I 
108TH CONGRESS 
2D SESSION 
H. R. 4370 
To ensure that the Direct Loan Program is a competitive alternative to 
the Federal Family Education Loan Program for schools and students. 
IN THE HOUSE OF REPRESENTATIVES 
MAY 17, 2004 
Mr. PETRI (for himself and Mr. GEORGE MILLER of California) introduced 
the following bill; which was referred to the Committee on Education and 
the Workforce 
A BILL 
To ensure that the Direct Loan Program is a competitive 
alternative to the Federal Family Education Loan Pro-
gram for schools and students. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Direct Loan Reward 
Act of 2004’’. 
SEC. 2. DIRECT LOAN REWARD PROGRAM. 
Part D of title IV of the Higher Education Act of 
1965 (20 U.S.C. 1087a et seq.) is amended by adding at 
the end the following:
‘‘SEC. 460A. DIRECT LOAN REWARD PROGRAM. 
‘‘(a) PROGRAM AUTHORIZED.—The Secretary shall 
carry out a Direct Loan Reward Program to encourage 
institutions of higher education to participate in the stu-
dent loan program under this part. 
‘‘(b) PROGRAM REQUIREMENTS.—In carrying out the 
Direct Loan Reward Program, the Secretary shall— 
‘‘(1) provide to each institution of higher edu-
cation participating in the student loan program 
under this part a financial reward payment, in an 
amount determined in accordance with subsection 
(c), to encourage the institution to provide student 
loans under this part; 
‘‘(2) require each institution of higher edu-
cation receiving a payment under this section to pro-
vide student loans under this part for a period of 5 
years from the date the payment is made; 
‘‘(3) require that funds paid to institutions of 
higher education under this section be used to award 
students a supplement to such students’ Pell Grants 
under subpart 1 of part A; and 
‘‘(4) for a period of 2 years beginning on the 
date of enactment of this section, encourage all insti-
tutions of higher education to participate in the Di-
rect Loan Reward Program.
‘‘(c) AMOUNT.—The amount of a financial reward 
payment under this section shall be an amount equal to 
50 percent of the savings to the Federal Government gen-
erated by the institution’s participation in the student loan 
program under this part instead of the institution’s par-
ticipation in the student loan program under part B. 
‘‘(d) TRIGGER TO ENSURE COST NEUTRALITY.— 
‘‘(1) LIMIT TO ENSURE COST NEUTRALITY.— 
Notwithstanding subsection (c), the Secretary shall 
not distribute financial reward payments under the 
Direct Loan Reward Program that, in the aggre-
gate, exceed the Federal savings resulting from im-
plementation of the Direct Loan Reward Program. 
‘‘(2) FEDERAL SAVINGS.—In calculating Fed-
eral savings, as used in paragraph (1), the Secretary 
shall determine any Federal savings on loans made 
to students at institutions of higher education that 
participate in the Direct Loan Reward Program and 
that, on the date of enactment of the Direct Loan 
Reward Program, participated in the student loan 
program under part B, resulting from the difference 
of— 
‘‘(A) the Federal cost of loan volume made 
under this part; and
‘‘(B) the Federal cost of an equivalent type 
and amount of loan volume made, insured, or 
guaranteed under part B. 
‘‘(3) DISTRIBUTION
RULES.—If the Federal 
savings determined under paragraph (2) is not suffi-
cient to distribute full financial reward payments 
under the Direct Loan Reward Program, the Sec-
retary shall— 
‘‘(A) first make financial reward payments 
to those institutions of higher education that 
participated in the student loan program under 
part B on the date of enactment of the Direct 
Loan Reward Program; and 
‘‘(B) with any remaining Federal savings 
after making payments under subparagraph 
(A), make financial reward payments to the in-
stitutions of higher education not described in 
subparagraph (A) on a pro-rata basis. 
‘‘(4) DISTRIBUTION TO STUDENTS.—Any insti-
tution of higher education that receives a financial 
reward payment under this section shall distribute 
such payment among the students of such institu-
tion who are Pell Grant recipients by awarding each 
such student an equal supplemental grant. Such
supplemental grant shall be known as a ‘Pell Re-
ward’. 
‘‘(5) CARRY OVER.—Any institution of higher 
education that receives a reduced financial reward 
payment under paragraph (3)(B), shall remain eligi-
ble for the unpaid portion of such institution’s finan-
cial reward payment, as well as any additional finan-
cial reward payments for which the institution is 
otherwise eligible, in subsequent fiscal years.’’. 
Æ