(2) The current Federal Family Education
Loan (FFEL) program is, however, in need of re-
form. Many important positive changes were made
during the reauthorization of the Higher Education
Act in the 102d Congress, but further changes are
needed to make the FFEL program more efficient.
(3) It would be preferable to improve on a pub-
lic/private partnership that is known to work rather
than dismantle it in favor of an unproved direct
Government lending program, which would increase
the Federal debt, further enlarge the Federal bu-
reaucracy, add major new financial oversight activi-
ties to the already overburdened Department of
Education, and force the Congress to depend on es-
timated savings which may prove illusory.
(4) The large Direct Lending Demonstration
Program that was begun by the Higher Education
Amendments of 1992 is only now getting started. It
would be better to allow this Demonstration Pro-
gram to proceed and show some results before ex-
panding it to cover the entire federally insured stu-
dent lending system.
(5) Reforming the FFEL system with the im-
mediate savings and efficiencies that are contained
in this bill will in no way prevent the passage and
implementation of legislation that would begin a Na-
tional Service Program, as proposed by the Presi-
dent.
(6) Reforming the current FFEL system will
produce immediate savings without increasing the
size and debt of the Federal Government. It will also
assure students and their parents that they will con-
tinue to receive the funds they need for higher edu-
cation when they need them.
SEC. 2. INTEREST RATES.
Section 427A of the Act (20 U.S.C. 1077a) is amend-
ed—
(1) by redesignating subsection (h) as sub-
section (i); and
(2) by inserting after subsection (g) the follow-
ing new subsection:
‘‘(h) IN-SCHOOL
AND GRACE PERIOD INTEREST
RATES.—
‘‘(1) APPLICABLE RATE.—Notwithstanding any
other provision of this section, with respect to any
loan for which the first disbursement is made on or
after October 1, 1993, the applicable rate of interest
for interest which accrues—
‘‘(A) prior to the beginning of the repay-
ment period of the loan, or
‘‘(B) during the period in which principal
need not be paid (whether or not such principal
is in fact paid) by reason of a provision de-
scribed 
in 
section 
428(b)(1)(M) 
or
427(a)(2)(C),
shall not exceed the rate determined under para-
graph (2).
‘‘(2) METHOD OF CALCULATION.—For purposes
of paragraph (1) the rate determined under this
paragraph shall, during any 12-month period begin-
ning on July 1 and ending on June 30, be deter-
mined on the preceding June 1 and be equal to—
‘‘(A) the bond equivalent rate of 91-day
Treasury bills auctioned at the final auction
prior to such June 1; plus
‘‘(B) 2.6 percent.’’.
SEC. 3. LOAN TRANSFER FEES.
Section 428(b)(2) of the Act (20 U.S.C. 1078(b)(2))
is amended—
(1) by striking ‘‘and’’ at the end of subpara-
graph (E);
(2) by striking the period at the end of sub-
paragraph (F) and inserting ‘‘; and’’; and
(3) by adding at the end thereof the following
new subparagraph:
‘‘(G) provide that, if a lender or holder, on
or after October 1, 1993, sells, transfers, or as-
signs a loan under this part, then the transferee
shall pay to the Secretary a transfer fee in an
amount equal to 0.25 percent the principal and
accrued unpaid interest of the loan.’’.
SEC. 4. RISK SHARING.
(a) GUARANTY AGENCY REINSURANCE PERCENT-
AGE.—Section 
428(c)(1) 
of 
the 
Act 
(20 
U.S.C.
1078(c)(1)) is amended—
(1) in subparagraph (A), by striking ‘‘100 per-
cent’’ and inserting ‘‘96 percent’’;
(2) in subparagraph (B)(i), by striking ‘‘90 per-
cent’’ and inserting ‘‘86 percent’’; and
(3) in subparagraph (B), by striking ‘‘80 per-
cent’’ and inserting ‘‘76 percent’’.
(b) RISK SHARING BY THE STUDENT LOAN MARKET-
ING ASSOCIATION.—
(1) GSL PROGRAM.—Section 428(b)(1)(G) of
the Act is amended by inserting before the semicolon
at the end thereof the following: ‘‘, except that for
loans held by the Student Loan Marketing Associa-
tion (other than loans made pursuant to section
439(q)) such percentage shall be 90 percent’’.
(2) FISL PROGRAM.—Section 425(b)(1) of the
Act is amended by inserting after ‘‘interest’’ in the
matter preceding clause (i) the following: ‘‘, except
that for loans held by the Student Loan Marketing
Association (other than loans made pursuant to sec-
tion 439(q)) such liability shall be 90 percent of
such unpaid balance, and’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to any loan on which a default
(as defined in section 435 of the Act) occurs on or after
the date of enactment of this Act.
SEC. 5. SHARES OF POST-DEFAULT COLLECTIONS.
Section 
428(c)(6) 
of 
the 
Act 
(20 
U.S.C.
1078(c)(6)(A) is amended by adding at the end the follow-
ing new subparagraph:
‘‘(D) Subparagraph (A)(ii) shall be applied with
respect to determinations of the Secretary’s equi-
table share of payments made by borrowers—
‘‘(i) during fiscal years 1994 and 1995, by
substituting ‘27 percent’ for ‘30 percent’; and
‘‘(ii) during fiscal year 1996 and succeed-
ing fiscal years, by substituting ‘26 percent’ for
‘30 percent’.’’.
SEC. 6. FEDERAL ADMINISTRATIVE EXPENSES.
(a) ADMINISTRATIVE COST ALLOWANCES.—Section
428(f)(1)(B) of the Higher Education Act of 1965 (20
U.S.C. 1078(f)(1)(B)) is amended by striking ‘‘1 percent’’
and inserting ‘‘0.50 percent’’.
(b) REINSURANCE FEES.—Section 428(c) of the Act
is amended—
(1) by striking paragraph (9); and
(2) by redesignating paragraph (10) as para-
graph (9).
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to loans made on or after October
1, 1993.
SEC. 7. PLUS LOAN AMOUNTS AND DISBURSEMENTS.
(a) LOAN AMOUNTS.—Section 428B(b) of the Act
(20 U.S.C. 1078–2(b)) is amended to read as follows:
‘‘(b) LIMITATIONS ON AMOUNTS OF LOANS.—
‘‘(1) ANNUAL
LIMIT.—Subject to paragraph
(2), the maximum amount parents may borrow for
one student in any academic year or its equivalent
(as defined by regulation of the Secretary) is
$10,000.
‘‘(2) LIMITATION BASED ON NEED.—Any loan
under this section may be counted as part of the ex-
pected family contribution in the determination of
need under this title, but no loan may be made to
SEC. 8. CONSOLIDATION LOAN SAVINGS.
(a) INTEREST RATES.—
(1) 
REDUCTION
OF
RATES.—Section
428C(c)(1)(B) of the Act (20 U.S.C. 1078–
3(c)(1)(B)) is amended to read as follows:
‘‘(B) Except as provided in subparagraph (C),
a consolidation loan shall bear interest at an annual
rate on the unpaid principal balance of the loan that
is equal to the lesser of—
‘‘(i) the weighted average of the interest
rates on the loans consolidated, rounded to the
nearest whole percent; or
‘‘(ii) for any 12-month period beginning on
July 1 and ending on June 30, determined on
the preceding June 1 that is a rate equal to—
‘‘(I) the bond equivalent rate of 52-
week Treasury bills auctioned at the final
auction before such June 1; plus
‘‘(II) 3.10 percent.’’.
(2) 
PERCENT
CEILING.—Section
428C(c)(1)(C) of the Act is amended by striking out
‘‘not less’’ and inserting ‘‘not more’’.
(b) LIMITATION
OF INTEREST SUBSIDY DURING
DEFERMENT.—Section 428C(c)(4)(C) of the Act is
amended 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 sec-
tion; 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-
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);’’.
(c) LENDER FEES.—Section 428C(c) of the Act is
amended by adding at the end the following new para-
graph:
‘‘(6) INSURANCE FEE FROM LENDERS.—Each
lender shall pay to the Secretary, by quarterly in-
stallments, an annual amount equal to 0.5 percent
of the average principal amount outstanding on
loans under this section held by the lender, as deter-
mined in accordance with such regulations as the
Secretary shall prescribe.’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to loans for which the first dis-
bursement is made on or after October 1, 1993.
SEC. 9. DATE OF DEFAULT DETERMINATIONS.
(a) AMENDMENTS.—Section 435(l) of the Act (20
U.S.C. 1085(l)) is amended—
(1) by striking ‘‘180 days’’ and inserting ‘‘270
days’’; and
(2) by striking ‘‘240 days’’ and inserting ‘‘330
days’’.
(b) 
CONFORMING
AMENDMENT.—Section
428(c)(1)(A) of the Act (20 U.S.C. 1078(c)(1)(A)) is
amended by striking the last sentence and inserting the
following: ‘‘A guaranty agency shall file a claim for reim-
bursement under this subsection within 45 days after the
agency’s discharge of its insurance obligation, except that
when a guaranty agency discharges its insurance obliga-
tion prior to 360 days after a loan becomes delinquent
with respect to any installment thereon, the guaranty
agency shall file a claim under this subsection within 45
days after the loan becomes 360 days delinquent with re-
spect to any such installment.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply on and after October 1, 1993.
SEC. 10. SPECIAL ALLOWANCES ON TAX EXEMPT FUNDS.
(a) SPECIAL
ALLOWANCE
AMENDMENT.—Section
438(b)(2)(B) of the Act (20 U.S.C. 1087–1(b)(2)(B)) is
amended—
(1) by striking the first sentence of division (i)
and inserting the following: ‘‘The quarterly rate of
the special allowance for holders of loans which were
made or purchased with funds obtained by the hold-
er from the issuance of obligations, the income from
which is exempt from taxation under the Internal
Revenue Code of 1986, shall be 85 percent of the
quarterly rate of the special allowance established
under subparagraph (A).’’;
(2) by striking division (ii); and
(3) by redesignating division (iii) as division
(ii).
(b) PURCHASE PREMIUMS.—Section 438(d)(2) of the
Act is amended—
(1) by striking subparagraph (C); and
(2) by redesignating subparagraphs (D), (E),
and (F) as subparagraphs (C), (D), and (E), respec-
tively.
(c) EFFECTIVE DATE.—The amendment made by
this section shall apply to loans made on and after October
1, 1993.
SEC. 11. LENDER ORIGINATION FEES.
Section 438 of the Act (20 U.S.C. 1087–1) is amend-
ed—
(1) in the heading of subsection (c) by inserting
‘‘FROM STUDENTS’’ after ‘‘ORIGINATION FEES’’;
(2) by redesignating subsections (d) and (e) as
subsections (e) and (f), respectively; and
(3) by inserting after subsection (c) the follow-
ing new subsection:
‘‘(d) ORIGINATION FEES FROM LENDERS.—
‘‘(1) DEDUCTION FROM INTEREST AND SPECIAL
ALLOWANCE
SUBSIDIES.—Notwithstanding 
sub-
section (b), the total amount of interest and special
allowance payable under section 428(a)(3)(A) and
subsection (b) of this section, respectively, to any
holder shall be reduced by the Secretary by an origi-
nation fee in an amount determined in accordance
with paragraph (2) of this subsection. If the total
amount of interest and special allowance payable
under section 428(a)(3)(A) and subsection (b) of
this section, respectively, is less than the amount of
such origination fee, the Secretary shall deduct such
excess amount from subsequent quarters’ payments
until the total amount has been deducted.
‘‘(2) AMOUNT OF ORIGINATION FEES.—Subject
to paragraph (3) of this subsection, with respect to
any loan (other than loans made under sections
428A, 428B, 428C, and 428H) for which a com-
pleted note or other written evidence of the loan was
sent or delivered to the borrower for signing on or
after July 1, 1993, the amount of the origination fee
which shall be deducted under paragraph (1) shall
be equal to 1 percent of the principal amount of the
loan.
‘‘(3) 
SLS, 
PLUS, 
CONSOLIDATION, 
AND
UNDSUBSIDIZED LOANS.—With respect to any loans
made under section 428A, 428B, 428C, and 428H
and disbursed on or after October 1, 1993, each eli-
gible lender under this part shall pay to the Sec-
retary an origination fee of 1 percent of the prin-
cipal amount of the loan.
‘‘(4) DISTRIBUTION OF ORIGINATION FEES.—
All origination fees collected pursuant to this section
on loans authorized under section 428A, 428B,
428C, or 428H shall be paid to the Secretary by the
lender and deposited in the fund authorized under
section 431 of this part.’’.
SEC. 12. LENDER-OF-LAST-RESORT REQUIREMENT.
Section 439(q)(1)(A) of the Act (20 U.S.C. 1087–
2) is amended by ‘‘may begin’’ and inserting ‘‘shall
begin’’.
SEC. 13. STUDENT LOAN MARKETING ASSOCIATION STUDY.
Section 439 of the Act is further amended by adding
at the end thereof the following new subsection:
‘‘(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 6 months of the enactment of this provision,
which shall examine alternatives concerning the status, op-
erations, and purposes of the Association. Such alter-
natives shall include providing for an orderly transition of
the Association from a Government-Sponsored Enterprise
to a private corporation. Such study shall—
‘‘(A) consider how best to meet the needs of
students and taxpayers for financing for postsecond-
ary education;
‘‘(B) reflect the need for the Association to
maintain liquidity and perform other functions for
the Federal Education Loan program;
‘‘(C) consider any appropriate changes to part
D of title VII, relating to the College Construction
Loan Insurance Association; and
‘‘(D) be considered by the Secretaries of Edu-
cation and the Treasury in developing any legislative
proposals concerning any changes to the status of
the Association as a Government-Sponsored Enter-
prise or its duties under the Federal Family Edu-
cation Loan program.
‘‘(2) The Secretaries of Education and the Treasury
are directed to work with the Association to ensure that
any changes in the Association’s status, operations, or
purposes are carried out efficiently and effectively.’’.
SEC. 14. REPAYMENT OPTIONS.
(a) REGULATIONS REQUIRED.—The Secretary of
Education shall, not later than 60 days after the date of
enactment of this Act—
(1) prescribe the regulations required for the
implementation of the income sensitive repayment
options pursuant to section 428(b)(1)(E)(i) and
428(m) of the Act;
(2) take such steps as may be necessary—
(A) to inform borrowers under part B of
title IV of the Act of the availability of stand-
ard, graduated, and income sensitive repayment
options for student loans; and
(B) to ensure that lenders under such part
permit borrowers to fully exercise such options.
(b) CONFORMING AMENDMENTS.—Section 428(b)(1)
of the Act (20 U.S.C. 1078(b)(1)) is amended—
(1) in subparagraph (D)(ii), by inserting ‘‘ex-
cept as permitted pursuant to subparagraph (E),’’;
(2) in subparagraph (E)—
(A) by striking ‘‘subparagraphs (D) and
(L)’’ and inserting ‘‘subparagraph (L)’’;
(B) by inserting ‘‘or 428H’’ after ‘‘section
428A’’;
(C) by inserting ‘‘under subsection (m)’’
after ‘‘regulations of the Secretary’’; and
(D) by striking ‘‘nor more than 10 years’’.
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HR 2219 IH——2