168 
‘‘(2) ELIGIBILITY.—The Secretary may assume 
interest payments under paragraph (1) only for a 
borrower who— 
‘‘(A) has submitted an application in com-
pliance with subsection (d); 
‘‘(B) obtained one or more loans described 
in paragraph (1) as an undergraduate student; 
‘‘(C) is a new borrower (within the meaning 
of section 103(7) of this Act) on or after the date 
of enactment of the College Access and Oppor-
tunity Act of 2005; 
‘‘(D) is a highly qualified teacher of science, 
technology, engineering or mathematics at an el-
ementary or secondary school in a high need 
local educational agency, or is a mathematics, 
science, or engineering professional; and 
‘‘(E) enters into an agreement with the Sec-
retary to complete 5 consecutive years of service 
in a position described in subparagraph (D), 
starting on the date of the agreement. 
‘‘(3) PRIOR INTEREST LIMITATIONS.—The Sec-
retary shall not make any payments for interest 
that— 
‘‘(A) accrues prior to the beginning of the 
repayment period on a loan in the case of a loan
169 
made under section 428H or a Federal Direct 
Unsubsidized Stafford Loan; or 
‘‘(B) has accrued prior to the signing of an 
agreement under paragraph (2)(E). 
‘‘(4) INITIAL SELECTION.—In selecting partici-
pants for the program under this section, the Sec-
retary— 
‘‘(A) shall choose among eligible applicants 
on the basis of— 
‘‘(i) the national security, homeland se-
curity, and economic security needs of the 
United States, as determined by the Sec-
retary, in consultation with other Federal 
agencies, including the Departments of 
Labor, Defense, Homeland Security, Com-
merce, and Energy, the Central Intelligence 
Agency, and the National Science Founda-
tion; and 
‘‘(ii) the academic record or job per-
formance of the applicant; and 
‘‘(B) may choose among eligible applicants 
on the basis of— 
‘‘(i) the likelihood of the applicant to 
complete the 5-year service obligation;
170 
‘‘(ii) the likelihood of the applicant to 
remain in science, mathematics, or engi-
neering after the completion of the service 
requirement; or 
‘‘(iii) other relevant criteria deter-
mined by the Secretary. 
‘‘(5) AVAILABILITY
SUBJECT
TO
APPROPRIA-
TIONS.—Loan interest payments under this section 
shall be subject to the availability of appropriations. 
If the amount appropriated for any fiscal year is not 
sufficient to provide interest payments on behalf of all 
qualified applicants, the Secretary shall give priority 
to those individuals on whose behalf interest payments 
were made during the preceding fiscal year. 
‘‘(6) REGULATIONS.—The Secretary is author-
ized to prescribe such regulations as may be necessary 
to carry out the provisions of this section. 
‘‘(b) DURATION
AND AMOUNT
OF INTEREST PAY-
MENTS.—The period during which the Secretary shall pay 
interest on behalf of a student borrower who is selected 
under subsection (a) is the period that begins on the effective 
date of the agreement under subsection (a)(2)(E), continues 
after successful completion of the service obligation, and 
ends on the earlier of—
171 
‘‘(1) the completion of the repayment period of 
the loan; 
‘‘(2) payment by the Secretary of a total of 
$5,000 on behalf of the borrower; 
‘‘(3) if the borrower ceases to fulfill the service 
obligation under such agreement prior to the end of 
the 5-year period, as soon as the borrower is deter-
mined to have ceased to fulfill such obligation in ac-
cordance with regulations of the Secretary; or 
‘‘(4) 6 months after the end of any calendar year 
in which the borrower’s gross income equals or exceeds 
4 times the national per capita disposable personal 
income (current dollars) for such calendar year, as 
determined on the basis of the National Income and 
Product Accounts Tables of the Bureau of Economic 
Analysis of the Department of Commerce, as deter-
mined in accordance with regulations prescribed by 
the Secretary. 
‘‘(c) REPAYMENT TO ELIGIBLE LENDERS.—Subject to 
the regulations prescribed by the Secretary by regulation 
under subsection (a)(6), the Secretary shall pay to each eli-
gible lender or holder for each payment period the amount 
of the interest that accrues on a loan of a student borrower 
who is selected under subsection (a). 
‘‘(d) APPLICATION FOR REPAYMENT.—
172 
‘‘(1) IN GENERAL.—Each eligible individual de-
siring loan interest payment under this section shall 
submit a complete and accurate application to the 
Secretary at such time, in such manner, and con-
taining such information as the Secretary may re-
quire. 
‘‘(2) FAILURE TO COMPLETE SERVICE AGREE-
MENT.—Such application shall contain an agreement 
by the individual that, if the individual fails to com-
plete the 5 consecutive years of service required by 
subsection (a)(2)(E), the individual agrees to repay 
the Secretary the amount of any interest paid by the 
Secretary on behalf of the individual. 
‘‘(e) TREATMENT OF CONSOLIDATION LOANS.—A con-
solidation loan made under section 428C of this Act, or a 
Federal Direct Consolidation Loan made under part D of 
title IV of this Act, may be a qualified loan for the purpose 
of this section only to the extent that such loan amount was 
used by a borrower who otherwise meets the requirements 
of this section to repay— 
‘‘(1) a loan made under section 428 or 428H of 
this Act; or 
‘‘(2) a Federal Direct Stafford Loan, or a Fed-
eral Direct Unsubsidized Stafford Loan, made under 
part D of title IV of this Act.
173 
‘‘(f) PREVENTION OF DOUBLE BENEFITS.—No bor-
rower may, for the same service, receive a benefit under both 
this section and— 
‘‘(1) any loan forgiveness program under title IV 
of this Act; or 
‘‘(2) subtitle D of title I of the National and 
Community Service Act of 1990 (42 U.S.C. 12601 et 
seq.). 
‘‘(g) DEFINITIONS.—As used in this section— 
‘‘(1) the term ‘high need local educational agen-
cy’ has the same meaning given such term in section 
201(b)(4); and 
‘‘(2) the term ‘mathematics, science, or engineer-
ing professional’ means a person who— 
‘‘(A) holds a baccalaureate, masters, or doc-
toral degree (or a combination thereof) in 
science, mathematics, or engineering; and 
‘‘(B) works in a field the Secretary deter-
mines is closely related to that degree, which 
shall include working as a professor at a two- or 
four-year institution of higher education. 
‘‘SEC. 419C. MATHEMATICS AND SCIENCE EDUCATION CO-
ORDINATING COUNCIL GRANTS. 
‘‘(a) PURPOSES.—The purposes of this section in-
clude—
174 
‘‘(1) supporting programs that encourage stu-
dents to enroll in and successfully complete bacca-
laureate and advanced degrees in science, technology, 
engineering, and mathematics; 
‘‘(2) achieving the common objective of orga-
nizing, leading, and implementing State-based reform 
agendas that support the continuing improvement of 
mathematics and science education; and 
‘‘(3) improving collaboration in a State among 
the State educational agency, 2-year and 4-year insti-
tutions of higher education, and the business commu-
nity through the development or improvement of a co-
ordinating council. 
‘‘(b) DEFINITIONS.—For the purposes of this section: 
‘‘(1) the term ‘eligible State’ means— 
‘‘(A) the Governor of a State; or 
‘‘(B) in the case of a State for which the 
constitution or laws of the State designate an in-
dividual, entity, or agency in the State, other 
than the Governor, to be responsible for coordi-
nation among segments of the State’s educational 
systems, such individual, entity, or agency. 
‘‘(2) the term ‘mathematics and science edu-
cation coordinating council’ means an organization 
that is charged by a State with coordinating mathe-
175 
matics and science education in the State. Such a 
council shall be composed of education, business, and 
community leaders working together to increase stu-
dent participation and academic achievement in 
mathematics and science. 
‘‘(c) STATE GRANTS.—From amounts made available 
under section 419D for this section, the Secretary is author-
ized to use not more than $5,000,000 to award grants on 
a competitive basis to eligible States for the purpose of car-
rying out activities described in subsection (d). 
‘‘(d) USES OF FUNDS.—An eligible State that receives 
a grant under this section is authorized to use grant funds 
to carry out one or more of the following activities: 
‘‘(1) In a State in which a mathematics and 
science education coordinating council does not exist, 
planning and establishing such a council. 
‘‘(2) In a State in which such a council exists, 
reforming or expanding the activities of the council, 
including implementing State-based reform agendas 
that support the continuing improvement of mathe-
matics and science education, and support services 
that lead to better teacher recruitment and training, 
increased student academic achievement, and in-
creased student enrollment and degree attainment in 
science, technology, engineering, and mathematics.
176 
‘‘(3) Coordinating with activities under part B 
of title II of the Elementary and Secondary Edu-
cation Act of 1965 and with title II of this Act, espe-
cially as it pertains to the recruitment and prepara-
tion of highly qualified mathematics and science 
teachers. 
‘‘(e) APPLICATION.—To be eligible to receive a grant 
under this section, an eligible State shall submit an appli-
cation to the Secretary that— 
‘‘(1) describes the activities the State will carry 
out with the funds; 
‘‘(2) contains a plan for continuing such activi-
ties once Federal funding ceases; and 
‘‘(3) contains such other information and assur-
ances as the Secretary may require. 
‘‘(f) CONSULTATION.—The Governor of a State, or the 
individual, entity, or agency in the State described in sub-
section (b)(1)(B), shall consult with the State board of edu-
cation, State educational agency, and the State agency for 
higher education, as appropriate, with respect to the activi-
ties assisted under this section. In the case of an individual, 
entity, or agency described in subsection (b)(1)(B), such 
consultation shall also include the Governor. 
‘‘(g) CONSTRUCTION.—Nothing in this section shall be 
construed to negate or supersede the legal authority under
177 
State law of any State agency, State entity, or State public 
official over programs that are under the jurisdiction of the 
agency, entity, or official. 
‘‘(h) ADMINISTRATIVE PROVISIONS.— 
‘‘(1) IN GENERAL.— 
‘‘(A) Grants awarded under this section 
shall be awarded for a period not to exceed 5 
years. 
‘‘(B) A grantee may receive a grant under 
this part only once. 
‘‘(C) Payments of grant funds under this 
section shall be annual. 
‘‘(2) SECRETARIAL SELECTIONS.—The Secretary 
shall determine which applications receive funds 
under this section, and the amount of the grant. In 
determining grant amounts, the Secretary shall take 
into account the total amount of funds available for 
all grants under this section and the nature of each 
grant proposal, including whether funds are being 
sought to assist in the creation of a new State mathe-
matics and science education coordinating council or 
to extend the work of an existing council. The Sec-
retary shall also take into account the equitable geo-
graphic distribution of grants throughout the United 
States.
178 
‘‘(3) MATCHING
REQUIREMENT.—Each eligible 
State receiving a grant under this section shall pro-
vide, from non-Federal sources, an amount equal to 
50 percent of the amount of the grant (in cash or in 
kind) to carry out the activities supported by the 
grant. 
‘‘(i) ACCOUNTABILITY AND EVALUATION.— 
‘‘(1) STATE GRANT ACCOUNTABILITY REPORT.— 
An eligible State that receives a grant under this sec-
tion shall submit an annual accountability report to 
the Secretary. Such report shall include a description 
of the degree to which the eligible State, in using 
grant funds, has made substantial progress in meet-
ing its objectives. 
‘‘(2) EVALUATION
AND
DISSEMINATION.—The 
Secretary shall evaluate the activities funded under 
this section and report the Secretary’s findings re-
garding such activities to the authorizing committees. 
The Secretary shall broadly disseminate successful 
practices developed by eligible States under this sec-
tion, and shall broadly disseminate information re-
garding such practices that were found to be ineffec-
tive. 
‘‘(3) REVOCATION.—If the Secretary determines 
that an eligible State is not making substantial
179 
progress in meeting the purposes, objectives, and 
measures, as appropriate, required under this section 
by the end of the second year of a grant, then the 
grant payment shall not be made for the third year 
and subsequent years of the grant. 
‘‘SEC. 419D. AUTHORIZATION OF APPROPRIATIONS. 
‘‘There are authorized to be appropriated $41,000,000 
for fiscal year 2006 and such sums as may be necessary 
for each of the 5 succeeding fiscal years to carry out this 
subpart.’’. 
SEC. 409. CHILD CARE ACCESS. 
Section 419N(g) (20 U.S.C. 1070e(g)) is amended— 
(1) by striking ‘‘1999’’ and inserting ‘‘2006’’; 
and 
(2) by striking ‘‘4 succeeding’’ and inserting ‘‘5 
succeeding’’. 
SEC. 410. LEARNING ANYTIME ANYWHERE PARTNERSHIPS. 
(a) REPEAL.—Subpart 8 of part A of title IV (20 
U.S.C. 1070f—1070f–6) is repealed. 
(b) CONFORMING AMENDMENT.—Section 400(b) (20 
U.S.C. 1070(b)) is amended by striking ‘‘through 8’’ and 
inserting ‘‘through 7’’.
180 
PART B—FEDERAL FAMILY EDUCATION LOAN 
PROGRAM 
SEC. 421. REAUTHORIZATION OF FEDERAL FAMILY EDU-
CATION LOAN PROGRAM. 
(a) AUTHORIZATION
OF APPROPRIATIONS.—Section 
421(b)(5) (20 U.S.C. 1071(b)(5)) is amended by striking 
‘‘an administrative cost allowance’’ and inserting ‘‘a loan 
processing and issuance fee’’. 
(b) EXTENSION OF AUTHORITY.— 
(1) FEDERAL INSURANCE LIMITATIONS.—Section 
424(a) (20 U.S.C. 1074(a)) is amended— 
(A) by striking ‘‘2004’’ and inserting 
‘‘2012’’; and 
(B) by striking ‘‘2008’’ and inserting 
‘‘2016’’. 
(2) GUARANTEED LOANS.—Section 428(a)(5) (20 
U.S.C. 1078(a)(5)) is amended— 
(A) by striking ‘‘2004’’ and inserting 
‘‘2012’’; and 
(B) by striking ‘‘2008’’ and inserting 
‘‘2016’’. 
(3) CONSOLIDATION
LOANS.—Section 428C(e) 
(20 U.S.C. 1078–3(e)) is amended by striking ‘‘2004’’ 
and inserting ‘‘2012’’.
181 
SEC. 422. LOAN LIMITS. 
(a) 
FEDERAL
INSURANCE
LIMITS.—Section 
425(a)(1)(A) (20 U.S.C. 1075(a)(1)(A)) is amended— 
(1) in clause (i)(I), by striking ‘‘$2,625’’ and in-
serting ‘‘$3,500’’; and 
(2) in clause (ii)(I), by striking ‘‘$3,500’’ and 
inserting ‘‘$4,500’’. 
(b) GUARANTEE LIMITS.—Section 428(b)(1)(A) (20 
U.S.C. 1078(b)(1)(A)) is amended— 
(1) in clause (i)(I), by striking ‘‘$2,625’’ and in-
serting ‘‘$3,500’’; and 
(2) in clause (ii)(I), by striking ‘‘$3,500’’ and 
inserting ‘‘$4,500’’. 
(c) COUNTING
OF CONSOLIDATION LOANS AGAINST 
LIMITS.—Section 
428C(a)(3)(B) 
(20 
U.S.C. 
1078– 
3(a)(3)(B)) is amended by adding at the end the following 
new clause: 
‘‘(ii) Loans made under this section shall, to the 
extent used to pay off the outstanding principal bal-
ance on loans made under this title, excluding cap-
italized interest, be counted against the applicable 
limitations on aggregate indebtedness contained in 
sections 425(a)(2), 428(b)(1)(B), 428H(d), 455, and 
464(a)(2)(B).’’. 
(d) EFFECTIVE DATE.—The amendments made by this 
section shall apply with respect to any loan made, insured,
182 
or guaranteed under part B or part D of title IV of the 
Higher Education Act of 1965 for which the first disburse-
ment of principal is made on or after July 1, 2007. 
SEC. 423. INTEREST RATES AND SPECIAL ALLOWANCES. 
(a) FFEL INTEREST RATES.—Section 427A (20 
U.S.C. 1077a(k)) is amended— 
(1) in subsection (k)— 
(A) by striking ‘‘, AND BEFORE JULY 1, 
2006’’ in the heading of such subsection; and 
(B) by striking ‘‘, and before July 1, 2006,’’ 
each place it appears other than paragraph (4); 
(2) by striking subsection (l); and 
(3) by redesignating subsections (m) and (n) as 
subsections (l) and (m), respectively. 
(b) DIRECT LOAN INTEREST RATES.—Section 455(b) 
(20 U.S.C. 1087e(b)) is amended— 
(1) in paragraph (6)— 
(A) by striking ‘‘, AND BEFORE JULY 1, 
2006’’ in the heading of such paragraph; and 
(B) by striking ‘‘, and before July 1, 2006,’’ 
each place it appears other than subparagraph 
(D); 
(2) by striking paragraph (7); and 
(3) by redesignating paragraphs (8) and (9) as 
paragraphs (7) and (8), respectively.
183 
(c) CONSOLIDATION LOAN INTEREST RATES.— 
(1) FFEL LOANS.—Section 427A(k) (20 U.S.C. 
1077a(k)) is further amended— 
(A) in the heading of paragraph (4), by in-
serting ‘‘BEFORE JULY 1, 2006’’ after ‘‘LOANS’’; 
(B) by redesignating paragraph (5) as 
paragraph (6); and 
(C) by inserting after paragraph (4) the fol-
lowing: 
‘‘(5) CONSOLIDATION LOANS ON OR AFTER JULY 
1, 2006.— 
‘‘(A) BORROWER ELECTION.—With respect 
to any consolidation loan under section 428C for 
which the application is received by an eligible 
lender on or after July 1, 2006, the applicable 
rate of interest shall, at the election of the bor-
rower at the time of application for the loan, be 
either at the rate determined under subpara-
graph (B) or the rate determined under subpara-
graph (C). 
‘‘(B) VARIABLE RATE.—Except as provided 
in subparagraph (D), the rate determined under 
this subparagraph shall, during any 12-month 
period beginning on July 1 and ending on June
184 
30, be determined on the preceding June 1 and, 
for such 12-month period, not be more than— 
‘‘(i) the bond equivalent rate of 91-day 
Treasury bills auctioned at the final auc-
tion held prior to such June 1; plus 
‘‘(ii) 2.3 percent, 
except that such rate shall not exceed 8.25 per-
cent. 
‘‘(C) FIXED RATE.—Except as provided in 
subparagraph (D), the rate determined under 
this subparagraph shall be determined for the 
duration of the term of the loan on the July 1 
that is or precedes the date on which the applica-
tion is received by an eligible lender, and shall 
be, for such duration, not more than— 
‘‘(i) the bond equivalent rate of 91-day 
Treasury bills auctioned at the final auc-
tion held prior to the June 1 immediately 
preceding such July 1; plus 
‘‘(ii) 3.3 percent, 
except that such rate shall not exceed 8.25 per-
cent. 
‘‘(D) CONSOLIDATION OF PLUS LOANS.—In 
the case of any such consolidation loan that is 
used to repay loans each of which was made
185 
under section 428B or was a Federal Direct 
PLUS Loan (or both), the rates determined 
under clauses (B) and (C) shall be determined— 
‘‘(i) by substituting ‘3.1 percent’ for 
‘2.3 percent’; 
‘‘(ii) by substituting ‘4.1 percent’ for 
‘3.3 percent’; and 
‘‘(iii) by substituting ‘9.0 percent’ for 
‘8.25 percent’.’’. 
(2) DIRECT
LOANS.—Section 455(b)(6) (20 
U.S.C. 1087e(b)(6)) is further amended— 
(A) in the heading of subparagraph (D), by 
inserting ‘‘BEFORE JULY 1, 2006’’ after ‘‘LOANS’’ 
(B) by redesignating subparagraph (E) as 
subparagraph (F); and 
(C) by inserting after subparagraph (D) the 
following: 
‘‘(E) CONSOLIDATION LOANS ON OR AFTER 
JULY 1, 2006.— 
‘‘(i) BORROWER ELECTION.—Notwith-
standing the preceding paragraphs of this 
subsection, with respect to any Federal Di-
rect Consolidation Loan for which the ap-
plication is received by an eligible lender on 
or after July 1, 2006, the applicable rate of
186 
interest shall, at the election of the borrower 
at the time of application for the loan, be 
either at the rate determined under clause 
(ii) or the rate determined under clause 
(iii). 
‘‘(ii) VARIABLE RATE.—Except as pro-
vided in clause (iv), the rate determined 
under this clause shall, during any 12- 
month period beginning on July 1 and end-
ing on June 30, be determined on the pre-
ceding June 1 and, for such 12-month pe-
riod, be equal to— 
‘‘(I) the bond equivalent rate of 
91-day Treasury bills auctioned at the 
final auction held prior to such June 
1; plus 
‘‘(II) 2.3 percent, 
except that such rate shall not exceed 8.25 
percent. 
‘‘(iii) FIXED
RATE.—Except as pro-
vided in clause (iv), the rate determined 
under this clause shall be determined for the 
duration of the term of the loan on the July 
1 that is or precedes the date on which the
187 
application is received by an eligible lender, 
and shall be, for such duration, equal to— 
‘‘(I) the bond equivalent rate of 
91-day Treasury bills auctioned at the 
final auction held prior to the June 1 
immediately preceding such July 1; 
plus 
‘‘(II) 3.3 percent, 
except that such rate shall not exceed 8.25 
percent. 
‘‘(iv) 
CONSOLIDATION
OF
PLUS 
LOANS.—In the case of any such Federal 
Direct Consolidation Loan that is used to 
repay loans each of which was made under 
section 428B or was a Federal Direct 
PLUS Loan (or both), the rates determined 
under clauses (ii) and (iii) shall be deter-
mined— 
‘‘(I) by substituting ‘3.1 percent’ 
for ‘2.3 percent’; 
‘‘(II) by substituting ‘4.1 percent’ 
for ‘3.3 percent’; and 
‘‘(III) by substituting ‘9.0 percent’ 
for ‘8.25 percent’.’’.
188 
(d) CONSOLIDATION
LOAN
CONFORMING
AMEND-
MENT.—Section 
428C(c)(1)(A)(ii) 
(20 
U.S.C. 
1078– 
3(c)(1)(A)(ii)) is amended by striking ‘‘section 427A(l)(3)’’ 
and inserting ‘‘section 427A(k)(5)’’. 
(e) CONFORMING AMENDMENTS FOR SPECIAL ALLOW-
ANCES.— 
(1) AMENDMENT.—Subparagraph (I) of section 
438(b)(2) (20 U.S.C. 1087–1(b)(2)) is amended— 
(A) by striking clause (ii) and inserting the 
following: 
‘‘(ii) IN
SCHOOL
AND
GRACE
PE-
RIOD.—In the case of any loan for which 
the first disbursement is made on or after 
January 1, 2000, and for which the appli-
cable interest rate is described in section 
427A(k)(2), clause (i)(III) of this subpara-
graph shall be applied by substituting ‘1.74 
percent’ for ‘2.34 percent’.’’; 
(B) in clause (iii)— 
(i) by striking ‘‘or (l)(2)’’; and 
(ii) by striking ‘‘, subject to clause (v) 
of this subparagraph’’; 
(C) in clause (iv)— 
(i) by striking ‘‘or (l)(3)’’ and insert-
ing ‘‘or (k)(5)’’; and
189 
(ii) by striking ‘‘, subject to clause (vi) 
of this subparagraph’’; and 
(D) by striking clauses (v), (vi), and (vii) 
and inserting the following: 
‘‘(v) RECAPTURE
OF
EXCESS
INTER-
EST.— 
‘‘(I) EXCESS
CREDITED.—With 
respect to a loan on which the applica-
ble interest rate is determined under 
section 427A(k) and for which the first 
disbursement of principal is made on 
or after July 1, 2006, if the applicable 
interest rate for any 3-month period 
exceeds the special allowance support 
level applicable to such loan under this 
subparagraph for such period, then an 
adjustment shall be made by calcu-
lating the excess interest in the amount 
computed under subclause (II) of this 
clause, and by crediting the excess in-
terest to the Government not less often 
than annually. 
‘‘(II) CALCULATION OF EXCESS.— 
The amount of any adjustment of in-
terest on a loan to be made under this
190 
subsection for any quarter shall be 
equal to— 
‘‘(aa) the applicable interest 
rate minus the special allowance 
support level determined under 
this subparagraph; multiplied by 
‘‘(bb) the average daily prin-
cipal balance of the loan (not in-
cluding unearned interest added 
to principal) during such cal-
endar quarter; divided by 
‘‘(cc) four. 
‘‘(III) SPECIAL ALLOWANCE SUP-
PORT
LEVEL.—For purposes of this 
clause, the term ‘special allowance sup-
port level’ means, for any loan, a num-
ber expressed as a percentage equal to 
the sum of the rates determined under 
subclauses (I) and (III) of clause (i), 
and applying any substitution rules 
applicable to such loan under clauses 
(ii), (iii), and (iv) in determining such 
sum.’’. 
(2) EFFECTIVE DATE.—The amendments made 
by this subsection shall not apply with respect to any
191 
special allowance payment made under section 438 of 
the Higher Education Act of 1965 (20 U.S.C 1087– 
1) before July 1, 2006. 
SEC. 424. ADDITIONAL LOAN TERMS AND CONDITIONS. 
(a) FEDERAL DEFAULT FEES.— 
(1) IN GENERAL.—Subparagraph (H) of section 
428(b)(1) (20 U.S.C. 1078(b)(1)(H)) is amended to 
read as follows: 
‘‘(H) provides— 
‘‘(i) for loans for which the first dis-
bursement of principal is made before July, 
1, 2006, for the collection of a single insur-
ance premium equal to not more than 1.0 
percent of the principal amount of the loan, 
by deduction proportionately from each in-
stallment payment of the proceeds of the 
loan to the borrower, and insures that the 
proceeds of the premium will not be used for 
incentive payments to lenders; or 
‘‘(ii) for loans for which the first dis-
bursement of principal is made on or after 
July 1, 2006, for the collection and deposit 
into the Federal Student Loan Reserve 
Fund under section 422A of a Federal de-
fault fee of 1.0 percent of the principal
192 
amount of such loan, which shall be de-
ducted proportionately from each install-
ment payment of the proceeds of the loan to 
the borrower prior to payment to the bor-
rower, and insures that the proceeds of the 
Federal default fee will not be used for in-
centive payments to lenders;’’. 
(2) UNSUBSIDIZED
LOANS.—Section 428H(h) 
(20 U.S.C. 1078–8(h)) is amended by adding at the 
end the following new sentence: ‘‘In lieu of the insur-
ance premium authorized under the preceding sen-
tence, and effective for loans for which the first dis-
bursement of principal is made on or after July 1, 
2006, each State or nonprofit private institution or 
organization having an agreement with the Secretary 
under section 428(b)(1) shall collect and deposit into 
the Federal Student Loan Reserve Fund under section 
422A a Federal default fee of 1.0 percent of the prin-
cipal amount of the loan, obtained by deduction pro-
portionately from each installment payment of the 
proceeds of the loan to the borrower.’’. 
(3) VOLUNTARY
FLEXIBLE
AGREEMENTS.—Sec-
tion 428A(a)(1) (20 U.S.C. 1078–1(a)(1)) is amend-
ed—
193 
(A) by striking ‘‘or’’ at the end of subpara-
graph (A); 
(B) by striking the period at the end of sub-
paragraph (B) and inserting ‘‘; or’’; and 
(C) by adding at the end the following new 
subparagraph: 
‘‘(C) the Federal default fee required by sec-
tion 428(b)(1)(H) and the second sentence of sec-
tion 428H(h).’’. 
(b) DISBURSEMENT.—Section 428(b)(1)(N) (20 U.S.C. 
1078(b)(1)(N)(ii)) is amended— 
(1) in clause (i), by inserting ‘‘(including an eli-
gible foreign institution, except as provided in clause 
(ii))’’ after ‘‘institution’’; and 
(2) in clause (ii), by striking ‘‘or at an eligible 
foreign institution’’. 
(c) REPAYMENT PLANS.— 
(1) FFEL LOANS.—Section 428(b)(9)(A) (20 
U.S.C. 1078(b)(9)(A)) is amended— 
(A) by inserting before the semicolon at the 
end of clause (ii) the following: ‘‘, and the Sec-
retary may not restrict the proportions or ratios 
by which such payments may be graduated with 
the informed agreement of the borrower’’;
194 
(B) by striking ‘‘and’’ at the end of clause 
(iii); 
(C) by redesignating clause (iv) as clause 
(v); and 
(D) by inserting after clause (iii) the fol-
lowing new clause: 
‘‘(iv) a delayed repayment plan under 
which the borrower makes scheduled pay-
ments for not more than 2 years that are 
annually not less than the amount of inter-
est due or $600, whichever is greater, and 
then makes payments in accordance with 
clause (i), (ii), or (iii); and’’. 
(2) DIRECT
LOANS.—Section 455(d)(1) (20 
U.S.C. 1087e(d)(1)) is amended— 
(A) by redesignating subparagraph (D) as 
subparagraph (E); and 
(B) by striking subparagraphs (A), (B), 
and (C) and inserting the following: 
‘‘(A) a standard repayment plan, consistent 
with subsection (a)(1) of this section and with 
section 428(b)(9)(A)(i); 
‘‘(B) a graduated repayment plan, con-
sistent with section 428(b)(9)(A)(ii);
195 
‘‘(C) an extended repayment plan, con-
sistent with section 428(b)(9)(A)(v), except that 
the borrower shall annually repay a minimum 
amount determined by the Secretary in accord-
ance with section 428(b)(1)(L); 
‘‘(D) a delayed repayment plan under 
which the borrower makes scheduled payments 
for not more than 2 years that are annually not 
less than the amount of interest due or $600, 
whichever is greater, and then makes payments 
in accordance with subparagraph (A), (B), or 
(C); and’’. 
(d) ORIGINATION FEES.— 
(1) FFEL PROGRAM.—Paragraph (2) of section 
438(c) (20 U.S.C. 1087–1(c)) is amended— 
(A) by striking the designation and heading 
of such paragraph and inserting the following: 
‘‘(2) AMOUNT OF ORIGINATION FEES.— 
‘‘(A) IN GENERAL.—’’; and 
(B) by adding at the end the following new 
subparagraph: 
‘‘(B) SUBSEQUENT REDUCTIONS.—Subpara-
graph (A) shall be applied to loans made under 
this part (other than loans made under sections 
428C and 439(o))—
196 
‘‘(i) by substituting ‘2.0 percent’ for 
‘3.0 percent’ with respect to loans for which 
the first disbursement of principal is made 
on or after July 1, 2006, and before July 1, 
2007; 
‘‘(ii) by substituting ‘1.5 percent’ for 
‘3.0 percent’ with respect to loans for which 
the first disbursement of principal is made 
on or after July 1, 2007, and before July 1, 
2008; 
‘‘(iii) by substituting ‘1.0 percent’ for 
‘3.0 percent’ with respect to loans for which 
the first disbursement of principal is made 
on or after July 1, 2008, and before July 1, 
2009; 
‘‘(iv) by substituting ‘0.5 percent’ for 
‘3.0 percent’ with respect to loans for which 
the first disbursement of principal is made 
on or after July 1, 2009, and before July 1, 
2010; and 
‘‘(v) by substituting ‘0.0 percent’ for 
‘3.0 percent’ with respect to loans for which 
the first disbursement of principal is made 
on or after July 1, 2010.’’.
197 
(2) DIRECT LOAN PROGRAM.—Subsection (c) of 
section 455 (20 U.S.C. 1087e(c)) is amended to read 
as follows: 
‘‘(c) LOAN FEE.— 
‘‘(1) IN GENERAL.—The Secretary shall charge 
the borrower of a loan made under this part an origi-
nation fee of 4.0 percent of the principal amount of 
loan. 
‘‘(2) SUBSEQUENT REDUCTION.—Paragraph (1) 
shall be applied to loans made under this part, other 
than consolidation loans and PLUS loans— 
‘‘(A) by substituting ‘not more or less than 
3.0 percent’ for ‘4.0 percent’ with respect to loans 
for which the first disbursement of principal is 
made on or after July 1, 2006, and before July 
1, 2007; 
‘‘(B) by substituting ‘not more or less than 
2.5 percent’ for ‘4.0 percent’ with respect to loans 
for which the first disbursement of principal is 
made on or after July 1, 2007, and before July 
1, 2008; 
‘‘(C) by substituting ‘not more or less than 
2.0 percent’ for ‘4.0 percent’ with respect to loans 
for which the first disbursement of principal is
198 
made on or after July 1, 2008, and before July 
1, 2009; 
‘‘(D) by substituting ‘not more or less than 
1.5 percent’ for ‘4.0 percent’ with respect to loans 
for which the first disbursement of principal is 
made on or after July 1, 2009, and before July 
1, 2010; and 
‘‘(E) by substituting ‘not more or less than 
1.0 percent’ for ‘4.0 percent’ with respect to loans 
for which the first disbursement of principal is 
made on or after July 1, 2010. 
‘‘(3) WAIVERS AND REPAYMENT INCENTIVES PRO-
HIBITED.—Beginning with loans made on or after 
July 1, 2006, the Secretary is prohibited— 
‘‘(A) from waiving any amount of the loan 
fee prescribed under this section as part of a re-
payment incentive in section 455(b)(7); and 
‘‘(B) from providing any repayment incen-
tive before the borrower enters repayment.’’. 
(e) FIXED RATE OFFSET CHARGE.— 
(1) 
FFEL 
CONSOLIDATION
LOANS.—Section 
438(c) (20 U.S.C. 1087–1(c)) is further amended— 
(A) in paragraph (1)(A), by inserting after 
‘‘paragraph (2) of this subsection’’ the following: 
‘‘and the amount the lender is authorized to col-
199 
lect as a fixed rate offset charge in accordance 
with paragraph (9) of this subsection’’; 
(B) in paragraph (1)(B)— 
(i) by inserting ‘‘and the fixed rate off-
set charge’’ after ‘‘origination fee’’; and 
(ii) by inserting ‘‘and fixed rate offset 
charges’’ after ‘‘origination fees’’; 
(C) in paragraphs (3) and (4), by inserting 
‘‘and fixed rate offset charge’’ after ‘‘origination 
fee’’ each place it appears; 
(D) in paragraph (5)— 
(i) by inserting ‘‘or fixed rate offset 
charge’’ after ‘‘origination fee’’; and 
(ii) by inserting ‘‘or fixed rate offset 
charges’’ after ‘‘origination fees’’; 
(E) in paragraph (7), by inserting ‘‘and 
fixed rate offset charges’’ after ‘‘origination fees’’; 
and 
(F) by adding at the end the following new 
paragraph: 
‘‘(9) FIXED RATE OFFSET CHARGES FOR CON-
SOLIDATION
LOANS.—For any loan under section 
428C for which the borrower elects to take a fixed rate 
under section 427A(k)(5)(C), the lender is authorized 
to collect a fixed rate offset charge in an amount not
200 
to exceed 0.5 percent of the principal amount of the 
loan. Such amount may be added to the principal 
amount of the loan for repayment by the borrower.’’. 
(2) DIRECT LOANS.—Section 455(c) (20 U.S.C. 
1087e(c)), as amended by subsection (d)(2) of this sec-
tion, is further amended by adding at the end the fol-
lowing new paragraph: 
‘‘(4) FIXED RATE OFFSET CHARGES FOR CON-
SOLIDATION LOANS.—For any Federal Direct Consoli-
dation Loan for which the borrower elects to take a 
fixed rate under section 455(b)(6)(E)(iii), the Sec-
retary shall collect a fixed rate offset charge in an 
amount not to exceed 0.5 percent of the principal 
amount of the loan. Such amount may be added to 
the principal amount of the loan for repayment by 
the borrower. Such amount is not subject to the re-
quirements of paragraph (3) of this subsection.’’. 
SEC. 425. CONSOLIDATION LOAN CHANGES. 
(a) CROSS-CONSOLIDATION BETWEEN PROGRAMS.— 
Section 428C (20 U.S.C. 1078–3) is amended— 
(1) in subsection (a)(3)(B)(i)— 
(A) by inserting ‘‘or under section 455(g)’’ 
after ‘‘under this section’’ both places it appears; 
(B) by inserting ‘‘under both sections’’ after 
‘‘terminates’’
201 
(C) by striking ‘‘and’’ at the end of sub-
clause (III); 
(D) by striking the period at the end of sub-
clause (IV) and inserting ‘‘; and’’; and 
(E) by adding at the end the following new 
subclause: 
‘‘(V) an individual may obtain a subse-
quent consolidation loan under section 455(g) 
only for the purposes of obtaining an income 
contingent repayment plan, and only if the loan 
has been submitted to the guaranty agency for 
default aversion.’’; and 
(2) in subsection (b)(5), by striking the first sen-
tence and inserting the following: ‘‘In the event that 
a lender with an agreement under subsection (a)(1) of 
this section denies a consolidation loan application 
submitted to it by an eligible borrower under this sec-
tion, or denies an application submitted to it by such 
a borrower for a consolidation loan with income-sen-
sitive repayment terms, the Secretary shall offer any 
such borrower who applies for it, a direct consolida-
tion loan. The Secretary shall offer such a loan to a 
borrower who has defaulted, for the purpose of resolv-
ing the default.’’. 
(b) REPEAL OF IN-SCHOOL CONSOLIDATION.—
202 
(1) DEFINITION OF REPAYMENT PERIOD.—Sec-
tion 428(b)(7)(A) (20 U.S.C. 1078(b)(7)(A)) is 
amended by striking ‘‘shall begin—’’ and all that fol-
lows through ‘‘earlier date.’’ and inserting the fol-
lowing: ‘‘shall begin the day after 6 months after the 
date the student ceases to carry at least one-half the 
normal full-time academic workload (as determined 
by the institution).’’. 
(2) CONFORMING
CHANGE
TO
ELIGIBLE
BOR-
ROWER
DEFINITION.—Section 
428C(a)(3)(A)(ii)(I) 
(20 U.S.C. 1078–3(a)(3)(A)(ii)(I)) is amended by in-
serting ‘‘as determined under section 428(b)(7)(A)’’ 
after ‘‘repayment status’’. 
(c) ADDITIONAL AMENDMENTS.—Section 428C (20 
U.S.C. 1078–3) is amended— 
(1) in subsection (a)(3), by striking subpara-
graph (C); and 
(2) in subsection (b)(1)— 
(A) by striking everything after ‘‘under this 
section’’ the first place it appears in subpara-
graph (A) and inserting the following: ‘‘and that, 
if all the borrower’s loans under this part are 
held by a single holder, the borrower has notified 
such holder that the borrower is seeking to obtain 
a consolidation loan under this section;’’;
203 
(B) by striking ‘‘(i) which’’ and all that fol-
lows through ‘‘and (ii)’’ in subparagraph (C); 
(C) by striking ‘‘and’’ at the end of sub-
paragraph (E); 
(D) by redesignating subparagraph (F) as 
subparagraph (G); and 
(E) by inserting after subparagraph (E) the 
following new subparagraph: 
‘‘(F) that the lender of the consolidation 
loan shall, upon application for such loan, pro-
vide the borrower with a clear and conspicuous 
notice of at least the following information: 
‘‘(i) the effects of consolidation on total 
interest to be paid, fees to be paid, and 
length of repayment; 
‘‘(ii) the effects of consolidation on a 
borrower’s underlying loan benefits, includ-
ing 
loan 
forgiveness, 
cancellation, 
deferment, and reduced interest rates on 
those underlying loans; 
‘‘(iii) the ability of the borrower to 
prepay the loan, pay on a shorter schedule, 
and to change repayment plans; 
‘‘(iv) that borrower benefit programs 
may vary among different loan holders, and
204 
a description of how the borrower benefits 
may vary among different loan holders; 
‘‘(v) the tax benefits for which bor-
rowers may be eligible; 
‘‘(vi) the consequences of default; and 
‘‘(vii) that by making the application 
the applicant is not obligated to agree to 
take the consolidation loan; and’’. 
(d) EFFECTIVE DATE FOR SINGLE HOLDER AMEND-
MENT.—The amendment made by subsection (c)(2)(A) shall 
apply with respect to any loan made under section 428C 
of the Higher Education Act of 1965 (20 U.S.C. 1078–3) 
for which the application is received by an eligible lender 
on or after July 1, 2006. 
(e) CONFORMING AMENDMENTS TO DIRECT LOAN PRO-
GRAM.—Section 455 (20 U.S.C. 1087e) is amended 
(1) in subsection (a)(1) by inserting ‘‘428C,’’ 
after ‘‘428B,’’; 
(2) in subsection (a)(2)— 
(A) by striking ‘‘and’’ at the end of sub-
paragraph (B); 
(B) by redesignating subparagraph (C) as 
subparagraph (D); and 
(C) by inserting after subparagraph (B) the 
following:
205 
‘‘(C) section 428C shall be known as ‘Fed-
eral Direct Consolidation Loans’; and ’’; and 
(3) in subsection (g)— 
(A) by striking the second sentence; and 
(B) by adding at the end the following new 
sentences: ‘‘To be eligible for a consolidation loan 
under this part, a borrower must meet the eligi-
bility criteria set forth in section 428C(a)(3). 
The Secretary, upon application for such a loan, 
shall comply with the requirements applicable to 
a lender under section 428C(b)(1)(F).’’. 
SEC. 426. DEFERMENT OF STUDENT LOANS FOR MILITARY 
SERVICE. 
(a) FEDERAL FAMILY EDUCATION LOANS.—Section 
428(b)(1)(M) (20 U.S.C. 1078(b)(1)(M)) is amended— 
(1) by striking ‘‘or’’ at the end of clause (ii); 
(2) by redesignating clause (iii) as clause (iv); 
and 
(3) by inserting after clause (ii) the following 
new clause: 
‘‘(iii) not in excess of 3 years during 
which the borrower— 
‘‘(I) is serving on active duty dur-
ing a war or other military operation 
or national emergency; or
206 
‘‘(II) is performing qualifying 
National Guard duty during a war or 
other military operation or national 
emergency; or’’. 
(b) DIRECT LOANS.—Section 455(f)(2) (20 U.S.C. 
1087e(f)(2)) is amended— 
(1) by redesignating subparagraph (C) as sub-
paragraph (D); and 
(2) by inserting after subparagraph (B) the fol-
lowing new subparagraph: 
‘‘(C) not in excess of 3 years during which 
the borrower— 
‘‘(i) is serving on active duty during a 
war or other military operation or national 
emergency; or 
‘‘(ii) is performing qualifying National 
Guard duty during a war or other military 
operation or national emergency; or’’. 
(c) PERKINS LOANS.—Section 464(c)(2)(A) (20 U.S.C. 
1087dd(c)(2)(A)) is amended— 
(1) by redesignating clauses (iii) and (iv) as 
clauses (iv) and (v), respectively; and 
(2) by inserting after clause (ii) the following 
new clause:
207 
‘‘(iii) not in excess of 3 years during which the 
borrower— 
‘‘(I) is serving on active duty during a war 
or other military operation or national emer-
gency; or 
‘‘(II) is performing qualifying National 
Guard duty during a war or other military op-
eration or national emergency;’’. 
(d) DEFINITIONS.—Section 481 (20 U.S.C. 1088) is 
amended by adding at the end the following new subsection: 
‘‘(d) DEFINITIONS FOR MILITARY DEFERMENTS.—For 
purposes of parts B, D, and E of this title: 
‘‘(1) ACTIVE DUTY.—The term ‘active duty’ has 
the meaning given such term in section 101(d)(1) of 
title 10, United States Code, except that such term 
does not include active duty for training or attend-
ance at a service school. 
‘‘(2) MILITARY OPERATION.—The term ‘military 
operation’ means a contingency operation as such 
term is defined in section 101(a)(13) of title 10, 
United States Code. 
‘‘(3) NATIONAL
EMERGENCY.—The term ‘na-
tional emergency’ means the national emergency by 
reason of certain terrorist attacks declared by the 
President on September 14, 2001, or subsequent na-
208 
tional emergencies declared by the President by rea-
son of terrorist attacks. 
‘‘(4) SERVING ON ACTIVE DUTY.—The term ‘serv-
ing on active duty during a war or other military op-
eration or national emergency’ means service by an 
individual who is— 
‘‘(A) a Reserve of an Armed Force ordered 
to active duty under section 12301(a), 12301(g), 
12302, 12304, or 12306 of title 10, United States 
Code, or any retired member of an Armed Force 
ordered to active duty under section 688 of such 
title, for service in connection with a war or 
other military operation or national emergency, 
regardless of the location at which such active 
duty service is performed; and 
‘‘(B) any other member of an Armed Force 
on active duty in connection with such emer-
gency or subsequent actions or conditions who 
has been assigned to a duty station at a location 
other than the location at which such member is 
normally assigned. 
‘‘(5) QUALIFYING NATIONAL GUARD DUTY.—The 
term ‘qualifying National Guard duty during a war 
or other military operation or national emergency’ 
means service as a member of the National Guard on
209 
full-time National Guard duty (as defined in section 
101(d)(5) of title 10, United States Code) under a call 
to active service authorized by the President or the 
Secretary of Defense for a period of more than 30 
consecutive days under section 502(f) of title 32, 
United States Code, in connection with a war, other 
military operation, or a national emergency declared 
by the President and supported by Federal funds.’’. 
(e) RULE OF CONSTRUCTION.—Nothing in the amend-
ments made by this section shall be construed to authorize 
any refunding of any repayment of a loan. 
(f) EFFECTIVE DATE.—The amendments made by this 
section shall apply with respect to loans for which the first 
disbursement is made on or after July 1, 1993, to an indi-
vidual who is a new borrower (within the meaning of sec-
tion 103 of the Higher Education Act of 1965 (20 U.S.C. 
1003)) on or after such date. 
SEC. 427. LOAN FORGIVENESS FOR SERVICE IN AREAS OF 
NATIONAL NEED. 
Section 428K (20 U.S.C. 1078–11) is amended to read 
as follows: 
‘‘SEC. 428K. LOAN FORGIVENESS FOR SERVICE IN AREAS OF 
NATIONAL NEED. 
‘‘(a) PURPOSES.—The purposes of this section are—
210 
‘‘(1) to encourage highly trained individuals to 
enter and continue in service in areas of national 
need; and 
‘‘(2) to reduce the burden of student debt for 
Americans who dedicate their careers to service in 
areas of national need. 
‘‘(b) PROGRAM AUTHORIZED.— 
‘‘(1) IN GENERAL.—The Secretary is authorized 
to carry out a program of assuming the obligation to 
repay, pursuant to paragraphs (2) of subsection (c) 
and subsection (d), a qualified loan amount for a 
loan made, insured, or guaranteed under this part or 
part D (other than loans made under section 428B 
and 428C and comparable loans made under part D), 
for any new borrower after the date of enactment of 
the College Access and Opportunity Act of 2005, 
who— 
‘‘(A) has been employed full-time for at 
least 5 consecutive complete school, academic, or 
calendar years, as appropriate, in an area of na-
tional need described in subsection (c); and 
‘‘(B) is not in default on a loan for which 
the borrower seeks forgiveness. 
‘‘(2) AWARD BASIS.—Loan repayment under this 
section shall be on a first-come, first-served basis pur-
211 
suant to the designation under subsection (c) and sub-
ject to the availability of appropriations. 
‘‘(3) REGULATIONS.—The Secretary is author-
ized to issue such regulations as may be necessary to 
carry out the provisions of this section. 
‘‘(c) AREAS OF NATIONAL NEED.— 
‘‘(1) STATUTORY CATEGORIES.—For purposes of 
this section, an individual shall be treated as em-
ployed in an area of national need if the individual 
is employed full time and is any of the following: 
‘‘(A) EARLY CHILDHOOD EDUCATORS.—An 
individual who is employed as an early child-
hood educator in an eligible preschool program 
or child care facility in a low-income commu-
nity, and who is involved directly in the care, 
development and education of infants, toddlers, 
or young children through age five. 
‘‘(B) NURSES.—An individual who is em-
ployed— 
‘‘(i) as a nurse in a clinical setting; or 
‘‘(ii) as a member of the nursing fac-
ulty at an accredited school of nursing (as 
those terms are defined in section 801 of the 
Public Health Service Act (42 U.S.C. 296)).
212 
‘‘(C) FOREIGN
LANGUAGE
SPECIALISTS.— 
An individual who has obtained a baccalaureate 
degree in a critical foreign language and is em-
ployed— 
‘‘(i) in an elementary or secondary 
school as a teacher of a critical foreign lan-
guage; or 
‘‘(ii) in an agency of the United States 
Government in a position that regularly re-
quires the use of such critical foreign lan-
guage. 
‘‘(D) LIBRARIANS.—An individual who is 
employed full-time as a libarian in— 
‘‘(i) a public library that serves a geo-
graphic area within which the public 
schools have a combined average of 30 per-
cent or more of their total student enroll-
ments composed of children counted under 
section 1113(a)(5) of the Elementary and 
Secondary Education Act of 1965; or 
‘‘(ii) an elementary or secondary school 
which is in the school district of a local edu-
cational agency which is eligible in such 
year for assistance pursuant to title I of the 
Elementary and Secondary Education Act
213 
of 1965, and which for the purpose of this 
paragraph and for that year has been deter-
mined by the Secretary (pursuant to regula-
tions and after consultation with the State 
educational agency of the State in which the 
school is located) to be a school in which the 
enrollment of children counted under section 
1113(a)(5) of the Elementary and Sec-
ondary Education Act of 1965 exceeds 30 
percent of the total enrollment of that 
school. 
‘‘(E) HIGHLY QUALIFIED TEACHERS: BILIN-
GUAL
EDUCATION
AND
LOW-INCOME
COMMU-
NITIES.—An individual who— 
‘‘(i) is highly qualified as such term is 
defined in section 9101 of the Elementary 
and Secondary Education Act of 1965; and 
‘‘(ii)(I) is employed as a full-time 
teacher of bilingual education; or 
‘‘(II) is employed as a teacher for serv-
ice in a public or nonprofit private elemen-
tary or secondary school which is in the 
school district of a local educational agency 
which is eligible in such year for assistance 
pursuant to title I of the Elementary and
214 
Secondary Education Act of 1965, and 
which for the purpose of this paragraph and 
for that year has been determined by the 
Secretary (pursuant to regulations and 
after consultation with the State edu-
cational agency of the State in which the 
school is located) to be a school in which the 
enrollment of children counted under section 
1113(a)(5) of the Elementary and Sec-
ondary Education Act of 1965 exceeds 40 
percent of the total enrollment of that 
school. 
‘‘(F) FIRST
RESPONDERS
IN
LOW-INCOME 
COMMUNITIES.—An individual who— 
‘‘(i) is employed as a firefighter, police 
officer, or emergency medical technician; 
and 
‘‘(ii) serves as such in a low-income 
community. 
‘‘(G) CHILD WELFARE WORKERS.—An indi-
vidual who— 
‘‘(i) has obtained a degree in social 
work or a related field with a focus on serv-
ing children and families; and
215 
‘‘(ii) is employed in public or private 
child welfare services. 
‘‘(H) SPEECH-LANGUAGE PATHOLOGISTS.— 
An individual who is a speech-language patholo-
gist, who is employed in an eligible preschool 
program or an elementary or secondary school, 
and who has, at a minimum, a graduate degree 
in speech-language pathology, or communication 
sciences and disorders. 
‘‘(I) ADDITIONAL
AREAS
OF
NATIONAL 
NEED.—An individual who is employed in an 
area designated by the Secretary under para-
graph (2) and has completed a baccalaureate or 
advanced degree related to such area. 
‘‘(2) DESIGNATION
OF
AREAS
OF
NATIONAL 
NEED.—After consultation with appropriate Federal, 
State, and community-based agencies and organiza-
tions, the Secretary shall designate areas of national 
need. In making such designations, the Secretary 
shall take into account the extent to which— 
‘‘(A) the national interest in the area is 
compelling; 
‘‘(B) the area suffers from a critical lack of 
qualified personnel; and
216 
‘‘(C) other Federal programs support the 
area concerned. 
‘‘(d) QUALIFIED LOAN AMOUNT.—The Secretary shall 
repay not more than $5,000 in the aggregate of the loan 
obligation on a loan made under section 428 or 428H that 
is outstanding after the completion of the fifth consecutive 
school, academic, or calendar year, as appropriate, de-
scribed in subsection (b)(1). 
‘‘(e) CONSTRUCTION.—Nothing in this section shall be 
construed to authorize the refunding of any repayment of 
a loan made under section 428 or 428H. 
‘‘(f) INELIGIBILITY OF NATIONAL SERVICE AWARD RE-
CIPIENTS.—No student borrower may, for the same service, 
receive a benefit under both this section and subtitle D of 
title I of the National and Community Service Act of 1990 
(42 U.S.C. 12601 et seq.). 
‘‘(g) INELIGIBILITY FOR DOUBLE BENEFITS.—No bor-
rower may receive a reduction of loan obligations under 
both this section and section 428J or 460. 
‘‘(h) DEFINITIONS.—In this section 
‘‘(1) CHILD
CARE
FACILITY.—The term ‘child 
care facility’ means a facility, including a home, 
that— 
‘‘(A) provides for the education and care of 
children from birth through age 5; and
217 
‘‘(B) meets any applicable State or local 
government licensing, certification, approval, or 
registration requirements. 
‘‘(2) CRITICAL FOREIGN LANGUAGE.—The term 
‘critical foreign language’ includes the languages of 
Arabic, Korean, Japanese, Chinese, Pashto, Persian- 
Farsi, Serbian-Croatian, Russian, Portuguese, and 
any other language identified by the Secretary of 
Education, in consultation with the Defense Lan-
guage Institute, the Foreign Service Institute, and the 
National Security Education Program, as a critical 
foreign language need. 
‘‘(3) EARLY CHILDHOOD EDUCATOR.—The term 
‘early childhood educator’ means an early childhood 
educator employed in an eligible preschool program 
who has completed a baccalaureate or advanced de-
gree in early childhood development, early childhood 
education, or in a field related to early childhood edu-
cation. 
‘‘(4) 
ELIGIBLE
PRESCHOOL
PROGRAM.—The 
term ‘eligible preschool program’ means a program 
that provides for the care, development, and education 
of infants, toddlers, or young children through age 5, 
meets any applicable State or local government li-
218 
censing, certification, approval, and registration re-
quirements, and is operated by— 
‘‘(A) a public or private school that may be 
supported, sponsored, supervised, or adminis-
tered by a local educational agency; 
‘‘(B) a Head Start agency serving as a 
grantee designated under the Head Start Act (42 
U.S.C. 9831 et seq.); 
‘‘(C) a nonprofit or community based orga-
nization; or 
‘‘(D) a child care program, including a 
home. 
‘‘(5) LOW-INCOME
COMMUNITY.—In this sub-
section, the term ‘low-income community’ means a 
community in which 70 percent of households earn 
less than 85 percent of the State median household in-
come. 
‘‘(6) NURSE.—The term ‘nurse’ means a nurse 
who meets all of the following: 
‘‘(A) The nurse graduated from— 
‘‘(i) an accredited school of nursing (as 
those terms are defined in section 801 of the 
Public Health Service Act (42 U.S.C. 296)); 
‘‘(ii) a nursing center; or
219 
‘‘(iii) an academic health center that 
provides nurse training. 
‘‘(B) The nurse holds a valid and unre-
stricted license to practice nursing in the State 
in which the nurse practices in a clinical setting. 
‘‘(C) The nurse holds one or more of the fol-
lowing: 
‘‘(i) A graduate degree in nursing, or 
an equivalent degree. 
‘‘(ii) A nursing degree from a collegiate 
school of nursing (as defined in section 801 
of the Public Health Service Act (42 U.S.C. 
296)). 
‘‘(iii) A nursing degree from an asso-
ciate degree school of nursing (as defined in 
section 801 of the Public Health Service Act 
(42 U.S.C. 296)). 
‘‘(iv) A nursing degree from a diploma 
school of nursing (as defined in section 801 
of the Public Health Service Act (42 U.S.C. 
296)). 
‘‘(7) 
SPEECH-LANGUAGE
PATHOLOGIST.—The 
term ‘speech-language pathologist’ means a speech- 
language pathologist who meets all of the following:
220 
‘‘(A) the speech-language pathologist has re-
ceived, at a minimum, a graduate degree in 
speech-language pathology or communication 
sciences and disorders from an institution of 
higher education accredited by an agency or as-
sociation recognized by the Secretary pursuant 
to section 496(a) of this Act; and 
‘‘(B) the speech-language pathologist meets 
or exceeds the qualifications as defined in section 
1861(ll) of the Social Security Act (42 U.S.C. 
1395x). 
‘‘(i) AUTHORIZATION OF APPROPRIATIONS.—There are 
authorized to be appropriated to carry out this section such 
sums as may be necessary for fiscal year 2006 and such 
sums as may be necessary for each of the 5 succeeding fiscal 
years.’’. 
SEC. 428. UNSUBSIDIZED STAFFORD LOANS. 
(a) AMENDMENT.—Section 428H(d)(2)(C) (20 U.S.C. 
1078–8(d)(2)(C)) is amended by striking ‘‘$10,000’’ and in-
serting ‘‘$12,000’’. 
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall apply to loans for which the first disburse-
ment of principal is made on or after July 1, 2007.
221 
SEC. 429. ELIMINATION OF TERMINATION DATES FROM 
TAXPAYER-TEACHER PROTECTION ACT OF 
2004. 
(a) EXTENSION OF LIMITATIONS ON SPECIAL ALLOW-
ANCE FOR LOANS FROM THE PROCEEDS OF TAX EXEMPT 
ISSUES.—Section 
438(b)(2)(B) 
(20 
U.S.C. 
1087– 
1(b)(2)(B)) is amended— 
(1) in clause (iv), by striking ‘‘and before Janu-
ary 1, 2006,’’; and 
(2) in clause (v)(II)— 
(A) by striking ‘‘and before January 1, 
2006,’’ each place it appears in divisions (aa) 
and (bb); and 
(B) by striking ‘‘, and before January 1, 
2006’’ in division (cc). 
(b) ADDITIONAL LIMITATION ON SPECIAL ALLOWANCE 
FOR LOANS FROM
THE PROCEEDS
OF TAX EXEMPT 
ISSUES.—Section 438(b)(2)(B) (20 U.S.C 1087–1(b)(2)(B)) 
is further amended by adding at the end thereof the fol-
lowing new clause: 
‘‘(vi) Notwithstanding clauses (i), (ii), and (v), 
the quarterly rate of the special allowance shall be the 
rate determined under subparagraph (A), (E), (F), 
(G), (H), or (I) of this paragraph, as the case may 
be, for a holder of loans—
222 
‘‘(I) that were made or purchased on or 
after October 1, 2005; or 
‘‘(II) that were not earning a quarterly rate 
of special allowance determined under clauses (i) 
or (ii) of subparagraph (B) of this paragraph 
(20 U.S.C. 1087–1(b)(2)(b)) as of October 1, 
2005.’’. 
(c) ELIMINATION OF EFFECTIVE DATE LIMITATION ON 
HIGHER TEACHER LOAN FORGIVENESS BENEFITS.—Para-
graph (3) of section 3(b) of the Taxpayer-Teacher Protection 
Act of 2004 (20 U.S.C. 1078–10, note) is repealed. 
(d) ADDITIONAL CHANGES TO TEACHER LOAN FOR-
GIVENESS PROVISIONS.— 
(1) FFEL 
PROVISIONS.—Section 428J (20 
U.S.C. 1078–10) is amended— 
(A) in subsection (b)(1)(B), by inserting 
after ‘‘1965’’ the following: ‘‘, or meets the re-
quirements of subsection (g)(3)’’; 
(B) in subsection (c)(3)— 
(i) by striking ‘‘and’’ at the end of sub-
paragraph (A); 
(ii) by striking the period at the end of 
subparagraph (B) and inserting ‘‘; and’’; 
and
223 
(iii) by inserting after subparagraph 
(B) the following new subparagraph: 
‘‘(C) an elementary or secondary school 
teacher who primarily teaches reading— 
‘‘(i) who meets the requirements of sub-
section (b); 
‘‘(ii) who has obtained a separate read-
ing instruction credential from the State in 
which the teacher is employed; and 
‘‘(iii) who is certified by the chief ad-
ministrative officer of the public or non-
profit private elementary or secondary 
school in which the borrower is employed to 
teach reading— 
‘‘(I) as being proficient in teach-
ing the essential components of reading 
instruction as defined in section 1208 
of the Elementary and Secondary Edu-
cation Act of 1965; and 
‘‘(II) as having such credential.’’; 
and 
(C) in subsection (g), by adding at the end 
the following new paragraph: 
‘‘(3) PRIVATE
SCHOOL
TEACHERS.—An indi-
vidual who is employed as a teacher in a private
224 
school and is exempt from State certification require-
ments (unless otherwise applicable under State law), 
may, in lieu of the requirement of subsection 
(a)(1)(B), have such employment treated as quali-
fying employment under this section if such indi-
vidual is permitted to and does satisfy rigorous sub-
ject knowledge and skills tests by taking competency 
tests in the applicable grade levels and subject areas. 
For such purposes, the competency tests taken by such 
a private school teacher must be recognized by 5 or 
more States for the purpose of fulfilling the highly 
qualified teacher requirements under section 9101 of 
the Elementary and Secondary Education Act of 
1965, and the score achieved by such teacher on each 
test must equal or exceed the average passing score of 
those 5 States.’’. 
(2) DIRECT LOAN PROVISIONS.—Section 460 (20 
U.S.C. 1087j) is amended— 
(A) in subsection (b)(1)(A)(ii), by inserting 
after ‘‘1965’’ the following: ‘‘, or meets the re-
quirements of subsection (g)(3)’’; 
(B) in subsection (c)(3)— 
(i) by striking ‘‘and’’ at the end of sub-
paragraph (A);
225 
(ii) by striking the period at the end of 
subparagraph (B) and inserting ‘‘; and’’; 
and 
(iii) by inserting after subparagraph 
(B) the following new subparagraph: 
‘‘(C) an elementary or secondary school 
teacher who primarily teaches reading— 
‘‘(i) who meets the requirements of sub-
section (b); 
‘‘(ii) who has obtained a separate read-
ing instruction credential from the State in 
which the teacher is employed; and 
‘‘(iii) who is certified by the chief ad-
ministrative officer of the public or non-
profit private elementary or secondary 
school in which the borrower is employed to 
teach reading— 
‘‘(I) as being proficient in teach-
ing the essential components of reading 
instruction as defined in section 1208 
of the Elementary and Secondary Edu-
cation Act of 1965; and 
‘‘(II) as having such credential.’’; 
and
226 
(C) in subsection (g), by adding at the end 
the following new paragraph: 
‘‘(3) PRIVATE
SCHOOL
TEACHERS.—An indi-
vidual who is employed as a teacher in a private 
school and is exempt from State certification require-
ments (unless otherwise applicable under State law), 
may, in lieu of the requirement of subsection 
(a)(1)(A)(ii), have such employment treated as quali-
fying employment under this section if such indi-
vidual is permitted to and does satisfy rigorous sub-
ject knowledge and skills tests by taking competency 
tests in the applicable grade levels and subject areas. 
For such purposes, the competency tests taken by such 
a private school teacher must be recognized by 5 or 
more States for the purpose of fulfilling the highly 
qualified teacher requirements under section 9101 of 
the Elementary and Secondary Education Act of 
1965, and the score achieved by such teacher on each 
test must equal or exceed the average passing score of 
those 5 States.’’. 
SEC. 430. ADDITIONAL ADMINISTRATIVE PROVISIONS. 
(a) TREATMENT OF EXEMPT CLAIMS.— 
(1) 
INSURANCE
COVERAGE.—Section 
428(b)(1)(G) (20 U.S.C. 1078(b)(1)(G)) is amended 
by inserting before the semicolon at the end the fol-
227 
lowing: ‘‘and 100 percent of the unpaid principal 
amount of exempt claims as defined in subsection 
(c)(1)(G)’’. 
(2) TREATMENT.—Section 428(c)(1) (20 U.S.C. 
1078(c)(1)) is amended— 
(A) by redesignating subparagraph (G) as 
subparagraph (I), and moving such subpara-
graph 2 em spaces to the left; and 
(B) by inserting after subparagraph (F) the 
following new subparagraph: 
‘‘(G)(i) Notwithstanding any other provisions of 
this section, in the case of exempt claims, the Sec-
retary shall apply the provisions of— 
‘‘(I) the fourth sentence of subparagraph (A) 
by substituting ‘100 percent’ for ‘95 percent’; 
‘‘(II) subparagraph (B)(i) by substituting 
‘100 percent’ for ‘85 percent’; and 
‘‘(III) subparagraph (B)(ii) by substituting 
‘100 percent’ for ‘75 percent’. 
‘‘(ii) For purposes of clause (i) of this subpara-
graph, the term ‘exempt claims’ means claims with 
respect to loans for which it is determined that the 
borrower (or the student on whose behalf a parent has 
borrowed), without the lender’s or the institution’s 
knowledge at the time the loan was made, provided
228 
false or erroneous information or took actions that 
caused the borrower or the student to be ineligible for 
all or a portion of the loan or for interest benefits 
thereon.’’. 
(b) REDUCTION OF INSURANCE/REINSURANCE PER-
CENTAGE.— 
(1) INSURANCE PERCENTAGE REDUCTION.—Sec-
tion 428(b)(1)(G) as amended by subsection (a)(1) is 
further amended by inserting after the matter inserted 
by such subsection the following: ‘‘, except, for any 
loan for which the first disbursement of principal is 
made on or after July 1, 2006, the preceding provi-
sions of this subparagraph shall be applied by sub-
stituting ‘96 percent’ for ‘98 percent’ ’’. 
(2) REINSURANCE
PERCENTAGE
REDUCTION.— 
Section 428(c)(1) as amended by subsection (a)(2) is 
further amended by adding after subparagraph (G) as 
added by such subsection the following new subpara-
graph: 
‘‘(H) Notwithstanding subparagraphs (A) and 
(B), but subject to subparagraphs (E) and (F), in the 
case of a loan for which the first disbursement of 
principal is made on or after July 1, 2006, the Sec-
retary shall apply—
229 
‘‘(i) the fourth sentence of subparagraph (A) 
by substituting ‘93 percent’ for ‘95 percent’; 
‘‘(ii) subparagraph (B)(i) by substituting 
‘83 percent’ for ‘85 percent’; and 
‘‘(iii) subparagraph (B)(ii) by substituting 
‘73 percent’ for ‘75 percent’.’’. 
(3) INCREASE
INSURANCE
FOR
EXCEPTIONAL 
PERFORMANCE.—Section 428I (20 U.S.C. 1078–9) is 
amended to read as follows: 
‘‘SEC. 428I. SPECIAL INSURANCE AND REINSURANCE RULES 
FOR EXCEPTIONAL PERFORMANCE. 
‘‘(a) DESIGNATION OF LENDERS AND SERVICERS.— 
‘‘(1) IN GENERAL.—Whenever the Secretary de-
termines that an eligible lender or servicer meets the 
performance measures required by paragraph (2), the 
Secretary shall designate that eligible lender or 
servicer, as the case may be, for exceptional perform-
ance. The Secretary shall notify each appropriate 
guaranty agency of the eligible lenders and servicers 
designated under this section. 
‘‘(2) PERFORMANCE MEASURES.— 
‘‘(A) In determining whether to award a 
lender or servicer the exceptional performance 
designation, the Secretary shall require that the 
lender or servicer be performing at or above the
230 
95 percentile of the industry, and demonstrate 
improved performance against the lender’s or 
service’s average of the last 3 years on the factors 
described in subparagraph (B). 
‘‘(B) The factors on which the Secretary 
shall require improvement shall include— 
‘‘(i) delinquency rates; 
‘‘(ii) the rate at which delinquent ac-
counts are restored to good standing; 
‘‘(iii) default rates; 
‘‘(iv) the rate of rejected claims; and 
‘‘(v) any other such measures as deter-
mined by the Secretary. 
‘‘(C) In addition, the Secretary shall not 
make any award of such a designation unless the 
consequence of the designation is cost-neutral to 
the Federal Government. 
‘‘(3) ADDITIONAL
INFORMATION
ON
LENDERS 
AND SERVICERS.—Each appropriate guaranty agency 
shall provide the Secretary with such other informa-
tion in its possession regarding an eligible lender or 
servicer desiring designation as may relate to the Sec-
retary’s determination under paragraph (1), includ-
ing but not limited to any information suggesting
231 
that the application of a lender or servicer for des-
ignation should not be approved. 
‘‘(4) DETERMINATIONS BY THE SECRETARY.— 
‘‘(A) The Secretary shall designate an eligi-
ble lender or servicer for exceptional performance 
if the eligible lender or servicer meets the per-
formance measures required by paragraph (2). 
‘‘(B) The Secretary shall make the deter-
mination under paragraph (1) based upon the 
documentation submitted by the eligible lender or 
servicer as specified in regulation, such other in-
formation as provided by any guaranty agency 
under paragraph (3), and any information in 
the possession of the Secretary or submitted by 
any other agency or office of the Federal Govern-
ment. 
‘‘(C) The Secretary shall inform the eligible 
lender or servicer and the appropriate guaranty 
agency that its application for designation as an 
exceptional performance lender or servicer has 
been approved or disapproved. 
‘‘(5) TRANSITION.— 
‘‘(A) Any eligible lender or servicer des-
ignated for exceptional performance as of the day 
before the date of enactment of the College Access
232 
and Opportunity Act of 2005 shall continue to 
be so designated, and subject to the requirements 
of this section as in effect on that day (including 
revocation), until the performance standards de-
scribed in paragraph (2) are established. 
‘‘(B) The Secretary shall not designate any 
additional eligible lenders or servicers for excep-
tional performance until those performance 
standards are established. 
‘‘(b) PAYMENT
TO LENDERS
AND SERVICERS.—A 
guaranty agency shall pay, to each eligible lender or 
servicer (as agent for an eligible lender) designated under 
subsection (a), 98 percent of the unpaid principal and in-
terest of all loans for which claims are submitted for pay-
ment by that eligible lender or servicer for the one-year pe-
riod following the receipt by the guaranty agency of the no-
tification of designation under this section, or until the 
guaranty agency receives notice from the Secretary that the 
designation of the lender or servicer under subsection (a)(2) 
has been revoked. 
‘‘(c) REVOCATION AUTHORITY.— 
‘‘(1) The Secretary shall revoke the designation 
of a lender or a servicer under subsection (a) if the 
Secretary determines that the lender or servicer has
233 
failed to meet the performance standards required by 
subsection (a)(2). 
‘‘(2) Notwithstanding any other provision of this 
section, a designation under subsection (a) may be re-
voked at any time by the Secretary, in the Secretary’s 
discretion, if the Secretary determines that the eligible 
lender or servicer has failed to meet the criteria and 
performance standards established by the Secretary in 
regulation, or if the Secretary believes the lender or 
servicer may have engaged in fraud in securing des-
ignation under subsection (a), or is failing to service 
loans in accordance with program regulations. 
‘‘(d) DOCUMENTATION.—Nothing in this section shall 
restrict or limit the authority of guaranty agencies to re-
quire the submission of claims documentation evidencing 
servicing performed on loans, except that the guaranty 
agency may not require greater documentation than that 
required for lenders and servicers not designated under sub-
section (a). 
‘‘(e) SPECIAL RULE.—Reimbursements made by the 
Secretary on loans submitted for claim by an eligible lender 
or loan servicer designated for exceptional performance 
under this section shall not be subject to additional review 
by the Secretary or repurchase by the guaranty agency for 
any reason other than a determination by the Secretary
234 
that the eligible lender or loan servicer engaged in fraud 
or other purposeful misconduct in obtaining designation for 
exceptional performance. 
‘‘(f) LIMITATION.—Nothing in this section shall be con-
strued to affect the processing of claims on student loans 
of eligible lenders not subject to this section. 
‘‘(g) CLAIMS.—A lender or servicer designated under 
subsection (a) failing to service loans or otherwise comply 
with applicable program regulations shall be considered in 
violation of section 3729 of title 31, United States Code. 
‘‘(h) TERMINATION.—The Secretary may terminate the 
designation of lenders and servicers under this section if 
he determines that termination would be in the fiscal inter-
est of the United States. 
‘‘(i) DEFINITIONS.—As used in this section— 
‘‘(1) the term ‘eligible loan’ means a loan made, 
insured, or guaranteed under this part; and 
‘‘(2) the term ‘servicer’ means an entity servicing 
and collecting student loans that— 
‘‘(A) has substantial experience in servicing 
and collecting consumer loans or student loans; 
‘‘(B) has an independent financial audit 
annually which is furnished to the Secretary and 
any other parties designated by the Secretary;
235 
‘‘(C) has business systems which are capable 
of meeting the requirements of this part; 
‘‘(D) has adequate personnel who are knowl-
edgeable about the student loan programs author-
ized by this part; and 
‘‘(E) does not have any owner, majority 
shareholder, director, or officer of the entity who 
has been convicted of a felony.’’. 
(4) EFFECTIVE
DATE
OF
AMENDMENTS.—The 
amendments made by this subsection shall apply with 
respect to loans for which the first disbursement of 
principal is made on or after July 1, 2006. 
(c) DOCUMENTATION
OF
FORBEARANCE
AGREE-
MENTS.—Section 428(c) (20 U.S.C. 1078(c)) is further 
amended— 
(1) in paragraph (3)(A)(i), by striking ‘‘in writ-
ing’’; and 
(2) by adding at the end the following new para-
graph: 
‘‘(10) 
DOCUMENTATION
OF
FORBEARANCE 
AGREEMENTS.—For the purposes of paragraph (3), 
the terms of forbearance agreed to by the parties shall 
be documented by confirming the agreement of the 
borrower by notice to the borrower from the lender, 
and by recording the terms in the borrower’s file.’’.
236 
(d) CONSOLIDATION OF DEFAULTED LOANS.—Section 
428(c) (20 U.S.C. 1078(c)) is further amended— 
(1) in paragraph (2)(A)— 
(A) by inserting ‘‘(i)’’ after ‘‘including’’; 
and 
(B) by inserting before the semicolon at the 
end the following: ‘‘and (ii) requirements estab-
lishing procedures to preclude consolidation lend-
ing from being an excessive proportion of guar-
anty agency recoveries on defaulted loans under 
this part’’; 
(2) in paragraph (2)(D), by striking ‘‘paragraph 
(6)’’ and inserting ‘‘paragraph (6)(A)’’; and 
(3) in paragraph (6)— 
(A) by inserting ‘‘(A)’’ before ‘‘For the pur-
pose of paragraph (2)(D),’’; 
(B) by redesignating subparagraphs (A) 
and (B) as clauses (i) and (ii), respectively; and 
(C) by adding at the end the following new 
subparagraphs: 
‘‘(B) A guaranty agency shall— 
‘‘(i) on or after October 1, 2006— 
‘‘(I) not charge the borrower collection costs 
in an amount in excess of 18.5 percent of the 
outstanding principal and interest of a defaulted
237 
loan that is paid off through consolidation by the 
borrower under this title; and 
‘‘(II) remit to the Secretary a portion of the 
collection charge under subclause (I) equal to 8.5 
percent of the outstanding principal and interest 
of such defaulted loan; and 
‘‘(ii) on and after October 1, 2009, remit to the 
Secretary the entire amount charged under clause 
(i)(I) with respect to each defaulted loan that is paid 
off with excess consolidation proceeds. 
‘‘(C) For purposes of subparagraph (B), the term ‘ex-
cess consolidation proceeds’ means, with respect to any 
guaranty agency for any Federal fiscal year beginning on 
or after October 1, 2009, the proceeds of consolidation of 
defaulted loans under this title that exceed 45 percent of 
the agency’s total collections on defaulted loans in such Fed-
eral fiscal year.’’. 
(e) VOLUNTARY
FLEXIBLE
AGREEMENTS.—Section 
428A (20 U.S.C. 1078–1) is amended— 
(1) in subsection (a)(1)(B), by striking ‘‘unless 
the Secretary’’ and all that follows through ‘‘des-
ignated guarantor’’; 
(2) by striking paragraph (2) of subsection (a);
238 
(3) in paragraph (4)(B) of subsection (a), by 
striking ‘‘and any waivers provided to other guaranty 
agencies under paragraph (2)’’; 
(4) by redesignating paragraphs (3) and (4) of 
subsection (a) as paragraphs (2) and (3), respectively; 
and 
(5) by striking paragraph (3) of subsection (c) 
and inserting the following: 
‘‘(3) NOTICE
TO
INTERESTED
PARTIES.—Once 
the Secretary reaches a tentative agreement in prin-
ciple under this section, the Secretary shall publish in 
the Federal Register a notice that invites interested 
parties to comment on the proposed agreement. The 
notice shall state how to obtain a copy of the tentative 
agreement in principle and shall give interested par-
ties no less than 30 days to provide comments. The 
Secretary may consider such comments prior to pro-
viding the notices pursuant to paragraph (2).’’. 
(f) 
FRAUD: 
REPAYMENT
REQUIRED.—Section 
428B(a)(1) (20 U.S.C. 1078–2(a)(1)) is amended— 
(1) by striking ‘‘and’’ at the end of subpara-
graph (A); 
(2) by striking the period at the end of subpara-
graph (B) and inserting ‘‘; and’’; and