SEC. 2. MARKET-BASED DETERMINATION OF LENDER RE-
TURNS. 
(a) JOINT PLANNING STUDY TO SELECT AUCTION 
MECHANISMS FOR TESTING.— 
(1) PLANNING
STUDY.—The Secretaries of 
Education and Treasury jointly shall conduct a plan-
ning study, in consultation with the Office of Man-
agement and Budget, the Congressional Budget Of-
fice, the Government Accountability Office, and 
other individuals and entities the Secretaries deter-
mine appropriate, to— 
(A) examine the matters described in para-
graph (2) in order to determine which market- 
based mechanisms for determining lender re-
turns on loans made, insured, or guaranteed 
under part B of title IV of the Higher Edu-
cation Act of 1965 (20 U.S.C. 1071 et seq.) 
shall be tested under the pilot programs de-
scribed in subsection (c); and 
(B) determine what related administrative 
and other changes will be required in order to 
ensure that high-quality services are provided 
under a successful implementation of market- 
based determinations of lender returns for all 
loans made, insured, or guaranteed under such 
part. 
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(2) MATTERS EXAMINED.—The planning study 
under this subsection shall examine— 
(A) whether it is most appropriate to auc-
tion existing loans under part B of title IV, to 
auction the rights to originate loans under such 
part, or whether the sale of securities backed by 
federally owned student loan assets originated 
by banks acting as agents of the Federal Gov-
ernment would provide the most efficient mar-
ket-based alternative; 
(B) matters related to efficient financial 
organization of any auctions or sales, including 
how loans and origination rights are bundled, 
the capital structure of any securitization plan, 
and issues related to servicing; and 
(C) how to ensure that statutory, regu-
latory, and administrative requirements do not 
impede separate management and ownership of 
loans or assets backed by loans under part B 
of title IV. 
(3) MECHANISMS.—In determining which mar-
ket-based mechanisms are the most promising mod-
els to test the pilot programs under subsection (b), 
the planning study shall take into account whether 
a particular market-based mechanism will— 
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(A) ensure loan availability under part B 
of title IV to all eligible students at all partici-
pating institutions; 
(B) minimize administrative complexity for 
borrowers, institutions, lenders, and the Federal 
Government; and 
(C) reduce Federal costs if used on a pro-
gram-wide basis. 
(4) REPORT.—A report on the results of the 
planning study, together with a plan for implementa-
tion of one or more pilot programs using promising 
market-based approaches for determining lender re-
turns, shall be transmitted to Congress not later 
than 6 months following the date of enactment of 
this Act. 
(5) EXCLUSION.—In conducting the planning 
study, and proposing pilot programs for testing 
under this section, the Secretaries of Education and 
the Treasury shall exclude from consideration the 
Federal PLUS loans described in section 428B that 
are the subject of the competitive loan auction pilot 
program under section 499 of the Higher Education 
Act of 1965 (as added by section 701 of the College 
Cost Reduction and Access Act). 
(b) PILOT PROGRAMS TO BE TESTED.— 
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(1) AUTHORIZATION.— 
(A) IN
GENERAL.—Notwithstanding any 
other provision of law, after the report de-
scribed in subsection (a)(4) is transmitted to 
Congress, the Secretary of Education shall, in 
consultation with the Secretary of the Treasury, 
begin preparations necessary to carry out pilot 
programs meeting the requirements of this sub-
section in accordance with the implementation 
plan included in the report. 
(B) IMPLEMENTATION
DATE.—The Sec-
retary of Education shall commence implemen-
tation of the pilot programs under this sub-
section not earlier than July 1, 2009. 
(C) DURATION AND LOAN VOLUME.—The 
pilot programs under this subsection shall be 
not more than two academic years in duration, 
and the Secretary of Education may use the 
pilot programs to determine the lender returns 
for not more than— 
(i) 10 percent of the annual loan vol-
ume under this part B of title IV during 
the first year of the pilot programs under 
this subsection; and 
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(ii) 20 percent of the annual loan vol-
ume under this part B of title IV during 
the second year of the pilot programs 
under this subsection. 
(2) VOLUNTARY PARTICIPATION.— 
(A) Participation in any auction-based 
pilot program under this subsection shall be vol-
untary for eligible institutions and eligible lend-
ers participating under part B of title IV prior 
to July 1, 2006. 
(B) All savings to the United States Treas-
ury generated by such auctions shall be distrib-
uted to institutions participating under this sec-
tion on a basis proportionate to loan volume 
under such part for supplemental, need-based 
financial aid, except that an institution that is 
operating as an eligible lender under section 
435(d)(2) shall not be eligible for any such dis-
tribution. 
(3) INDEPENDENT EVALUATION.—The Govern-
ment Accountability Office shall conduct an inde-
pendent evaluation of the pilot programs conducted 
under this section and under section 499 of the 
Higher Education Act of 1965 (as added by section 
701 of the College Cost Reduction and Access Act). 
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