(2) in section 438(b)(5) (20 U.S.C. 1087–
1(b)(5)), by striking the matter following subpara-
graph (B). 
(c) EFFECTIVE DATE.—The amendments made by 
subsections (a) and (b) shall take effect on July 1, 2007. 
SEC. 6. REDUCTION OF LENDER SPECIAL ALLOWANCE PAY-
MENTS. 
Section 438(b)(2)(I) of the Higher Education Act of 
1965 (20 U.S.C. 1087–1(b)(2)(I)) is amended by adding 
at the end the following new clauses: 
‘‘(vi) REDUCTION
FOR
LOANS
DIS-
BURSED ON OR AFTER JULY 1, 2007.—With 
respect to a loan on which the applicable 
interest rate is determined under section 
427A(l) and for which the first disburse-
ment of principal is made on or after July 
1, 2007, the special allowance payment 
computed pursuant to this subparagraph 
shall be computed—
‘‘(I) by substituting ‘2.24 per-
cent’ for ‘2.34 percent’ each place it 
appears in this subparagraph; 
‘‘(II) by substituting ‘1.64 per-
cent’ for ‘1.74 percent’ in clause (ii); 
and
‘‘(III) by substituting ‘2.54 per-
cent’ for ‘2.64 percent’ each place it 
appears in clauses (iii) and (iv). 
‘‘(vii) 
SMALLER
LENDER
EXEMP-
TION.—Clause (vi) shall not apply to the 
calculation of the special allowance pay-
ment with respect to any 3-month period 
for any holder of eligible loans that, to-
gether with its affiliated holders, is des-
ignated by the Secretary as a small lender. 
‘‘(viii) DESIGNATION OF SMALL LEND-
ERS.—In determining which holders of eli-
gible loans qualify for the exemption pro-
vided under clause (vii), the Secretary 
shall, using the most recently available 
data with respect to the total principal 
amount of eligible loans held by holders—
‘‘(I) rank all holders of eligible 
loans in descending order by total 
principal amount of eligible loans 
held; 
‘‘(II) calculate the total principal 
amount of eligible loans held by all 
holders; and
‘‘(III) identify the subset of con-
secutively ranked holders under sub-
clause (I), starting with the lowest 
ranked holder, that together hold a 
total principal amount of such loans 
equal to 10 percent of the total 
amount calculated under subclause 
(II), but excluding the holder, if any, 
whose holdings when added cause the 
total holdings of the subset to both 
equal and then exceed such 10 per-
cent of such total amount calculated; 
and 
‘‘(IV) designate as small lenders 
any holder identified as a member of 
the subset under subclause (III).’’. 
SEC. 7. INCREASED LOAN FEES FROM LENDERS. 
Paragraph (2) of section 438(d) of the Higher Edu-
cation Act of 1965 (20 U.S.C. 1087–1(d)(2)) is amended 
to read as follows: 
‘‘(2) AMOUNT OF LOAN FEES.—The amount of 
the loan fee which shall be deducted under para-
graph (1), but which may not be collected from the 
borrower, shall be equal to—
‘‘(A) 0.50 percent of the principal amount 
of the loan with respect to any loan under this 
part for which the first disbursement was made 
on or after October 1, 1993, and before July 1, 
2007; and 
‘‘(B) 1.0 percent of the principal amount 
of the loan with respect to any loan under this 
part for which the first disbursement was made 
on or after July 1, 2007.’’. 
SEC. 8. INTEREST PAYMENT REBATE FEE. 
Section 428C(f)(2) of the Higher Education Act of 
1965 (20 U.S.C. 1078–2(f)(2)) is amended—
(1) by striking ‘‘SPECIAL RULE—’’ and insert-
ing ‘‘SPECIAL RULES—(A)’’; and 
(2) by adding at the end the following new sub-
paragraph: 
‘‘(B) For consolidation loans based on applica-
tions received on or after July 1, 2007, if 90 percent 
or more of the total principal and accrued unpaid in-
terest outstanding on the loans held, directly or indi-
rectly, by any holder is comprised of principal and 
accrued unpaid interest owed on consolidation loans, 
the rebate described in paragraph (1) for such hold-
er shall be equal to 1.30 percent of the principal 
plus accrued unpaid interest on such loans.’’. 
Passed the House of Representatives January 17, 
2007. 
Attest:
Clerk.
110TH CONGRESS 
1ST SESSION 
H. R. 5
AN ACT 
To amend the Higher Education Act of 1965 to 
reduce interest rates for student borrowers.