I
104TH CONGRESS
1ST SESSION
H. R. 530
To amend the Higher Education Act of 1965 to stabilize the student loan
programs, improve congressional oversight, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
JANUARY 17, 1995
Mr. GOODLING (for himself, Mr. MCKEON, Mr. GUNDERSON, Mr. HOEKSTRA,
Mr. BARRETT of Nebraska, Mr. GORDON, Mr. POMEROY, Mr. PETERSON
of Florida, and Mr. STENHOLM) introduced the following bill; which was
referred to the Committee on Economic and Educational Opportunities
and, in addition, to the Committee on Government Reform and Oversight,
for a period to be subsequently determined by the Speaker, in each case
for consideration of such provisions as fall within the jurisdiction of the
committee concerned
A BILL
To amend the Higher Education Act of 1965 to stabilize
the student loan programs, improve congressional over-
sight, and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; REFERENCES.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Student Loan Evaluation and Stabilization Act of 1995’’.
(b) REFERENCES.—References in this Act to ‘‘the
Act’’ are references to the Higher Education Act of 1965
(20 U.S.C. 1001 et seq.).
SEC. 2. FINDINGS.
The Congress finds that:
(1) The current public/private student loan
partnership is fulfilling the mission set for it by
Congress, delivering loans to students reliably and in
a timely fashion, and should be preserved.
(2) The Administration’s dismantling of the
Federal Family Education Loan (FFEL) Program
which has begun in order to replace it with an
unproven direct Government lending program, which
increases the Federal debt, further enlarges the Fed-
eral bureaucracy, adds major new financial oversight
activities to the already overburdened Department of
Education, and forces Congress to depend on esti-
mated budget savings which may prove illusory,
needs to be stopped so that a true and valid com-
parison of the student loan programs can occur.
(3) The Federal Direct Student Loan (FDSL)
Program pilot is only now getting started and has
proceeded fairly smoothly when dealing with 5 per-
cent of new loan volume. This slow and cautious ap-
proach should be continued as the volume increases
to 40 percent. This pilot program should continue to
proceed slowly and cautiously and demonstrate suc-
cessful results before expanding it to additional loan
volume.
(4) While the FDSL Program pilot continues
its test phase, reform of the FFEL Program which
will benefit students and institutions of higher edu-
cation should be a continuing priority for the De-
partment of Education.
SEC. 3. PARTICIPATION OF INSTITUTIONS AND ADMINIS-
TRATION OF DIRECT LOAN PROGRAMS.
(a) LIMITATION ON PROPORTION OF LOANS MADE
UNDER DIRECT LOAN PROGRAM.—Section 453(a) of the
Act (20 U.S.C. 1087c(a)) is amended—
(1) by amending paragraph (2) to read as
follows:
‘‘(2) DETERMINATION OF NUMBER OF AGREE-
MENTS.—In the exercise of the Secretary’s discre-
tion, the Secretary shall enter into agreements under
subsections (a) and (b) of section 454 with institu-
tions for participation in the programs under this
part, subject to the following:
‘‘(A) for academic year 1994–1995, loans
made under this part shall represent 5 percent
of the new student loan volume for such year;
and
‘‘(B) for academic year 1995–1996 and for
any succeeding fiscal year, loans made under
this part shall be limited to loans to students
and parents of students attending eligible insti-
tutions that have applied and been accepted for
participation in the program under this part on
or before December 31, 1994.’’
(2) by striking paragraph (3); and
(3) by redesignating paragraph (4) as para-
graph (3).
(b) 
ELIMINATION
OF
CONSCRIPTION.—Section
453(b)(2) of such Act is amended—
(1) by striking subparagraph (B);
(2) by redesignating subparagraphs (A)(i) and
(A)(ii) as subparagraphs (A) and (B) respectively;
and
(3) in such subparagraph (B) (as so redesig-
nated) by striking ‘‘clause (i); and’’ and inserting
‘‘subparagraph (A).’’.
(c) CONTROL OF ADMINISTRATIVE EXPENSES.—
(1) IN GENERAL.—Section 458(a) of the Act is
amended to read as follows:
‘‘(a) IN GENERAL.—Each fiscal year, there shall be
available to the Secretary of Education from funds not
otherwise appropriated, funds to be obligated for adminis-
trative costs under this part, not to exceed (from such
funds not otherwise appropriated) $260,000,000 in fiscal
year 
1994, 
$295,000,000 
in 
fiscal 
year 
1995,
$395,000,000 in fiscal year 1996, $400,000,000 in fiscal
year 1997, and $400,000,000 in fiscal year 1998. Such
administrative costs shall include the costs of annually as-
sessing the program under this part and, subject to sub-
section (e) of this section, payment of an administrative
cost allowance for the expenses of guaranty agencies in
servicing outstanding loans in their portfolios and in guar-
anteeing new loans. If in any fiscal year the Secretary de-
termines that additional funds for administrative expenses
are needed, the Secretary is authorized to use funds avail-
able under this section for a subsequent fiscal year for
such expenses, except that the total expenditures by the
Secretary (from such funds not otherwise appropriated)
shall not exceed $1,750,000,000 in fiscal years 1994
through 1998. The Secretary is also authorized to carry
over funds available under this section to a subsequent
fiscal year.’’.
Department for services supporting the loan programs
under parts B and D of this title and the current and
projected costs of such contracts.’’.
(d) ELIMINATION
OF
TRANSITION
TO
DIRECT
LOANS.—The Act is further amended—
(1) in section 422(c)(7)—
(A) by striking ‘‘during the transition’’ and
all that follows through ‘‘part D of this title’’
in subparagraph (A); and
(B) by striking ‘‘section 428(c)(10)(F)(v)’’
in subparagraph (B) and inserting ‘‘section
428(c)(9)(F)(v)’’;
(2) in section 428(c)(8)—
(A) by striking ‘‘(A)’’ after the paragraph
designation; and
(B) by striking subparagraph (B);
(3) in section 428(c)(9)(E)—
(A) by inserting ‘‘or’’ after the semicolon
at the end of clause (iv);
(B) by striking ‘‘; or’’ at the end of clause
(v) and inserting a period; and
(C) by striking clause (vi);
(4) in clause (vii) of section 428(c)(9)(F)—
(A) by inserting ‘‘and’’ before ‘‘to avoid
disruption’’; and
(B) by striking ‘‘, and to ensure an orderly
transition’’ and all that follows through the end
of such clause and inserting a period;
(5) in section 428(c)(9)(K), by striking ‘‘the
progress of the transition from the loan programs
under this part to’’ and inserting ‘‘the integrity and
administration of’’;
(6) in section 428(e)(1)(B)(ii), by striking
‘‘during the transition’’ and all that follows through
‘‘part D of this title’’;
(7) in section 428(e)(3), by striking ‘‘of transi-
tion’’;
(8) in section 428(j)(3)—
(A) by striking ‘‘DURING TRANSITION TO
DIRECT LENDING’’; and
(B) by striking ‘‘during the transition’’
and all that follows through ‘‘part D of this
title,’’ and inserting a comma;
(9) in section 453(c)(2), by striking ‘‘TRANSI-
TION’’ and inserting ‘‘INSTITUTIONAL’’;
(10) in section 453(c)(3), by striking ‘‘AFTER
TRANSITION’’; and
(11) in section 456(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’’.
SEC. 4. ABILITY OF BORROWERS TO CONSOLIDATE UNDER
DIRECT AND GUARANTEED LOAN PROGRAMS.
(a) ABILITY OF PART D BORROWERS TO OBTAIN
FEDERAL STAFFORD CONSOLIDATION LOANS.—Section
428C(a)(4) of the Act (20 U.S.C. 1078–3(a)(4)) is
amended—
(1) by striking ‘‘or’’ at the end of subparagraph
(B);
(2) by redesignating subparagraphs (C) and
(D) as subparagraphs (D) and (E); and
(3) by inserting after subparagraph (B) the fol-
lowing new subparagraph:
‘‘(C) made under part D of this title;’’.
(b) ABILITY OF PART B BORROWERS TO OBTAIN
FEDERAL
DIRECT
CONSOLIDATION
LOANS.—Section
428C(b)(5) of such Act is amended to read as follows:
‘‘(5) DIRECT CONSOLIDATION LOANS FOR BOR-
ROWERS IN SPECIFIED CIRCUMSTANCES.—
‘‘(A) The Secretary may offer a borrower
a direct consolidation loan in the event that a
borrower otherwise eligible for a consolidation
loan pursuant to this section is—
‘‘(i) unable to obtain a consolidation
loan from a lender with an agreement
under subsection (a)(1), or
‘‘(ii)(I) evidences a substantial exist-
ing or projected difficulty in repaying loans
received under this part; and
‘‘(II) desires a consolidation loan with
an income contingent repayment schedule
as offered to borrowers under part D of
this title.
‘‘(B) The Secretary shall establish appro-
priate certification procedures to verify the eli-
gibility of borrowers for loans pursuant to this
paragraph.
‘‘(C) The Secretary shall not offer such
consolidation loans if, in the Secretary’s judg-
ment, the Department of Education does not
have the necessary origination and servicing ar-
rangements in place for such loans, or the pro-
jected volume in the program would be desta-
bilizing to the availability of loans otherwise
available under this part.’’.
SEC. 5. RESERVE FUND PROGRAMS.
(a) GUARANTY AGENCY RESERVE LEVELS.—Section
428(c)(9) of such Act (20 U.S.C. 1078(c)(9)) is
amended—
(1) in subparagraph (E)—
(A) by striking ‘‘The Secretary’’ and in-
serting ‘‘After notice and opportunity for a
hearing on the record, the Secretary’’;
(B) by inserting ‘‘or’’ after the semicolon
at the end of clause (iv);
(C) by striking ‘‘; or’’ at the end of clause
(v) and inserting a period; and
(D) by striking clause (vi); and
(2) in subparagraph (F)—
(A) by inserting ‘‘dedicated to the func-
tions of the agency under the loan insurance
program under this part’’ after ‘‘assets of the
guaranty agency’’ in clause (vi); and
(B) in clause (vi), by inserting before ‘‘;
or’’ the following ‘‘, except that the Secretary
may not take any action to require the guar-
anty agency to provide to the Secretary the
and other members of the higher education commu-
nity, the Secretary shall develop—
‘‘(A) a methodology for the calculation of
institutional default rates under the loan pro-
grams operated pursuant to this part;
‘‘(B) criteria for the initiation of termi-
nation proceedings on basis of such default
rates; and
‘‘(C) procedures for the conduct of such
termination proceedings.
‘‘(2) COMPARABILITY TO PART B.—In develop-
ing the methodology, criteria, and procedures re-
quired by paragraph (1), the Secretary shall, to the
maximum extent possible, establish standards for
the termination of institutions from participation in
loan programs under this part that are comparable
to the standards established for the termination of
institutions from participation in the loan programs
under part B. Such procedures shall also include
provisions for the appeal of default rate calculations
based on deficiencies in the servicing of loans under
this part that are comparable to the provisions for
such appeals based on deficiencies in the servicing of
loans under part B.’’.
SEC.
7.
APPLICATION FOR PART B LOANS USING FREE
FEDERAL APPLICATION.
Section 483(a) of the Act (20 U.S.C. 1090(a)) is
amended—
(1) in paragraph (1)—
(A) by inserting ‘‘B,’’ after ‘‘assistance
under parts A,’’;
(B) by striking ‘‘part A) and to determine
the need of a student for the purpose of part
B of this title’’ and inserting ‘‘part A).’’; and
(C) by striking the last sentence and in-
serting the following: ‘‘Such form may be in an
electronic or any other format (subject to sec-
tion 485B) in order to facilitate use by borrow-
ers and institutions.’’; and
(2) in paragraph (3), by striking ‘‘and States
shall receive,’’ and inserting ‘‘, any guaranty agency
authorized by any such institution, and States shall
receive, at their request and’’.
SEC. 8. CREDIT REFORM.
(a) AMENDMENT.—Section 502(5)(B) of the Con-
gressional Budget Act (31 U.S.C. 661a(5)(B)) is amended
to read as follows:
‘‘(B) The cost of a direct loan shall be the net
present value, at the time when the direct loan is
disbursed, of the following cash flows for the esti-
mated life of the loan:
‘‘(i) Loan disbursements.
‘‘(ii) Repayments of principal.
‘‘(iii) Payments of interest and other
payments by or to the Government over the life
of the loan after adjusting for estimated de-
faults, prepayments, fees, penalties, and other
recoveries.
‘‘(iv) In the case of a direct student loan
made pursuant to the program authorized
under part D of title IV of the Higher Edu-
cation Act of 1965, direct and indirect ex-
penses, including but not limited to the follow-
ing: expenses arising from credit policy and
oversight, activities related to credit extension,
loan origination, loan servicing, training, pro-
gram promotion and payments to contractors,
other Government entities, and program partici-
pants, collection of delinquent loans, and write-
off and close-out of loans.’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) of this section shall apply to all fiscal years
beginning on or after October 1, 1995, and to statutory
changes made on or after the date of enactment of this
Act.
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