‘‘(2) CAPITALIZATION OF INTEREST.— 
‘‘(A) IN
GENERAL.—Interest on loans 
made under this section— 
‘‘(i) which accrues prior to the begin-
ning 
of 
repayment 
under 
paragraph 
(1)(A)(i), shall be added to the principal 
amount of the loan; and 
‘‘(ii) which accrues prior to the begin-
ning 
of 
repayment 
under 
paragraph 
(1)(A)(ii) or during a period in which pay-
ments of principal are deferred pursuant to 
paragraph (1)(B) shall, if agreed upon by 
the borrower and the lender— 
‘‘(I) be paid monthly or quar-
terly; or 
‘‘(II) be added to the principal 
amount of the loan not more fre-
quently than quarterly by the lender. 
‘‘(B) INSURABLE
LIMITS.—Capitalization 
of interest under this paragraph shall not be 
deemed to exceed the annual insurable limit on 
account of the borrower.’’. 
(b) 
CONFORMING
AMENDMENT.—Section 
428(b)(7)(C) (20 U.S.C. 1078(b)(7)(C)) is amended by 
striking ‘‘, 428B,’’. 
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(c) EFFECTIVE DATE.—The amendments made by 
this section shall be effective for loans issued on or after 
July 1, 2008. 
SEC. 4. SPECIAL RULES FOR PLUS LOANS. 
Section 428B(a)(3) is amended to read as follows: 
‘‘(3) SPECIAL RULES.— 
‘‘(A) 
PARENT
BORROWERS.—Whenever 
necessary to carry out the provisions of this 
section, the terms ‘student’ and ‘borrower’ as 
used in this part shall include a parent bor-
rower under this section. 
‘‘(B) EXTENUATING
CIRCUMSTANCES.— 
For loans made on or after July 1, 2008, and 
before July 1, 2009, a lender may determine 
that a borrower meets the extenuating cir-
cumstances requirement described in regula-
tions promulgated by the Secretary to carry out 
this section or section 455 if the borrower is 
180 or fewer days delinquent on their home 
mortgage payments.’’. 
SEC. 5. LENDER-OF-LAST-RESORT. 
(a) IN GENERAL.—Section 428(j) of the Higher Edu-
cation Act of 1965 (20 U.S.C. 1078(j)) is amended— 
(1) in the first sentence of paragraph (1), by 
striking ‘‘students eligible to receive interest benefits 
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paid on their behalf under subsection (a) of this sec-
tion who are otherwise unable to obtain loans under 
this part’’ and inserting ‘‘students and parents who 
are otherwise unable to obtain loans under this part 
(except for consolidation loans under section 428C) 
or who attend an institution of higher education in 
the State that is designated under paragraph (4)’’; 
(2) in paragraph (2)(B), by inserting ‘‘, in the 
case of students and parents applying for loans 
under this subsection because of an inability to oth-
erwise obtain loans under this part (except for con-
solidation loans under section 428C),’’ after ‘‘lender, 
nor’’; 
(3) in paragraph (3)(C)— 
(A) in the first sentence, by inserting ‘‘or 
designates an institution of higher education for 
participation in the program under this sub-
section under paragraph (4),’’ after ‘‘under this 
part’’; and 
(B) in the third sentence, by inserting ‘‘or 
to eligible borrowers who attend an institution 
in the State that is designated under paragraph 
(4)’’ after ‘‘problems’’; and 
(4) by adding at the end the following: 
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‘‘(4) INSTITUTION-WIDE STUDENT QUALIFICA-
TION.—Upon the request of an institution of higher 
education and pursuant to standards developed by 
the Secretary, the guaranty agency designated for a 
State shall designate such institution for participa-
tion in the lender-of-last-resort program under this 
paragraph. If the guaranty agency designates an in-
stitution under this paragraph, such agency shall 
make loans, in the same manner as such loans are 
made under paragraph (1), to students and parent 
borrowers of the designated institution, regardless of 
whether the students or parent borrowers are other-
wise unable to obtain loans under this part (other 
than a consolidation loan under section 428C).’’. 
(b) EFFECTIVE DATE.—The amendments made by 
subsection (a) shall take effect on the date of enactment 
of this Act. 
SEC. 6. MANDATORY ADVANCES. 
(a) IN GENERAL.—Section 421(b) of the Higher 
Education Act of 1965 (20 U.S.C. 1071(b)) is amended— 
(1) in paragraph (4), by striking ‘‘programs, 
and’’ and inserting ‘‘programs,’’; 
(2) in paragraph (5), by striking ‘‘agencies.’’ 
and inserting ‘‘agencies, and’’; and 
(3) by adding at the end the following: 
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‘‘(6) there is authorized to be appropriated, and 
there are appropriated, out of any money in the 
Treasury not otherwise appropriated, such sums as 
may be necessary for the purpose of carrying out 
section 422(c)(7).’’. 
(b) EFFECTIVE DATE.—The amendments made by 
subsection (a) shall take effect on the date of enactment 
of this Act. 
SEC. 7. TEMPORARY AUTHORITY TO PURCHASE STUDENT 
LOANS. 
(a) SPENDING AUTHORITY.— 
(1) AUTHORITY GRANTED.—The first sentence 
of section 451(a) of the Higher Education Act of 
1965 (20 U.S.C. 1087a(a)) is amended— 
(A) by inserting ‘‘(1)’’ after ‘‘as may be 
necessary’’; and 
(B) by inserting before the period at the 
end of such sentence the following: ‘‘; and (2) 
for purchasing loans under section 459A’’. 
(2) 
CONFORMING
AMENDMENT.—Section 
451(a) of such Act (20 U.S.C. 1087a(a)) is further 
amended by striking ‘‘Such loans shall’’ and insert-
ing ‘‘Loans made under this part shall’’. 
(b) TEMPORARY AUTHORITY.—Part D of title IV of 
the Higher Education Act of 1965 (20 U.S.C. 1087a et 
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seq.) is amended by inserting after section 459 the fol-
lowing new section: 
‘‘SEC. 459A. TEMPORARY AUTHORITY TO PURCHASE STU-
DENT LOANS. 
‘‘(a) AUTHORITY TO PURCHASE.—Upon a deter-
mination by the Secretary that there is an inadequate 
availability of loan capital to meet the demand for loans 
under sections 428, 428B, and 428H, whether as a result 
of inadequate liquidity for such loans or for other reasons, 
the Secretary, in consultation with the Secretary of the 
Treasury, is authorized to purchase from any eligible lend-
er, as defined by section 435(d)(1), loans originated under 
sections 428, 428B, or 428H on or after October 1, 2003, 
on such terms as the Secretary determines (after consulta-
tion with the Secretary of the Treasury) are in the best 
interest of the United States, except that any loan pur-
chase under this section shall not result in any cost to 
the Federal Government. The Secretary shall promptly 
publish any determination under this subsection in the 
Federal Register. 
‘‘(b) PROCEEDS.—The Secretary shall require, as a 
condition of any purchase under subsection (a), that the 
funds paid by the Secretary to any eligible lender under 
this section shall be used in a manner consistent with en-
suring continued participation of such lender in the Fed-
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eral student loan programs authorized under part B of 
this title. 
‘‘(c) EXPIRATION OF AUTHORITY.—The Secretary’s 
authority to purchase loans under this section shall expire 
on July 1, 2009.’’. 
(c) CONTRACTING AUTHORITY.—Section 456(b) of 
the Higher Education Act of 1965 (20 U.S.C. 1087f(b)) 
is amended by inserting ‘‘or purchased’’ after ‘‘loans 
made’’ each place it appears in paragraphs (2) and (3). 
SEC. 8. SENSE OF CONGRESS. 
It is a sense of Congress that, at a time when our 
economy is fragile and higher education and retraining op-
portunities are more important than ever— 
(1) the Federal financial institutions, such as 
the Federal Financing Bank and Federal Reserve, 
and federally chartered private entities such as the 
Federal Home Loan Banks and others, should con-
sider, in consultation with the Secretary of Treasury 
and the Secretary of Education, using available au-
thorities in a timely manner, if needed, to assist in 
ensuring that students and families can access Fed-
eral student loans for academic year 2008–2009, 
and if needed in the subsequent academic year, in a 
manner that results in no increased costs to tax-
payers; and 
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(2) any action taken as a result of such consid-
eration should in no way limit or delay the Secretary 
of Education’s authority to operate the lender-of- 
last-resort provisions of section 428(j) of the Higher 
Education Act of 1965 (as amended by this Act), 
nor the authority to purchase Federal Family Edu-
cation Loan Program loans, as authorized by section 
459A of such Act (as added by this Act). 
Æ 
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