I
105TH CONGRESS
1ST SESSION
H. R. 2140
To amend the Higher Education Act of 1965 to improve accountability
and reform certain programs.
IN THE HOUSE OF REPRESENTATIVES
JULY 10, 1997
Mr. KLINK (for himself, Mr. FOX of Pennsylvania, Mr. KILDEE, Mr. ENGLISH
of Pennsylvania, Mr. MASCARA, Ms. DELAURO, Ms. WOOLSEY, Mr. AN-
DREWS, Mr. DOYLE, Mr. HOLDEN, and Mr. COYNE) introduced the fol-
lowing bill; which was referred to the Committee on Education and the
Workforce
A BILL
To amend the Higher Education Act of 1965 to improve
accountability and reform certain programs.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; REFERENCE.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Federal Accountability and Institutional Reform in Edu-
cation Act of 1997’’.
(b) REFERENCES.—Except as otherwise expressly
provided, whenever in this Act an amendment or repeal
is expressed in terms of an amendment to, or repeal of,
a section or other provision, the reference shall be consid-
ered to be made to a section or other provision of the
Higher Education Act of 1965 (20 U.S.C. 1001 et seq.).
SEC. 2. FINDINGS.
The Congress finds that—
(1) the Federal Government is reducing spend-
ing in all areas, including postsecondary education;
(2) reductions in postsecondary education
spending fall on students, institutions, State loan
guaranty agencies and lenders;
(3) the administration of postsecondary edu-
cation is the responsibility of the Department of
Education; and
(4) reforms should be made to postsecondary
education programs—
(A) to provide greater accountability from
the Department, educational institutions, lend-
ers, guaranty agencies, servicers, and secondary
markets; and
(B) to enhance institutional compliance
with Department policies.
SEC. 3. STUDENT LOAN COHORT DEFAULT MANAGEMENT
REFORMS.
(a) ADMINISTRATIVE AND FISCAL PROCEDURES.—
Section 428(c)(2)(A) (20 U.S.C. 1078(c)(2)(A)) is amend-
ed by striking ‘‘proof that reasonable attempts were
made’’ and inserting ‘‘proof that the institution and the
State licensing board were contacted and other reasonable
attempts were made’’
(b) REIMBURSEMENT.—Section 428(c)(2)(G) (20
U.S.C. 1078(c)(2)(G)) is amended by striking ‘‘certifies
to the Secretary that diligent attempts have been made’’
and inserting ‘‘demonstrates to the Secretary that diligent
attempts, including direct contact with the institution and
the State licensing board, have been made.’’.
(c) LIMITATION.—Section 428 (20 U.S.C. 1078) is
amended by adding at the end the following:
‘‘(o) LIMITATION.—Notwithstanding any other provi-
sion of this section, the Secretary shall not reimburse or
permit any eligible lender, servicer, or guaranty agency (or
its affiliates) who previously filed a claim for reimburse-
ment on a loan to retain any proceeds from subsequent
collection of a defaulted loan to the extent that such funds,
when added to the amount of prior reimbursement under
this section, exceed 100 percent of the original principal
of the loan.’’.
(d) NOTICE
TO SECRETARY
AND PAYMENT
OF
LOSS.—The third sentence of section 430(a) (20 U.S.C.
1080(a)) is amended—
(1) by inserting ‘‘all’’ after ‘‘required to meet’’;
and
(2) by inserting ‘‘the institution and the State
licensing board were contacted and other’’ after
‘‘submit proof that’’.
(e) ANNUAL
REPORT.—Section 430 (20 U.S.C.
1080) is amended by adding at the end the following:
‘‘(f) ANNUAL REPORT.—The Secretary shall report
annually to Congress that lenders, servicers and guaranty
agencies have demonstrated their compliance with servic-
ing and due diligence requirements, under both statute
and regulation. The Secretary shall also provide informa-
tion on the successful practices of low-default lenders,
servicers and guaranty agencies to other financial, servic-
ing and guaranty institutions participating in this title to
encourage duplication of successful servicing and collec-
tion programs.’’.
(f) NOTICE TO INSTITUTIONS OF CREDIT BUREAU
INFORMATION.—Section 430A(e) (20 U.S.C. 1080a(e)) is
amended by striking ‘‘is authorized to’’ and inserting
‘‘shall’’.
(g) CIRCUMSTANCES.—Section 435(a)(2) (20 U.S.C.
1085(a)(2)) is amended by adding at the end the follow-
ing:
‘‘(D) The circumstances referred to in subpara-
graph (A)(ii) shall be uniformly applied to all eligible
institutions and shall require that such an institu-
tion meet the following criteria:
‘‘(i) Not less than 50 percent of the stu-
dents enrolled in eligible programs qualify for
an award under subpart 1 of part A of title IV.
‘‘(ii) The institution’s student completion
rate is 60 percent or greater.
‘‘(iii) The initial job placement rate of pro-
gram graduates is 60 percent or greater.’’.
(h) COHORT DEFAULT RATE.—Section 435(m) (20
U.S.C. 1085(m)) is amended—
(1) in paragraph (1)—
(A) in subparagraph (A), by striking ‘‘30
or more current’’ and inserting ‘‘75 or more
current’’;
(B) in subparagraph (B), by striking ‘‘paid
claims’’ and inserting ‘‘properly paid claims for
insurance as required by section 430’’; and
(C) in subparagraph (C), by striking
‘‘fewer than 30’’ and inserting ‘‘fewer than 75’’;
and
(2) in paragraph (2)—
(A) by redesignating subparagraph (D) as
subparagraph (E); and
(B) by inserting after subparagraph (C)
the following new subparagraph:
‘‘(D) Any loan for which the Secretary has
reimbursed the guaranty agency for claims on
the insurance on a defaulted loan, and the
agency has subsequently brought the loan into
current repayment under section 428(c)(6),
shall be removed from an institution’s default
rate and the institution’s rate shall be recal-
culated to reflect an accurate percentage of the
borrowers in default for the three most recent
cohorts used to determine institutional eligi-
bility under this subsection.’’.
SEC. 4. LIMITED INJUNCTIVE RELIEF.
Section 432(a)(2) (20 U.S.C. 1082(a)(2)) is amended
by striking ‘‘Secretary’s control and’’ and inserting ‘‘Sec-
retary’s control, except that, notwithstanding the provi-
sions of this paragraph, any district court of the United
States, in reviewing any final determination of the Sec-
retary concerning eligibility for, or the terms of participa-
tion in, any loan or grant program under this title, may
enter any order that would be appropriate under sections
705 and 706 of title 5, United States Code, and’’.
SEC. 5. EXPANDED REVIEW OF LOAN SERVICING AND COL-
LECTION RECORDS.
Section 435(a)(3) (20 U.S.C. 1085(a)(3)) is amended
by inserting after ‘‘loan servicers’’ the following ‘‘, or at
the request of the institution, a complete copy of the
records,’’.
SEC. 6. REPAYMENT TERMS.
(a) INSURED LOANS.—Section 427 (20 U.S.C. 1077)
is amended—
(1) in subsection (a)(2)—
(A) in subparagraph (B), in the matter
preceding clause (i), by striking ‘‘over a period’’
through ‘‘nor more than 10 years’’ and insert-
ing ‘‘in accordance with the repayment plan se-
lected under subsection (d),’’;
(B) in subparagraph (C), at the end of the
subparagraph, by striking out ‘‘the 10-year pe-
riod described in subparagraph (B);’’ and in-
serting the following: ‘‘the length of the repay-
ment period under a repayment plan described
in subsection (d);’’;
(C) by striking subparagraph (F);
(D) by redesignating subparagraphs (G),
(H), and (I) as subparagraphs (F), (G), and
(H), respectively; and
(E) in subparagraph (G) (as redesignated
by subparagraph (D)), by striking ‘‘the option’’
through the end of the subparagraph and in-
serting ‘‘the repayment options described in
subsection (d); and’’;
(2) in subsection (c), by striking ‘‘in subsection
(a)(2)(H),’’ and inserting the following: ‘‘by a repay-
ment plan selected by the borrower under subpara-
graph (C) or (D) of subsection (d)(1),’’; and
(3) by adding after subsection (c) the following
new subsection:
‘‘(d) REPAYMENT PLANS.—
‘‘(1) DESIGN AND SELECTION.—In accordance
with regulations of the Secretary, the lender shall
offer a borrower of a loan made under this part the
plans described in this subsection for repayment of
such loan, including principal and interest thereon.
No plan may require a borrower to repay a loan in
less than 5 years. The borrower may choose from—
‘‘(A) a standard repayment plan, with a
fixed annual repayment amount paid over a
fixed period of time, not to exceed 10 years;
‘‘(B) an extended repayment plan, with a
fixed annual repayment amount paid over an
extended period of time, not to exceed 30 years,
except that the borrower shall repay annually a
minimum amount determined in accordance
with subsection (c);
‘‘(C) a graduated repayment plan, with an-
nual repayment amounts established at 2 or
more graduated levels and paid over an ex-
tended period of time, not to exceed 30 years,
except that the borrower’s scheduled payments
shall not be less than 50 percent, nor more
than 150 percent, of what the amortized pay-
ment on the amount owed would be if the loan
were repaid under the standard repayment
plan; and
‘‘(D) an income-sensitive repayment plan,
with income-sensitive repayment amounts paid
over a fixed period of time prescribed by the
Secretary, not to exceed 25 years, at the end of
which any remaining obligation of the borrower
shall be discharged under section 437(e).
‘‘(2) LENDER SELECTION OF OPTION IF BOR-
ROWER DOES NOT SELECT.—If a borrower of a loan
made under this part does not select a repayment
plan described in paragraph (1), the lender shall
provide the borrower with a repayment plan de-
scribed in paragraph (1)(A).
‘‘(3) CHANGES IN SELECTIONS.—The borrower
of a loan made under this part may change the bor-
rower’s selection of a repayment plan under para-
graph (1), or the lender’s selection of a plan for the
borrower under paragraph (2), as the case may be,
under such conditions as may be prescribed by the
Secretary in regulation.
‘‘(4) ACCELERATION PERMITTED.—Under any
of the plans described in this subsection, the bor-
rower shall be entitled to accelerate, without penalty,
repayment on the borrower’s loans under this part.’’.
(b) GUARANTEED
LOANS.—Section 428(b) (20
U.S.C. 1078) is amended—
(1) in paragraph (1)—
(A) in subparagraph (D), by striking
clauses (i) and (ii) and the clause designation
‘‘(iii)’’;
(B) in subparagraph (E)—
(i) in clause (i)—
(I) 
by 
striking 
‘‘or 
section
428A,’’ and inserting ‘‘or section
428H,’’; and
(II) by striking ‘‘the option’’
through the end of the clause and in-