I 
108TH CONGRESS 
1ST SESSION H. R. 2504
To amend the Higher Education Act of 1965 to improve the opportunity 
for Federal student loan borrowers to consolidate their loans at reason-
able interest rates. 
IN THE HOUSE OF REPRESENTATIVES 
JUNE 18, 2003
Mr. DAVIS of Illinois introduced the following bill; which was referred to the 
Committee on Education and the Workforce 
A BILL 
To amend the Higher Education Act of 1965 to improve 
the opportunity for Federal student loan borrowers to 
consolidate their loans at reasonable interest rates.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Student Loan Fairness 
Consolidation Act of 2003’’. 
SEC. 2. AUTHORITY TO REFINANCE EXISTING CONSOLIDA-
TION LOANS. 
(a) 
FFEL 
CONSOLIDATION
LOANS.—Section 
428C(a)(3)(B) of the Higher Education Act of 1965 (20
U.S.C. 1078–3(a)(3)(B)) is amended by adding at the end 
the following new clause: 
‘‘(ii) Notwithstanding clause (i) of this subpara-
graph, a borrower of a consolidation loan on which 
the interest is established at a fixed rate under sec-
tion 427A, 428C(c), or 455 may obtain a subsequent 
consolidation loan for the purposes of refinancing 
such earlier consolidation loan at a variable rate of 
interest under section 427A(m) or 455(b)(8), except 
that the authority to refinance a consolidation loan 
under this clause shall not apply to a consolidation 
loan that was used exclusively to repay loans made 
under section 428B or Federal Direct PLUS Loans 
(or both such loans).’’. 
(b) PARALLEL TERMS FOR FEDERAL DIRECT CON-
SOLIDATION LOANS.—Section 455(a) of the Higher Edu-
cation Act of 1965 (20 U.S.C. 1087e(a)) is amended—
(1) in paragraph (1), by inserting ‘‘428C,’’ 
after ‘‘428B,’’; and 
(2) in paragraph (2)—
(A) by striking ‘‘and’’ at the end of sub-
paragraph (B); 
(B) by redesignating subparagraph (C) as 
subparagraph (D); and
(C) by inserting after subparagraph (B) 
the following: 
‘‘(C) section 428C shall be known as ‘Fed-
eral Direct Consolidation Loans’.’’. 
SEC. 3. AVAILABILITY OF VARIABLE INTEREST RATE CON-
SOLIDATION LOANS. 
(a) FFEL CONSOLIDATION LOANS.—Section 427A 
of the Higher Education Act of 1965 (20 U.S.C. 1077a) 
is amended—
(1) by redesignating subsection (m) and (n) as 
subsections (n) and (o), respectively; and 
(2) by inserting after subsection (l) the fol-
lowing: 
‘‘(m) VARIABLE INTEREST RATE CONSOLIDATION 
LOANS.—
‘‘(1) VARIABLE
RATE.—Notwithstanding sub-
sections (h), (k), and (l), with respect to any loan 
made pursuant to section 428C for which the first 
disbursement is made on or after the date of enact-
ment of the Student Loan Fairness Consolidation 
Act of 2003, the applicable rate of interest shall, 
during any 12-month period beginning on July 1 
and ending on June 30, be determined on the pre-
ceding June 1 and be equal to—
‘‘(A) the bond equivalent rate of 91-day 
Treasury bills auctioned at the final auction 
held prior to such June 1; plus 
‘‘(B) 2.3 percent, 
except that such rate shall not exceed 8.25 percent. 
‘‘(2) RECOVERY
OF
EXCESS
INTEREST.—If, 
with respect to a consolidation loan on which the ap-
plicable interest rate is determined under this sub-
section, the applicable interest rate for any 3-month 
period exceeds the special allowance rate applicable 
to such loan under section 438(b)(2)(I) for such pe-
riod, then an adjustment shall be made—
‘‘(A) by calculating the excess interest in 
the amount computed under paragraph (3) of 
this subsection; and 
‘‘(B) by crediting the excess interest to the 
Government. 
‘‘(3) AMOUNT OF ADJUSTMENT.—The amount 
of any adjustment of interest on a loan to be made 
under this subsection for any quarter shall be equal 
to—
‘‘(A) the applicable interest rate minus the 
special allowance rate determined under section 
438(a)(2)(I); multiplied by
‘‘(B) the average daily principal balance of 
the loan (not including unearned interest added 
to principal) during such calendar quarter; di-
vided by 
‘‘(C) four. 
‘‘(4) 
INAPPLICABILITY
TO
CONSOLIDATION 
LOANS USED TO REPAY PLUS LOANS.—The provi-
sions of paragraph (1) of this subsection shall not 
apply to a consolidation loan that was used exclu-
sively to repay loans made under section 428B or 
Federal Direct PLUS Loans (or both such loans).’’. 
(b) FEDERAL DIRECT CONSOLIDATION LOANS.—
Section 455(b) of the Higher Education Act of 1965 (20 
U.S.C. 1087e(b)) is amended—
(1) by redesignating paragraphs (8) and (9) as 
paragraphs (9) and (10), respectively; and 
(2) by inserting after paragraph (7) the fol-
lowing: 
‘‘(8) VARIABLE
INTEREST
RATE
CONSOLIDA-
TION LOANS.—
‘‘(A) VARIABLE
RATE.—Notwithstanding 
the preceding paragraphs of this subsection, 
with respect to any Federal Direct Consolida-
tion Loan for which the first disbursement is 
made on or after the date of enactment of the
Student Loan Fairness Consolidation Act of 
2003, the applicable rate of interest shall, dur-
ing any 12-month period beginning on July 1 
and ending on June 30, be determined on the 
preceding June 1 and be equal to—
‘‘(i) the bond equivalent rate of 91-
day Treasury bills auctioned at the final 
auction held prior to such June 1; plus 
‘‘(ii) 2.3 percent, 
except that such rate shall not exceed 8.25 per-
cent. 
‘‘(B) INAPPLICABILITY TO CONSOLIDATION 
LOANS USED TO REPAY PLUS LOANS.—The pro-
visions of this subsection shall not apply to a 
consolidation loan that was used exclusively to 
repay loans made under section 428B or Fed-
eral Direct PLUS Loans (or both such loans).’’. 
(c) 
CONFORMING
AMENDMENT.—Section 
438(b)(2)(I) is amended by striking ‘‘section 427A(k)(4) 
or (l)(3)’’ each place it appears in clauses (iv) and (vi) 
and inserting ‘‘section 427A(k)(4), (l)(3), or (m)’’.
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