctoral degree in medicine, dentistry, phar-
macy, veterinary medicine, law, and the doctorate de-
gree in the physical or natural sciences, engineering,
mathematics, or other scientific disciplines in which
African Americans are underrepresented;
‘‘(5) establish or improve a development office to
strengthen and increase contributions from alumni
and the private sector;
‘‘(6) assist in the establishment or maintenance
of an institutional endowment to facilitate financial
independence pursuant to section 331 of this title;
and
‘‘(7) funds and administrative management, and
the acquisition of equipment, including software, for
use in strengthening funds management and manage-
ment information systems.’’.
(3) ELIGIBILITY.—Section 326(e) (20 U.S.C.
1063b(e)) is amended—
(A) in paragraph (1)
(i) by striking ‘‘include—’’ and insert-
ing ‘‘are the following:’’;
(ii) by inserting ‘‘and other qualified
graduate programs’’ before the semicolon at
the end of subparagraphs (F) through (J);
(iii) by striking ‘‘and’’ at the end of
subparagraph (O);
(iv) by inserting ‘‘University’’ after
‘‘Jackson State’’ in subparagraph (P);
(v) by striking the period at the end of
such subparagraph and inserting a semi-
colon; and
(vi) by inserting after such subpara-
graph the following new subparagraphs:
‘‘(Q) Norfolk State University qualified
graduate program; and
‘‘(R) Tennessee State University qualified
graduate program.’’; and
(B) by striking paragraphs (2) and (3) and
inserting the following:
‘‘(2) QUALIFIED GRADUATE PROGRAM.—For the
purposes of this section, the term ‘qualified graduate
program’ means a graduate or professional program
that provides an accredited program of instruction in
the physical or natural sciences, engineering, mathe-
matics, or other scientific discipline in which African
Americans are underrepresented and has students en-
rolled in such program at the time of application for
a grant under this section.
‘‘(3) SPECIAL
RULE.—Institutions that were
awarded grants under this section prior to October 1,
1998, shall continue to receive such grants, subject to
the availability of appropriated funds, regardless of
the eligibility of the institutions described in subpara-
graphs (Q) and (R) of paragraph (1).’’; and
(C) in paragraph (4), by inserting before
the period at the end the following: ‘‘, except that
the president or chancellor of the institution may
decide which graduate or professional school or
qualified graduate program will receive funds
under the grant in any one fiscal year’’.
(4) FUNDING RULE.—Section 326(f) (20 U.S.C.
1063b(f)) is amended—
(A) by striking ‘‘Of the amount appro-
priated’’ and inserting ‘‘Subject to subsection
(g), of the amount appropriated’’;
(B) in paragraph (1)—
(i) by striking ‘‘$12,000,000’’ and in-
serting ‘‘$26,000,000’’; and
(ii) by striking ‘‘(A) through (E)’’ and
inserting ‘‘(A) through (P)’’.
(C) by striking paragraph (2) and inserting
the following:
‘‘(2) the next $1,000,000 in excess of $26,000,000
shall be available for the purpose of making grants to
institutions or programs identified in subparagraphs
(Q) and (R) of subsection (e)(1); and
‘‘(3) 
if 
the 
amount 
appropriated 
exceeds
$27,000,000, the Secretary shall develop a formula for
making allotments of such excess to each of the insti-
tutions or programs identified in subparagraphs (A)
through (R) using the following elements:
‘‘(A) the number of students enrolled in the
eligible institution’s professional or graduate
school, or qualified graduate program which re-
ceived funding under this section in the previous
year;
‘‘(B) the average cost of education per stu-
dent for all full-time graduate or professional
students (or the equivalent) enrolled in the eligi-
ble professional school, graduate school or doc-
toral students in the qualified graduate program;
and
‘‘(C) the number of students who received
their first professional or doctoral degree at the
professional or graduate school or the qualified
graduate program in the preceding year for
which the institution received funding under this
section.’’.
(5) HOLD HARMLESS RULE.—Section 326 is fur-
ther amended by adding at the end the following new
subsection:
‘‘(g) 
HOLD
HARMLESS
RULE.—Notwithstanding
paragraphs (2) and (3) of subsection (f), no institution or
qualified program identified in subsection (e)(1) that re-
ceived a grant for fiscal year 1998 and that is eligible to
receive a grant in a subsequent fiscal year shall receive a
grant amount in any such subsequent fiscal year that is
less than the grant amount received for fiscal year 1998,
unless the amount appropriated is not sufficient to provide
such grant amounts to all such institutions and programs.’’.
SEC. 303. MINORITY SCIENCE AND ENGINEERING IMPROVE-
MENT PROGRAM.
(a) AMENDMENT.—Title III (20 U.S.C. 1051) is
amended—
(1) by redesignating part D as part E; and
(2) by inserting after part C the following new
part:
‘‘PART D—MINORITY SCIENCE AND ENGINEERING
IMPROVEMENT PROGRAM
‘‘SEC. 341. PROGRAM AUTHORIZED.
‘‘The Secretary shall, in accordance with the provi-
sions of this part, carry out a program of making grants
to institutions of higher education that are designed to effect
long-range improvements in science and engineering edu-
cation, and improve support programs for minority stu-
dents enrolled in science and engineering programs at pre-
dominantly minority institutions.
‘‘SEC. 342. USE OF FUNDS.
‘‘Funds appropriated for the purpose of this subpart
may be made available for—
‘‘(1) providing needed services to groups of mi-
nority institutions or providing training for scientists
and engineers from eligible minority institutions;
‘‘(2) providing needed services to groups of insti-
tutions serving significant numbers of minority stu-
dents or providing training for scientists and engi-
neers from such institutions to improve their ability
to train minority students in science or engineering;
‘‘(3) assisting minority institutions to improve
the quality of preparation of their students for grad-
uate work or careers in science, mathematics, and
technology;
‘‘(4) improving access of undergraduate students
at minority institutions to careers in the sciences,
mathematics, and engineering;
‘‘(5) improving access of minority students, par-
ticularly minority women, to careers in the sciences,
mathematics, and engineering;
‘‘(6) improving access for pre-college minority
students to careers in science, mathematics, and engi-
neering through community outreach programs con-
ducted through colleges and universities eligible for
support through the Minority Science and Engineer-
ing Improvement Programs;
‘‘(7) disseminating activities, information, and
educational materials designed to address specific
barriers to the entry of minorities into science and
technology, and conducting activities and studies con-
cerning the flow of underrepresented ethnic minorities
into scientific careers;
‘‘(8) supporting curriculum models to encourage
minority student participation in research careers in
science, mathematics, and technology; and
‘‘(9) improving the capability of minority insti-
tutions for self-assessment, management, and evalua-
tion of their science, mathematics, and engineering
programs and dissemination of their results.
‘‘SEC. 343. ELIGIBILITY FOR GRANTS.
‘‘The Secretary may make grants under this part to
minority institutions (as defined in section 347), organiza-
tions, and entities to enable them to carry out programs
and activities authorized by this part:
‘‘(1)(A) institutions of higher education granting
baccalaureate degrees; and
‘‘(B) institutions of higher education granting
associate degrees which—
‘‘(i) have a curriculum including science or
engineering subjects;
‘‘(ii) apply jointly with institutions de-
scribed in subparagraph (A); and
‘‘(iii) have an articulation agreement with
institutions described in subparagraph (A) for
its science or engineering students; and
‘‘(2) consortia of—
‘‘(A) institutions which have a curriculum
in science or engineering;
‘‘(B) graduate institutions which have a
curriculum in science or engineering;
‘‘(C) Federal Education Research Centers;
‘‘(D) research laboratories of, or under con-
tract with, the Department of Energy;
‘‘(E) private organizations which have
science or engineering facilities; or
‘‘(F) quasi-governmental entities which have
a significant scientific or engineering mission;
to enable such institutions and consortia to carry pro-
grams and activities authorized by this part.
‘‘SEC. 344. GRANT APPLICATION.
‘‘(a) SUBMISSION AND CONTENTS OF APPLICATIONS.—
An eligible applicant (as determined under section 343)
that desires to receive a grant under this part shall submit
to the Secretary an application therefor at such time or
times, in such manner, and containing such information
as the Secretary may prescribe by regulation. Such applica-
tion shall set forth—
‘‘(1) a program of activities for carrying out one
or more of the purposes described in section 342 in
such detail as will enable the Secretary to determine
the degree to which such program will accomplish
such purpose or purposes; and
‘‘(2) such other policies, procedures, and assur-
ances as the Secretary may require by regulation.
‘‘(b) 
APPROVAL
BASED
ON
LIKELIHOOD
OF
PROGRESS.—The Secretary shall approve an application
only if the Secretary determines that the application sets
forth a program of activities which are likely to make sub-
stantial progress toward achieving the purposes of this part.
‘‘SEC. 345. CROSS PROGRAM AND CROSS AGENCY COOPERA-
TION.
‘‘The Minority Science and Engineering Improvement
Programs shall cooperate and consult with other programs
within the Department and within Federal, State, and pri-
vate agencies which carry out programs to improve the
quality of science, mathematics, and engineering education.
‘‘SEC. 346. ADMINISTRATIVE PROVISIONS.
‘‘(a) TECHNICAL STAFF.—The Secretary shall ap-
point, without regard to the provisions of title 5 of the
United States Code governing appointments in the competi-
tive service, not less than one technical employees with ap-
propriate scientific and educational background to admin-
ister the programs under this part who may be paid with-
out regard to the provisions of chapter 51 and subchapter
III of chapter 53 of such title relating to classification and
General Schedule pay rates.
‘‘(b) PROCEDURES FOR GRANT REVIEW.—The Sec-
retary shall establish procedures for reviewing and evaluat-
ing grants and contracts made or entered into under such
programs. Procedures for reviewing grant applications,
based on the peer review system, or contracts for financial
assistance under this title may not be subject to any review
outside of officials responsible for the administration of the
Minority Science and Engineering Improvement Program.
‘‘SEC. 347. DEFINITIONS.
‘‘For the purpose of this part—
‘‘(1) The term ‘minority institution’ means an
institution of higher education whose enrollment of a
single minority or a combination of minorities (as
defined in paragraph (2)) exceeds 50 percent of the
total enrollment. The Secretary shall verify this infor-
mation from the data on enrollments in the higher
education general information surveys (HEGIS) fur-
nished by the institution to the Office for Civil
Rights, Department of Education.
‘‘(2) The term ‘minority’ means American In-
dian, Alaskan Native, Black (not of Hispanic origin),
Hispanic (including persons of Mexican, Puerto
Rican, Cuban, and Central or South American ori-
gin), Pacific Islander or other ethnic group underrep-
resented in science and engineering.
‘‘(3) The term ‘science’ means, for the purpose of
this program, the biological, engineering, mathemati-
cal, physical, behavioral, and social sciences, and his-
tory and philosophy of science; also included are
interdisciplinary fields which are comprised of over-
lapping areas among two or more sciences.’’.
SEC. 304. GENERAL PROVISIONS.
(a) APPLICATIONS FOR ASSISTANCE.—Section 351(a)
(20 U.S.C. 1066(a)) is amended to read as follows:
‘‘(a) APPLICATIONS.—
‘‘(1) APPLICATIONS REQUIRED.—Any institution
which is eligible for assistance under this title shall
submit to the Secretary an application for assistance
at such time, in such form, and containing such in-
formation, as may be necessary to enable the Sec-
retary to evaluate its need for assistance. Subject to
the availability of appropriations to carry out this
title, the Secretary may approve an application for a
grant under this title only if the Secretary determines
that—
‘‘(A) the application meets the requirements
of subsection (b);
‘‘(B) the applicant is eligible for assistance
in accordance with the part of this title under
which the assistance is sought; and
‘‘(C) the applicant’s performance goals are
sufficiently rigorous as to meet the purposes of
this title and the performance objectives and in-
dicators for this title established by the Secretary
pursuant to the Government Performance and
Results Act.
‘‘(2) PRELIMINARY APPLICATIONS.—In carrying
out paragraph (1), the Secretary shall develop a pre-
liminary application for use by eligible institutions
applying under part A prior to the submission of the
principal application.’’.
(b) CONTENTS OF APPLICATIONS.—Section 351(b) is
amended—
(1) in paragraph (5)(A), by inserting ‘‘and the
Government Performance and Results Act’’ after
‘‘under this title’’; and
(2) in paragraph (6), by inserting before the
semicolon the following: ‘‘, except that for purposes of
section 316, paragraphs (2) and (3) shall not apply’’.
(c) WAIVERS.—Section 352(a) (20 U.S.C. 1067(a)) is
amended—
(1) by striking ‘‘or’’ at the end of paragraph (5);
(2) by redesignating paragraph (6) as para-
graph (7); and
(3) by inserting after paragraph (5) the follow-
ing new paragraph:
‘‘(6) that is a tribally controlled community col-
lege as defined in the Tribally Controlled Community
College Act of 1978; or’’.
(d) APPLICATION REVIEW PROCESS.—Section 353(a)
(20 U.S.C. 1068(a)) is amended—
(1) in paragraph (2), by striking ‘‘Native Amer-
ican colleges and universities’’ and inserting ‘‘Tribal
Colleges and Universities’’; and
(2) in paragraph (3)—
(A) by striking subparagraph (A); and
(B) by redesignating subparagraphs (B)
and (C) as subparagraphs (A) and (B), respec-
tively.
(e) CONTINUATION AWARDS.—Part D of title III is
amended by inserting after section 354 (20 U.S.C. 1069)
the following new section:
‘‘SEC. 355. CONTINUATION AWARDS.
‘‘The Secretary shall make continuation awards under
this title for the second and succeeding years of a grant
only after determining that the recipient is making satisfac-
tory progress in carrying out the grant.’’.
(f) AUTHORIZATION
OF APPROPRIATIONS.—Section
360 (20 U.S.C. 1069f) is amended—
(1) by striking subsection (a) and inserting the
following:
‘‘(a) AUTHORIZATIONS.—
‘‘(1) PART A.—(A) There are authorized to be
appropriated to carry out part A (other that sections
316), $135,000,000 for fiscal year 1999, and such
sums as may be necessary for each of the 4 succeeding
fiscal years.
‘‘(B) There are authorized to be appropriated to
carry out section 316, $10,000,000 for fiscal year
1999, and such sums as may be necessary for each of
the 4 succeeding fiscal years.
‘‘(2) PART B.—(A) There are authorized to be
appropriated to carry out part B (other than section
326), $135,000,000 for fiscal year 1999, and such
sums as may be necessary for each of the 4 succeeding
fiscal years.
‘‘(B) There are authorized to be appropriated to
carry out section 326, $35,000,000 for fiscal year
1999, and such sums as may be necessary for each of
the 4 succeeding fiscal years.
‘‘(3) PART C.—There are authorized to be appro-
priated to carry out part C, $10,000,000 for fiscal
year 1999, and such sums as may be necessary for
each of the 4 succeeding fiscal years.
‘‘(4) PART D.—There are authorized to be appro-
priated to carry out Part D, $10,000,000 for fiscal
year 1999, and such sums as may be necessary for
each of the 4 succeeding fiscal years.’’; and
(2) by striking subsections (c), (d) and (e).
TITLE IV—STUDENT ASSISTANCE
PART A—GRANTS TO STUDENTS
SEC. 401. PELL GRANTS.
(a) EXTENSION OF AUTHORITY.—Section 401(a) (20
U.S.C. 1070a(a)) is amended—
(1) in paragraph (1)—
(A) by striking ‘‘September 30, 1998’’ and
inserting ‘‘September 30, 2004’’; and
(B) by striking the second sentence; and
(2) in paragraph (2), by striking ‘‘the disburse-
ment system required by paragraph (1)’’ and insert-
ing ‘‘the disbursement of Federal Pell Grants’’.
(b) AMOUNT
OF GRANT.—Section 401(b)(2)(A) is
amended to read as follows:
‘‘(2)(A) The amount of the Federal Pell Grant for a
student eligible under this part shall be—
‘‘(i) $4,500 for academic year 1999–2000,
‘‘(ii) $4,700 for academic year 2000–2001,
‘‘(iii) $4,900 for academic year 2001–2002,
‘‘(iv) $5,100 for academic year 2002–2003, and
‘‘(v) $5,300 for academic year 2003–2004,
less an amount equal to the amount determined to be the
expected family contribution with respect to that student
for that year.’’.
(c) RELATION OF MAXIMUM GRANT TO TUITION AND
EXPENSES.—Section 401(b)(3) is amended—
(1) by striking ‘‘$2,400’’ each place it appears
and inserting ‘‘$3,000’’; and
(2) by adding at the end the following new sub-
paragraph:
‘‘(C) An institution that charged only fees in lieu of
tuition as of January 31, 1997, may include in its deter-
mination of tuition charged, fees that would normally con-
stitute tuition.’’.
(d) DEPENDENT CARE AND DISABILITY RELATED EX-
PENSES.—Section 401(b)(3)(B) is amended by striking
‘‘$750’’ and inserting ‘‘$1,500’’.
(e) INSTITUTIONAL INELIGIBILITY BASED ON DEFAULT
RATES.—Section 401 is amended by adding at the end the
following new subsection:
‘‘(j) INSTITUTIONAL INELIGIBILITY BASED
ON DE-
FAULT RATES.—
‘‘(1) IN GENERAL.—No institution of higher edu-
cation shall be an eligible institution for purposes of
this section if such institution of higher education is
ineligible to participate in a loan program under this
title as a result of a final default rate determination
made by the Secretary under part B or D of this title,
or both, after the final publication of fiscal year 1996
cohort default rates.
‘‘(2) SANCTIONS
SUBJECT
TO
APPEAL
OPPOR-
TUNITY.—No institution may be subject to the terms
of this subsection unless it has had the opportunity to
appeal its default rate determination under regula-
tions issued by the Secretary for the Federal Family
Education Loan or Federal Direct Loan Program, as
applicable. This subsection shall not apply to an in-
stitution that was not participating in the loan pro-
grams authorized under part B or D of this title on
the date of enactment of the Higher Education
Amendments of 1998, unless the institution subse-
quently participates in the loan programs.’’.
(f) CONFORMING AMENDMENTS.—
(1) Section 400(a)(1) (20 U.S.C. 1070(a)(1)) is
amended by striking ‘‘basic educational opportunity
grants’’ and inserting ‘‘Federal Pell Grants’’.
(2) The heading of subpart 1 of part A of title
IV is amended to read as follows:
‘‘Subpart 1—Federal Pell Grants’’.
(3) Section 401 is amended—
(A) in the heading of the section, by strik-
ing ‘‘BASIC
EDUCATIONAL
OPPORTUNITY’’
and inserting ‘‘FEDERAL PELL’’;
(B) in subsection (a)(3), by striking ‘‘Basic
grants’’ and inserting ‘‘Grants’’;
(C) by striking ‘‘basic grant’’ each place it
appears and inserting ‘‘Federal Pell Grant’’; and
(D) by striking ‘‘basic grants’’ each place it
appears and inserting ‘‘Federal Pell Grants’’.
(4) Section 401(f)(3) is amended by striking
‘‘Education and Labor’’ and inserting ‘‘Education
and the Workforce’’.
(5) Section 452(c) (20 U.S.C. 1087b(c)) is
amended by striking ‘‘basic grants’’ and inserting
‘‘Federal Pell Grants’’.
(6) Subsections (j)(2) and (k)(3) of section 455
(20 U.S.C. 1087e) are each amended by striking
‘‘basic grants’’ and inserting ‘‘Federal Pell Grants’’.
SEC. 402. FEDERAL TRIO PROGRAMS.
(a) PROGRAM AUTHORITY; AUTHORIZATION OF AP-
PROPRIATIONS.—
(1) DURATION OF GRANTS.—Section 402A(b)(2)
(20 U.S.C. 1070a–11(b)(2)) is amended—
(A) by striking subparagraph (A);
(B) by striking the period at the end of sub-
paragraph (B) and inserting ‘‘; and’’;
(C) by redesignating subparagraph (B) as
subparagraph (A); and
(D) by adding at the end the following new
subparagraph:
‘‘(B) grants under section 402H shall be
awarded for a period determined by the Sec-
retary.’’.
(2) MINIMUM
GRANTS.—Section 402A(b)(3) is
amended to read as follows:
‘‘(3) MINIMUM GRANTS.—Unless the institution
or agency requests a smaller amount, individual
grants under this chapter shall be no less than—
‘‘(A) $170,000 for programs authorized by
sections 402D and 402G;
‘‘(B) $180,000 for programs authorized by
sections 402B and 402F; and
‘‘(C) $190,000 for programs authorized by
sections 402C and 402E.’’.
(3) PROCEDURES FOR AWARDING GRANTS AND
CONTRACTS.—Subsection (c) of section 402A is
amended to read as follows:
‘‘(c) PROCEDURES FOR AWARDING GRANTS AND CON-
TRACTS.—
‘‘(1) APPLICATION REQUIREMENTS.—An eligible
entity that desires to receive a grant or contract
under this chapter shall submit an application to the
Secretary in such manner and form, and containing
such information and assurances, as the Secretary
may reasonably require.
‘‘(2) PRIOR
EXPERIENCE.—In making grants
under this chapter, the Secretary shall consider each
applicant’s prior experience of service delivery under
the particular program for which funds are sought.
The level of consideration given the factor of prior ex-
perience shall not vary from the level of consideration
given such factor during fiscal years 1994 through
1997, except that grants made under section 402H
shall not be given prior experience consideration.
‘‘(3) ORDER OF AWARDS; PROGRAM FRAUD.—(A)
Except with respect to grants made under sections
402G and 402H and as provided in subparagraph
(B), the Secretary shall award grants and contracts
under this chapter in the order of the scores received
by the application for such grant or contract in the
peer review process required under section 110 and
adjusted for prior experience in accordance with
paragraph (2) of this subsection.
‘‘(B) The Secretary is not required to provide as-
sistance to a program otherwise eligible for assistance
under this chapter, if the Secretary has determined
that such program has involved the fraudulent use of
funds under this chapter.
‘‘(4) PEER
REVIEW
PROCESS.—(A) The Sec-
retary shall assure that, to the extent practicable,
members of groups underrepresented in higher edu-
cation, including African Americans, Hispanics, Na-
tive Americans, Alaska Natives, Asian Americans,
100
Native American Pacific Islanders (including Native
Hawaiians), are represented as readers of applica-
tions submitted under this chapter. The Secretary
shall also assure that persons from urban and rural
backgrounds are represented as readers.
‘‘(B) The Secretary shall ensure that each appli-
cation submitted under this chapter is read by at
least 3 readers who are not employees of the Federal
Government (other than as readers of applications).
‘‘(5) NUMBER
OF
APPLICATIONS
FOR
GRANTS
AND CONTRACTS.—The Secretary shall not limit the
number of applications submitted by an entity under
any program authorized under this chapter if the ad-
ditional applications describe programs serving dif-
ferent populations or campuses.
‘‘(6) COORDINATION
WITH
OTHER
PROGRAMS
FOR
DISADVANTAGED
STUDENTS.—The 
Secretary
shall encourage coordination of programs assisted
under this chapter with other programs for disadvan-
taged students operated by the sponsoring institution
or agency, regardless of the funding source of such
programs. The Secretary shall not limit an entity’s
eligibility to receive funds under this chapter because
such entity sponsors a program similar to the pro-
gram to be assisted under this chapter, regardless of
101
the funding source of such program. The Secretary
shall permit the Director of a program receiving
funds under this chapter to administer one or more
additional programs for disadvantaged students oper-
ated by the sponsoring institution or agency, regard-
less of the funding sources of such programs.
‘‘(7) APPLICATION STATUS.—The Secretary shall
inform each entity operating programs under this
chapter regarding the status of their application for
continued funding at least 8 months prior to the expi-
ration of the grant or contract. The Secretary, in the
case of an entity that is continuing to operate a suc-
cessful program under this chapter, shall ensure that
the start-up date for a new grant or contract for such
program immediately follows the termination of pre-
ceding grant or contract so that no interruption of
funding occurs for such successful reapplicants. The
Secretary shall inform each entity requesting assist-
ance under this chapter for a new program regarding
the status of their application at least 8 months prior
to the proposed startup date of such program.’’.
(4) AUTHORIZATION OF APPROPRIATIONS.—Sec-
tion 402A(f) is amended—
102
(A) by striking ‘‘$650,000,000 for fiscal
year 1993’’ and inserting ‘‘$800,000,000 for fis-
cal year 1999’’; and
(B) by striking everything after the first
sentence.
(b) TALENT SEARCH.—Section 402B(b) (20 U.S.C.
1070a–12(b)) is amended—
(1) by striking paragraph (4) and inserting the
following:
‘‘(4) guidance on and assistance in secondary
school reentry, entry to general educational develop-
ment (GED) programs, other alternative education
programs for secondary school dropouts, or post-
secondary education;’’; and
(2) in paragraph (8), by striking ‘‘parents’’ and
inserting ‘‘families’’.
(c) UPWARD
BOUND.—Section 402C (20 U.S.C.
1070a–13) is amended—
(1) in subsection (b)—
(A) in paragraph (2), by striking ‘‘personal
counseling’’ and inserting ‘‘counseling and work-
shops’’;
(B) in paragraph (6)—
(i) by inserting ‘‘work-study and
other’’ before ‘‘activities’’; and
103
(ii) by inserting before the semicolon at
the end the following: ‘‘, including careers
requiring a postsecondary degree’’;
(C) in paragraph (9), by striking ‘‘and’’ at
the end;
(D) 
in 
paragraph 
(10), 
by 
striking
‘‘through (9)’’ and inserting ‘‘through (10)’’; and
(E) by redesignating paragraph (10) as
paragraph (11) and by inserting after para-
graph (9) the following new paragraph:
‘‘(10) special services to enable veterans to make
the transition to postsecondary education; and’’; and
(2) in subsection (c), by inserting ‘‘, other than
a project a majority of the participants in which are
veterans,’’ after ‘‘this chapter’’.
(d) 
STUDENT
SUPPORT
SERVICES.—Section
402D(c)(6) (20 U.S.C. 1070a–14(c)(6)) is amended by in-
serting before the period at the end the following: ‘‘and min-
imize the student’s loan burden’’.
(e) POSTBACCALAUREATE ACHIEVEMENT PROGRAM.—
Section 402E (20 U.S.C. 1070a–15) is amended—
(1) in subsection (c)(3), by inserting ‘‘or accept-
ed in a graduate program’’ after ‘‘degree program’’;
and
104
(2) in subsection (e)(1), by striking ‘‘$2,400’’
and inserting ‘‘$3,200’’.
(f) 
STAFF
DEVELOPMENT
ACTIVITIES.—Section
402G(b) (20 U.S.C. 1070a–17(b)) is amended by inserting
after paragraph (3) the following new paragraph:
‘‘(4) The use of appropriate educational tech-
nology in the operation of projects assisted under this
chapter.’’.
(g) EVALUATION FOR PROJECT IMPROVEMENT.—Sec-
tion 402H(b) (20 U.S.C. 1070a–18(b)) is amended by add-
ing at the end the following new sentence: ‘‘Such evaluations
shall also investigate the effectiveness of alternative and in-
novative methods within Federal TRIO programs of in-
creasing access to, and retention of, students in postsecond-
ary education.’’.
SEC. 403. NATIONAL EARLY INTERVENTION AND PARTNER-
SHIP PROGRAM.
Section 404G (20 U.S.C. 1070a–27) is amended by
striking ‘‘1993’’ and inserting ‘‘1999’’.
SEC. 404. REPEALS.
(a) REPEALS OF SUBPART 2 PROVISIONS.—The follow-
ing provisions of subpart 2 of part A of title IV are re-
pealed:
(1) Chapter 3 (20 U.S.C. 1070a–31 et seq.).
(2) Chapter 4 (20 U.S.C. 1070a–41 et seq.).
105
(3) Chapter 5 (20 U.S.C. 1070a–51 et seq.).
(4) Chapter 6 (20 U.S.C. 1070a–61 et seq.).
(5) Chapter 7 (20 U.S.C. 1070a–71 et seq.).
(6) Chapter 8 (20 U.S.C. 1070a–81 et seq.).
(b) SUBPART 8.—Subpart 8 of part A of title IV (20
U.S.C. 1070f) is repealed.
(c) CONFORMING AMENDMENT.—Section 400(b) (20
U.S.C. 1070(b)) is amended by striking ‘‘subparts 1 through
8’’ and inserting ‘‘subparts 1 through 6’’.
SEC. 405. ESTABLISHMENT OF NEW PROGRAMS.
Subpart 2 of part A of title IV is amended by inserting
after chapter 2 (20 U.S.C. 1070a–81) the following new
chapters:
‘‘CHAPTER 3—HIGH HOPES FOR COLLEGE
‘‘Subchapter A—21st Century Scholar Certificates
‘‘SEC. 406A. 21ST CENTURY SCHOLAR CERTIFICATES.
‘‘(a) FINDINGS.—The Congress makes the following
findings:
‘‘(1) Among low-income students who, despite
high test scores, are not planning on attending college,
nearly 60 percent cite an inability to afford school as
the reason.
‘‘(2) About 80 percent of our 12th graders who
are interested in continuing their education after high
school go on to college if their parents read materials
106
about financial aid, compared to only 55 percent of
such students if their parents do not read this mate-
rial.
‘‘(3) In 1996, the American Council on Edu-
cation found that the public overestimated the tuition
of public 2-year colleges by about 3 times the actual
average tuition, of public 4-year colleges by over twice
the actual average tuition, and of private 4-year uni-
versities by almost one-third more than the actual av-
erage tuition.
‘‘(4) There is a need for, and a significant bene-
fit from, providing students, and through them their
parents, with information about the variety of Fed-
eral student financial assistance programs, such as
Pell grants, Federal work-study and loans, and the
AmeriCorps Education Awards that make college
more affordable than ever before.
‘‘(b) AUTHORITY.—
‘‘(1) The Secretary, using funds appropriated
under section 407H(a) of this Act—
‘‘(A) shall ensure that certificates, to be
known as 21st Century Scholar Certificates, are
provided to all students participating in projects
under chapter 2; and
107
‘‘(B) may, as practicable, ensure that such
certificates are provided to all students in grades
6 through 12 who attend schools at which at
least 50 percent of the students enrolled are eligi-
ble for free or reduced-price lunch.
‘‘(2) A 21st Century Scholar Certificate shall be
personalized for each student and indicate the amount
of Federal financial aid for college for which a stu-
dent may be eligible.
‘‘Subchapter B—High Hopes Partnerships
‘‘SEC. 407A. PURPOSE.
‘‘It is the purpose of this chapter to encourage and pre-
pare students in low-income communities, beginning not
later than the 7th grade, to prepare for, enter, and success-
fully complete college by assisting college-school-community
partnerships to—
‘‘(1) provide in-school and on-campus early col-
lege awareness activities to these students and their
parents;
‘‘(2) ensure ongoing adult guidance and other
support to these students;
‘‘(3) provide useful, early information to these
students and their parents on the need for, options re-
lated to, and financing (including the availability of
financial assistance) of a college education; and
108
‘‘(4) help ensure that these students have access
to rigorous core courses, such as algebra and geom-
etry, that prepare them for college.
‘‘SEC. 407B. GRANTS.
‘‘(a) GRANTS
AUTHORIZED.—From funds appro-
priated under section 407H(a), the Secretary shall make
grants to college-school-community partnerships for activi-
ties under section 407D.
‘‘(b) ELIGIBLE PARTNERSHIP.—For purposes of this
chapter, an eligible partnership shall include—
‘‘(1) one or more local educational agencies act-
ing on behalf of—
‘‘(A) one or more participating schools; and
‘‘(B) the public secondary schools that stu-
dents from these schools would normally attend;
‘‘(2) one or more degree granting institutions of
higher education; and
‘‘(3) at least two community organizations or
entities, such as businesses, professional associations,
community-based organizations, or other public or
private agencies or organizations.
‘‘(c) DEFINITIONS.—For the purpose of this chapter—
‘‘(1) ‘participating school’ means a public school
in which—
‘‘(A) there is a 7th grade;
109
‘‘(B) one or more cohorts of students receive
services under this chapter; and
‘‘(C) at least 50 percent of the students en-
rolled are eligible for free or reduced-price lunch;
and
‘‘(2) ‘cohort of students’ means—
‘‘(A) an entire grade level of students in a
participating school; or
‘‘(B) if the partnership determines that it
would promote the effectiveness of a project, an
entire grade level of students, beginning not later
than the 7th grade, who reside in public housing
as defined in section 3(b)(1) of the United States
Housing Act of 1937.
‘‘(d) DURATION.—Each grant awarded under this
chapter shall be for a 6-year period.
‘‘(e) COST SHARING.—
‘‘(1) Federal funds shall provide no more than
80 percent of the cost of the project in the first year,
70 percent of the cost in the second year, 60 percent
of the cost in the third year, 50 percent of the cost
in the fourth year, 40 percent of the cost in the fifth
year, and 30 percent of the cost in the sixth year.
‘‘(2) The non-Federal share of grants awarded
under this chapter may—
110
‘‘(A) be in cash or in kind, fairly evaluated,
including services, supplies, or equipment; and
‘‘(B) include the non-Federal share of work-
study grants under part C of title IV of this Act
awarded to students who serve as tutors or men-
tors in projects under this chapter.
‘‘(3) The Secretary may waive the cost sharing
requirement described in paragraph (1) for any eligi-
ble partnership that demonstrates to the satisfaction
of the Secretary an extraordinary hardship that pre-
vents compliance with that requirement.
‘‘(f) EQUITABLE GEOGRAPHIC DISTRIBUTION.—To the
extent possible, the Secretary shall award grants under this
chapter in a manner that achieves an equitable geographic
distribution of those grants.
‘‘(g) PRIORITY AWARDS UNDER CHAPTER 2.—Before
making grants under this chapter for fiscal year 1999, the
Secretary shall, as appropriate, make awards to recipients
eligible for continuation awards under chapter 2 of subpart
2 of this title as it was in effect prior to the enactment
of the Higher Education Amendments of 1998.
‘‘SEC. 407C. GRANT APPLICATION; PREFERENCES.
‘‘(a) APPLICATION REQUIRED.—An eligible partner-
ship desiring to receive a grant under this chapter shall
111
submit an application to the Secretary, in such form and
containing such information, as the Secretary may require.
‘‘(b) APPLICATION
CONTENTS.—Each application
shall include—
‘‘(1) the name of each partner and a description
of its responsibilities, including the designation of ei-
ther an institution of higher education or a local edu-
cational agency as the fiscal agent for the partner-
ship;
‘‘(2) a description of the need for the project, in-
cluding a description of how the project will build on
existing services and activities, if any;
‘‘(3) a listing of the human, financial (other
than funds under this chapter), and other resources
that each member of the partnership will contribute
to the partnership, and a description of the efforts
each member of the partnership will make in seeking
additional resources;
‘‘(4) a description of how the project will oper-
ate, including how grant funds will be used to meet
the purpose of this chapter;
‘‘(5) a description of how services will be coordi-
nated with, and will complement and enhance, serv-
ices received by participating schools and students
under other related Federal and non-Federal pro-
112
grams, including programs under title I, part A of
title VII, and part 1 of title X of the Elementary and
Secondary Education Act of 1965, the School-to-Work
Opportunities Act of 1994, section 402 of this Act,
and the Individuals with Disabilities Education Act;
‘‘(6) a description of how the partnership will
support and continue the services under this chapter
after the grant has expired;
‘‘(7) an assurance from each local educational
agency using funds under this chapter that—
‘‘(A) at least 50 percent of the students en-
rolled in each participating school are eligible
for free or reduced-price lunch;
‘‘(B) its aggregate expenditures per student
for activities described in this chapter will not be
reduced from the level of such expenditures in the
year prior to the grant; and
‘‘(C) someone at each participating school
will be designated as the primary point of con-
tact for the partnership;
‘‘(8) an assurance that participating students
will have access to rigorous core academic courses that
reflect challenging State or local academic standards;
and
113
‘‘(9) an assurance that members will provide the
performance information required by the Secretary,
which would be used to base continuation of the
grant.
‘‘(c) PREFERENCES.—In reviewing applications under
this chapter, the Secretary shall give preference to projects
that—
‘‘(1) will serve participating schools in which at
least 75 percent of the students enrolled are eligible
for free or reduced-price lunch;
‘‘(2) provide a commitment from non-Federal
sources to pay all or part of the cost of college,
through tuition assistance or guarantees (not already
available), such as ‘last-dollar grants’, for participat-
ing students; and
‘‘(3) hold participating students responsible for
school or community service and high academic per-
formance.
‘‘SEC. 407D. PROGRAM REQUIREMENTS; USES OF FUNDS.
‘‘(a) PROGRAM REQUIREMENTS.—Projects under this
chapter shall—
‘‘(1) have a program coordinator who is either
full-time or whose primary responsibility is the
project under this chapter;
114
‘‘(2) provide services to at least one cohort of stu-
dents, beginning not later than the 7th grade;
‘‘(3) ensure that the services authorized under
this chapter are provided through the 12th grade to
students in the cohort, including students who attend
another participating school or a secondary school
identified under section 407B(b)(1)(B);
‘‘(4) include activities and information that fos-
ter and improve parent involvement in promoting
postsecondary education for their children, including
the provision of useful early information on the ad-
vantages of a college education, academic admissions
requirements, and the need to take core courses, ad-
missions and achievement tests, application proce-
dures, college costs and options, and the availability
of student financial aid;
‘‘(5) include academic counseling, career aware-
ness, and tutoring or mentoring from trained person-
nel, as well as other student support services that en-
able students to succeed academically and apply for,
enter, and complete college;
‘‘(6) include training in promoting early college
awareness for classroom teachers, guidance counselors,
and staff of the schools involved in the project; faculty
and program personnel in participating institutions
115
of higher education; and participating mentors and
tutors;
‘‘(7) include activities on college campuses and
enrichment activities associated with postsecondary
education; and
‘‘(8) include arrangements that ensure that all
participating students have access to rigorous core
courses that reflect challenging State or local aca-
demic standards and that prepare them for college.
‘‘(b) USE OF FUNDS.—In addition to the activities de-
scribed in subsection (a), a recipient of funds under this
chapter may use them—
‘‘(1) where necessary and appropriate to ensure
active participation, to pay stipends to participating
students and their mentors;
‘‘(2) where necessary and appropriate to ensure
active participation, to pay transportation costs for
participants to attend project-sponsored activities;
‘‘(3) to provide out-of-school and summer activi-
ties related to the project;
‘‘(4) for project evaluation; and
‘‘(5) to recognize the responsibility and achieve-
ment of participating students through ceremonies,
awards, and other means.
116
‘‘SEC. 407E. SERVICES FOR STUDENTS ATTENDING PRIVATE
SCHOOLS.
‘‘A local educational agency that participates in an
eligible partnership shall provide services supported with
Federal funds under this chapter on an equitable basis, con-
sistent with section 14503 of Elementary and Secondary
Education Act of 1965, to students in private schools that—
‘‘(1) have a 7th grade;
‘‘(2) have students at least 50 percent of whom
are eligible for free or reduced-price lunch; and
‘‘(3) are located in the normal attendance area
of a participating school.
‘‘SEC. 407F. EVALUATION.
‘‘In order to improve the operation of the program as-
sisted under this chapter, the Secretary shall, with funds
appropriated under section 407H(a), make grants to, and
enter into contracts and cooperative agreements with, insti-
tutions of higher education and other public and private
institutions and organizations to evaluate the effectiveness
of the program assisted under this chapter and, as appro-
priate, disseminate such results.
‘‘SEC. 407G. PEER REVIEW.
‘‘The Secretary shall use a peer review process to re-
view applications under this chapter and make rec-
ommendations for funding to the Secretary.
117
‘‘SEC. 407H. AUTHORIZATION OF APPROPRIATIONS.
‘‘(a) AUTHORIZATION OF APPROPRIATION.—There are
authorized to be appropriated $140,000,000 for fiscal year
1999 and such sums as may be necessary for each of the
5 succeeding fiscal years to carry out this chapter.
‘‘(b) RESERVATION FOR TECHNICAL ASSISTANCE AND
PEER REVIEW.—From the amount appropriated under
subsection (a) for any fiscal year, the Secretary may reserve
up 0.5 percent of that amount to obtain additional qualified
readers and additional staff to review applications, to in-
crease the level of oversight monitoring, to support impact
studies, program assessments and reviews, and to provide
technical assistance to potential applicants and current
grantees.
‘‘CHAPTER 4—FRANK TEJEDA SCHOLARSHIP
PROGRAM
‘‘SEC. 408A. STATEMENT OF PURPOSE.
‘‘It is the purpose of this chapter to establish a Frank
Tejeda Scholarship Program to recruit and train teachers
who are proficient in both Spanish and English and who
show promise of academic achievement.
‘‘SEC. 408B. SCHOLARSHIPS AUTHORIZED.
‘‘(a) PROGRAM AUTHORITY.—The Secretary is author-
ized, in accordance with the provisions of this chapter, to
award scholarships to individuals consistent with the pur-
poses of this chapter.
118
‘‘(b) TEJEDA SCHOLARS.—Individuals awarded schol-
arships under this chapter shall be known as ‘Tejeda Schol-
ars’.
‘‘SEC. 408C. ALLOCATION AMONG STATES.
‘‘(a) ALLOCATION FORMULA.—From the sums appro-
priated pursuant to the authority of section 408H for any
fiscal year, the Secretary shall allocate to each State an
amount equal to $5,000 multiplied by the number of schol-
arships determined by the Secretary to be available to such
State in accordance with subsection (b).
‘‘(b) NUMBER OF SCHOLARSHIPS AVAILABLE.—The
number of scholarships to be made available in a State for
any fiscal year shall bear the same ratio to the number of
scholarships made available to all States as the State’s pop-
ulation ages 5 through 17 bears to the population ages 5
through 17 in all the States, except that not less than 10
scholarships shall be made available to any State.
‘‘(c) USE OF CENSUS DATA.—For the purpose of this
section, the population ages 5 through 17 in a State and
in all the States shall be determined by the most recently
available data, satisfactory to the Secretary, from the Bu-
reau of the Census. The Bureau of the Census shall produce
and publish intercensal data for Puerto Rico and the other
territories.
119
‘‘SEC. 408D. ELIGIBILITY OF SCHOLARS.
‘‘(a) HIGH SCHOOL GRADUATION OR EQUIVALENT AND
ADMISSION
TO INSTITUTION REQUIRED.—Each student
awarded a scholarship under this chapter shall—
‘‘(1) be—
‘‘(A) a low-income individual, as that term
is defined in section 402A(g)(2) of this title; or
‘‘(B) an individual who is eligible for a Pell
Grant under subpart 1 of this part;
‘‘(2) be a citizen of the United States;
‘‘(3) be a resident of the State in which he or she
applies;
‘‘(4) be enrolled or accepted for enrollment on a
full- or part-time basis, at a graduate or undergradu-
ate level, in an institution of higher education that
has an accredited teacher preparation program;
‘‘(5) have demonstrated proficiency in the
English and Spanish languages, as certified by the
applicant’s academic institution; and
‘‘(6) have agreed, upon graduation from such
program—
‘‘(A) to serve no less than one year for each
year of scholarship assistance, but no fewer than
two years of service in total, as a teacher in a
public elementary or secondary school in which
there is a demonstrated need for Spanish-speak-
120
ing teachers and professionals, as determined by
the Secretary;
‘‘(B) to complete such service within 6 years
of graduation; and
‘‘(C) that if the student is unable to com-
plete such service, the student will, except as pro-
vided in subsection (c), repay the Secretary the
total amount, or a pro rata amount of the schol-
arship received under this chapter in proportion
to the amount of service completed, plus interest
and collection costs in the same manner as re-
payment of a student loan made under part D
of this title.
‘‘(b) SELECTION BASED ON PROMISE OF ACADEMIC
ACHIEVEMENT.—Each student awarded a scholarship
under this chapter must demonstrate outstanding academic
achievement and show promise of continued academic
achievement, as certified by the student’s academic institu-
tion.
‘‘(c) EXCEPTION TO REPAYMENT OBLIGATION.—
‘‘(1) DEFERRAL DURING CERTAIN PERIODS.—A
recipient shall not be considered in violation of the
agreement entered into pursuant to subsection
(a)(4)(C) during any period in which the recipient—
121
‘‘(A) is pursuing a full-time course of study
related to the field of teaching at an eligible in-
stitution;
‘‘(B) is serving, not in excess of 3 years, as
a member of the armed services of the United
States;
‘‘(C) is temporarily totally disabled for a
period of time not to exceed 3 years as estab-
lished by sworn affidavit of a qualified physi-
cian;
‘‘(D) is unable to secure employment for a
period not to exceed 12 months by reason of hav-
ing to care for a spouse, child, parent, or imme-
diate family member who is disabled;
‘‘(E) is seeking and unable to find full-time
employment for a single period not to exceed 12
months;
‘‘(F) is seeking and unable to find full-time
employment as a teacher in a public or private
nonprofit preschool, elementary or secondary
school, or education program for a single period
not to exceed 27 months; or
‘‘(G) satisfies the provisions of additional
repayment exceptions that may be prescribed by
122
the Secretary in regulations issued pursuant to
this subpart.
‘‘(2) FORGIVENESS
IF
PERMANENTLY
TOTALLY
DISABLED.—A recipient shall be excused from repay-
ment of any scholarship assistance received under this
chapter if the recipient becomes permanently totally
disabled as established by sworn affidavit of a quali-
fied physician.
‘‘SEC. 408E. SELECTION OF SCHOLARS.
‘‘(a) ESTABLISHMENT OF CRITERIA.—The Secretary
shall establish criteria for the selection of scholars under this
chapter that meet the requirements of section 408D.
‘‘(b) TIMING OF SELECTION.—The selection process
shall be completed, and the awards made, no later than May
1 of the academic year preceding the academic year for
which the award will be used.
‘‘SEC. 408F. STIPENDS AND SCHOLARSHIP CONDITIONS.
‘‘(a) AMOUNT OF AWARD.—Each student awarded a
scholarship under this chapter shall receive a stipend of
$5,000 for the academic year of study for which the scholar-
ship is awarded, except that in no case shall the total
amount of financial aid awarded to such student exceed
such student’s total cost-of-attendance.
‘‘(b) USE OF AWARD.—The State educational agency
shall establish procedures to assure that a scholar awarded
123
a scholarship under this chapter pursues a course of study
at an institution of higher education.
‘‘SEC. 408G. CONSTRUCTION OF NEEDS PROVISIONS.
‘‘Notwithstanding section 471, nothing in this chapter,
or any other Act, shall be construed to permit the receipt
of a scholarship under this chapter to be counted for any
needs test in connection with the awarding of any grant
or the making of any loan under this Act or any other pro-
vision of Federal law relating to educational assistance.
‘‘SEC. 408H. AUTHORIZATION OF APPROPRIATIONS.
‘‘There are authorized to be appropriated for this chap-
ter $5,000,000 for fiscal year 1998 and such sums as may
be necessary for each of the 4 succeeding fiscal years.
‘‘CHAPTER 5—CAMPUS-BASED CHILD CARE
‘‘SEC. 410A. CAMPUS-BASED CHILD CARE.
‘‘(a) PROGRAM AUTHORIZED.—
‘‘(1) AUTHORITY.—The Secretary may award
grants to institutions of higher education to assist the
institutions in providing campus-based child care
services to low-income students.
‘‘(2) AMOUNT OF GRANTS.—
‘‘(A) IN GENERAL.—The amount of a grant
awarded to an institution of higher education
under this section for a fiscal year shall not ex-
ceed 1 percent of the total amount of all Federal
124
Pell Grant funds awarded to students enrolled at
the institution of higher education for the preced-
ing fiscal year.
‘‘(B) MINIMUM.—A grant under this section
shall be awarded in an amount that is not less
than $10,000.
‘‘(3) DURATION AND PAYMENTS.—
‘‘(A) 
DURATION.—The 
Secretary 
shall
award a grant under this section for a period of
3 years.
‘‘(B) PAYMENTS.—Subject to paragraph (2),
the Secretary shall make annual grant payments
under this section.
‘‘(4) ELIGIBLE INSTITUTIONS.—An institution of
higher education shall be eligible to receive a grant
under this section for a fiscal year if the total amount
of all Federal Pell Grant funds awarded to students
enrolled at the institution of higher education for the
preceding fiscal year equals or exceeds $350,000.
‘‘(5) USE OF FUNDS.—Grant funds under this
section shall be used by an institution of higher edu-
cation to support or establish a campus-based child
care program serving the needs of low-income students
enrolled at the institution of higher education.
125
‘‘(6) DEFINITION
OF
LOW-INCOME
STUDENT.—
For the purpose of this section, the term ‘low-income
student’ means a student who is eligible to receive a
Federal Pell Grant for the fiscal year for which the
determination is made.
‘‘(b) APPLICATIONS.—An institution of higher edu-
cation desiring a grant under this section shall submit an
application to the Secretary at such time, in such manner,
and accompanied by such information as the Secretary
may require. Each application shall—
‘‘(1) demonstrate that the institution is an eligi-
ble institution described in subsection (a)(4);
‘‘(2) specify the amount of funds requested;
‘‘(3) demonstrate the need of low-income students
at the institution for campus-based child care services
by including in the application student demographics
and other relevant data;
‘‘(4) identify the resources the institution will
draw upon to support the child care program and the
participation of low-income students in the program,
such as accessing social services funding, using stu-
dent activity fees to help pay the costs of child care,
using resources obtained by meeting the needs of par-
ents who are not low-income students, accessing foun-
dation, corporate, or other institutional support, and
126
demonstrating that the use of the resources will not
result in increases in student tuition;
‘‘(5) contain an assurance that the institution
will meet the child care needs of low-income students
through the provision of services, or through a con-
tract for the provision of services;
‘‘(6) provide a timeline, covering the period from
receipt of the grant through the provision of the child
care services, delineating the specific steps the institu-
tion will take to achieve the goal of providing low-in-
come students with child care services;
‘‘(7) specify any measures the institution will
take to assist low-income students with child care
during the period before the institution provides child
care services;
‘‘(8) include a plan for identifying resources
needed for the child care services, including space in
which to provide child care services, and technical as-
sistance if necessary;
‘‘(9) contain an assurance that any child care
facility assisted under this section will meet the ap-
plicable State or local government licensing, certifi-
cation, approval, or registration requirements; and
‘‘(10) contain a plan for any child care facility
assisted under this section to become accredited with-
127
in 3 years of the date the institution first receives as-
sistance under this section.
‘‘(c) REPORTING REQUIREMENTS; CONTINUING ELIGI-
BILITY.—
‘‘(1) REPORTING REQUIREMENTS.—
‘‘(A) REPORTS.—Each institution of higher
education receiving a grant under this section
shall report to the Secretary 18 months and 36
months after receiving the first grant payment
under this section.
‘‘(B) CONTENTS.—The report shall in-
clude—
‘‘(i) data on the population served
under this section;
‘‘(ii) information on campus and com-
munity resources and funding used to help
low-income students access child care serv-
ices;
‘‘(iii) information on progress made
toward accreditation of any child care facil-
ity; and
‘‘(iv) information on the impact of the
grant on the quality, availability, and af-
fordability of campus-based child care serv-
ices.
128
‘‘(2) CONTINUING
ELIGIBILITY.—The Secretary
shall make the third annual grant payment under
this section to an institution of higher education only
if the Secretary determines, on the basis of the 18-
month report submitted under paragraph (1), that the
institution is making a good faith effort to ensure
that low-income students at the institution have ac-
cess to affordable, quality child care services.
‘‘(d) AUTHORIZATION
OF APPROPRIATIONS.—There
are authorized to be appropriated to carry out this section
$30,000,000 for fiscal year 1999 and such sums as may be
necessary for each of the 4 succeeding fiscal years.’’.
SEC. 406. FEDERAL SUPPLEMENTAL EDUCATIONAL OPPOR-
TUNITY GRANTS.
(a) EXTENSION OF AUTHORITY.—Section 413A(b)(1)
(20 U.S.C. 1070b(b)(1)) is amended by striking ‘‘1993’’ and
inserting ‘‘1999’’.
(b) USE OF FUNDS FOR LESS-THAN-FULL-TIME STU-
DENTS.—Subsection (d) of section 413C (20 U.S.C. 1070b–
2(d)) is amended by striking ‘‘and if the total financial
need’’ and all that follows and inserting the following: ‘‘,
then grant funds shall be made available to such independ-
ent and less-than-full-time students.’’.
(c) ALLOCATION OF FUNDS.—Section 413D (20 U.S.C.
1070b-3) is amended—
129
(1) by striking subsection (b); and
(2) in subsection (c)(1), by striking ‘‘three-quar-
ters of the remainder’’ and inserting ‘‘the remainder’’;
(3) in subsection (c)(2)(A)(i), by striking ‘‘sub-
section (d)’’ and inserting ‘‘subsection (c)’’;
(4) by redesignating subsections (c), (d), (e), and
(f) as subsections (b), (c), (d), and (e), respectively;
and
(5) by inserting after subsection (e) (as so redes-
ignated) the following new subsection:
‘‘(f) CARRY-OVER/CARRY-BACK AUTHORITY.—
‘‘(1) CARRY-OVER AUTHORITY.—
‘‘(A) CARRY-OVER UP TO 10 PERCENT.—Of
the sums granted to an eligible institution under
this subpart for any fiscal year, 10 percent may,
at the discretion of the institution, remain avail-
able for expenditure during the succeeding fiscal
year to carry out the program under this sub-
part.
‘‘(B) REALLOCATION OF EXCESS.—Any of
the sums so granted to an institution for a fiscal
year which are not needed by that institution to
operate programs under this subpart during that
fiscal year, and which it does not wish to use
during the next fiscal year as authorized in the
130
preceding sentence, shall remain available to the
Secretary for making grants under section 413B
to other institutions in the same State until the
close of the second fiscal year next succeeding the
fiscal year for which such funds were appro-
priated.
‘‘(2) CARRY-BACK AUTHORITY.—
‘‘(A) CARRY-BACK UP TO 10 PERCENT.—Up
to 10 percent of the sums the Secretary deter-
mines an eligible institution may receive from
funds which have been appropriated for a fiscal
year may be used by the institution for expendi-
ture during the fiscal year preceding the fiscal
year for which the sums were appropriated.
‘‘(B) USE OF CARRIED-BACK FUNDS.—An
eligible institution may make grants to students
after the end of the academic year, but prior to
the beginning of the succeeding fiscal year, from
such succeeding fiscal year’s appropriations.’’.
SEC. 407. GRANTS TO STATES FOR STATE STUDENT INCEN-
TIVES.
(a) AUTHORIZATION
OF APPROPRIATIONS.—Section
415A(b) of the Higher Education Act of 1965 (20 U.S.C.
1070c(b)) is amended—
131
(1) in paragraph (1), by striking ‘‘1993’’ and in-
serting ‘‘1999’’;
(2) by redesignating paragraph (2) as para-
graph (3); and
(3) by inserting after paragraph (1) the follow-
ing:
‘‘(2) RESERVATION.—For any fiscal year for
which the amount appropriated under paragraph (1)
exceeds $25,000,000, the excess shall be available to
carry out section 415E.’’.
(b) SPECIAL LEVERAGING EDUCATIONAL ASSISTANCE
PARTNERSHIP PROGRAM.—Subpart 4 of part A of title IV
of the Higher Education Act of 1965 (20 U.S.C. 1070c et
seq.) is amended—
(1) by redesignating section 415E as section
415F; and
(2) by inserting after section 415D the following:
‘‘SEC. 415E. SPECIAL LEVERAGING EDUCATIONAL ASSIST-
ANCE PARTNERSHIP PROGRAM.
‘‘(a) IN GENERAL.—From amounts reserved under sec-
tion 415A(b)(2) for each fiscal year, the Secretary shall—
‘‘(1) make allotments among States in the same
manner as the Secretary makes allotments among
States under section 415B; and
132
‘‘(2) award grants to States, from allotments
under paragraph (1), to enable the States to pay the
Federal share of the cost of the authorized activities
described in subsection (c).
‘‘(b) AUTHORIZED ACTIVITIES.—Each State receiving
a grant under this section may use the grant funds for—
‘‘(1) increasing the dollar amount of grants
awarded under section 415B to eligible students who
demonstrate financial need;
‘‘(2) carrying out transition programs from sec-
ondary school to postsecondary education for eligible
students who demonstrate financial need;
‘‘(3) carrying out a financial aid program for el-
igible students who demonstrate financial need and
wish to enter teaching or computer-related careers, or
other fields of study determined by the State to be
critical to the State’s workforce needs;
‘‘(4) carrying out early intervention programs,
mentoring programs, and career education programs
for eligible students who demonstrate financial need;
and
‘‘(5) awarding merit or academic scholarships to
eligible students who demonstrate financial need.
‘‘(c) MAINTENANCE OF EFFORT REQUIREMENT.—Each
State receiving a grant under this section for a fiscal year
133
shall provide the Secretary an assurance that the aggregate
amount expended per student or the aggregate expenditures
by the State, from funds derived from non-Federal sources,
for the authorized activities described in subsection (b) for
the preceding fiscal year were not less than the amount ex-
pended per student or the aggregate expenditures by the
State for the activities for the second preceding fiscal year.
The Secretary may waive this subsection for good cause,
as determined by the Secretary.
‘‘(d) FEDERAL SHARE.—The Federal share of the cost
of the authorized activities described in subsection (b) for
any fiscal year shall be 25 percent.’’.
(c) TECHNICAL AND CONFORMING AMENDMENTS.—
(1) PURPOSE.—Subsection (a) of section 415A of
the Higher Education Act of 1965 (20 U.S.C.
1070c(a)) is amended to read as follows:
‘‘(a) PURPOSE OF SUBPART.—It is the purpose of this
subpart to make incentive grants available to States to as-
sist States in—
‘‘(1) providing grants to—
‘‘(A) eligible students attending institutions
of higher education or participating in programs
of study abroad that are approved for credit by
institutions of higher education at which such
students are enrolled; and
134
‘‘(B) eligible students for campus-based
community service work-study; and
‘‘(2) carrying out the activities described in sec-
tion 415F.’’.
(2) ALLOTMENT.—Section 415B(a)(1) of the
Higher Education Act of 1965 (20 U.S.C. 1070c–
1(a)(1)) is amended by inserting ‘‘and not reserved
under section 415A(b)(2)’’ after ‘‘415A(b)(1)’’.
SEC. 408. SPECIAL PROGRAMS FOR STUDENTS WHOSE FAMI-
LIES ARE ENGAGED IN MIGRANT AND SEA-
SONAL FARMWORK.
(a) COORDINATION.—Section 418A(d) (20 U.S.C.
1070d–2(d)) is amended by inserting after ‘‘contains assur-
ances’’ the following: ‘‘that the grant recipient will coordi-
nate its project, to the extent feasible, with other local, State,
and Federal programs to maximize the resources available
for migrant students, and’’.
(b) EXTENSION OF AUTHORITY.—Section 418A(g) is
amended by striking ‘‘1993’’ each place it appears and in-
serting ‘‘1999’’.
(c) DATA COLLECTION.—Section 418A is amended by
adding at the end the following new subsection:
‘‘(h) DATA COLLECTION.—The National Center for
Education Statistics shall collect postsecondary education
data on migrant students.’’.
135
(d) TECHNICAL AMENDMENTS.—Section 418A(e) is
amended by striking ‘‘authorized by subpart 4 of this part
in accordance with section 417A(b)(2)’’ and inserting ‘‘in
accordance with section 402A(c)(1)’’.
SEC. 409. BYRD SCHOLARSHIPS.
(a) ELIGIBILITY.—Section 419G (20 U.S.C. 1070d–
37) is amended by adding at the end the following new sub-
section:
‘‘(e) TERMINATION OF ELIGIBILITY.—The eligibility of
students from the Federated States of Micronesia, the Re-
public of the Marshall Islands, and Palau shall expire on
September 30, 2001.’’.
(b) AUTHORIZATION
OF APPROPRIATIONS.—Section
419K (20 U.S.C. 1070d–41) is amended by striking
‘‘$10,000,000 for fiscal year 1993’’ and inserting
‘‘$40,000,000 for fiscal year 1999’’.
PART B—FEDERAL FAMILY EDUCATION LOAN
PROGRAM
SEC. 411. LIMITATION REPEALED.
Section 421 (20 U.S.C. 1071) is amended by striking
subsection (d).
SEC. 412. ADVANCES TO RESERVE FUNDS.
Section 422 (20 U.S.C. 1072) is amended—
(1) 
in 
subsection 
(a)(2), 
by 
striking
‘‘428(c)(10)(E)’’ and inserting ‘‘428(c)(9)(E)’’;
136
(2) in subsection (c)(6)(B)(i), by striking ‘‘han-
dle written’’ and inserting ‘‘handle written, elec-
tronic,’’;
(3) in subsection (c)(7)
(A) by striking ‘‘to a guaranty agency—’’
and everything that follows through ‘‘(B) if the
Secretary’’ and inserting ‘‘to a guaranty agency,
if the Secretary’’;
(B) by striking ‘‘428(c)(10)(F)(v)’’ and in-
serting ‘‘428(c)(9)(F)(v)’’;
(C) by inserting ‘‘and’’ after ‘‘cash needs,’’;
and
(D) by striking ‘‘or ensure’’ and everything
that follows and inserting a period; and
(4) in the first and second sentences of subsection
(g)(1), by striking ‘‘or the program authorized by
part D of this title’’ each place it appears.
SEC. 413. GUARANTY AGENCY REFORMS.
(a) FEDERAL STUDENT LOAN RESERVE FUND.—Part
B of title IV is amended by inserting after section 422 (20
U.S.C. 1072) the following new section:
‘‘SEC. 422A. FEDERAL STUDENT LOAN RESERVE FUND.
‘‘(a) ESTABLISHMENT.—Each guaranty agency shall,
not later than 60 days after the date of enactment of this
section, deposit all funds, securities, and other liquid assets
137
contained in the reserve fund established pursuant to sec-
tion 422 of this part into a Federal Student Loan Reserve
Fund (in this section and section 422B referred to as the
‘Federal Fund’) which shall be an account of a type selected
by the agency, with the approval of the Secretary.
‘‘(b) INVESTMENT OF FUNDS.—Funds maintained in
the Federal Fund shall be invested in obligations issued or
guaranteed by the United States or a State, or in other
similarly low-risk securities selected by the guaranty agen-
cy.
‘‘(c) ADDITIONAL DEPOSITS.—After the establishment
of the Federal Fund, a guaranty agency shall deposit into
the Federal Fund—
‘‘(1) all amounts received from the Secretary as
payment of reinsurance on loans pursuant to section
428(c)(1);
‘‘(2) from amounts collected on behalf of the obli-
gation of a defaulted borrower, a percentage amount
equal to the complement of the reinsurance percentage
in effect when payment under the guaranty agreement
was made with respect to the defaulted loan pursuant
to sections 428(c)(6)(A) and 428F(a)(1)(B); and
‘‘(3) insurance premiums collected from borrow-
ers pursuant to sections 428(b)(1)(H) and 428H(h).
138
‘‘(d) USES OF FUNDS.—Subject to subsection (f), the
Federal Fund may only be used by a guaranty agency—
‘‘(1) to pay lender claims pursuant to section
428(b)(1)(G), section 428(j), section 437, and section
439(q); and
‘‘(2) to pay into the Agency Operating Fund es-
tablished pursuant to section 422B a default preven-
tion fee in accordance with section 428(l).
‘‘(e) OWNERSHIP OF FEDERAL FUND.—
‘‘(1) IN
GENERAL.—The Federal Fund of the
guaranty agency, and any assets purchased or devel-
oped with funds from the Federal Fund or any other
funds considered reserve funds on the date of enact-
ment of this section, regardless of who holds or con-
trols the reserves or assets, shall be considered to be
the property of the United States to be used in the op-
eration of the program authorized by this part, as
provided in subsection (d) of this section.
‘‘(2) NONLIQUID RESERVE FUND AND OTHER AS-
SETS.—Notwithstanding any other provision of law,
nonliquid reserve fund assets, such as buildings and
equipment purchased or developed by the guaranty
agency with funds from the Federal Fund, or any
other funds considered reserve funds on the date of en-
actment of this section shall—
139
‘‘(A) remain the property of the United
States;
‘‘(B) be used only for such purposes as the
Secretary determines are appropriate; and
‘‘(C) be subject to such restrictions on the
disposition of such assets (which may include a
requirement that any sale of such assets be at not
less than fair market value) as the Secretary de-
termines are appropriate.
‘‘(f) TRANSITION.—
‘‘(1) IN
GENERAL.—In order to establish the
Agency Operating Fund authorized by section 422B,
each guaranty agency may transfer up to 180 days
cash expenses for normal operating expenses, as a
working capital reserve as defined in Office of Man-
agement and budget circular A–87 (Cost Accounting
Standards) from the Federal Fund for deposit into
the Agency Operating Fund for use in the perform-
ance of its duties under this part. Such transfers may
occur during the first three years following the estab-
lishment of the Operating Fund. However, no agency
may transfer in excess of 50 percent of the Federal
Fund balance to its Operating Fund during any fis-
cal year. In determining the transfer amount, the
agency shall insure that sufficient funds remain in
140
the Federal Fund to pay lender claims within the re-
quired time periods and to meet the reserve recall re-
quirements of the Balanced Budget Act of 1997.
‘‘(2) REPAYMENT PROVISIONS.—Each guaranty
agency shall begin repayment of sums transferred
pursuant to this subsection no later than the start of
the fourth year after the establishment of the Agency
Operating Fund, and shall repay all amounts trans-
ferred no later than 5 years from the date of the es-
tablishment of the Agency Operating Fund. Each
guaranty agency shall provide to the Secretary, on an
annual basis, a financial analysis demonstrating its
ability to repay all outstanding amounts while any
transferred amounts are owned to the Federal Fund.
‘‘(3) SPECIAL RULE.—In applying the minimum
reserve level required by section 428(c)(9)(A), the Sec-
retary shall include all amounts owed to the Federal
Fund by the agency due to transfers allowed under
paragraph (1) in the calculation.’’.
(b) AGENCY OPERATING FUND ESTABLISHED.—Part
B of title IV is further amended by inserting after section
422A (as added by subsection (a)) the following new section:
‘‘SEC. 422B. AGENCY OPERATING FUND.
‘‘(a) ESTABLISHMENT.—Each guaranty agency shall,
not later than 60 days after the date of enactment of this
141
section, establish a fund designated as the Agency Operating
Fund (hereinafter referred to as the ‘Operating Fund’).
‘‘(b) INVESTMENT OF FUNDS.—Funds deposited into
the Operating Fund shall be invested at the discretion of
the guaranty agency in accordance with prudent investor
standards.
‘‘(c) ADDITIONAL DEPOSITS.—After the establishment
of the Operating Fund, the guaranty agency shall deposit
into the Operating Fund—
‘‘(1) the loan processing and issuance fee paid by
the Secretary pursuant to section 428(f);
‘‘(2) the portfolio maintenance fee paid by the
Secretary pursuant to section 458;
‘‘(3) the default prevention fee paid in accord-
ance with section 428(l);
‘‘(4) amounts retained by the guaranty agency
pursuant to section 428(c)(6)(B) from collection on
defaulted loans held by the agency, after payment of
the Secretary’s equitable share, excluding amounts de-
posited in the Federal Fund pursuant to section
422A(c)(2); and
‘‘(5) interest earned on the Federal Fund during
the first 3 years after the date of enactment of this
section, but only to the extent permitted by regula-
tions prescribed by the Secretary to permit a limited
142
number of guaranty agencies (not to exceed 10) essen-
tial resources to maintain sufficient operating funds
and to restructure their operations in accordance with
the requirements of this section and section 422A.
‘‘(d) USES OF FUNDS.—
‘‘(1) IN
GENERAL.—Funds in the Operating
Fund shall be used for activities related to student fi-
nancial aid, including application processing, loan
disbursement, enrollment and repayment status man-
agement, default prevention activities, default collec-
tion activities, school and lender training, financial
awareness and outreach activities, compliance mon-
itoring, other loan program related activities in sup-
port of postsecondary education and other student fi-
nancial aid related activities as determined by the
guaranty agency.
‘‘(2) SPECIAL
RULE.—The guaranty agency
may, in its discretion, transfer funds from the Oper-
ating Fund to the Federal Student Loan Reserve
Fund for use in accordance with section 422A. Such
transfer shall be irrevocable, and any funds so trans-
ferred shall become the property of the United States.
‘‘(3) DEFINITIONS.—For purposes of this sub-
section:
143
‘‘(A) The term ‘default collection activities’
means activities of a guaranty agency which are
directly related to the collection of the loan on
which a default claim has been paid to the par-
ticipating lender, including the due diligence ac-
tivities required pursuant to regulations of the
Secretary.
‘‘(B) The term ‘default prevention activities’
means activities of a guaranty agency which are
directly related to providing collection assistance
to the lender on a delinquent loan, prior to the
loan’s being legally in a default status, including
due diligence activities required pursuant to reg-
ulations of the Secretary.
‘‘(C) The term ‘enrollment and repayment
status management’ means activities of a guar-
anty agency which are directly related to
ascertaining the student’s enrollment status, in-
cluding prompt notification to the lender of such
status, an audit of the note or written agreement
to determine if the provisions of that note or
agreement are consistent with the records of the
guaranty agency as to the principal amount of
the loan guaranteed, and an examination of the
note or agreement to assure that the repayment
144
provisions are consistent with the provisions of
this part.
‘‘(e) OWNERSHIP OF OPERATING FUND.—The Operat-
ing Fund of the guaranty agency shall be considered to be
the property of the guaranty agency. The Secretary may
regulate the uses or expenditure of moneys in the Operating
Fund with respect to activities required under guaranty
agency agreements under subsections (b) and (c) of section
428 until such time as a guaranty agency has repaid to
the Federal Fund all reserve funds transferred under section
422A(f). During any period in which funds are owed to
the Federal Fund as a result of a transfer under 422A(f),
moneys in the Operating Fund may only be used for ex-
penses related to the student loan programs authorized
under this part. The Secretary may require such necessary
reports and audits as provided in section 428(b)(2).’’.
(c) ADDITIONAL RECALL OF RESERVES.—Section 422
(as amended by section 412) is further amended by adding
at the end the following new subsection:
‘‘(i) ADDITIONAL RECALL OF RESERVES.—
‘‘(1) IN GENERAL.—Notwithstanding any other
provision 
of 
law, 
the 
Secretary 
shall 
recall
$30,000,000 for each of the fiscal years 1999, 2000,
2001, 2002, and 2003 from the reserve funds held by
guaranty agencies.
145
‘‘(2) DEPOSIT.—Funds recalled by the Secretary
under this subsection shall be deposited in the Treas-
ury.
‘‘(3) REQUIRED SHARE.—The Secretary shall re-
quire each guaranty agency to return annually re-
serve funds under paragraph (1) based on one-fifth of
the agency’s required share. For purposes of this
paragraph, a guaranty agency’s required share shall
be determined as follows:
‘‘(A) The Secretary shall impose on each
guaranty agency an equal percentage reduction
in the amount of the agency’s reserve funds held
as of September 30, 1996.
‘‘(B) The equal percentage reduction shall
be the percentage obtained by dividing—
‘‘(i) $150,000,000 by
‘‘(ii) the total amount of all such agen-
cies’ reserve funds held as of September 30,
1996.
‘‘(4) OFFSET
OF
REQUIRED
SHARES.—If any
guaranty returns to the Secretary any reserves in ex-
cess of the amount required under this subsection or
subsection (h), the total amount required to be re-
turned under paragraph (1) shall be reduced by the
amount of such additional reserve return.
146
‘‘(5) DEFINITION OF RESERVE FUNDS.—The term
‘reserve funds’ when used with respect to a guaranty
agency—
‘‘(A) includes any reserve funds in cash or
liquid assets held by the guaranty agency, or
held by, or under the control of, any other entity;
and
‘‘(B) does not include building, equipment,
or other nonliquid assets.’’.
(d) CONFORMING AMENDMENTS.—
(1) REINSURANCE PAYMENTS.—
(A) AMENDMENTS.—Section 428(c)(1) (20
U.S.C. 1078(c)(1)) is amended—
(i) in subparagraph (A), by striking
‘‘98 percent’’ and inserting ‘‘95 percent’’;
(ii) in subparagraph (B)(i), by strik-
ing ‘‘88 percent’’ and inserting ‘‘85 per-
cent’’; and
(iii) in subparagraph (B)(ii), by strik-
ing ‘‘78 percent’’ and inserting ‘‘75 per-
cent’’;
(iv) in subparagraph (E)—
(I) by striking ‘‘for ‘98 percent’;’’
and inserting ‘‘for ‘95 percent’;’’;
147
(II) by striking ‘‘for ‘88 percent’;’’
and inserting ‘‘for ‘85 percent’;’’; and
(III) by striking ‘‘for ‘78 per-
cent’.’’ and inserting ‘‘for ‘75 per-
cent’.’’;
(v) in subparagraph (F)—
(I) by striking ‘‘for ‘98 percent’;’’
and inserting ‘‘for ‘95 percent’;’’;
(II) by striking ‘‘for ‘88 percent’;’’
and inserting ‘‘for ‘85 percent’;’’; and
(III) by striking ‘‘for ‘78 per-
cent’.’’ and inserting ‘‘for ‘75 per-
cent’.’’;
(vi) by striking subparagraph (D) and
redesignating subparagraphs (E) and (F)
as subparagraphs (D) and (E), respectively.
(B) EFFECTIVE
DATE.—The amendments
made by subparagraph (A) of this paragraph
apply to loans for which the first disbursement
is made on or after October 1, 1998.
(2) EQUITABLE
SHARE.—Section 428(c)(6) is
amended—
(A) in subparagraph (A)—
(i) by striking ‘‘(A) For the purpose’’
and inserting ‘‘For the purpose’’; and
148
(ii) by striking clause (ii) and insert-
ing the following:
‘‘(ii) an amount equal to 24 percent of such
payments for use in accordance with section
422B.’’;
(B) by striking subparagraphs (B) and (C);
and
(C) by redesignating clauses (i) and (ii) as
subparagraphs (A) and (B).
(3) GUARANTY AGENCY RESERVE LEVEL.—Sec-
tion 428(c)(9)(C) is amended—
(A) by striking ‘‘80 percent pursuant to sec-
tion 428(c)(1)(B)(ii)’’ and inserting ‘‘85 percent
pursuant to paragraph (1)(B)(i) of this sub-
section’’; and
(B) by striking ‘‘30 working days’’ and in-
serting ‘‘45 working days’’.
(4) PAYMENT
OF
CERTAIN
COSTS.—Section
428(f) is amended—
(A) by striking paragraph (1)(A) and in-
serting the following:
‘‘(1) PAYMENT
FOR
CERTAIN
ACTIVITIES.—(A)
The Secretary shall, in accordance with the provisions
of this paragraph, pay to each guaranty agency for
each fiscal year a loan processing and issuance fee
149
equal to 0.65 percent of the total principal amount of
the loans on which insurance was issued under this
part during such fiscal year by such agency.’’; and
(B) in paragraph (1)(B), by striking the
first sentence and inserting the following: ‘‘The
payment required by subparagraph (A) shall be
paid on a quarterly basis.’’.
(5) DEFAULT
AVERSION
ASSISTANCE.—Section
428(l) is amended to read as follows:
‘‘(l) DEFAULT AVERSION ASSISTANCE.—
‘‘(1) ASSISTANCE REQUIRED.—Upon receipt of a
proper request from a lender received not earlier than
the 60th day of delinquency, a guaranty agency hav-
ing an agreement with the Secretary under subsection
(c) of this section shall engage in default aversion ac-
tivities designed to prevent the default by a borrower
on a loan covered by such agreement.
‘‘(2) REIMBURSEMENT.—(A) A guaranty agency
may, in accordance with the provisions of this para-
graph, transfer from the Federal Student Loan Re-
serve Account to the Operating Account a default
aversion fee. Such fee shall be paid for any loan on
which a claim for default has not been presented that
the guaranty agency successfully brings into current
150
repayment status on or before the 210th day after the
loan becomes 60 days delinquent.
‘‘(B) The default aversion fee shall be equal to 1
percent of the total unpaid principal and accrued in-
terest on the loan at the time the request is submitted
by the lender. Such fee shall not be paid more than
once on any loan for which the guaranty agency
averts the default unless the borrower remained cur-
rent in payments for at least 12 months prior to the
subsequent delinquency. A guaranty agency may
transfer such fees earned under this subsection no
more frequently than monthly.
‘‘(C) For the purpose of earning the default aver-
sion fee, the term ‘current repayment status’ means
that the borrower is not delinquent in the payment of
any principal or interest on the loan.’’.
SEC. 414. SCOPE AND DURATION OF PROGRAM.
Section 424(a) (20 U.S.C. 1074(a)) is amended—
(1) by striking ‘‘October 1, 2002’’ and inserting
‘‘October 1, 2004’’; and
(2) by striking ‘‘September 30, 2006’’ and insert-
ing ‘‘September 30, 2008’’.
151
SEC. 415. LIMITATIONS ON INDIVIDUAL FEDERALLY IN-
SURED LOANS AND FEDERAL LOAN INSUR-
ANCE.
Section 425(a)(1)(A) (20 U.S.C. 1075(a)(1)(A)) is
amended—
(1) in clause (i)—
(A) by inserting ‘‘and’’ after the semicolon
at the end of subclause (I); and
(B) by striking subclauses (II) and (III)
and inserting the following:
‘‘(II) if such student is enrolled in a
program of undergraduate education which
is less than one academic year, the maxi-
mum annual loan amount that such student
may receive may not exceed the amount
that bears the same ratio to the amount
specified in subclause (I) as the length of
such program measured in semester, tri-
mester, quarter, or clock hours bears to one
academic year;’’; and
(2) by inserting ‘‘and’’ after the semicolon at the
end of clause (iii).
SEC. 416. APPLICABLE INTEREST RATES.
(a) APPLICABLE INTEREST RATES.—
(1) AMENDMENT.—Section 427A (20 U.S.C.
1077a) is amended to read as follows:
152
‘‘SEC. 427A. APPLICABLE INTEREST RATES.
‘‘(a) INTEREST RATES FOR NEW LOANS ON OR AFTER
JULY 1, 1998.—
‘‘(1) IN
GENERAL.—Subject to paragraph (2),
with respect to any loan made, insured, or guaranteed
under this part (other than a loan made pursuant to
section 428B or 428C) for which the first disburse-
ment is made on or after July 1, 1998, the applicable
rate of interest shall, during any 12-month period be-
ginning on July 1 and ending on June 30, be deter-
mined on the preceding June 1 and be equal to—
‘‘(A) the bond equivalent rate of 91-day
Treasury bills auctioned at the final auction held
prior to such June 1; plus
‘‘(B) 2.3 percent,
except that such rate shall not exceed 8.25 percent.
‘‘(2) IN SCHOOL AND GRACE PERIOD RULES.—
With respect to any loan under this part (other than
a loan made pursuant to section 428B or 428C) for
which the first disbursement is made on or after July
1, 1998, the applicable rate of interest for interest
which accrues—
‘‘(A) prior to the beginning of the repay-
ment period of the loan; or
‘‘(B) during the period in which principal
need not be paid (whether or not such principal
153
is in fact paid) by reason of a provision de-
scribed in section 428(b)(1)(M) or 427(a)(2)(C),
shall be determined under paragraph (1) by substitut-
ing ‘1.7 percent’ for ‘2.3 percent’.
‘‘(3) PLUS LOANS.—With respect to any loan
under section 428B for which the first disbursement
is made on or after July 1, 1998, the applicable rate
of interest shall be determined under paragraph (1)—
‘‘(A) by substituting ‘3.1 percent’ for ‘2.3
percent’; and
‘‘(B) by substituting ‘9.0 percent’ for ‘8.25
percent’.
‘‘(b) LESSER RATES PERMITTED.—Nothing in this
section or section 428C shall be construed to prohibit a lend-
er from charging a borrower interest at a rate less than
the rate which is applicable under this part.
‘‘(c) CONSULTATION.—The Secretary shall determine
the applicable rate of interest under this section after con-
sultation with the Secretary of the Treasury and shall pub-
lish such rate in the Federal Register as soon as practicable
after the date of determination.’’.
(2) 
CONFORMING
AMENDMENT.—Section
428B(d)(4) (20 U.S.C. 1078–2(d)(4)) is amended by
striking ‘‘section 427A(c)’’ and inserting ‘‘section
427A(a)(3)’’.
154
(b) SPECIAL ALLOWANCES.—
(1) 
AMENDMENT.—Section 
438(b)(2)(F) 
(20
U.S.C. 1087–1(b)(2)(F)) is amended to read as fol-
lows:
‘‘(F) LOANS DISBURSED AFTER JULY 1, 1998.—
‘‘(i) IN
GENERAL.—Subject to paragraph
(4) and clauses (ii), (iii), and (iv) of this sub-
paragraph, the special allowance paid pursuant
to this subsection on loans for which the first dis-
bursement is made on or after July 1, 1998,
shall be computed—
‘‘(I) by determining the average of the
bond equivalent rates of 91-day Treasury
bills auctioned for such 3-month period;
‘‘(II) by subtracting the applicable in-
terest rates on such loans from such average
bond equivalent rate;
‘‘(III) by adding 2.8 percent to the re-
sultant percent; and
‘‘(IV) by dividing the resultant percent
by 4.
‘‘(ii) IN SCHOOL AND GRACE PERIOD.—In
the case of any loan for which the first disburse-
ment is made on or after July 1, 1998, and for
which the applicable rate of interest is described
155
in section 427A(a)(2), clause (i)(III) of this sub-
paragraph shall be applied by substituting ‘2.2
percent’ for ‘2.8 percent’.
‘‘(iii) PLUS LOANS.—In the case of any
loan for which the first disbursement is made on
or after July 1, 1998, and for which the applica-
ble rate of interest is described in section
427A(a)(3), clause (i)(III) of this subparagraph
shall be applied by substituting ‘3.1 percent’ for
‘2.8 percent’, subject to clause (iv) of this sub-
paragraph.
‘‘(iv) LIMITATION ON SPECIAL ALLOWANCES
FOR PLUS LOANS.—In the case of loans dis-
bursed on or after July 1, 1998, for which the in-
terest rate is determined under 427A(a)(3), a
special allowance shall not be paid for a loan
made under section 428B unless the rate deter-
mined for any 12-month period under section
427A(a)(3) exceeds 9 percent.’’.
(2) 
CONFORMING
AMENDMENT.—Section
438(b)(2)(C)(ii) is amended by striking ‘‘In the case’’
and inserting ‘‘Subject to subparagraph (F), in the
case’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply with respect to any loan made, insured,
156
or guaranteed under part B of title IV of the Higher Edu-
cation Act of 1965 for which the first disbursement is made
on or after July 1, 1998.
SEC. 417. FEDERALLY GUARANTEED STUDENT LOANS.
(a) REQUIREMENTS FOR FEDERAL INTEREST SUB-
SIDIES.—Section 428(a)(2) (20 U.S.C. 1078(a)(2)) is
amended by striking everything preceding subparagraph
(D) and inserting the following:
‘‘(2) ADDITIONAL
REQUIREMENTS
TO
RECEIVE
SUBSIDY.—(A) Each student qualifying for a portion
of an interest payment under paragraph (1) shall
provide to the lender a statement from the eligible in-
stitution, at which the student has been accepted for
enrollment, or at which the student is in attendance,
which certifies the eligibility of the student to receive
a loan under this part and the amount of the loan
for which such student is eligible.
‘‘(B) A student shall qualify for a portion of an
interest payment under paragraph (1) if the eligible
institution has provided the lender with a statement
that—
‘‘(i) at the lender’s request, sets forth such
student’s estimated cost of attendance (as deter-
mined under section 472);
157
‘‘(ii) sets forth such student’s estimated fi-
nancial assistance; and
‘‘(iii) sets forth a schedule for disbursement
of the proceeds of the loan in installments, con-
sistent with the requirements of section 428G.
‘‘(C) For the purpose of clause (ii) of subpara-
graph (B), a student shall qualify for a portion of an
interest payment under paragraph (1) if the eligible
institution has provided the lender with a statement
evidencing a determination of need for a loan (as de-
termined under part F of this title) and the amount
of such need, subject to the provisions of subpara-
graph (D).’’.
(b) DURATION OF AUTHORITY.—Section 428(a)(5) is
amended—
(1) by striking ‘‘September 30, 2002’’ and insert-
ing ‘‘September 30, 2004’’; and
(2) by striking ‘‘September 30, 2006’’ and insert-
ing ‘‘September 30, 2008’’.
(c) ANNUAL LOAN LIMITS.—Section 428(b)(1)(A) is
amended—
(1) in clause (i)—
(A) by inserting ‘‘and’’ after the semicolon
at the end of subclause (I); and
158
(B) by striking subclauses (II) and (III)
and inserting the following:
‘‘(II) if such student is enrolled in
a program of undergraduate education
which is less than one academic year,
the maximum annual loan amount
that such student may receive may not
exceed the amount that bears the same
ratio to the amount specified in sub-
clause (I) as the length of such pro-
gram measured in semester, trimester,
quarter, or clock hours bears to one
academic year;’’; and
(2) by inserting ‘‘and’’ after the semicolon at the
end of clause (iii).
(d) SELECTION
OF
REPAYMENT
PLANS.—Section
428(b)(1)(D) is amended by striking ‘‘and (iii)’’ and insert-
ing the following: ‘‘(iii) the student borrower may annually
change the selection of a repayment plan under this part,
and (iv)’’.
(e) COINSURANCE.—Section 428(b)(1)(G) is amended
by striking ‘‘not less than’’.
(f) DEFERMENTS.—Section 428(b)(1)(M) is amend-
ed—
159
(1) in clause (i)(I), by inserting before the semi-
colon the following: ‘‘, except that no borrower, not-
withstanding the provisions of the promissory note,
shall be required to borrow an additional loan under
this title in order to be eligible to receive a deferment
under this clause’’; and
(2) in clause (ii), by inserting before the semi-
colon the following: ‘‘, except that no borrower who
qualifies for unemployment benefits shall be required
to provide any additional paperwork for a deferment
under this clause’’.
(g) LIMITATION, SUSPENSION, AND TERMINATION.—
Section 428(b)(1)(U) is amended—
(1) by striking ‘‘emergency action,,’’ each place
it appears and inserting ‘‘emergency action,’’; and
(2) by striking ‘‘a compliance audit of each lend-
er’’ and inserting the following: ‘‘in the case of any
lender that originates or holds more than $5,000,000
in loans made under this title during an annual
audit period, a compliance audit of such lender’’.
(h) ADDITIONAL
INSURANCE
PROGRAM
REQUIRE-
MENTS.—Section 428(b)(1) is further amended—
(1) by striking ‘‘and’’ at the end of subpara-
graph (W);
(2) in subparagraph (X)—
160
(A) by striking ‘‘428(c)(10)’’ and inserting
‘‘428(c)(9)’’; and
(B) by striking the period at the end and
inserting ‘‘; and’’; and
(3) by adding at the end the following new sub-
paragraph:
‘‘(Y) provides that the lender shall deter-
mine the eligibility of a borrower for a deferment
described in subparagraph (M)(i) based on re-
ceipt of (i) a request for deferment from the bor-
rower, (ii) a newly completed loan application
that documents the borrower’s eligibility for a
deferment, or (iii) student status information re-
ceived by the lender that the borrower is enrolled
on at least a half-time basis.’’.
(i) 
RESTRICTIONS
ON
INDUCEMENTS.—Section
428(b)(3) is amended—
(1) by striking subparagraph (C) and inserting
the following:
‘‘(C) conduct unsolicited mailings of student
loan application forms to students enrolled in
secondary school or a postsecondary institution,
or to parents of such students, except that appli-
cations may be mailed to students who have pre-
161
viously received loans guaranteed under this
part by the guaranty agency; or’’; and
(2) by adding at the end the following new sen-
tence:
‘‘It shall not be a violation of this paragraph for a
guaranty agency to provide assistance to institutions
of higher education comparable to the kinds of assist-
ance provided to institutions of higher education by
the Department of Education.’’.
(j) GUARANTY AGENCY INFORMATION TO ELIGIBLE IN-
STITUTIONS.—Section 428(c)(2)(H)(ii) is amended to read
as follows:
‘‘(ii) the guaranty agency shall not re-
quire the payment from the institution of
any fee for such information; and’’.
(k) FORBEARANCE.—Section 428(c)(3) is amended—
(1) in subparagraph (A)(i), by striking ‘‘writ-
ten’’;
(2) in subparagraph (B), by inserting before the
semicolon the following: ‘‘, including forbearance
granted after consideration of a borrower’s total debt
burden’’; and
(3) in the last sentence—
(A) by striking ‘‘and (ii)’’ and inserting
‘‘(ii)’’; and
162
(B) by inserting before the period at the end
the following: ‘‘, and (iii) forbearance for periods
not to exceed 60 days if the lender reasonably de-
termines that such suspensions are necessary to
research or process information relative to such
loan or to collect appropriate documentation re-
lating to the borrower’s request for a deferment
or forbearance’’.
(l) ASSIGNMENT.—Section 428(c)(8) is amended—
(1) by striking ‘‘(A)’’; and
(2) by striking subparagraph (B).
(m) AGENCY
TERMINATION.—Section 428(c)(9) is
amended—
(1) in subparagraph (E)—
(A) by inserting ‘‘or’’ at the end of clause
(iv);
(B) by striking ‘‘; or’’ at the end of clause
(v) and inserting a period; and
(C) by striking clause (vi);
(2) in subparagraph (F)(vii), by striking ‘‘to
avoid disruption’’ and everything that follows and in-
serting ‘‘and to avoid disruption of the student loan
program.’’;
(3) in subparagraph (I), by inserting ‘‘on the
record’’ after ‘‘for a hearing’’; and
163
(4) in subparagraph (K)—
(A) by striking ‘‘and Labor’’ and inserting
‘‘and the Workforce’’; and
(B) by striking everything after ‘‘guaranty
agency system’’ and inserting a period.
(n) LENDER REFERRAL.—Section 428(e) is amend-
ed—
(1) in paragraph (1)(B)(ii), by striking ‘‘during
the transition’’ and everything that follows through
‘‘part D of this title’’; and
(2) in paragraph (3), by striking ‘‘for costs of
transition’’.
(o) ACTION
ON AGREEMENTS.—Section 428(g) is
amended by striking ‘‘and Labor’’ and inserting ‘‘and the
Workforce’’.
(p) LENDERS-OF-LAST RESORT.—Section 428(j) is
amended by striking paragraph (3).
(q) 
INCOME
CONTINGENT
REPAYMENT.—Section
428(m) is amended by striking ‘‘shall require at least 10
percent of the borrowers’’ and inserting ‘‘may require bor-
rowers’’.
(r) STATE SHARE OF DEFAULT COSTS.—Subsection
(n) of section 428 is repealed.
164
(s) BLANKET CERTIFICATE OF GUARANTY.—Section
428 of the Act is amended by adding at the end the follow-
ing new subsection:
‘‘(n) BLANKET CERTIFICATE OF LOAN GUARANTY.—
‘‘(1) IN GENERAL.—Any guaranty agency that
has or enters into any insurance program agreement
with the Secretary under this part may—
‘‘(A) offer eligible lenders participating in
the agency’s guaranty program blanket certifi-
cates of loan guaranty that permit the lender to
make loans without receiving prior approval
from the guaranty agency of individual loans for
eligible borrowers enrolled in eligible programs
at eligible institutions; and
‘‘(B) provide eligible lenders with the abil-
ity to transmit electronically data to the agency
concerning loans the lender has elected to make
under the agency’s insurance program via stand-
ard reporting formats, such reporting to occur at
reasonable, mutually acceptable intervals.
‘‘(2) LIMITATIONS ON BLANKET CERTIFICATE OF
GUARANTY.—A guaranty agency and eligible lender
may establish by mutual agreement limitations or re-
strictions on the number or volume of loans issued by
a lender under the blanket certificate of guaranty.’’.
165
SEC. 418. VOLUNTARY AGREEMENTS WITH GUARANTY
AGENCIES.
Part B of title IV is amended by inserting after section
428 (20 U.S.C. 1078) the following new section:
‘‘SEC. 428A. VOLUNTARY FLEXIBLE AGREEMENTS WITH
GUARANTY AGENCIES.
‘‘(a) VOLUNTARY AGREEMENTS.—
‘‘(1) AUTHORITY.—Notwithstanding any other
provision of law, the Secretary may enter into a vol-
untary, flexible agreement with not more than 6 guar-
anty agencies under this section, in lieu of agreements
with a guaranty agency under subsections (b) and (c)
of section 428, under which the Secretary may waive
or modify any requirement under this title applicable
to the responsibilities of the Secretary and a guaranty
agency.
‘‘(2) ELIGIBILITY.—Any guaranty agency that
had one or more agreements with the Secretary under
subsections (b) and (c) of section 428 as of the day
before the date of enactment of this section may enter
into an agreement with the Secretary under this sub-
section.
‘‘(b) TERMS OF AGREEMENT.—An agreement between
the Secretary and a guaranty agency under this section—
‘‘(1) shall be developed by the Secretary, in con-
sultation with the guaranty agency;
166
‘‘(2) shall be for a period not to exceed five years,
and may be renewed upon the agreement of the par-
ties;
‘‘(3) may include provisions—
‘‘(A) specifying the responsibilities of the
guaranty agency under the agreement, such as—
‘‘(i) administering the issuance of in-
surance on loans made under this part on
behalf of the Secretary;
‘‘(ii) monitoring insurance commit-
ments made under this part;
‘‘(iii) default prevention activities;
‘‘(iv) review of default claims made by
lenders;
‘‘(v) payment of default claims;
‘‘(vi) collection of defaulted loans;
‘‘(vii) adoption of internal systems of
accounting and auditing that are acceptable
to the Secretary, and reporting the result
thereof to the Secretary on a timely, accu-
rate, and auditable basis;
‘‘(viii) timely and accurate collection
and reporting of such other data as the Sec-
retary may require to carry out the pur-
poses of the programs under this title;
167
‘‘(ix) monitoring of institutions and
lenders participating in the program under
this part; and
‘‘(x) the performance of other program
functions by the guaranty agency.
‘‘(B) regarding the fees the Secretary shall
pay, in lieu of revenues that the guaranty agen-
cy may otherwise receive under this part, to the
guaranty agency under the agreement, and other
funds that the guaranty agency may receive or
retain under the agreement, except that in no
case may the cost to the Secretary of the agree-
ment, as reasonably projected by the Secretary,
exceed the cost to the Secretary, as similarly pro-
jected, in the absence of the agreement;
‘‘(C) regarding the use of net revenues, as
described in the agreement under this section, for
such other activities in support of postsecondary
education as may be agreed to by the Secretary
and the guaranty agency;
‘‘(D) regarding the standards by which the
guaranty agency’s performance of its responsibil-
ities under the agreement will be assessed, and
the consequences for a guaranty agency’s failure
168
to achieve a specified level of performance on 1
or more performance standards;
‘‘(E) regarding the circumstances in which
a guaranty agency’s agreement under this sec-
tion may be ended in advance of its expiration
date;
‘‘(F) regarding such other businesses, pre-
viously purchased or developed with reserve
funds, that relate to the program under this part
and in which the Secretary permits the guaranty
agency to engage; and
‘‘(G) such other provisions as the Secretary
may determine to be necessary to protect the
United States from the risk of unreasonable loss
and to promote the purposes of this part; and
‘‘(4) shall provide for uniform lender participa-
tion with the guaranty agency under the terms of the
agreement.
‘‘(c) TERMINATION.—At the expiration or early termi-
nation of an agreement under this section, the Secretary
shall reinstate the guaranty agency’s prior agreements
under subsections (b) and (c) of section 428, subject only
to such additional requirements as the Secretary determines
to be necessary in order to ensure the efficient transfer of
responsibilities between the agreement under this section
169
and the agreements under subsections (b) and (c) of section
428, including the guaranty agency’s compliance with re-
serve requirements under sections 422 and 428.’’.
SEC. 419. FEDERAL CONSOLIDATION LOANS.
(a) AGREEMENTS WITH LENDERS.—Section 428C(a)
(20 U.S.C. 1078–3(a)) is amended—
(1) by striking subclause (II) of paragraph
(3)(B)(i) and inserting the following:
‘‘(II) that loans received during the 180-day
period following the making of the consolidation
loan may be added to the consolidation loan.’’;
and
(2) by striking subparagraph (C) of paragraph
(4) and inserting the following:
‘‘(C) made under part D of this title;’’.
(b) CONTENTS OF AGREEMENTS.—Section 428C(b) is
amended—
(1) in paragraph (1)(A), by striking ‘‘under this
section and (i)’’ and everything that follows and in-
serting ‘‘under this section;’’;
(2) in paragraph (4)(C)(ii)—
(A) by redesignating subclause (III) as sub-
clause (IV);
(B) by inserting after subclause (II) the fol-
lowing new clause:
170
‘‘(III) by the Secretary, in the case of
a consolidation loan for which the applica-
tion is received by an eligible lender on or
after October 1, 1998, except that the Sec-
retary shall pay such interest only on that
portion of the loan that repays Federal
Stafford Loans for which the student bor-
rower received an interest subsidy under
section 428 or Federal Direct Stafford
Loans for which the borrower received an
interest subsidy under section 455; or’’; and
(C) in subclause (IV) (as redesignated), by
striking ‘‘subclause (I) or (II)’’ and inserting
‘‘subclause (I), (II), or (III)’’; and
(3) in paragraph (6)(A), by inserting before the
semicolon at the end the following: ‘‘except that (i) a
lender is not required to consolidate loans described
in subparagraph (D) or (E) of subsection (a)(4); and
(ii) a lender is not prohibited from establishing a
minimum loan balance for which it will process a
consolidation loan application’’.
(c) EXTENSION OF AUTHORITY.—Section 428C(e) is
amended by striking ‘‘September 30, 2002’’ and inserting
‘‘September 30, 2004’’.
171
SEC. 420. DISBURSEMENT.
(a) REQUIREMENTS.—Section 428G(a)(1) (20 U.S.C.
1078–7(a)(1)) is amended by inserting ‘‘greater than one
semester, one trimester, one quarter, or four months’’ after
‘‘period of enrollment’’.
(b) DISBURSEMENT.—Section 428G(b)(1) is amended
by adding at the end the following new sentence: ‘‘An insti-
tution whose cohort default rate (as determined under sec-
tion 435(a)) for each of the three most recent fiscal years
for which data are available is less than 10 percent shall
be exempt from the requirements of this paragraph.’’.
(c) WITHHOLDING OF SECOND DISBURSEMENT.—Sec-
tion 428G(d)(2) is amended by inserting ‘‘by more than
$300’’ after ‘‘under this title’’.
SEC. 421. UNSUBSIDIZED STAFFORD LOANS.
(a) ELIGIBLE BORROWERS.—Section 428H(b) (20
U.S.C. 1078–8(b)) is amended by striking ‘‘which—’’ and
everything that follows and inserting the following:
‘‘which certifies the eligibility of the student to receive a
loan under this part and the amount of the loan for which
such student is eligible. A student shall qualify for a loan
if the eligible institution has provided the lender with a
statement that—
‘‘(1) at the lender’s request, sets forth such stu-
dent’s estimated cost of attendance (as determined
under section 472);
172
‘‘(2) sets forth such student’s estimated financial
assistance, including a loan which qualifies for sub-
sidy payments under section 428; and
‘‘(3) sets forth a schedule for disbursement of the
proceeds of the loan in installments, consistent with
the requirements of section 428G.’’.
(b) LOAN LIMITS.—Section 428H(d)(2)(A) is amend-
ed—
(1) by inserting ‘‘and’’ after the semicolon at the
end of clause (i); and
(2) by striking clauses (ii) and (iii) and insert-
ing the following:
‘‘(ii) if such student is enrolled in a
program of undergraduate education which
is less than one academic year, the maxi-
mum annual loan amount that such student
may receive may not exceed the amount
that bears the same ratio to the amount
specified in clause (i) as the length of such
program measured in semester, trimester,
quarter, or clock hours bears to one aca-
demic year;’’.
(c) QUALIFICATION.—Section 428H(e) is amended by
adding at the end the following new paragraph:
173
‘‘(7) 
QUALIFICATION
FOR
FORBEARANCE,
DEFERMENT, AND INCOME-SENSITIVE REPAYMENT.—A
borrower of a loan made under this section may qual-
ify for a forbearance or deferment, or an income-sen-
sitive repayment plan for which the borrower is eligi-
ble, immediately upon receipt by the lender or holder
of a request from the borrower. Any necessary sup-
porting documentation shall be secured by the lender
or holder within 30 days of the request in order to
continue the forbearance, deferment, or income-sen-
sitive repayment plan.’’.
(d) REPEAL.—Section 428H(f) is repealed.
SEC. 422. REPEAL OF LOAN FORGIVENESS.
Section 428J (20 U.S.C. 1078–10) is repealed.
SEC. 423. LEGAL POWERS AND RESPONSIBILITIES.
(a) GENERAL POWERS.—Section 432(a)(2) (20 U.S.C.
1082(a)(2)) is amended by inserting ‘‘except that this sec-
tion shall not be deemed to limit court review under chapter
7 of title 5, United States Code’’ after ‘‘Secretary’s control’’.
(b) AUDIT
OF FINANCIAL TRANSACTIONS.—Section
432(f)(1) is amended—
(1) in subparagraph (B), by striking ‘‘section
435(d)(1) (D), (F), or (H);’’ and inserting ‘‘section
435(d)(1); and’’;
(2) in subparagraph (C)—
174
(A) by striking ‘‘and Labor’’ and inserting
‘‘and the Workforce’’; and
(B) by striking ‘‘; and’’ and inserting a pe-
riod; and
(3) by striking subparagraph (D).
(c) PROGRAM OF ASSISTANCE.—Section 432(k)(3) is
amended by striking ‘‘Within 1 year’’ and everything that
follows through ‘‘1992, the’’ and inserting ‘‘The’’.
(d) COMMON FORMS AND FORMATS.—Section 432(m)
is amended—
(1) in paragraph (1)(A), by striking ‘‘The Sec-
retary’’ and inserting ‘‘Subject to paragraph (2), the
Secretary’’;
(2) by striking subparagraph (C) of paragraph
(1);
(3) in subparagraph (D), by striking ‘‘Nothing’’
and inserting ‘‘Subject to paragraph (2), nothing’’;
(4) by redesignating subparagraph (D) of such
paragraph as subparagraph (C);
(5) by redesignating paragraphs (2) and (3) as
paragraphs (3) and (4), respectively;
(6) by inserting after paragraph (1) the follow-
ing new paragraph:
‘‘(2) FREE APPLICATION FOR FEDERAL STUDENT
AID.—For academic year 1999–2000 and thereafter,
175
the Secretary shall prescribe the Free Application for
Federal Student Aid as the application form under
this part (other than sections 428B and 428C).’’; and
(7) by adding at the end the following new para-
graph:
‘‘(5) MASTER PROMISSORY NOTE.—
‘‘(A) DEVELOPMENT AND APPROVAL.—With-
in 180 days of enactment of this Act, the Sec-
retary, in cooperation with representatives of
guaranty agencies, eligible lenders, institutions,
students, and organizations involved in student
financial assistance, shall develop and approve a
master promissory note that will allow for a
multiyear line of credit. Such note shall address
the needs of participants in the programs under
this part. The Secretary shall also develop and
approve a corresponding master promissory note
for use under part D of this title that addresses
the needs of participants in the programs under
such part.
‘‘(B) SALE
AND
ASSIGNMENT; ENFORCE-
MENT.—Notwithstanding the preceding provi-
sions of this section, each loan made under a
master promissory note providing for a line of
credit may be sold and assigned independently of
176
any other loan made under the same promissory
note, and each such loan shall be separately en-
forceable in all State and Federal courts on the
basis of an original or copy of the master prom-
issory note with its terms.’’.
(e) DEFAULT
REDUCTION
MANAGEMENT.—Section
432(n) is amended—
(1) in paragraph (1), by striking ‘‘1993’’ and in-
serting ‘‘1999’’; and
(2) in paragraph (3), by striking ‘‘and Labor’’
and inserting ‘‘and the Workforce’’.
(f) REPORTING REQUIREMENT.—Section 432(p) is
amended by striking ‘‘State postsecondary reviewing enti-
ties designated under subpart 1 of part H,’’.
SEC. 424. STUDENT LOAN INFORMATION.
Section 433 (20 U.S.C. 1083) is amended—
(1) in the first sentence of subsection (a), by in-
serting ‘‘in simple and understandable terms’’ after
‘‘to the borrower’’; and
(2) in the first sentence of subsection (b), by in-
serting ‘‘in simple and understandable terms’’ after
‘‘under this subsection’’.
SEC. 425. DEFINITIONS.
(a) COHORT DEFAULT RATE.—Section 435(a) (20
U.S.C. 1085(a)) is amended—
177
(1) in subparagraph (A) of paragraph (2)—
(A) by striking ‘‘or’’ at the end of clause (i);
and
(B) by striking clause (ii) and inserting the
following:
‘‘(ii) there are exceptional mitigating cir-
cumstances within the meaning of paragraph
(4); or
‘‘(iii) there are, in the judgment of the Sec-
retary, 
other 
exceptional 
mitigating 
cir-
cumstances that would make the application of
this paragraph inequitable.’’;
(2) in subparagraph (C) of paragraph (2), by
striking ‘‘July 1, 1998,’’ and inserting ‘‘July 1,
1999,’’;
(3) in paragraph (3), by inserting ‘‘or, at the re-
quest of the institution, a complete copy of the records
for loans made under this part or of the direct loan
servicer for loans made under part D’’ after ‘‘and
loan servicers’’; and
(4) by adding at the end the following new para-
graphs:
‘‘(4) 
DEFINITION
OF
MITIGATING
CIR-
CUMSTANCES.—For purposes of paragraph (2), an in-
stitution shall be treated as having exceptional miti-
178
gating circumstances that make application of that
paragraph inequitable if such institution is certified
by a certified public accountant to meet each of the
following criteria:
‘‘(A) at least two-thirds of the students en-
rolled on at least a half-time basis at the institu-
tion—
‘‘(i) are eligible to receive a Federal
Pell Grant award that is at least equal to
one-half the maximum Federal Pell Grant
award for which the student would be eligi-
ble based on his or her enrollment status; or
‘‘(ii) have an adjusted gross income of
the student, and his or her parents (unless
the student is an independent student), of
less than the poverty level, as determined
under criteria established by the Depart-
ment of Health and Human Services;
‘‘(B) at least two-thirds of the students en-
rolled on a full-time basis at the institution in
any 12-month period ending not more than six
months prior to the date the institution submits
its appeal, and who remain enrolled beyond the
point at which the student would be entitled to
a tuition refund of 100 percent—
179
‘‘(i) complete the educational program
in which they are enrolled within the time
normally required to complete that pro-
gram, as specified in the institution’s en-
rollment contract, catalog, or other mate-
rials; or
‘‘(ii) continue to be enrolled and are
making satisfactory academic progress to-
ward completion of their program; or
‘‘(iii) have entered active duty in the
armed forces of the United States; and
‘‘(C) at least two-thirds of the students en-
rolled on a full-time basis at the institution who
complete the educational program in which they
are enrolled within any 12-month period ending
not more than six months prior to the date the
institution submits its appeal are placed for at
least 13 weeks in an employment position for
which they have been trained, or are enrolled for
at least 13 weeks in higher level education pro-
gram for which the educational program of the
institution provided substantial preparation, or
have entered active duty in the armed forces of
the United States.
180
‘‘(5) REDUCTION OF DEFAULT RATES AT CER-
TAIN MINORITY INSTITUTIONS.—
‘‘(A) BENEFICIARIES
OF
EXCEPTION
RE-
QUIRED
TO
ESTABLISH
MANAGEMENT
PLAN.—
After July 1, 1998, any institution that has a
cohort default rate that equals or exceeds 25 per-
cent for each of the three most recent fiscal years
for which data are available and that relies on
the exception in paragraph (2)(C) of this sub-
section to continue to be an eligible institution
shall—
‘‘(i) submit to the Secretary a default
management plan which the Secretary, in
his discretion, after consideration of the in-
stitution’s history, resources, dollars in de-
fault, and targets for default reduction, de-
termines is acceptable and provides reason-
able assurance that the institution will, by
July 1, 2001, have a cohort default rate that
is less than 25 percent;
‘‘(ii) engage an independent third
party (which may be paid with funds re-
ceived under part B of title III) to provide
technical assistance in implementing such
default management plan; and
181
‘‘(iii) provide to the Secretary, on an
annual basis or at such other intervals as
the Secretary may require, evidence of co-
hort default rate improvement and success-
ful implementation of such default manage-
ment plan.
‘‘(B) DISCRETIONARY
ELIGIBILITY
CONDI-
TIONED ON IMPROVEMENT.—Notwithstanding the
expiration of the exception in paragraph (2)(C),
the Secretary may, in his discretion, continue to
treat an institution described in subparagraph
(A) of this paragraph as an eligible institution
for each of the one-year periods beginning on
July 1, 1999, and July 1, 2000, only if the insti-
tution submits by the beginning of such period
evidence satisfactory to the Secretary that—
‘‘(i) such institution has complied and
is continuing to comply with the require-
ments of subparagraph (A); and
‘‘(ii) such institution has made sub-
stantial improvement, during each of the
preceding one-year periods, in its cohort de-
fault rate.
‘‘(6) SPECIAL RULE BASED ON PARTICIPATION
RATE INDICES.—(A) An institution that demonstrates
182
to the Secretary that its participation rate index (as
defined in regulations in effect on July 1, 1996) is
equal to or less than .0375 for any of the three most
recent fiscal years for which data are available shall
not be subject to paragraph (2).
‘‘(B) An institution shall provide the Secretary
with sufficient data to determine its participation
rate index within 30 days after receiving an initial
notification of its draft cohort default rate.
‘‘(C) Prior to publication of a final cohort de-
fault rate for an institution that provides the data
under subparagraph (B), the Secretary shall notify
the institution of its compliance or noncompliance
with subparagraph (A).’’.
(b) ELIGIBLE LENDER.—Section 435(d) is amended—
(1) in paragraph (1)(A)(ii)—
(A) by striking ‘‘or’’ at the end of subclause
(I); and
(B) by inserting before the semicolon at the
end of subclause (II) the following: ‘‘, or (III) it
is a bank that is a wholly owned subsidiary of
a nonprofit foundation, the foundation is de-
scribed in section 501(c)(3) of the Internal Reve-
nue Code of 1986 and exempt from taxation
under section 501(a) of such Code and has been
183
participating in the program authorized by this
part for three years as of the date of enactment
of the Higher Education Amendments of 1998
and only makes loans to undergraduate students
who are 22 years of age or younger and has a
portfolio of not more than $10,000,000; and in
determining whether the making or holding of
loans to students and parents under this part is
the primary consumer credit function of the eli-
gible lender, all loans (including student loans
and other consumer loans) made or held as trust-
ee or in a trust capacity for the benefit of a third
party shall be considered’’;
(2) in paragraph (1)—
(A) by striking ‘‘and’’ at the end of sub-
paragraph (I);
(B) by striking the period at the end of sub-
paragraph (J) and inserting ‘‘; and’’; and
(C) by adding at the end the following new
subparagraph:
‘‘(K) a wholly owned subsidiary of a pub-
licly held holding company which, for the three
years preceding the date of enactment of this
subparagraph, through one or more subsidiaries
(i) acts as a finance company, and (ii) partici-
184
pates in the program authorized by this part
pursuant to subparagraph (C).’’; and
(3) in paragraph (5), by adding at the end the
following new sentence:
‘‘It shall not be a violation of this paragraph for a
lender to provide assistance to institutions of higher
education comparable to the kinds of assistance pro-
vided to institutions of higher education by the De-
partment of Education.’’.
(c) LINE OF CREDIT.—Section 435(e) is amended to
read as follows:
‘‘(e) LINE OF CREDIT.—The term ‘line of credit’ means
an agreement between the lender and the borrower pursuant
to a master promissory note under which the lender may
make and disburse, in addition to the initial loan, addi-
tional loans in subsequent years.’’.
SEC. 426. DISCHARGE.
(a) DOCUMENTATION.—Section 437(a) (20 U.S.C.
1087(a)) is amended by adding at the end the following:
‘‘A certification of permanent and total disability from a
Veteran’s Hospital shall be acceptable documentation for
discharge under this subsection.’’.
(b) DISCHARGE.—Section 437(c)(1) is amended—
(1) by inserting after ‘‘falsely certified by the eli-
gible institution,’’ the following: ‘‘or if the institution
185
failed to make a refund of loan proceeds which it
owed to such student’s lender,’’; and
(2) by adding at the end the following new sen-
tences: ‘‘In the case of a discharge based upon a fail-
ure to refund, the amount of the discharge shall not
exceed that portion of the loan which should have been
refunded. The Secretary shall report to the Committee
on Education and the Workforce of the House of Rep-
resentatives and the Committee on Labor and Human
Resources of the Senate annually as to the dollar
amount of loan discharges attributable to failures to
make refunds.’’.
SEC. 427. CANCELLATION OF LOANS FOR CERTAIN PUBLIC
SERVICE.
Section 437 is further amended—
(1) in the section heading, by striking out the pe-
riod at the end thereof and inserting in lieu thereof
a semicolon and ‘‘LOAN
FORGIVENESS
FOR
TEACHING.’’;
(2) by amending the heading for subsection (c)
to read as follows: ‘‘DISCHARGE RELATED TO SCHOOL
CLOSURE OR FALSE CERTIFICATION.—’’; and
(3) by adding at the end thereof the following
new subsection:
‘‘(e) CANCELLATION OF LOANS FOR TEACHING.—
186
‘‘(1) FUNCTIONS OF SECRETARY.—The Secretary
shall discharge the liability of a borrower of a quali-
fying loan by repaying the amount owed on the loan,
to the extent specified in paragraph (4), for service
described in paragraph (3).
‘‘(2) QUALIFYING LOANS.—
‘‘(A) IN
GENERAL.—For purposes of this
subsection, a loan is a qualifying loan if—
‘‘(i) the loan was made under section
428 on or after the date of enactment of the
Higher Education Amendments of 1998 to a
borrower who, on the date of entering into
the note or other written evidence of the
loan, had no outstanding balance of prin-
cipal or interest on any loan made before
such date; and
‘‘(ii) the loan was obtained to cover the
cost of instruction for an academic year
after the first and second year of under-
graduate education.
‘‘(B) LIMITATION.—The Secretary may not
repay loans described in subparagraph (A) to
cover the costs of instruction for more than two
academic years, or three academic years in the
187
case of a program of instruction normally re-
quiring five years.
‘‘(C) 
TREATMENT
OF
CONSOLIDATION
LOANS.—A loan made under section 428C may
be a qualifying loan for the purposes of this sub-
section only to the extent that such loan was
used to repay a loan or loans that meet the re-
quirements of subparagraphs (A) and (B), as de-
termined in accordance with regulations pre-
scribed by the Secretary.
‘‘(3) QUALIFYING SERVICE.—A loan shall be dis-
charged under paragraph (1) for service by the bor-
rower as a full-time teacher for each complete aca-
demic year of service, after completion of the second
academic year of service, in a public or other non-
profit private elementary or secondary school—
‘‘(A) which is in the school district of a
local educational agency which is eligible in such
year for assistance pursuant to title I of the Ele-
mentary and Secondary Education Act of 1965;
and
‘‘(B) which for the purpose of this para-
graph and for that year has been determined by
the State educational agency of the State in
which the school is located to be a school in
188
which the enrollment of children counted under
section 1124(c) of the Elementary and Secondary
Education Act of 1965 exceeds 30 percent of the
total enrollment of that school.
‘‘(4) RATE OF DISCHARGE.—(A) Loans shall be
discharged under this subsection at the rate of—
‘‘(i) 30 percent for the first or second com-
plete academic year of qualifying service as de-
scribed in paragraph (3) (after completion of two
years of service); and
‘‘(ii) 40 percent for the third complete year
of such qualifying service.
‘‘(B) The total amount that may be discharged
under this subsection for any borrower shall not ex-
ceed $17,750.
‘‘(C) If a portion of a loan is discharged under
subparagraph (A) for any year, the entire amount of
interest on that loan that accrues for that year shall
also be discharged by the Secretary.
‘‘(D) Nothing in this section shall be construed
to authorize refunding of any repayment of a loan.
‘‘(5) LIMITATION ON TEACHER ELIGIBILITY.—
‘‘(A) SECONDARY
SCHOOL
TEACHERS.—A
borrower may not receive assistance under this
subsection by virtue of teaching in a secondary
189
school unless such borrower majored in the sub-
ject area in which they are teaching.
‘‘(B) ELEMENTARY SCHOOL TEACHERS.—A
borrower may not receive assistance under this
subsection by virtue of teaching in a elementary
school unless such borrower demonstrates, in ac-
cordance with State teacher certification or li-
censing requirements, subject matter knowledge
and teaching skills in reading, writing, mathe-
matics, and other subjects taught in elementary
schools.
‘‘(6) RULE OF CONSTRUCTION.—The amount of a
loan, and interest on a loan, that is canceled under
this subsection shall not be considered income for pur-
poses of the Internal Revenue Code of 1986.
‘‘(7) PREVENTION
OF
DOUBLE
BENEFITS.—No
borrower may, for the same service, receive a benefit
under both this subsection and subtitle D of title I of
the National and Community Service Act of 1990 (42
U.S.C. 12571 et seq.).
‘‘(8) METHOD OF PAYMENT.—The Secretary shall
specify in regulations the manner in which lenders
shall be reimbursed for loans made under this part,
or portions thereof, that are discharged under this
subsection.
190
‘‘(9) LIST.—If the list of schools in which a
teacher may perform service pursuant to paragraph
(3) is not available before May 1 of any year, the Sec-
retary may use the list for the year preceding the year
for which the determination is made to make such
service determination.
‘‘(10) CONTINUING
ELIGIBILITY.—Any teacher
who performs service in a school which—
‘‘(A) meets the requirements of paragraph
(3) in any year during such service; and
‘‘(B) in a subsequent year fails to meet the
requirements of such subsection,
may continue to teach in such school and shall be eli-
gible for loan cancellation pursuant to this subsection
with respect to such subsequent years.’’.
SEC. 428. DEBT MANAGEMENT OPTIONS.
Section 437A (20 U.S.C. 1087–O) is repealed.
SEC. 429. SPECIAL ALLOWANCES.
(a) COMPUTATION.—Section 438(b)(2) (20 U.S.C.
1087–1(b)(2)) is amended—
(1) in subparagraph (A), by striking ‘‘(E), and
(F)’’ and inserting ‘‘and (E)’’; and
(2) in subparagraph (B)(iv), by striking ‘‘, (E),
or (F)’’ and inserting ‘‘or (E)’’.
(b) ORIGINATION FEES.—Section 438(c) is amended—
191
(1) in paragraph (2)—
(A) by striking ‘‘(other than’’ and inserting
‘‘(including loans made under section 428H, but
excluding’’; and
(B) by adding at the end the following new
sentence: ‘‘Except as provided in paragraph (8),
a lender is not authorized to assess an origina-
tion fee under this paragraph unless the lender
assesses the same fee to all student borrowers.’’;
and
(2) by adding at the end the following new para-
graph:
‘‘(8) EXCEPTION.—Notwithstanding paragraph
(2), a lender may assess a lesser origination fee for
a borrower demonstrating greater financial need as
determined by such borrower’s adjusted gross family
income.’’.
(c) LENDING FROM PROCEEDS OF TAX EXEMPT OBLI-
GATIONS.—Section 438 is amended—
(1) by striking subsection (e); and
(2) by redesignating subsection (f) as subsection
(e).
(d) STUDY.—Section 438 is amended by adding at the
end the following new subsection:
192
‘‘(f) STUDY.—The Comptroller General shall conduct
a statistical analysis of the subsidized and unsubsidized
student loan programs under part B to gather data on lend-
ers’ policies on charging origination fees and to determine
if there are any anomalies that would indicate any institu-
tional, programmatic, or socioeconomic discrimination in
the assessing or waiving of such fees. The Comptroller Gen-
eral shall report to the appropriate committees of Congress
within two years after the date of enactment of the Higher
Education Amendments of 1998.’’.
PART C—FEDERAL WORK-STUDY PROGRAMS
SEC. 435. AMENDMENTS TO PART C.
(a) EXTENSION OF AUTHORITY; DEFINITION.—
(1) ELIGIBLE
STUDENTS.—Section 441(a) (20
U.S.C. 2751(a)) is amended by inserting after ‘‘pro-
fessional students’’ the following: ‘‘, including students
participating in an internship or practicum, or as a
research assistant, as determined by the Secretary,’’.
(2) EXTENSION OF AUTHORITY.—Section 441(b)
is amended by striking ‘‘$800,000,000 for fiscal year
1993’’ and inserting ‘‘$1,000,000,000 for fiscal year
1999’’.
(3) DEFINITION OF COMMUNITY SERVICE.—Sec-
tion 441(c) is amended by striking ‘‘which are’’ and
193
inserting ‘‘that are performed off-campus or on-cam-
pus and that are’’.
(b) ALLOCATION OF FUNDS.—Section 442 (42 U.S.C.
2752) is amended—
(1) by striking subsection (b);
(2) in subsection (c)(1), by striking ‘‘three-quar-
ters of the remainder’’ and inserting ‘‘the remainder’’;
(3) in subsection (c)(2)(A)(i), by striking ‘‘sub-
section (d)’’ and inserting ‘‘subsection (c)’’;
(4) in subsection (e)(1), by striking ‘‘subsection
(c)’’ and inserting ‘‘subsection (b)’’; and
(5) by redesignating subsections (c), (d), (e), and
(f) as subsections (b), (c), (d), and (e), respectively.
(c) TUTORING AND LITERACY ACTIVITIES.—
Section 443 of the Higher Education Act of 1965 (42
U.S.C. 2753) is amended—
(1) in subsection (b)(2)—
(A) by striking ‘‘and’’ at the end of sub-
paragraph (A);
(B) by redesignating subparagraph (B) as
subparagraph (C); and
(C) by inserting after subparagraph (A) the
following new subparagraph:
‘‘(B) in academic year 1999 and succeeding
academic years, an institution shall use at least
194
2 percent of the total amount of funds granted
to such institution under this section for such
academic year in accordance with subsection (d);
and’’; and
(2) by adding at the end the following new sub-
section:
‘‘(d) TUTORING AND LITERACY ACTIVITIES.—
‘‘(1) USE OF FUNDS.—In any academic year to
which subsection (b)(2)(B) applies, an institution
shall use the amount required to be used in accord-
ance with this subsection to compensate (including
compensation for time spent in directly related train-
ing and travel) students—
‘‘(A) employed as a reading tutor for chil-
dren who are in preschool through elementary
school; or
‘‘(B) employed in family literacy projects.
‘‘(2) PRIORITY
FOR
SCHOOLS.—An institution
shall—
‘‘(A) give priority, in using such funds, to
the employment of students in the provision of
tutoring services in schools that—
‘‘(i) are identified for school improve-
ment under section 1116(c) of the Elemen-
195
tary and Secondary Education Act of 1965;
or
‘‘(ii) are selected by a local educational
agency under section 15104(a)(2) of such
Act; and
‘‘(B) ensure that any student compensated
with such funds who is employed in a school se-
lected under section 15104(a)(2) of the Elemen-
tary and Secondary Education Act of 1965 is
trained in the instructional practices based on
reliable, replicable research on reading used by
the school pursuant to such section 15104.
‘‘(3) FEDERAL SHARE.—The Federal share of the
compensation of work study students compensated
under this subsection may exceed 75 percent.
‘‘(4) WAIVER.—The Secretary may waive the re-
quirements of this subsection if the Secretary deter-
mines that enforcing such requirements would cause
a hardship for students at the institution.
‘‘(5) RETURN OF FUNDS.—Any institution that
does not use the amount required under this sub-
section, and that does not request and receive a waiv-
er from the Secretary under paragraph (4), shall re-
turn to the Secretary, at such time as the Secretary
may require for reallocation under paragraph (6),
196
any balance of such amount that is not used as so re-
quired.
‘‘(6) 
REALLOCATION.—The 
Secretary 
shall
reallot any amounts returned pursuant to paragraph
(5) among institutions that used at least 4 percent of
the total amount of funds granted to such institution
under this section to compensate students employed in
tutoring and literacy activities in the preceding aca-
demic year. Such funds shall be reallotted among such
institutions on the same basis as excess eligible
amounts are allocated to institutions pursuant to sec-
tion 442(c). Funds received by institutions pursuant
to this paragraph shall be used in the same manner
as amounts required to be used in accordance with
this subsection.’’.
(d) GRANT REQUIREMENTS.—
(1) COMMUNITY SERVICE.—Section 443(b)(2)(A)
(42 U.S.C. 2753(b)(2)(A)) is amended—
(A) by striking ‘‘in fiscal year 1994 and
succeeding fiscal years,’’; and
(B) by inserting ‘‘(including time spent in
travel or training, or both, directly related to
such community service)’’ after ‘‘community
service’’.
197
(2) USE
OF
FUNDS
FOR
INDEPENDENT
AND
LESS-THAN-FULL-TIME STUDENTS.—Section 443(b)(3)
(42 U.S.C. 2753(b)(3)) is amended to read as follows:
‘‘(3) provide that in the selection of students for
employment under such work-study program, only
students, who demonstrate financial need in accord-
ance with part F of this title, and who meet the re-
quirements of section 484 will be assisted, except that
if the institution’s grant under this part is directly
or indirectly based in part on the financial need dem-
onstrated by students who are (A) attending the insti-
tution less than full time, or (B) independent stu-
dents, then grant funds shall be made available to
such less than full-time and independent students;’’.
(3) AVAILABILITY
OF
EMPLOYMENT.—Section
443(b)(6) is amended by striking everything after ‘‘in
need thereof’’ and inserting a semicolon.
(4) ACADEMIC RELEVANCE.—Section 443(c)(4) is
amended by inserting before the semicolon at the end
the following: ‘‘, to the maximum extent practicable’’.
(e) FLEXIBLE USE OF FUNDS.—Section 445(b) (42
U.S.C. 2755(b)) is amended by adding at the end the follow-
ing new paragraph:
‘‘(3) An eligible institution may, with the permission
of a student, make payments to the student under this part
198
by crediting the student’s account at the institution or by
making a direct deposit to the student’s account at a deposi-
tory institution. An eligible institution may only credit the
student’s account at the institution for (A) tuition and fees,
(B) in the case of institutionally owned housing, room and
board, and (C) other institutionally provided goods and
services.’’.
(f) JOB LOCATION AND DEVELOPMENT PROGRAMS.—
Section 446 (42 U.S.C. 2756) is amended—
(1) in subsection (a)(1)—
(A) by striking ‘‘$50,000’’ and inserting
‘‘$60,000’’; and
(B) by striking ‘‘community service jobs, for
currently enrolled students’’ and inserting ‘‘com-
munity service jobs and cooperative education
jobs, for currently enrolled students, including
students participating in work-study programs
under this part’’; and
(2) in subsection (b)—
(A) 
by 
redesignating 
paragraphs 
(4)
through (6) as paragraphs (5) through (7); and
(B) by inserting after paragraph (3) the fol-
lowing new paragraph:
‘‘(4) provide that the institution will notify the
Secretary if the institution will use funds under this
199
section to develop cooperative education jobs and will
provide assurances that—
‘‘(A) the funds provided under this para-
graph will supplement and not supplant any co-
operative education funds available to the insti-
tution;
‘‘(B) in the case of 2-year programs, funds
will be used to develop and expand cooperative
education, jobs for associate degree or certificate
students only;
‘‘(C) the work portion of a cooperative edu-
cation job developed or expanded under this
paragraph will be related to a student’s aca-
demic program; and
‘‘(D) the institution will furnish the Sec-
retary a report on cooperative education jobs ex-
panded and developed under this paragraph, in-
cluding—
‘‘(i) how the funds were used;
‘‘(ii) a list of employers and whether
the employer is a for-profit or not-for-profit
entity; and
‘‘(iii) the employers’ role in the cooper-
ative education job.’’.
200
(g) WORK COLLEGES EXTENSION OF AUTHORITY.—
Section 448(f) (42 U.S.C. 2756b(f)) is amended by striking
‘‘1993’’ and inserting ‘‘1999’’.
PART D—WILLIAM D. FORD FEDERAL DIRECT
LOAN PROGRAM
SEC. 436. SELECTION OF INSTITUTIONS.
(a) GENERAL AUTHORITY.—Section 453(a) (20 U.S.C.
1087c(a)) is amended—
(1) by striking ‘‘PHASE-IN’’ and everything that
follows through ‘‘GENERAL AUTHORITY.—’’ and in-
serting ‘‘GENERAL AUTHORITY.—’’; and
(2) by striking paragraphs (2), (3), and (4).
(b) SELECTION
CRITERIA.—Section 453(b)(2) is
amended by striking ‘‘prescribe,’’ and everything that fol-
lows through the end of subparagraph (B) and inserting
‘‘prescribe.’’.
(c) ORIGINATION.—Section 453(c) is amended—
(1) in paragraph (2)—
(A) in the heading, by striking ‘‘TRANSI-
TION SELECTION CRITERIA’’ and inserting ‘‘SE-
LECTION CRITERIA’’;
(B) by striking ‘‘For academic year 1994–
1995, the Secretary’’ and inserting ‘‘The Sec-
retary’’;
(C) by striking subparagraph (A); and
201
(D) in subparagraph (E), by striking every-
thing after ‘‘deficiencies’’ and inserting a semi-
colon; and
(E) by redesignating subparagraphs (B)
through (H) as subparagraphs (A) through (G);
and
(2) in paragraph (3)—
(A) in the heading, by striking ‘‘AFTER
TRANSITION’’; and
(B) by striking ‘‘For academic year 1995–
1996 and subsequent academic years, the Sec-
retary’’ and inserting ‘‘The Secretary’’.
SEC. 437. TERMS AND CONDITIONS.
(a) INTEREST RATES.—
(1) AMENDMENT.—Section 455(b) (20 U.S.C.
1087e(b)) is amended to read as follows:
‘‘(b) INTEREST RATE.—
‘‘(1) RATES FOR FDSL AND FDUSL.—For Federal
Direct Stafford Loans and Federal Direct Unsub-
sidized Stafford Loans for which the first disburse-
ment is made on or after July 1, 1998, the applicable
rate of interest shall, during any 12-month period be-
ginning on July 1 and ending on June 30, be deter-
mined on the preceding June 1 and be equal to—
202
‘‘(A) the bond equivalent rate of 91-day
Treasury bills auctioned at the final auction held
prior to such June 1; plus
‘‘(B) 2.3 percent,
except that such rate shall not exceed 8.25 percent.
‘‘(2) IN SCHOOL AND GRACE PERIOD RULES.—
With respect to any Federal Direct Stafford Loan or
Federal Direct Unsubsidized Stafford Loan for which
the first disbursement is made on or after July 1,
1995, the applicable rate of interest for interest which
accrues—
‘‘(A) prior to the beginning of the repay-
ment period of the loan; or
‘‘(B) during the period in which principal
need not be paid (whether or not such principal
is in fact paid) by reason of a provision de-
scribed in section 428(b)(1)(M) or 427(a)(2)(C),
shall be determined under paragraph (1) by substitut-
ing ‘1.7 percent’ for ‘2.3 percent’.
‘‘(3) PLUS LOANS.—With respect to Federal Di-
rect PLUS Loan for which the first disbursement is
made on or after July 1, 1998, the applicable rate of
interest shall be determined under paragraph (1)—
‘‘(A) by substituting ‘3.1 percent’ for ‘2.3
percent’; and
203
‘‘(B) by substituting ‘9.0 percent’ for ‘8.25
percent’.
‘‘(4) REPAYMENT INCENTIVES.—Notwithstanding
any other provision of this part, the Secretary is au-
thorized to prescribe in regulation such reductions in
the interest rate paid by a borrower of a loan made
under this part as the Secretary determines appro-
priate to encourage on-time repayment. Such reduc-
tions may be offered only if the Secretary determines
they are both cost neutral and in the best financial
interest of the Federal Government. Any increase in
subsidy costs resulting from such reductions must be
completely offset by corresponding savings in funds
available for the Direct Loan Program in that fiscal
year from section 458 and other administrative ac-
counts.
‘‘(5) PUBLICATION.—The Secretary shall deter-
mine the applicable rates of interest under this sub-
section after consultation with the Secretary of the
Treasury and shall publish such rate in the Federal
Register as soon as practicable after the date of deter-
mination.’’.
(2) EFFECTIVE DATE.—The amendments made
by this section shall apply with respect to any loan
made under part D of title IV of the Higher Edu-
217
‘‘(g) REHABILITATION OF LOANS.—(1)(A) If the bor-
rower of a loan made under this part who has defaulted
on the loan makes 12 on-time, consecutive, monthly pay-
ments of amounts owed on the loan, the loan shall be consid-
ered rehabilitated, and the institution that made the loan
(or the Secretary, in the case of a loan held by the Sec-
retary) shall instruct any credit reporting organization to
which the default was reported to remove the default from
the borrower’s credit history.
‘‘(B) As long as the borrower continues to make sched-
uled repayments on a loan rehabilitated under this para-
graph, the rehabilitated loan shall be subject to the same
terms and conditions, and qualify for the same benefits and
privileges, as other loans made under this part.
‘‘(C) The borrower of a rehabilitated loan shall not be
precluded by section 484 from receiving additional grant,
loan, or work assistance under this title (for which he or
she is otherwise eligible) on the basis of defaulting on the
loan prior to such rehabilitation.
‘‘(D) A borrower may obtain the benefit of this para-
graph with respect to rehabilitating the loan only once.
‘‘(2) If the borrower of loan made under this part who
has defaulted on that loan makes 6 on-time, consecutive,
monthly payments of amounts owed on such loan, the bor-
rower’s eligibility for grant, loan, or work assistance under