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(iii) by inserting immediately following
subparagraph (D) the following new sub-
paragraph:
‘‘(E) that the lender shall offer an income-
sensitive repayment schedule, established by the
lender in accordance with the regulations of the
Secretary, to the borrower of any consolidation
loan made by the lender on or after July 1,
1994; and’’;
(B) in paragraph (4), by amending sub-
paragraph (C) to read as follows:
‘‘(C)(i) provides that periodic installments
of principal need not be paid, but interest shall
accrue and be paid in accordance with clause
(ii), during any period for which the borrower
would be eligible for a deferral under section
428(b)(1)(M), and that any such period shall
not be included in determining the repayment
period pursuant to subsection (c)(2) of this
section; and
‘‘(ii) provides that interest shall accrue and
be paid—
‘‘(I) by the Secretary, in the case of
a consolidation loan that consolidated only
Federal Stafford Loans for which the stu-
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dent borrower received an interest subsidy
under section 428; or
‘‘(II) by the borrower, or capitalized,
in the case of a consolidation loan other
than one described in subclause (I) ;’’; and
(C) by adding at the end thereof the fol-
lowing new paragraph:
‘‘(5) In the event that a borrower is unable to
obtain a consolidation loan with income-sensitive re-
payment terms acceptable to the borrower from a
lender with an agreement under subsection (a)(1),
the Secretary shall offer any such borrower who ap-
plies for it, a direct consolidation loan to be repaid
pursuant to an EXCEL Account under part D of
this title, except that the Secretary shall not offer
such loans if, in his or her judgment, the Depart-
ment does not yet have the necessary origination
and servicing arrangements in place for such
loans.’’; and
(3) in subsection (c)—
(A) in paragraph (1), by amending sub-
paragraphs (B) and (C) to read as follows:
‘‘(B) A consolidation loan made before
July 1, 1994, shall bear interest at an annual
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rate on the unpaid principal balance of the loan
that is equal to the greater of—
‘‘(i) the weighted average of the inter-
est rates on the loans consolidated,
rounded to the nearest whole percent; or
‘‘(ii) 9 percent.
‘‘(C) a consolidation loan made on or after
July 1, 1994 shall interest at an annual rate on
the unpaid principal balance of the loan that is
equal to the weighted average of the interest
rates on the loans consolidated, rounded up-
ward to the nearest whole percent.’’;
(B) in paragraph (2)—
(i) in subparagraph (A)—
(I) in the matter preceding clause
(i), by striking out ‘‘income sensitive
repayment schedules. Such repayment
terms’’ and inserting in lieu thereof
‘‘income sensitive repayment sched-
ules, established by the lender in ac-
cordance with the regulations of the
Secretary. Except as required by such
income sensitive repayment schedules,
or by the terms of repayment pursu-
ant to an EXCEL Account offered by
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the Secretary under subsection (b)(5),
such repayment terms’’
(II) by redesignating clauses (i),
(ii), (iii), (iv), and (v) as clauses (ii),
(iii), (iv), (v), and (vi), respectively;
and
(III) by inserting immediately
preceding clause (ii) (as redesignated
by subclause (II)) the following new
clause:
‘‘(i) is less than $7,500, then such
consolidation loan shall be repaid in not
more than ten years;’’;
(ii) by striking out subsection (B);
and
(iii) by redesignating subparagraph
(C) as subparagraph (B); and
(C) in paragraph (3)(A), by inserting im-
mediately following the subparagraph designa-
tion the following: ‘‘except as required by the
terms of repayment pursuant to an EXCEL
Account offered by the Secretary under sub-
section (b)(5),’’.
STUDENT LOAN MARKETING ASSOCIATION
SEC. 218. Section 439 of the Act is further amended
by adding at the end thereof the following new subsection:
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‘‘(s) TRANSITION STUDY AND ACTIVITIES.—(1) The
Secretaries of Education and the Treasury, in consultation
with the Association, shall prepare a study, to be com-
pleted within six months of the enactment of this provi-
sion, which shall examine alternatives concerning the sta-
tus, operations, and purposes of the Association during
and after the transition from the Federal Family Edu-
cation Loan Program to the Federal Direct Student Loan
Program. Such alternatives shall include providing for an
orderly transition of the Association from a Government-
Sponsored Enterprise to a private corporation when the
Federal Direct Student Loan Program is fully imple-
mented. Such study shall—
‘‘(A) consider how best to meet the needs of
students and taxpayers;
‘‘(B) reflect the need for the Association to
maintain liquidity and perform other functions for
the Federal Family Education Loan Program during
the transition from such program to the Federal Di-
rect Student Loan Program under part D of this
title, including additional duties as specified by the
Secretary of Education or the Secretary of the
Treasury;