133 
(ii) by striking ‘‘, subject to clause 
(vi) of this subparagraph’’; and 
(D) by striking clauses (v), (vi), and (vii) 
and inserting the following: 
‘‘(v) RECAPTURE OF EXCESS INTER-
EST.— 
‘‘(I) EXCESS
CREDITED.—With 
respect to a loan on which the applica-
ble interest rate is determined under 
section 427A(k) and for which the 
first disbursement of principal is 
made on or after July 1, 2006, if the 
applicable interest rate for any 3- 
month period exceeds the special al-
lowance rate applicable to such loan 
under this subparagraph for such pe-
riod, then an adjustment shall be 
made by calculating the excess inter-
est in the amount computed under 
subclause (II) of this clause, and by 
crediting the excess interest to the 
Government not less often than annu-
ally. 
‘‘(II) 
CALCULATION
OF
EX-
CESS.—The amount of any adjust-
134 
ment of interest on a loan to be made 
under this subsection for any quarter 
shall be equal to— 
‘‘(aa) the applicable interest 
rate minus the special allowance 
rate determined under this sub-
paragraph; multiplied by 
‘‘(bb) the average daily prin-
cipal balance of the loan (not in-
cluding unearned interest added 
to principal) during such cal-
endar quarter; divided by 
‘‘(cc) four.’’. 
(2) EFFECTIVE DATE.—The amendments made 
by this subsection shall not apply with respect to 
any special allowance payment made under section 
438 of the Higher Education Act of 1965 (20 U.S.C 
1087–1) before July 1, 2006. 
SEC. 424. ADDITIONAL LOAN TERMS AND CONDITIONS. 
(a) DISBURSEMENT.—Section 428(b)(1)(N) (20 
U.S.C. 1078(b)(1)(N)(ii)) is amended— 
(1) by striking ‘‘or’’ at the end of clause (i); 
and 
(2) by striking clause (ii) and inserting the fol-
lowing:
135 
‘‘(ii) in the case of a student who is 
studying outside the United States in a 
program of study abroad that is approved 
for credit by the home institution at which 
such student is enrolled, are, at the re-
quest of the student, disbursed directly to 
the student by the means described in 
clause (i), unless such student requests 
that the check be endorsed, or the funds 
transfer authorized, pursuant to an au-
thorized power-of-attorney; or 
‘‘(iii) in the case of a student who is 
studying outside the United States in a 
program of study at an eligible foreign in-
stitution, are, at the request of the foreign 
institution, disbursed directly to the stu-
dent by the means described in clause 
(i).’’. 
(b) REPAYMENT PLANS.— 
(1) FFEL LOANS.—Section 428(b)(9)(A) (20 
U.S.C. 1078(b)(9)(A)) is amended— 
(A) by inserting before the semicolon at 
the end of clause (ii) the following: ‘‘, and the 
Secretary may not restrict the proportions or 
ratios by which such payments may be grad-
136 
uated with the informed agreement of the bor-
rower’’; 
(B) by striking ‘‘and’’ at the end of clause 
(iii); 
(C) by redesignating clause (iv) as clause 
(v); and 
(D) by inserting after clause (iii) the fol-
lowing new clause: 
‘‘(iv) a delayed repayment plan under 
which the borrower makes scheduled pay-
ments for not more than 2 years that are 
annually not less than the amount of inter-
est due or $600, whichever is greater, and 
then makes payments in accordance with 
clause (i), (ii), or (iii); and’’. 
(2) DIRECT
LOANS.—Section 455(d)(1) (20 
U.S.C. 1087e(d)(1)) is amended— 
(A) by redesignating subparagraph (D) as 
subparagraph (E); and 
(B) by striking subparagraphs (A), (B), 
and (C) and inserting the following: 
‘‘(A) a standard repayment plan, con-
sistent with subsection (a)(1) of this section 
and with section 428(b)(9)(A)(i);