182
title,’’ in subparagraph (A) and inserting a
comma;
(9) 
in 
section 
453(c)(2) 
(20 
U.S.C.
1087c(c)(2)), by striking ‘‘TRANSITION’’ and insert-
ing ‘‘INSTITUTIONAL’’;
(10) in section 453(c), by striking paragraph
(3); and
(11) in section 456(b) (20 U.S.C. 1087f(b))—
(A) by inserting ‘‘and’’ after the semicolon
at the end of paragraph (3);
(B) by striking paragraph (4);
(C) by redesignating paragraph (5) as
paragraph (4); and
(D) in such paragraph (4) (as redesig-
nated), by striking ‘‘successful operation’’ and
inserting ‘‘integrity and efficiency’’.
(d) ADDITIONAL CONFORMING AMENDMENTS.—
(1) ABILITY OF PART D BORROWERS TO OBTAIN
FEDERAL STAFFORD CONSOLIDATION LOANS.—Sec-
tion 428C(a)(4) of such Act (20 U.S.C. 1078–
3(a)(4)) is amended—
(A) by redesignating subparagraphs (C)
and (D) as subparagraphs (D) and (E); and
(B) by inserting after subparagraph (B)
the following new subparagraph:
183
‘‘(C) made under part D of this title;’’.
(2) 
CONFORMING
AMENDMENTS.—Section
428C(b) of such Act (20 U.S.C. 1078–3(b)) is
amended by striking paragraph (5).
SEC. 4003. ELIMINATION OF GRACE PERIOD INTEREST SUB-
SIDIES.
Section 428(a)(3) of the Higher Education Act of
1965 (20 U.S.C. 1078(a)(3)) is amended by adding at the
end the following new subparagraph:
‘‘(C) Notwithstanding subparagraph (A), no
portion of the interest which accrues after the stu-
dent ceases to carry at an eligible institution at least
one-half the normal full-time academic workload (as
determined by the institution) and prior to the be-
ginning of the repayment period of the loan shall be
paid by the Secretary under this subsection on any
loan made on or after January 1, 1996. Interest on
the unpaid principal amount of any such loan during
the interval described in the preceding sentence
shall, at the option of the borrower—
‘‘(i) be paid monthly or quarterly, or
‘‘(ii) be added by the lender to the prin-
cipal amount of the loan at the commencement
of the repayment period.’’.
184
SEC. 4004. PLUS PROGRAM REDUCTIONS.
(a) LOAN LIMITS.—Section 428B(b) of the Higher
Education Act of 1965 (20 U.S.C. 1078-2(b)) is amend-
ed—
(1) by striking ‘‘(b) LIMITATION BASED
ON
NEED.—’’ and inserting the following:
‘‘(b) ANNUAL LIMITS.—
‘‘(1) LIMITATION BASED ON NEED.—’’;
(2) by inserting before the last sentence thereof
the following:
‘‘(3) LIMITATION COMPUTED ON BASIS OF AC-
TUAL PAYMENTS.—’’; and
(3) by inserting before paragraph (3) (as des-
ignated by the amendment made by paragraph (2)
of this subsection) the following new paragraph:
‘‘(2) DOLLAR
LIMITATION.—Subject to para-
graph (1), the maximum amount parents may bor-
row for one student in any academic year or its
equivalent (as defined by regulations of the Sec-
retary) is $15,000.’’.
(b) INTEREST REBATE.—Section 428B of such Act
is further amended by adding at the end the following new
subsection:
‘‘(f) INTEREST REBATE.—
‘‘(1) REBATE
REQUIRED.—Each holder of a
loan under this section made on or after the date of
185
enactment of the Omnibus Budget Reconciliation
Act of 1995, shall pay, on June 30 and December
31 of each year, to the Secretary a rebate of sub-
sidies in an amount equal to 0.8 percent of the out-
standing principal balance of loans held on such
date. Payment of such rebate shall be made not later
than 60 days after each such date.
‘‘(2) DEPOSIT
OF
REBATES.—The Secretary
shall deposit all fees collected pursuant to paragraph
(1) into the insurance fund established in section
431.’’.
(c) 
PLUS
LOANS
INTEREST
RATES.—Section
427A(c)(4) of such Act (20 U.S.C. 1077a(c)(4)) is amend-
ed by adding at the end the following new subparagraph:
‘‘(F) Notwithstanding subparagraphs (A), (D),
and (E), for any loan made pursuant to section
428B for which the first disbursement is made on or
after January 1, 1996—
‘‘(i) subparagraph (B) shall be applied by
substituting ‘4.0’ for ‘3.25’; and
‘‘(ii) the interest rate shall not exceed 11
percent.’’.
(d) CONFORMING AMENDMENT.—Section 427A(h) of
such Act (20 U.S.C. 1077a(h)) is amended—
(1) by striking paragraph (2); and
186
(2) by redesignating paragraph (3) as para-
graph (2).
SEC. 4005. LOAN TRANSFER FEE.
Section 428(b)(2) of the Higher Education Act of
1965 (20 U.S.C. 1078(b)(2)) is amended—
(1) by striking ‘‘and’’ at the end of subpara-
graph (E);
(2) by striking the period at the end of sub-
paragraph (F) and inserting ‘‘; and’’; and
(3) by adding at the end thereof the following
new subparagraph:
‘‘(G) provide that, if a lender or holder, on
or after January 1, 1996, sells, transfers, or as-
signs a loan under this part, then the transferee
shall pay to the Secretary a transfer fee in an
amount equal to 0.20 percent of the principal
of the loan, which transfer fee shall be depos-
ited into the insurance fund established in sec-
tion 431, except that the provisions of this sub-
paragraph shall not apply to any such sale,
transfer, or assignment by a lender or holder to
such lender’s or holder’s affiliate or pursuant to
a merger or other consolidation transaction.’’.
187
SEC. 4006. LENDER FEES TO GUARANTY AGENCIES.
Subsection (f) of section 428 of the Higher Education
Act of 1965 (20 U.S.C. 1078(f)) is amended to read as
follows:
‘‘(f) PAYMENTS OF CERTAIN COSTS.—
‘‘(1) PAYMENTS FROM LENDERS.—With respect
to any loan under this part for which the first dis-
bursement is made on or after January 1, 1996, the
originating lender shall remit to the guaranty agency
which guarantees the loan, a fee equal to 0.70 per-
cent of the principal amount of the loan.
‘‘(2) USE OF PAYMENTS.—Payments made pur-
suant to paragraph (1) shall be used for the pur-
poses of—
‘‘(A) the administrative costs of collections
of loans;
‘‘(B) the administrative costs of preclaim
assistance and other predefault activities;
‘‘(C) the administrative costs of monitoring
the enrollment and repayment status of stu-
dents; and
‘‘(D) other such costs related to the stu-
dent loan insurance program.
‘‘(3) TIMING OF PAYMENTS.—Payments made
pursuant to paragraph (1) shall be made at the time
189
are returned to or otherwise recovered by the Sec-
retary pursuant to this subsection shall be returned
to the Treasury of the United States for purposes of
reducing the Federal debt and shall be deposited
into the special account under section 3113(d) of
title 31, United States Code.’’.
(2) AMENDMENTS
TO
SECTION
428.—Section
428(c)(9)(A) of such Act (20 U.S.C. 1078(c)(9)(A))
is amended—
(A) by inserting ‘‘and’’ after the semicolon
at the end of clause (i);
(B) by striking ‘‘; and’’ at the end of
clause (ii) and inserting a period; and
(C) by striking clause (iii).
(b) APPLICATION FOR PART B LOANS USING FREE
FEDERAL APPLICATION.—
(1) SINGLE FORM REQUIRED.—Section 483(a)
of such Act (20 U.S.C. 1090(a)) is amended—
(A) in paragraph (1)—
(i) by inserting ‘‘B,’’ after ‘‘assistance
under parts A,’’;
(ii) by striking ‘‘and to determine the
need of a student for the purpose of part
B of this title’’; and
190
(iii) by striking the last sentence and
inserting the following: ‘‘Such form may be
in an electronic or any other format (sub-
ject to section 485B) in order to facilitate
use by borrowers and institutions.’’; and
(B) in paragraph (3), by striking ‘‘and
States shall receive,’’ and inserting ‘‘, any guar-
anty agency authorized by any such institution,
and States shall receive, at their request and’’.
(2) USE
OF
ELECTRONIC
FORMS.—Section
483(a) of such Act is further amended by adding the
following new paragraph after paragraph (4):
‘‘(5) ELECTRONIC FORMS.—(A) The Secretary,
in cooperation with representatives of institutions of
higher education, eligible lenders, and guaranty
agencies, shall prescribe an electronic version of the
form described in subsection (a)(1). Such electronic
form shall not require signatures to be collected at
the time such form is submitted if the data con-
tained in the electronic form is certified in one or
more separate writings. The Secretary shall pre-
scribe the initial electronic form not later than 90
days after the date of enactment of this paragraph.
‘‘(B) Nothing in this Act shall preclude the use
of the electronic form prescribed under subpara-
191
graph (A) through software developed, produced,
distributed (including by diskette, modem or net-
work communication, or otherwise) or collected by
eligible lenders, guaranty agencies, eligible institu-
tions, or consortia thereof. Such organization or con-
sortium shall submit such electronic form to the Sec-
retary for review prior to its use. If such electronic
form is inconsistent with the provisions of this part,
the Secretary shall notify the submitting organiza-
tion or consortium of his objection within 30 days of
such submission, and shall specifically identify the
necessary changes. In the absence of such an objec-
tion the organization or consortium may use the
electronic form as submitted. No fee may be charged
in connection with use of the electronic form, or of
any other electronic forms used in conjunction with
such form in applying for Federal or State student
financial assistance.’’.
(c) AMENDMENTS TO ELIGIBLE LENDER DEFINI-
TION.—Section 435(d)(1) of such Act (20 U.S.C. 1085)
is amended—
(1) by inserting before the semicolon at the end
of subparagraph (A) the following: ‘‘; and in deter-
mining whether the making or holding of loans to
students and parents under this part is the primary
192
consumer credit function of the eligible lender, loans
made or held as trustee or in a trust capacity for
the benefit of a third party shall not be considered’’;
(2) by striking ‘‘and’’ at the end of subpara-
graph (I);
(3) in subparagraph (J), by striking the period
and inserting ‘‘; and’’; and
(4) by adding at the end the following new sub-
paragraph:
‘‘(K) a wholly owned subsidiary of a pub-
licly-held holding company which, as of the date
of enactment of this subparagraph, through one
or more subsidiaries (i) acts as a finance com-
pany, and (ii) participates in the program au-
thorized by this part pursuant to subparagraph
(C).’’.
(d) ADDITIONAL AMENDMENTS TO SECTION 428.—
(1) AMENDMENTS.—Section 428 of such Act is
further amended—
(A) in subsection (b)(1)(G), by striking
‘‘98 percent’’ and inserting ‘‘95 percent’’;
(B) in subsection (b)(1)(X), by striking
‘‘section 428(c)(10)’’ and inserting ‘‘section
428(c)(9)’’;
193
(C) in subsection (c)(1)(A), by striking
‘‘98 percent’’ and inserting ‘‘96 percent’’;
(D) in subsection (c)(1)(B)(i), by striking
‘‘88 percent’’ and inserting ‘‘86 percent’’;
(E) in subsection (c)(1)(B)(ii), by striking
‘‘78 percent’’ and inserting ‘‘76 percent’’;
(F) in subsection (c)(9)(C)(ii), by striking
‘‘80 percent’’ and inserting ‘‘76 percent’’;
(G) in subsection (c)(9)(I) by inserting ‘‘on
the record’’ after ‘‘for a hearing’’;
(H) in subsection (j)(2)(A), by striking
‘‘60’’ and inserting ‘‘15’’;
(I) in subsection (j)(2)(B), by striking
‘‘two rejections’’ and inserting ‘‘one rejection’’;
and
(J) in subsection (l)—
(i) by striking paragraph (2); and
(ii) by striking ‘‘(1) ASSISTANCE RE-
QUIRED.—’’.
(2) EFFECTIVE DATE.—The amendments made
by paragraph (1) of this subsection shall apply to
loans on which the first disbursement of principal is
made on or after January 1, 1996.
200
(2) CORPORATE
POWERS.—The Corporation
shall have the power to engage in any business or
other activities for which corporations may be orga-
nized under the laws of any State of the United
States or the District of Columbia. The Corporation
shall have the power to enter into contracts, to exe-
cute instruments, to incur liabilities, to provide prod-
ucts and services, and to do all things as are nec-
essary or incidental to the proper management of its
affairs and the efficient operation of a private, for-
profit business.
(3) LIMITATION ON OWNERSHIP OF STOCK.—
Except as provided in subsection (d)(2) of this sec-
tion, no stock of the Corporation may be sold or is-
sued to an agency, instrumentality, or establishment
of the United States Government, to a Government
corporation or a Government controlled corporation
(as such terms are defined in section 103 of title 5,
United States Code), or to a Government sponsored
enterprise (as such term is defined in section 622 of
title 2, United States Code). The Student Loan
Marketing Association shall not own any stock of
the Corporation, except that it may retain the stock
it owns on the date of enactment. The Student Loan
Marketing Association shall not control the oper-