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(2) by redesignating subsection (g) as sub-
section (h); and 
(3) by inserting after subsection (f) the fol-
lowing new subsection: 
‘‘(g) DETERMINATION OF ACADEMIC YEAR.—Not-
withstanding section 481(a)(2), for the purpose of deter-
mining eligibility for a grant under this section, a student 
shall be considered to be enrolled or accepted for enroll-
ment in the first, second, third, or fourth academic year 
of a program of undergraduate education based on the 
student’s class standing, as determined by the institution 
of higher education at which the student is enrolled or ac-
cepted for enrollment.’’. 
(g) ELIGIBILITY FOR ACADEMIC COMPETITIVENESS 
GRANTS.—Section 401A is further amended— 
(1) in subsection (c)— 
(A) by striking ‘‘full–time’’; and 
(B) by amending paragraph (1) to read as 
follows: 
‘‘(1) is an eligible student under section 484, 
including being enrolled or accepted for enrollment 
in a degree, certificate, or other eligible program 
leading to a recognized educational credential at an 
institution of higher education;’’; and
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(2) in subsection (d), by adding at the end the 
following new paragraph: 
‘‘(3) ADJUSTMENT FOR LESS THAN FULL-TIME 
ENROLLMENT.—A grant awarded under this section 
to an eligible student who attends an eligible institu-
tion on a less than full-time (but at least half-time 
or more) basis shall be reduced in the same propor-
tion as would a Federal Pell Grant pursuant to sec-
tion 401(b)(2)(B).’’. 
SEC. 102. SUPPORT FOR WORKING STUDENTS. 
(a) DEPENDENT STUDENTS.—Subparagraph (D) of 
section 475(g)(2) (20 U.S.C. 1087oo)(g)(2)(D)) is amend-
ed to read as follows: 
‘‘(D) an income protection allowance of 
$3,750 (or a successor amount prescribed by 
the Secretary under section 478);’’. 
(b) INDEPENDENT STUDENTS WITHOUT DEPEND-
ENTS OTHER THAN A SPOUSE.—Clause (iv) of section 
476(b)(1)(A) (20 U.S.C. 1087pp(b)(1)(A)(iv)) is amended 
to read as follows: 
‘‘(iv) an income protection allowance 
of the following amount (or a successor 
amount prescribed by the Secretary under 
section 478)—
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‘‘(I) for single or separated stu-
dents, or married students where both 
are enrolled pursuant to subsection 
(a)(2), $6,690; and 
‘‘(II) for married students where 
1 is enrolled pursuant to subsection 
(a)(2), $10,720;’’. 
(c) UPDATED
TABLES
AND
AMOUNTS.—Section 
478(b) (20 U.S.C. 1087rr(b)) is amended— 
(1) in paragraph (1)— 
(A) by striking ‘‘REVISED TABLES.—For 
each’’ and inserting ‘‘REVISED TABLES.— 
‘‘(A) IN GENERAL.—For each’’; 
(B) in subparagraph (A) (as designated by 
subparagraph (A)), in the third sentence— 
(i) by striking ‘‘preceding sentence’’ 
and inserting ‘‘subparagraph (A)’’; and 
(ii) by striking ‘‘For the 2007–2008’’ 
and inserting the following: 
‘‘(B) SPECIAL RULE FOR 2007–2008 ACA-
DEMIC YEAR.—For the 2007–2008’’; and 
(C) by adding at the end the following: 
‘‘(C) 
SPECIAL
RULE
FOR
2009–2010 
THROUGH
2012–2013
ACADEMIC
YEARS.—For 
the 2009–2010 academic year, and for each of
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the 3 succeeding academic years, the Secretary 
shall revise the tables in accordance with this 
paragraph, except that, for the table in section 
477(b)(4), the Secretary shall revise such table 
by increasing the amounts contained in such 
table for the preceding academic year by 10 
percent.’’; and 
(2) in paragraph (2), by striking ‘‘shall be de-
veloped’’ and all that follows through the period at 
the end and inserting ‘‘shall be developed— 
‘‘(A) for academic year 2008–2009, by in-
creasing each of the dollar amounts contained 
in such section as such section was in effect on 
the day before the date of enactment of the Col-
lege Cost Reduction Act of 2007 by a percent-
age equal to the estimated percentage increase 
in the Consumer Price Index (as defined in sec-
tion 478(f)) between December 2006 and the 
December next preceding the beginning of such 
academic year, and rounding the result to the 
nearest $10; 
‘‘(B) for each of the academic years 2010– 
2011 and 2011–2012, by increasing each of the 
amounts determined under this paragraph for 
the preceding academic year by 10 percent; and
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‘‘(C) for each academic year after 2012– 
2013, by increasing each of the dollar amounts 
determined under this paragraph for academic 
year 2012–2013 by a percentage equal to the 
estimated percentage increase in the Consumer 
Price Index (as defined in section 478(f)) be-
tween December 2011 and the December next 
preceding the beginning of such academic year, 
and rounding the result to the nearest $10.’’. 
(d) EFFECTIVE DATE.—The amendments made by 
subsections (a) and (b) shall take effect on July 1, 2009, 
and the amendment made by subsection (c) shall take ef-
fect on July 1, 2008. 
SEC. 103. SIMPLIFIED NEEDS TEST AND AUTOMATIC ZERO 
IMPROVEMENTS. 
(a) SIMPLIFIED NEEDS TEST.—Section 479 (20 
U.S.C. 1087ss) is amended— 
(1) in subsection (b)— 
(A) in paragraph (1)(A)(i)— 
(i) in subclause (II), by striking ‘‘or’’ 
after the semicolon; 
(ii) by redesignating subclause (III) as 
subclause (IV); 
(iii) by inserting after subclause (II) 
the following:
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‘‘(III) 1 of whom is a dislocated 
worker; or’’; and 
(iv) in subclause (IV) (as redesignated 
by clause (ii)), by striking ‘‘12-month’’ and 
inserting ‘‘24-month’’; and 
(B) in paragraph (1)(B)(i)— 
(i) in subclause (II), by striking ‘‘or’’ 
after the semicolon; 
(ii) by redesignating subclause (III) as 
subclause (IV); 
(iii) by inserting after subclause (II) 
the following: 
‘‘(III) 1 of whom is a dislocated 
worker; or’’; and 
(iv) in subclause (IV) (as redesignated 
by clause (ii)), by striking ‘‘12-month’’ and 
inserting ‘‘24-month’’; 
(2) in subsection (c)— 
(A) in paragraph (1)— 
(i) in subparagraph (A)— 
(I) in clause (ii), by striking ‘‘or’’ 
after the semicolon; 
(II) by redesignating clause (iii) 
as clause (iv);
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(III) by inserting after clause (ii) 
the following: 
‘‘(iii) 1 of whom is a dislocated work-
er; or’’; and 
(IV) in clause (iv) (as redesig-
nated by subclause (II)), by striking 
‘‘12-month’’ 
and 
inserting 
‘‘24- 
month’’; and 
(ii) in subparagraph (B), by striking 
‘‘$20,000’’ and inserting ‘‘$30,000’’; and 
(B) in paragraph (2)— 
(i) in subparagraph (A)— 
(I) in clause (ii), by striking ‘‘or’’ 
after the semicolon; 
(II) by redesignating clause (iii) 
as clause (iv); 
(III) by inserting after clause (ii) 
the following: 
‘‘(iii) is a dislocated worker; or’’; and 
(IV) in clause (iv) (as redesig-
nated by subclause (II)), by striking 
‘‘12-month’’ 
and 
inserting 
‘‘24- 
month’’; and 
(ii) in subparagraph (B), by striking 
‘‘$20,000’’ and inserting ‘‘$30,000’’; and
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(C) in the flush matter following para-
graph (2)(B), by adding at the end the fol-
lowing: ‘‘The Secretary shall annually adjust 
the income level necessary to qualify an appli-
cant for the zero expected family contribution. 
The income level shall be adjusted according to 
increases in the Consumer Price Index, as de-
fined in section 478(f).’’; and 
(3) in subsection (d)— 
(A) 
by 
redesignating 
paragraphs 
(1) 
through (6) as subparagraphs (A) through (F), 
respectively and moving the margins of such 
subparagraphs 2 ems to the right; 
(B) by striking ‘‘(d) DEFINITION’’ and all 
that follows through ‘‘the term’’ and inserting 
the following: 
‘‘(d) DEFINITIONS.—In this section: 
‘‘(1) DISLOCATED
WORKER.—The term ‘dis-
located worker’ has the meaning given the term in 
section 101 of the Workforce Investment Act of 
1998 (29 U.S.C. 2801). 
‘‘(2) MEANS-TESTED FEDERAL BENEFIT PRO-
GRAM.—The term’’. 
(b) DISCRETION OF STUDENT FINANCIAL AID AD-
MINISTRATORS.—Section 479A(a) (20 U.S.C. 1087tt(a))
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is amended in the third sentence by inserting ‘‘a family 
member who is a dislocated worker (as defined in section 
101 of the Workforce Investment Act of 1998 (29 U.S.C. 
2801)),’’ after ‘‘recent unemployment of a family mem-
ber,’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall be effective on July 1, 2009. 
SEC. 104. DEFINITIONS. 
(a) TOTAL INCOME.—Section 480(a)(2) (20 U.S.C. 
1087vv(a)(2)) is amended— 
(1) by striking ‘‘and no portion’’ and inserting 
‘‘no portion’’; and 
(2) by inserting ‘‘and no distribution from any 
qualified education benefit described in subsection 
(f)(3) that is not subject to Federal income tax,’’ 
after ‘‘1986,’’. 
(b) UNTAXED INCOME
AND BENEFITS.—Section 
480(b) (20 U.S.C. 1087vv(b)) is amended to read as fol-
lows: 
‘‘(b) UNTAXED INCOME AND BENEFITS.— 
‘‘(1) The term ‘untaxed income and benefits’ 
means— 
‘‘(A) child support received; 
‘‘(B) workman’s compensation;
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‘‘(C) veteran’s benefits such as death pen-
sion, dependency, and indemnity compensation, 
but excluding veterans’ education benefits as 
defined in subsection (c); 
‘‘(D) interest on tax-free bonds; 
‘‘(E) housing, food, and other allowances 
(excluding rent subsidies for low-income hous-
ing) for military, clergy, and others (including 
cash payments and cash value of benefits); 
‘‘(F) cash support or any money paid on 
the student‘s behalf, except, for dependent stu-
dents, funds provided by the student’s parents; 
‘‘(G) untaxed portion of pensions; 
‘‘(H) payments to individual retirement ac-
counts and Keogh accounts excluded from in-
come for Federal income tax purposes; and 
‘‘(I) any other untaxed income and bene-
fits, such as Black Lung Benefits, Refugee As-
sistance, railroad retirement benefits, or Job 
Training Partnership Act noneducational bene-
fits or benefits received through participation in 
employment and training activities under title I 
of the Workforce Investment Act of 1998 (29 
U.S.C. 2801 et seq.).
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‘‘(2) The term ‘untaxed income and benefits’ 
shall not include the amount of additional child tax 
credit claimed for Federal income tax purposes.’’. 
(c) ASSETS.—Section 480(f) (20 U.S.C. 1087vv(f)) 
is amended— 
(1) in paragraph (3), by striking ‘‘shall not be 
considered an asset of a student for purposes of sec-
tion 475’’ and inserting ‘‘shall be considered an 
asset of the parent for purposes of section 475’’; 
(2) by redesignating paragraphs (4) and (5) as 
paragraphs (5) and (6), respectively; and 
(3) by inserting after paragraph (3) the fol-
lowing: 
‘‘(4) A qualified education benefit shall be con-
sidered an asset of the student for purposes of sec-
tion 476 and 477.’’. 
(d) 
OTHER
FINANCIAL
ASSISTANCE.—Section 
480(j)(2) (20 U.S.C. 1087vv(j)(2)) is amended by insert-
ing ‘‘, or a distribution that is not includable in gross in-
come under section 529 of such Code, under another pre-
paid tuition plan offered by a State, or under a Coverdell 
education savings account under section 530 of such 
Code,’’ after ‘‘1986’’. 
(e) EFFECTIVE DATE.—The amendments made by 
this section shall be effective on July 1, 2009.
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PART B—MAKING STUDENT LOANS MORE 
AFFORDABLE 
SEC. 111. INTEREST RATE REDUCTIONS. 
(a) FFEL INTEREST RATES.— 
(1) Section 427A(l) (20 U.S.C. 1077a(l)) is 
amended by adding at the end the following new 
paragraph: 
‘‘(4) REDUCED
RATES
FOR
UNDERGRADUATE 
SUBSIDIZED
LOANS.—Notwithstanding subsection 
(h) and paragraph (1) of this subsection, with re-
spect to any loan to an undergraduate student made, 
insured, or guaranteed under this part (other than 
a loan made pursuant to section 428B, 428C, or 
428H) for which the first disbursement is made on 
or after July 1, 2006, and before July 1, 2013, the 
applicable rate of interest shall be as follows: 
‘‘(A) For a loan for which the first dis-
bursement is made on or after July 1, 2006, 
and before July 1, 2008, 6.80 percent on the 
unpaid principal balance of the loan. 
‘‘(B) For a loan for which the first dis-
bursement is made on or after July 1, 2008, 
and before July 1, 2009, 6.12 percent on the 
unpaid principal balance of the loan. 
‘‘(C) For a loan for which the first dis-
bursement is made on or after July 1, 2009,