104TH CONGRESS
2D SESSION
H. R. 3863
AN ACT
To amend the Higher Education Act of 1965 to permit
lenders under the unsubsidized Federal Family Edu-
cation Loan program to pay origination fees on behalf
of borrowers.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Student Debt Reduc-
tion Act of 1996’’.
SEC. 2. UNSUBSIDIZED STUDENT LOANS.
(a) AMENDMENT.—Paragraph (1) of section 428H(f)
of the Higher Education Act of 1965 (20 U.S.C. 1078–
8(f)(1)) is amended to read as follows:
‘‘(1) AMOUNT OF ORIGINATION FEE.—Except
as provided in paragraph (5), an origination fee
shall be paid to the Secretary with respect to each
loan under this section in the amount of 3.0 percent
of the principal amount of the loan. Each lender
under this section is authorized to charge the bor-
rower for such origination fee, provided that the
lender assesses the same fee to all student borrow-
ers. Any such fee charged to the borrower shall be
deducted proportionately from each installment pay-
ment of the proceeds of the loan prior to payment
to the borrower.’’.
(b) CONFORMING AMENDMENTS.—Section 428H(f)
of such Act is further amended—
(1) in paragraph (3), by striking ‘‘the origina-
tion fee’’ and inserting ‘‘any origination fee that is
charged to the borrower’’;
(2) in paragraph (4), by striking ‘‘origination
fees authorized to be collected from borrowers’’ and
inserting ‘‘origination fees required under paragraph
(1)’’; and
(3) by adding at the end the following new
paragraph:
‘‘(6) EXCEPTION.—Notwithstanding paragraph
(1), a lender may assess a lesser origination fee for
a borrower demonstrating greater financial need as
determined by such borrower’s adjusted gross family
income.’’.
(c) REPORT ON COMPETITIVE ALLOCATION.—Within
60 days after the date of enactment of this Act, the Sec-
retary of Education shall submit to each House of the
Congress a legislative proposal that would permit the Sec-
retary to allocate the right to make subsidized and
unsubsidized student loans on the basis of competitive bid-
ding. Such proposal shall include provision to ensure that
any payments received from such competitive bidding are
equally allocated to deficit reduction and to pro rata re-
duction of origination fees in both guaranteed and direct
student loans.
SEC. 3. STUDY OF LOAN FEES.
(a) STUDY REQUIRED.—The Secretary of Education
shall conduct a statistical analysis of the subsidized and
unsubsidized student loan programs under part B of title
IV of the Higher Education Act of 1965 to gather data
on lenders’ use of loan fees and to determine if there are
any anomalies that would indicate any institutional, pro-
grammatic or socioeconomic discrimination in the assess-
ing or waiving such fees.
(b) REPORT.—The Secretary of Education shall sub-
mit to each House of the Congress a report on the study
required by subsection (a) within 2 years after the date
of enactment of this Act.
(c) STATISTICAL CHARACTERISTICS TO BE STUD-
IED.—In conducting the study required by subsection (a),
the Secretary of Education shall compare recipients of
loans on the basis of income, residence location, type and
location of higher education, program of instruction and
type of lender.
Passed the House of Representatives September 11,
1996.
Attest:
Clerk.