date the student for whom the loan is bor-
rowed ceases to carry at least one-half the 
normal full-time academic workload (as de-
termined by the institution); and 
‘‘(B) be subject to deferral during any pe-
riod during which the graduate or professional 
student or the parent meets the conditions re-
quired for a deferral under section 427(a)(2)(C) 
or 428(b)(1)(M). 
‘‘(2) CAPITALIZATION OF INTEREST.— 
‘‘(A) IN
GENERAL.—Interest on loans 
made under this section— 
‘‘(i) which accrues prior to the begin-
ning 
of 
repayment 
under 
paragraph 
(1)(A)(i), shall be added to the principal 
amount of the loan; and 
‘‘(ii) which accrues prior to the begin-
ning 
of 
repayment 
under 
paragraph 
(1)(A)(ii) or during a period in which pay-
ments of principal are deferred pursuant to 
paragraph (1)(B) shall, if agreed upon by 
the borrower and the lender— 
‘‘(I) be paid monthly or quar-
terly; or
‘‘(II) be added to the principal 
amount of the loan not more fre-
quently than quarterly by the lender. 
‘‘(B) INSURABLE
LIMITS.—Capitalization 
of interest under this paragraph shall not be 
deemed to exceed the annual insurable limit on 
account of the borrower.’’. 
(b) 
CONFORMING
AMENDMENT.—Section 
428(b)(7)(C) of such Act (20 U.S.C. 1078(b)(7)(C)) is 
amended by striking ‘‘, 428B,’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall be effective for loans issued on or after 
July 1, 2008. 
SEC. 4. SPECIAL RULES FOR PLUS LOANS. 
Section 428B(a)(3) of the Higher Education Act of 
1965 (20 U.S.C. 1078–2(a)(3)) is amended to read as fol-
lows: 
‘‘(3) SPECIAL RULES.— 
‘‘(A) 
PARENT
BORROWERS.—Whenever 
necessary to carry out the provisions of this 
section, the terms ‘student’ and ‘borrower’ as 
used in this part shall include a parent bor-
rower under this section. 
‘‘(B)(i) EXTENUATING CIRCUMSTANCES.— 
For loans made on or after July 1, 2008, and
before July 1, 2009, a lender may determine 
that extenuating circumstances exist under the 
regulations promulgated pursuant to paragraph 
(1)(A) if an applicant for a loan under this sec-
tion is delinquent for 180 days or less on their 
home mortgage payments and is not more than 
89 days delinquent on the repayment of any 
other debt. 
‘‘(ii) MASTER CALENDAR INAPPLICABLE.— 
Section 482 shall not apply to determinations 
made under clause (i).’’. 
SEC. 5. LENDER-OF-LAST-RESORT. 
(a) IN GENERAL.—Section 428(j) of the Higher Edu-
cation Act of 1965 (20 U.S.C. 1078(j)) is amended— 
(1) in the first sentence of paragraph (1), by 
striking ‘‘students eligible to receive interest benefits 
paid on their behalf under subsection (a) of this sec-
tion who are otherwise unable to obtain loans under 
this part’’ and inserting ‘‘eligible students and par-
ents who are otherwise unable to obtain loans under 
this part (except for consolidation loans under sec-
tion 428C) or who attend an institution of higher 
education in the State that is designated under 
paragraph (4)’’;
(2) in paragraph (2)(B), by inserting ‘‘, in the 
case of students and parents applying for loans 
under this subsection because of an inability to oth-
erwise obtain loans under this part (except for con-
solidation loans under section 428C),’’ after ‘‘lender, 
nor’’; 
(3) in paragraph (3)(C)— 
(A) in the first sentence, by inserting ‘‘or 
designates an institution of higher education for 
participation in the program under this sub-
section under paragraph (4)’’ after ‘‘under this 
part’’; and 
(B) in the third sentence, by inserting ‘‘or 
to eligible borrowers who attend an institution 
in the State that is designated under paragraph 
(4)’’ after ‘‘problems’’; and 
(4) by adding at the end the following: 
‘‘(4) INSTITUTION-WIDE STUDENT QUALIFICA-
TION.—Upon the request of an institution of higher 
education and pursuant to standards developed by 
the Secretary, the Secretary shall designate such in-
stitution for participation in the lender-of-last-resort 
program under this paragraph. If the Secretary des-
ignates an institution under this paragraph, the 
guaranty agency designated for the State in which
the institution is located shall make loans, in the 
same manner as such loans are made under para-
graph (1), to students and parent borrowers of the 
designated institution, regardless of whether the stu-
dents or parent borrowers are otherwise unable to 
obtain loans under this part (other than a consolida-
tion loan under section 428C). 
‘‘(5) STANDARDS
DEVELOPED
BY
THE
SEC-
RETARY.—In developing standards with respect to 
paragraph (4), the Secretary may require— 
‘‘(A) an institution of higher education to 
demonstrate that, despite due diligence on the 
part of the institution, the institution has been 
unable to secure the commitment of lenders 
willing to make loans to a significant number of 
students attending the institution; 
‘‘(B) that, prior to making a request under 
such paragraph for designation for participation 
in the lender-of-last-resort program, an institu-
tion of higher education shall demonstrate that 
the institution has met a minimum threshold, 
as determined by the Secretary, for the number 
or percentage of students at such institution 
who have received rejections from eligible lend-
ers for loans under this part; and
‘‘(C) any other standards and guidelines 
the Secretary determines to be appropriate.’’. 
(b) EFFECTIVE DATE.—The amendments made by 
subsection (a) shall take effect on the date of enactment 
of this Act. 
(c) REVIEW OF INDUCEMENTS LIMITATIONS.—With-
in 90 days after the date of enactment of this Act, the 
Secretary of Education shall review, and as necessary re-
vise, the Department of Education’s regulations con-
cerning prohibited guaranty agency inducements to eligi-
ble lenders (34 CFR 682.401(e)) to ensure that such 
agency’s do not engage in improper inducements in the 
expansion of operations of the lender-of-last-resort pro-
gram as authorized by the amendments made by this sec-
tion. The Secretary shall submit a report on the review 
and revision required by this subsection to the Committee 
on Education and Labor of the House of Representatives 
and the Committee on Health, Education, Labor, and 
Pensions of the Senate within 180 days after such date 
of enactment. 
SEC. 6. MANDATORY ADVANCES. 
(a) IN GENERAL.—Section 421(b) of the Higher 
Education Act of 1965 (20 U.S.C. 1071(b)) is amended— 
(1) in paragraph (4), by striking ‘‘programs, 
and’’ and inserting ‘‘programs,’’;
(2) in paragraph (5), by striking ‘‘agencies.’’ 
and inserting ‘‘agencies, and’’; and 
(3) by adding at the end the following: 
‘‘(6) there is authorized to be appropriated, and 
there are appropriated, out of any money in the 
Treasury not otherwise appropriated, such sums as 
may be necessary for the purpose of carrying out 
section 422(c)(7).’’. 
(b) EFFECTIVE DATE.—The amendments made by 
subsection (a) shall take effect on the date of enactment 
of this Act. 
SEC. 7. TEMPORARY AUTHORITY TO PURCHASE STUDENT 
LOANS. 
(a) SPENDING AUTHORITY.— 
(1) AUTHORITY GRANTED.—The first sentence 
of section 451(a) of the Higher Education Act of 
1965 (20 U.S.C. 1087a(a)) is amended— 
(A) by inserting ‘‘(1)’’ after ‘‘as may be 
necessary’’; and 
(B) by inserting before the period at the 
end of such sentence the following: ‘‘; and (2) 
for purchasing loans under section 459A’’. 
(2) 
CONFORMING
AMENDMENT.—Section 
451(a) of such Act (20 U.S.C. 1087a(a)) is further
amended by striking ‘‘Such loans shall’’ and insert-
ing ‘‘Loans made under this part shall’’. 
(b) TEMPORARY AUTHORITY.—Part D of title IV of 
the Higher Education Act of 1965 (20 U.S.C. 1087a et 
seq.) is amended by inserting after section 459 the fol-
lowing new section: 
‘‘SEC. 459A. TEMPORARY AUTHORITY TO PURCHASE STU-
DENT LOANS. 
‘‘(a) AUTHORITY TO PURCHASE.— 
‘‘(1) 
AUTHORITY; 
DETERMINATION
RE-
QUIRED.—Upon a determination by the Secretary 
that there is an inadequate availability of loan cap-
ital to meet the demand for loans under sections 
428, 428B, or 428H, whether as a result of inad-
equate liquidity for such loans or for other reasons, 
the Secretary, in consultation with the Secretary of 
the Treasury, is authorized to purchase, or enter 
into forward commitments to purchase, from any eli-
gible lender, as defined by section 435(d)(1), loans 
originated under sections 428, 428B, or 428H on or 
after October 1, 2003, on such terms as the Sec-
retary, the Secretary of the Treasury, and the Direc-
tor of the Office of Management and Budget jointly 
determine are in the best interest of the United 
States, except that any purchase under this section
shall not result in any net cost to the Federal Gov-
ernment, as determined jointly by the Secretary, the 
Secretary of the Treasury, and the Director of the 
Office of Management and Budget. 
‘‘(2) REGULATIONS REQUIRED.—The Secretary, 
the Secretary of the Treasury, and the Director of 
the Office of Management and Budget shall jointly 
promulgate emergency regulations and publish such 
emergency regulations promptly in the Federal Reg-
ister concerning the purchases authorized by para-
graph (1). 
‘‘(3) METHODOLOGY AND FACTORS; JUSTIFICA-
TION REQUIRED.—Such regulations shall outline the 
methodology and factors that the Secretary, the Sec-
retary of the Treasury, and the Director of the Of-
fice of Management and Budget shall consider in 
evaluating the price at which to purchase loans 
under sections 428, 428B, or 428H, and shall in-
clude a justification of how the use of such method-
ology and consideration of such factors used to de-
termine purchase price will ensure that loan pur-
chases do not result in any net cost to the Federal 
Government. 
‘‘(b) PROCEEDS.—The Secretary shall require, as a 
condition of any purchase under subsection (a), that the
funds paid by the Secretary to any eligible lender under 
this section shall be used: (1) to ensure continued partici-
pation of such lender in the Federal student loan pro-
grams authorized under part B of this title; and (2) to 
originate new Federal loans to students, as authorized 
under part B of this title. 
‘‘(c) MAINTAINING SERVICING ARRANGEMENTS.— 
The Secretary may, if agreed upon by an eligible lender 
selling loans under this section, contract with such lender 
for the servicing of the loans purchased, provided that— 
‘‘(1) the cost of such servicing arrangement 
does not exceed the cost the Federal Government 
would otherwise incur for the servicing of loans pur-
chased, as determined under subsection (a); and 
‘‘(2) such servicing arrangement is in the best 
interest of the borrowers whose loans are purchased. 
‘‘(d) EXPIRATION OF AUTHORITY.—The Secretary’s 
authority to purchase loans under this section shall expire 
on July 1, 2009.’’. 
(c) CONTRACTING AUTHORITY.—Section 456(b) of 
the Higher Education Act of 1965 (20 U.S.C. 1087f(b)) 
is amended by inserting ‘‘or purchased’’ after ‘‘loans 
made’’ each place it appears in paragraphs (2) and (3).
SEC. 8. SENSE OF CONGRESS. 
It is a sense of Congress that, at a time when our 
economy is fragile and higher education and retraining op-
portunities are more important than ever— 
(1) the Federal financial institutions, such as 
the Federal Financing Bank and Federal Reserve, 
and federally chartered private entities such as the 
Federal Home Loan Banks and others, should con-
sider, in consultation with the Secretary of Treasury 
and the Secretary of Education, using available au-
thorities in a timely manner, if needed, to assist in 
ensuring that students and families can access Fed-
eral student loans for academic year 2008–2009, 
and if needed in the subsequent academic year, in a 
manner that results in no increased costs to tax-
payers; and 
(2) any action taken as a result of such consid-
eration should in no way limit or delay the Secretary 
of Education’s authority to operate the lender-of- 
last-resort provisions of section 428(j) of the Higher 
Education Act of 1965 (as amended by this Act), 
nor the authority to purchase Federal Family Edu-
cation Loan Program loans, as authorized by section 
459A of such Act (as added by this Act).
SEC. 9. GAO STUDY ON IMPACT OF INCREASED LOAN LIM-
ITS. 
(a) STUDY REQUIRED.—The Comptroller General 
shall conduct a study to evaluate the impact of the in-
crease in Federal loan limits provided for in section 2 of 
this Act and section 8005 of the Deficit Reduction Act 
of 2005 with respect to the impact on— 
(1) tuition, fees, and room and board at institu-
tions of higher education; and 
(2) private loan borrowing by students and par-
ents for attendance at institutions of higher edu-
cation. 
(b) STUDY COMPONENTS.—The study required under 
subsection (a) shall be conducted for each major sector 
of institutions of higher education over a 5-year time pe-
riod. The report shall specifically analyze the following: 
(1) Whether, on average, tuition, fees, and 
room and board increase, decrease, or remain un-
changed in each such sector after the increases in 
Federal loan limits take effect. 
(2) Whether the amount of private educational 
loans taken out by students (and their parents) at 
institutions in each such sector to pay tuition, fees, 
and room and board increase, decrease, or remain 
unchanged.
(c) REPORT.—Not later than one year after the date 
of enactment of this Act, the Comptroller General shall 
provide an interim report to the Committee on Education 
and Labor of the House of Representatives and the Com-
mittee on Health, Education, Labor, and Pensions of the 
Senate including the initial results of the study conducted 
under this section. The Comptroller General shall follow 
up with such Committees after the third year and the fifth 
year after such date of enactment. 
Passed the House of Representatives April 17, 2008. 
Attest: 
Clerk.