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(F) by adding at the end the following:
‘‘(2) SIMPLIFYING THE DEPENDENCY OVERRIDE
PROCESS.—A financial aid administrator may make
a determination of independence under paragraph
(1)(I) based upon a documented determination of
independence that was previously made by another fi-
nancial aid administrator under such paragraph in
the same award year.’’;
(3) in subsection (e)—
(A) in paragraph (3), by striking ‘‘and’’
after the semicolon;
(B) in paragraph (4), by striking the period
at the end and inserting ‘‘; and’’; and
(C) by adding at the end the following:
‘‘(5) special combat pay.’’;
(4) in subsection (f), by striking paragraph (3)
and inserting the following:
‘‘(3) A qualified education benefit shall be con-
sidered an asset of—
‘‘(A) the student if the student is an inde-
pendent student; or
‘‘(B) the parent if the student is a depend-
ent student, regardless of whether the owner of
the account is the student or the parent.’’;
(5) in subsection (j)—
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(A) in paragraph (2), by inserting ‘‘, or a
distribution that is not includable in gross in-
come under section 529 of such Code, under an-
other prepaid tuition plan offered by a State, or
under a Coverdell education savings account
under section 530 of such Code,’’ after ‘‘1986’’;
and
(B) by adding at the end the following:
‘‘(4) Notwithstanding paragraph (1), special combat
pay shall not be treated as estimated financial assistance
for purposes of section 471(3).’’; and
(6) by adding at the end the following:
‘‘(n) SPECIAL COMBAT PAY.—The term ‘special com-
bat pay’ means pay received by a member of the Armed
Forces because of exposure to a hazardous situation.’’.
SEC. 605. AUTHORIZATION AND APPROPRIATIONS.
There are authorized to be appropriated, and there are
appropriated, out of any money in the Treasury not other-
wise appropriated, $10,000,000 for fiscal year 2008 for the
Department of Education to pay the estimated increase in
costs in the Federal Pell Grant program under section 401
of the Higher Education Act of 1965 (20 U.S.C. 1070a) re-
sulting from the amendments made by sections 603 and 604
for award year 2007–2008.
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TITLE VII—MISCELLANEOUS
SEC. 701. COMPETITIVE LOAN AUCTION PILOT PROGRAM.
Title IV (20 U.S.C. 1070 et seq.) is further amended
by adding at the end the following:
‘‘PART I—COMPETITIVE LOAN AUCTION PILOT
PROGRAM; STATE GRANT PROGRAM
‘‘SEC. 499. COMPETITIVE LOAN AUCTION PILOT PROGRAM.
‘‘(a) DEFINITIONS.—In this section:
‘‘(1) ELIGIBLE FEDERAL PLUS LOAN.—The term
‘eligible Federal PLUS Loan’ means a loan described
in section 428B made to a parent of a dependent stu-
dent.
‘‘(2) ELIGIBLE
LENDER.—The term ‘eligible
lender’ has the meaning given the term in section 435.
‘‘(b) PILOT PROGRAM.—The Secretary shall carry out
a pilot program under which the Secretary establishes a
mechanism for an auction of eligible Federal PLUS Loans
in accordance with this subsection. The pilot program shall
meet the following requirements:
‘‘(1) PLANNING AND IMPLEMENTATION.—During
the period beginning on the date of enactment of this
section and ending on June 30, 2009, the Secretary
shall plan and implement the pilot program under
this subsection.
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‘‘(2) ORIGINATION AND DISBURSEMENT; APPLICA-
BILITY
OF
SECTION
428B.—Beginning on July 1,
2009, the Secretary shall arrange for the origination
and disbursement of all eligible Federal PLUS Loans
in accordance with the provisions of this subsection
and the provisions of section 428B that are not incon-
sistent with this subsection.
‘‘(3) LOAN ORIGINATION MECHANISM.—The Sec-
retary shall establish a loan origination auction
mechanism that meets the following requirements:
‘‘(A) AUCTION.—The Secretary administers
an auction under this paragraph for each State
under which eligible lenders compete to originate
eligible Federal PLUS Loans under this para-
graph at all institutions of higher education
within the State.
‘‘(B) PREQUALIFICATION
PROCESS.—The
Secretary establishes a prequalification process
for eligible lenders desiring to participate in an
auction under this paragraph that contains, at
a minimum—
‘‘(i) a set of borrower benefits and serv-
icing requirements each eligible lender shall
meet in order to participate in such an auc-
tion; and
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‘‘(ii) an assessment of each such eligi-
ble lender’s capacity, including capital ca-
pacity, to participate effectively.
‘‘(C) 
TIMING
AND
ORIGINATION.—Each
State auction takes place every 2 years, and the
eligible lenders with the winning bids for the
State are the only eligible lenders permitted to
originate eligible Federal PLUS Loans made
under this paragraph for the cohort of students
at the institutions of higher education within the
State until the students graduate from or leave
the institutions of higher education.
‘‘(D) BIDS.—Each eligible lender’s bid con-
sists of the amount of the special allowance pay-
ment (including the recapture of excess interest)
the eligible lender proposes to accept from the
Secretary with respect to the eligible Federal
PLUS Loans made under this paragraph in lieu
of 
the 
amount 
determined 
under 
section
438(b)(2)(I).
‘‘(E) MAXIMUM
BID.—The maximum bid
allowable under this paragraph shall not exceed
the amount of the special allowance payable on
eligible Federal PLUS Loans made under this
paragraph computed under section 438(b)(2)(I)
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(other than clauses (ii), (iii), (iv), and (vi) of
such section), except that for purposes of the
computation under this subparagraph, section
438(b)(2)(I)(i)(III) shall be applied by sub-
stituting ‘1.74 percent’ for ‘2.34 percent’.
‘‘(F) WINNING BIDS.—The winning bids for
each State auction shall be the 2 bids containing
the lowest and the second lowest proposed special
allowance payments, subject to subparagraph
(E).
‘‘(G) AGREEMENT WITH SECRETARY.—Each
eligible lender having a winning bid under sub-
paragraph (F) enters into an agreement with the
Secretary under which the eligible lender—
‘‘(i) agrees to originate eligible Federal
PLUS Loans under this paragraph to each
borrower who—
‘‘(I) seeks an eligible Federal
PLUS Loan under this paragraph to
enable a dependent student to attend
an institution of higher education
within the State;
‘‘(II) is eligible for an eligible
Federal PLUS Loan; and