194
(e) REINSURANCE PERCENTAGE UNDER SECTION
428I.—Section 428I of such Act (20 U.S.C. 1078–9) is
amended in subsection (b)(1)—
(1) by striking ‘‘100 PERCENT’’ in the heading
and inserting ‘‘95 PERCENT’’; and
(2) by striking ‘‘100 percent’’ and inserting ‘‘95
percent’’.
(f) LOAN FEES FROM LENDERS.—Section 438(d)(2)
of such Act (20 U.S.C. 1087–1(d)(2)) is amended to read
as follows:
‘‘(2) AMOUNT OF LOAN FEES.—The amount of
the loan fee which shall be deducted under para-
graph (1) shall be—
‘‘(A) 0.50 percent of the principal amount
of the loan, for any loan under this part for
which the first disbursement was made on or
after October 1, 1993, and before January 1,
1996; or
‘‘(B) 0.30 percent of the principal amount
of the loan, for any loan under this part for
which the first disbursement was made on or
after January 1, 1996.’’.
(g) SMALL LENDER AUDIT EXEMPTION.—Section
428(b)(1)(U)(iii) 
of 
such 
Act 
(20 
U.S.C.
1078(b)(1)(U)(iii)) is amended—
195
(1) by inserting ‘‘in the case of any lender that
originates or holds more than $5,000,000 in prin-
cipal on loans made under this title in any fiscal
year,’’ before ‘‘for (I)’’;
(2) by inserting ‘‘such’’ before ‘‘lender at least
once’’;
(3) by inserting ‘‘such’’ before ‘‘a lender that is
audited’’; and
(4) by striking ‘‘if the lender’’ and inserting ‘‘if
such lender’’.
SEC. 4008. USE OF RESERVE FUNDS TO PURCHASE DE-
FAULTED LOANS.
Section 422 of the Higher Education Act of 1965 (20
U.S.C. 1072) is amended by adding at the end the follow-
ing new subsection:
‘‘(h) USE OF RESERVE FUNDS TO PURCHASE DE-
FAULTED LOANS.—
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2), a guaranty agency shall use not less than
50 percent of such agency’s reserve funds to pur-
chase and hold defaulted loans that are guaranteed
by such agency and for which a claim for insurance
is filed with such agency by an eligible lender after
the date of enactment of this subsection. The
amount of such purchases shall be considered as re-
196
serve funds under this section and used in the cal-
culation of the minimum reserve level under section
428(c)(9).
‘‘(2) SPECIAL RULE.—A guaranty agency shall
not be required to use its reserve funds to purchase
and hold defaulted loans in accordance with para-
graph (1) to the extent that—
‘‘(A) the dollar volume of insurance claims
filed with such agency does not amount to 50
percent of such agency’s available reserve
funds; or
‘‘(B) such use is prohibited by State law;
or
‘‘(C) such use will compromise the ability
of the guaranty agency to pay program ex-
penses.’’.
SEC. 4009. EXTENSION OF PERIOD A GUARANTY AGENCY
MUST HOLD A DEFAULTED LOAN.
(a) EXEMPTION
FOR
EXTENDED
HOLDING
PE-
RIOD.—The last sentence of section 428(c)(1)(A) of the
Higher Education Act of 1965 (20 U.S.C. 1078(c)(1)(A))
is amended by striking out ‘‘A guaranty agency’’ and in-
serting ‘‘Except as provided in section 428K, a guaranty
agency’’.
197
(b) NEW EXTENDED HOLDING PERIOD PROGRAM.—
Part B of title IV of such Act (20 U.S.C. 1071 et seq.)
is amended by inserting after section 428J the following
new section:
‘‘SEC. 428K. GUARANTOR PURCHASE OF CLAIMS WITH RE-
SERVE FUNDS.
‘‘(a) LOANS SUBJECT TO EXTENDED HOLDING PE-
RIOD.—Except as provided in subsection (b), a guaranty
agency shall file a claim for reimbursement with respect
to losses (resulting from the default of a student borrower)
subject to reimbursement by the Secretary pursuant to
section 428(c)(1) not less than 180 days nor more than
225 days after the guaranty agency discharges such agen-
cy’s insurance obligation on a loan insured under this
part. Such claim shall include losses on the unpaid prin-
cipal and accrued interest of any such loan, including in-
terest accrued from the date of such discharge to the date
such agency files the claim for reimbursement from the
Secretary.
‘‘(b) LOANS EXCLUDED FROM EXTENDED HOLD-
ING.—A guaranty agency may file a claim with respect
to losses subject to reimbursement by the Secretary pursu-
ant to section 428(c)(1) prior to 180 days after the date
the guaranty agency discharges such agency’s insurance
obligation on a loan insured under this part, if—
198
‘‘(1) such agency used 50 percent or more of
such agency’s reserve funds to purchase or hold
loans in accordance with section 422(h);
‘‘(2) such claim is based on an inability to lo-
cate the borrower and the guaranty agency certifies
to the Secretary that—
‘‘(A) diligent attempts were made to locate
the borrower through the use of reasonable
skip-tracing techniques in accordance with sec-
tion 428(c)(2)(G); and
‘‘(B) such skip-tracing attempts to locate
the borrower were unsuccessful; or
‘‘(3) the guaranty agency determines that the
borrower is unlikely to possess the financial re-
sources to begin repaying the loan prior to 180 days
after default by the borrower.
‘‘(c) GUARANTY AGENCY EFFORTS DURING EX-
TENDED HOLDING PERIOD.—A guaranty agency shall at-
tempt to bring a loan described in subsection (a) into re-
payment status prior to 180 days after the date the guar-
anty agency discharges its insurance obligation on the
loan, so that no claim for reimbursement by the Secretary
is necessary. Upon securing payment satisfactory to the
guaranty agency during the 180-day period, such agency
shall, if practicable, sell such loan to an eligible lender.
199
Such loan shall not be sold to an eligible lender that the
guaranty agency determines has substantially failed to ex-
ercise the due diligence required of lenders under this
part.
‘‘(d) REGULATION
PROHIBITED.—The Secretary
shall not regulate the collection activities of a guaranty
agency with respect to a loan described in subsection (a)
for which reinsurance has not been paid under section
428(c)(1).’’.
SEC. 4010. PRIVATIZATION OF COLLEGE CONSTRUCTION
LOAN INSURANCE ASSOCIATION.
(a) REPEAL OF STATUTORY RESTRICTIONS.—Part D
of title VII of the Higher Education Act of 1965 (20
U.S.C. 1132f et seq.) is repealed.
(b) STATUS OF THE CORPORATION.—
(1) STATUS OF THE CORPORATION.—The Cor-
poration shall not be an agency, instrumentality, or
establishment of the United States Government and
shall not be a ‘‘Government corporation’’ nor a
‘‘Government controlled corporation’’ as defined in
section 103 of title 5, United States Code. No action
under section 1491 of title 28, United States Code
(commonly known as the Tucker Act) shall be allow-
able against the United States based on the actions
of the Corporation.
201
ation of the Corporation, except that the Student
Loan Marketing Association may participate in the
election of directors as a shareholder, and may con-
tinue to exercise its right to appoint directors under
section 754 of the Higher Education Act of 1965 as
long as that section is in effect. The Student Loan
Marketing Association shall not provide financial
support or guarantees to the Corporation. Notwith-
standing the prohibitions in this subsection, the
United States may pursue any remedy against a
holder of the Corporation’s stock to which it would
otherwise be entitled.
(c) RELATED PRIVATIZATION REQUIREMENTS.—
(1) NOTICE
REQUIREMENTS.—During the 5-
year period following the date of the enactment of
this Act, the Corporation shall include in any docu-
ment offering the Corporation’s securities, in any
contracts for insurance, guarantee, or reinsurance of
obligations, and in any advertisement or promotional
material, a statement that—
(A) the Corporation is not a Government-
sponsored enterprise or instrumentality of the
United States; and
202
(B) the Corporation’s obligations are not
guaranteed by the full faith and credit of the
United States.
(2) CORPORATE CHARTER.—The Corporation’s
charter shall be amended as necessary and without
delay to conform the requirements of this Act.
(3) CORPORATE NAME.—The name of the Cor-
poration, or of any direct or indirect subsidiary
thereof, may not contain the term ‘‘College Con-
struction Loan Insurance Association’’.
(4) ARTICLES OF INCORPORATION.—The Cor-
poration shall amend its articles of incorporation
without delay to reflect that one of the purposes of
the Corporation shall be to guarantee, insure and re-
insure bonds, leases, and other evidences of debt of
educational institutions, including Historically Black
Colleges and Universities and other academic insti-
tutions which are ranked in the lower investment
grade category using a nationally recognized credit
rating system.
(5) TRANSITION REQUIREMENTS.—
(A) REQUIREMENTS UNTIL STOCK SALE.—
Notwithstanding subsection (a), the require-
ments of section 754 of the Higher Education
Act of 1965 (20 U.S.C. 1132f–3), as in exist-
203
ence as of the day before enactment of this Act,
shall continue to be effective until the day im-
mediately following the date of closing of the
purchase of the Secretary’s stock (or the date
of closing of the final purchase, in the case of
multiple transactions) pursuant to subsection
(d) of this section.
(B) REPORTS AFTER STOCK SALE.—The
Corporation shall, not later than March 30 of
the first full calendar year immediately follow-
ing the sale pursuant to subsection (d), and
each of the 2 succeeding years, submit to the
Secretary of Education a report describing the
Corporation’s efforts to assist in the financing
of 
education 
facilities 
projects, 
including
projects for elementary, secondary, and post-
secondary educational institution infrastructure,
and detailing, on a project-by-project basis, the
Corporation’s business dealings with edu-
cational institutions that are rated by a nation-
ally recognized statistical rating organization at
or below the organization’s third highest rat-
ings.
(d) SALE OF FEDERALLY OWNED STOCK.—
204
(1) SALE OF STOCK REQUIRED.—The Secretary
of the Treasury shall make every effort to sell, pur-
suant to section 324 of title 31, United States Code,
the stock of the Corporation owned by the Secretary
of Education not later than 6 months after the date
of the enactment of this Act.
(2) PURCHASE BY THE CORPORATION.—In the
event that the Secretary of the Treasury is unable
to sell the stock, or any portion thereof, at a price
acceptable to the Secretary of Education and the
Secretary of the Treasury, the Corporation shall
purchase, within the period specified in paragraph
(1), such stock at a price determined by the Sec-
retary of the Treasury and acceptable to the Cor-
poration based on independent appraisal by one or
more nationally recognized financial firms, except
that such price shall not exceed the value of the Sec-
retary’s stock as determined by the Congressional
Budget Office in House Report 104–153, dated
June 22, 1995. Such firms shall be selected by the
Secretary of the Treasury in consultation with the
Secretary of Education and the Corporation.
(e) ASSISTANCE BY THE CORPORATION.—The Cor-
poration shall provide such assistance as the Secretary of
205
the Treasury and the Secretary of Education may require
to facilitate the sale of the stock under this section.
(f) DEFINITION.—As used in this section, the term
‘‘Corporation’’ means the Corporation established pursu-
ant to the provision of law repealed by subsection (a).
SEC. 4011. ELIGIBLE INSTITUTION.
(a) AMENDMENTS.—Section 481(b) of the Higher
Education Act of 1965 (20 U.S.C. 1088(b)) is amended—
(1) by inserting before the period at the end of
the first sentence the following: ‘‘on the basis of a
review by the institution’s independent auditor using
generally accepted accounting principles’’; and
(2) by inserting after the end of such first sen-
tence the following new sentences: ‘‘For the purposes
of clause (6), revenues from sources that are not de-
rived from funds provided under this title include
revenues from programs of education or training
that do not meet the definition of an eligible pro-
gram in subsection (e), but are provided on a con-
tractual basis under Federal, State, or local training
programs, or to business and industry. For the pur-
poses of determining whether an institution meets
the requirements of clause (6), the Secretary shall
not consider the financial information of any institu-
206
tion for a fiscal year began on or before April 30,
1994.’’.
(b) EFFECTIVE DATE.—Notwithstanding section 713
of this Act, the amendments made by subsection (a) shall
apply to any determination made on or after July 1, 1994,
by the Secretary of Education pursuant to section
481(b)(6) of the Higher Education Act of 1965.
SEC. 4012. EXTENSION OF PROGRAM DURATION.
Part B of title IV of the Higher Education Act of
1965 is amended—
(1) in section 424(a) (20 U.S.C. 1074(a)), by
striking ‘‘1998’’ and inserting ‘‘2002’’;
(2) 
in 
section 
428(a)(5) 
(20 
U.S.C.
1078(a)(5))—
(A) by striking ‘‘2002’’ and inserting
‘‘2006’’; and
(B) by striking ‘‘1998’’ and inserting
‘‘2002’’; and
(3) in section 428C(e) (20 U.S.C. 1078–3(e)),
by striking the first sentence and inserting ‘‘The au-
thority to make loans under this section expires at
the close of September 30, 2002.’’.