(b) DEFINITION
OF OTHER FINANCIAL ASSIST-
ANCE.—Subsection (j) of section 480 of the Higher Edu-
cation Act of 1965 (20 U.S.C. 1087vv(j)) is amended—
(1) by striking ‘‘; TUITION
PREPAYMENT 
PLANS’’ in the heading of such subsection; 
(2) by striking ‘‘(1) For purposes’’ and insert-
ing ‘‘For purposes’’; and 
(3) by striking paragraph (2). 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply with respect to determinations of 
need under part F of title IV of the Higher Education 
Act of 1965 for academic years beginning on or after July 
1, 2005. 
SEC. 6. SPECIAL TRANSITION ASSISTANCE PLANS FOR BOR-
ROWERS. 
(a) PLANS AUTHORIZED.—Section 428(b)(9) (20 
U.S.C. 1078(b)(9)) is amended by adding at the end the 
following new subparagraph: 
‘‘(C) SPECIAL
TRANSITION
ASSISTANCE 
PLANS.—In addition to the plans required by 
subparagraph (A), the lender shall provide a 
borrower who has not yet completed 12 months 
in the repayment period with the option to 
repay a loan made under this section in accord-
ance with a special transition assistance plan.
The interest rate on a loan for which the bor-
rower elected a special transition assistance 
plan shall be determined in accordance with 
section 427A(k) or 427A(l), as applicable. If a 
borrower participates in a special transition as-
sistance plan for 24 or more months, and then 
repays the outstanding balance of the loan more 
than 24 months prior to the last scheduled pay-
ment on the loan, the borrower shall repay the 
Secretary the amount of interest that accrued 
on the loan during the 24 months beginning on 
the effective date of the plan.’’. 
(b) INTEREST RATES.—
(1) PRE-2006
LOANS.—Section 427A(k) (20 
U.S.C. 1077a(k)) is amended—
(A) by redesignating paragraph (6) as 
paragraph (7); and 
(B) by inserting after paragraph (5) the 
following new paragraph: 
‘‘(6) SPECIAL TRANSITION ASSISTANCE PLANS 
INTEREST RATES.—
‘‘(A) IN GENERAL.—Notwithstanding para-
graph (1), with respect to any loan for which 
the borrower elected a special transition assist-
ance plan as provided in section 428(b)(9)(C)—
‘‘(i) for 24 months beginning on the 
effective date of the plan the applicable 
rate of interest shall be 3.4 percent; and 
‘‘(ii) for the last 24 months of the 
scheduled repayment period the applicable 
rate of interest shall be computed for each 
calendar quarter beginning January 1, 
April 1, July 1, and October 1 of each 
year—
‘‘(I) by determining the average 
of the bond equivalent rates of the 
quotes of the 3-month commercial 
paper (financial) rates in effect for 
each of the days in such quarter as 
reported by the Federal Reserve in 
Publication H–15 (or its successor) 
for such 3-month period; 
‘‘(II) by subtracting the applica-
ble interest rates on such loans from 
such average bond equivalent rate; 
‘‘(III) by adding 2.34 percent to 
the resultant percent; and by dividing 
the resultant percent by 4. 
‘‘(B) EXCEPTION.—The interest rate on a 
loan for which the borrower elected a special
transition assistance plan for the period begin-
ning the first day of the last 24 months of the 
scheduled repayment period until the beginning 
of the first calendar quarter thereafter will be 
computed using the average of the bond equiva-
lent rates of the quotes of the 3-month commer-
cial paper (financial) rates in effect for the 
quarter ending the previous March 31, June 30, 
September 30, or December 31.’’. 
(2) POST-2006
LOANS.—Section 427A(l) (20 
U.S.C. 1077a(l)) is amended by adding at the end 
the following new paragraph: 
‘‘(4) SPECIAL TRANSITION ASSISTANCE PLANS 
INTEREST RATES.—
‘‘(A) IN GENERAL.—Notwithstanding para-
graph (1), with respect to any loan for which 
the borrower elected a special transition assist-
ance plan as provided in section 428(b)(9)(C)—
‘‘(i) for 24 months beginning on the 
effective date of the plan the applicable 
rate of interest shall be 3.4 percent; and 
‘‘(ii) for the last 24 months of the 
scheduled repayment period the applicable 
rate of interest shall be computed for each 
calendar quarter beginning January 1,
April 1, July 1, and October 1 of each 
year—
‘‘(I) by determining the average 
of the bond equivalent rates of the 
quotes of the 3-month commercial 
paper (financial) rates in effect for 
each of the days in such quarter as 
reported by the Federal Reserve in 
Publication H–15 (or its successor) 
for such 3-month period; 
‘‘(II) by subtracting the applica-
ble interest rates on such loans from 
such average bond equivalent rate; 
‘‘(III) by adding 2.34 percent to 
the resultant percent; and by dividing 
the resultant percent by 4. 
‘‘(B) EXCEPTION.—The interest rate on a 
loan for which the borrower elected a special 
transition assistance plan for the period begin-
ning the first day of the last 24 months of the 
scheduled repayment period until the beginning 
of the first calendar quarter thereafter will be 
computed using the average of the bond equiva-
lent rates of the quotes of the 3-month commer-
cial paper (financial) rates in effect for the