(1) Approximately 3,500,000 students (18 per-
cent of all undergraduate students) attend institu-
tions on a less than half-time basis.
(2) Currently, students who are not in a degree-
seeking program, or attend school less than half-
time, are not eligible for federal financial aid.
(3) Individuals in the 21st century workforce
will be expected to enhance their skills on a regular
basis in order to keep up with constantly changing
technology.
(4) Time and cost are the most frequently re-
ported barriers to participation in work-related
courses.
(5) Access to financial aid must be more widely
available to people who have family or work respon-
sibilities, or both.
(6) Employers will require that workers in the
21st century economy have training beyond high
school.
(7) Job security and success in the 21st century
economy will be dependent on workers access to life-
long learning skills.
(8) Approximately 20 percent of United States
workers are landing jobs with employers that offer
job security, training, and opportunities for lifelong
learning.
(9) Approximately 40 percent of American
workers are not receiving education after high
school. These workers may not be able to compete
for the best jobs in the 21st century economy.
(10) As America is forced to compete increas-
ingly in a global marketplace, employers must have
the best trained workforce in the world.
(11) Employers must have the domestic capac-
ity to fill the jobs of the 21st century economy.
SEC. 3. ESTABLISHMENT OF PROGRAM.
Part D of title IV of the Higher Education Act of
1965 is amended by inserting after section 460 (20 U.S.C.
1087j) the following new section:
‘‘SEC. 460A. DIRECT LOANS FOR LESS-THAN-HALF-TIME
STUDENTS.
‘‘(a) PURPOSE.—It is the purpose of this section to
establish a direct loan program at qualifying public insti-
tutions to provide loans to less-than-half-time students to
cover the costs of programs providing instruction to enable
those students to acquire or improve job skills.
‘‘(b) PROGRAM AUTHORITY.—From the funds appro-
priated under subsection (g), the Secretary shall provide
funds to qualifying public institutions, or consortia there-
of, that have entered into agreements with the Secretary
under subsection (c), or to alternative originators des-
ignated by the Secretary, to make loans to eligible part-
time students at those institutions in accordance with the
requirements of this section.
‘‘(c) PARTICIPATION AGREEMENTS.—
‘‘(1) ELIGIBILITY
OF
INSTITUTIONS; 
CON-
SORTIA.—The Secretary shall enter into a participa-
tion agreement under this subsection with any quali-
fying public institution, or consortia thereof, that
submits to the Secretary a request for participation
and a demonstration of its status as a qualifying
public institution. Subject to such requirements as
the Secretary may prescribe, two or more qualifying
public institutions may apply to the Secretary as
consortia to enter into agreements with the Sec-
retary to originate loans under this section for stu-
dents in attendance at such institutions.
‘‘(2) ALTERNATIVE
ORIGINATORS.—The Sec-
retary shall, by regulation, establish qualifications
for an organization to enter into an agreement with
the Secretary as an alternative originator.
‘‘(3) TERMS OF AGREEMENTS.—An agreement
under this section shall—
‘‘(A) provide for the establishment and
maintenance of a direct student loan program
at the institution under which the institution
will—
‘‘(i) identify eligible part-time stu-
dents who seek student financial assistance
at such institution;
‘‘(ii) determine the amount of eligible
education expenses of such students;
‘‘(iii) provide a statement that cer-
tifies the eligibility of any student to re-
ceive a loan under this section that is not
in excess of such eligible educational ex-
penses;
‘‘(iv) provide timely and accurate
information—
‘‘(I) concerning the status of stu-
dent borrowers while such students
are in attendance at the institution
and concerning any new information
of which the institution becomes
aware for such students after such
borrowers leave the institution, to the
Secretary for the servicing and col-
lecting of loans made under this part;
and
‘‘(II) if the institution does not
have an agreement with the Secretary
under this subsection, concerning stu-
dent eligibility and eligible educational
expenses to the Secretary as needed
for the alternative origination of loans
to eligible part-time students;
‘‘(B) provide assurances that the institu-
tion will comply with requirements established
by the Secretary relating to student loan infor-
mation with respect to loans made under this
section;
‘‘(C) provide that the institution accepts
responsibility and financial liability stemming
from its failure to perform its functions pursu-
ant to the agreement;
‘‘(D) provide that the institution will not
charge any fees of any kind, however described,
to student borrowers for origination activities or
the provision of any information necessary for
a student to receive a loan under this section,
or any benefits associated with such loan;
‘‘(E) provide that the institution or consor-
tium will originate loans to eligible part-time
students in accordance with this section, and
that such origination may include the accept-
ance of applications by means of the Internet or
other electronic means;
‘‘(F) provide that the note or evidence of
obligation on the loan shall be the property of
the Secretary; and
‘‘(G) include such other provisions as the
Secretary determines are necessary to protect
the interests of the United States and to pro-
mote the purposes of this section, except that
the Secretary shall not require any institution
to perform any needs analysis of any applicant
for a loan under this section.
‘‘(3) WITHDRAWAL AND TERMINATION PROCE-
DURES.—The Secretary shall establish procedures by
which institutions or consortia may withdraw or be
terminated from the program under this section.
‘‘(d) TERMS AND CONDITIONS OF LOANS.—
‘‘(1) IN GENERAL.—A note or other evidence of
a loan under this section shall—
‘‘(A) require the borrower to repay the
loan, together with interest thereon, in install-
ments beginning not less than one month after
the conclusion of the period of enrollment for
which the loan was made and ending not later
than one year thereafter, except that the bor-
rower shall be entitled to accelerate, without
penalty, repayment on the borrower’s loans
under this section;
‘‘(B) obligate the borrower to pay interest
on the outstanding balance of the loan at a rate
prescribed by the Secretary taking into account
the purposes of this section;
‘‘(C) require the borrower to participate in
exit counseling under section 485(b); and
‘‘(D) contain such additional terms and
conditions as the Secretary may require to pro-
tect the interests of the United States and to
promote the purposes of this section.
‘‘(2) DEFERMENT.—A borrower of a loan under
this section who meets the requirements of section
455(f)(2) shall be eligible for a deferment, during
which periodic installments of principal need not be
paid, and interest shall accrue and be capitalized or
paid by the borrower.
‘‘(3) SIMPLE
APPLICATION.—The common fi-
nancial reporting form required in section 483(a)(1)
shall not be required for an application for a loan
under this section. The Secretary shall prescribe by
regulation a simple form for determining eligibility
for and the amount of loans under this section.
‘‘(4) LOAN DISBURSEMENT.—Proceeds of loans
to students under this part shall be applied to the
student’s account for tuition and fees. The Secretary
shall establish periods for the payments of such pro-
ceeds in a manner consistent with payment of Fed-
eral Pell Grants under subpart 1 of part A of this
title.
‘‘(e) FISCAL
CONTROL
AND
FUND
ACCOUNT-
ABILITY.—Section 454(k) shall apply to funds provided
under this section.
‘‘(f) CONTRACTS FOR ORIGINATION, SERVICING, AND
DATA SYSTEMS.—The Secretary may enter into contracts
for—
‘‘(1) the alternative origination of loans to eligi-
ble part-time students attending qualifying public in-
stitutions with agreements to participate in the pro-
gram under this part, if such institutions do not
have agreements with the Secretary under sub-
section (c); and
‘‘(2) the servicing and collection of loans made
under this section.
‘‘(g) AUTHORIZATION OF APPROPRIATIONS.—There
are authorized to be appropriated to provide funds for
loans under this section such sums as may be necessary
for fiscal year 2001 and for each of the 4 succeeding fiscal
years.
‘‘(h) DEFINITIONS.—As used in this section:
‘‘(1) QUALIFYING PUBLIC INSTITUTIONS.—The
term ‘qualifying public institution’ means an institu-
tion that—
‘‘(A) is an eligible institution under section
435(a); and
‘‘(B) is a public institution that provides
an educational program for which the institu-
tion awards a bachelor’s degree or provides not
less than a 2-year program that is acceptable
for full credit toward such a degree.
‘‘(2) ELIGIBLE
PART-TIME
STUDENT.—The
term ‘eligible part-time student’ means a student
that is an eligible student as determined under sec-
tion 484, except that—
‘‘(A) the student does not meet the re-
quirements of section 484(a)(1), but is enrolled
or accepted for enrollment in a program of in-
struction the expenses for which are eligible
education expenses;
‘‘(B) the student is not required to meet
the requirements of section 484(a)(2), but the
Secretary may by regulation prescribe limita-
tions to prevent abuse;
‘‘(C) the institution may require students
to establish credit worthiness a condition of ob-
taining a loan under this section;
‘‘(D) a student who has obtained a loan or
loans to cover eligible education expenses for 4
courses of instruction shall not be an eligible
part-time student until such loan or loans are
repaid.
‘‘(3) ELIGIBLE
EDUCATION
EXPENSES.—The
term ‘eligible education expenses’ means the tuition
and fees, and the cost of any books, required with
respect to any course of instruction at a qualifying
public institution to acquire or improve job skills of
an individual.’’.
SEC. 4. EMPLOYER PAYMENTS ON DIRECT LOANS FOR
LESS-THAN-HALF-TIME STUDENTS EXCLUD-
ABLE FROM GROSS INCOME.
(a) IN GENERAL.—Subparagraph (A) of section
127(c)(1) of the Internal Revenue Code of 1986 (relating
to employer-provided educational assistance programs) is
amended by striking ‘‘and equipment)’’ and inserting ‘‘and