(1) AMENDMENT.—Section 455(c) of such Act 
(20 U.S.C. 1087e(c)) is amended to read as follows: 
‘‘(c) LOAN FEE.—The Secretary shall not collect di-
rectly or indirectly from any borrower any origination fee 
with respect to such loan, or any other fee relating to the 
origination of a loan however described.’’. 
(2) EFFECTIVE DATE.—The amendment made 
by paragraph (1) shall apply with respect to any 
loan made under part D of title IV on an after the 
first July 1 after the date of enactment of this Act. 
SEC. 104. AUTHORITY TO REFINANCE CONSOLIDATION 
LOANS. 
(a) CONSOLIDATION LOAN REFINANCING.—
(1) FFEL CONSOLIDATION
LOANS.—Section 
428C(a)(3)(B) of the Higher Education Act of 1965 
(20 U.S.C. 1078–3(a)(3)(B)) is amended by adding 
at the end the following new clause: 
‘‘(ii) Notwithstanding clause (i) of this subpara-
graph, a borrower of a consolidation loan on which 
the interest is established at a fixed rate under sec-
tion 427A, 428C(c), or 455 may obtain a subsequent 
consolidation loan for the purposes of refinancing 
such earlier consolidation loan at a fixed or variable 
rate under section 427A(l)(3) or 455(b)(7)(C) if the 
interest rate on such earlier consolidation loan ex-
ceeds the sum of 3.3 percent and the average of the 
bond equivalent rates of the 91-day Treasury bills 
auctioned for the previous calendar quarter.’’. 
(2) PARALLEL TERMS FOR FEDERAL DIRECT 
CONSOLIDATION
LOANS.—Section 455(a) of the 
Higher Education Act of 1965 (20 U.S.C. 1087e(a)) 
is amended—
(A) in paragraph (1), by inserting ‘‘428C,’’ 
after ‘‘428B,’’; and 
(B) in paragraph (2)—
(i) by striking ‘‘and’’ at the end of 
subparagraph (B); 
(ii) by redesignating subparagraph 
(C) as subparagraph (D); and 
(iii) by inserting after subparagraph 
(B) the following: 
‘‘(C) section 428C shall be know as ‘Fed-
eral Direct Consolidation Loans’.’’. 
(b) CONSOLIDATION LOAN INTEREST RATES.—
(1) FFEL LOANS.—Paragraph (3) of section 
427A(l) (20 U.S.C. 1077a(l)) is amended to read as 
follows: 
‘‘(3) CONSOLIDATION LOANS.—
‘‘(A) BORROWER ELECTION.—With respect 
to any consolidation loan under section 428C
for which the application is received by an eligi-
ble lender on or after July 1, 2006 (including 
an application for a subsequent consolidation 
loan under section 428C(a)(3)(B)(ii)), the ap-
plicable rate of interest shall, at the election of 
the borrower at the time of application for the 
loan, be either at the rate determined under 
subparagraph (B) or the rate determined under 
subparagraph (C). 
‘‘(B) VARIABLE
RATE.—Except as pro-
vided in subparagraph (D), the rate determined 
under this subparagraph shall, during any 12-
month period beginning on July 1 and ending 
on June 30, be determined on the preceding 
June 1 and be equal, for such 12-month period, 
to—
‘‘(i) the bond equivalent rate of 91-
day Treasury bills auctioned at the final 
auction held prior to such June 1; plus 
‘‘(ii) 2.3 percent, 
except that such rate shall not exceed 6.8 per-
cent. 
‘‘(C) FIXED RATE.—Except as provided in 
subparagraph (D), the rate determined under 
this subparagraph shall be determined on the
date on which the obligation to repay the loan 
is signed, and be equal, for the duration of the 
term of the loan, to the lesser of—
‘‘(i) the weighted average of the inter-
est rates on the loans consolidated, round-
ed to the nearest higher one-eighth of 1 
percent; or 
‘‘(ii) 6.8 percent. 
‘‘(D) CONSOLIDATION OF PLUS LOANS.—
In the case of any such consolidation loan that 
is used to repay loans each of which was made 
under section 428B or was a Federal Direct 
PLUS Loan (or both), the rates determined 
under subparagraphs (B) and (C) shall be de-
termined—
‘‘(i) by substituting ‘3.1 percent’ for 
‘2.3 percent’; and 
‘‘(ii) by substituting ‘7.9 percent’ for 
‘6.8 percent’.’’. 
(2) DIRECT LOANS.—Subparagraph (C) of sec-
tion 455(b)(7) (20 U.S.C. 1087e(b)(7)) is amended 
to read as follows: 
‘‘(C) CONSOLIDATION LOANS.—
‘‘(i) BORROWER ELECTION.—With re-
spect to any consolidation loan under sec-
tion 428C for which the application is re-
ceived by an eligible lender on or after July 
1, 2006 (including an application for a 
subsequent consolidation loan under sec-
tion 428C(a)(3)(B)(ii)), the applicable rate 
of interest shall, at the election of the bor-
rower at the time of application for the 
loan, be either at the rate determined 
under clause (ii) or the rate determined 
under clause (iii). 
‘‘(ii) VARIABLE
RATE.—Except as 
provided in clause (iv), the rate determined 
under this subparagraph shall, during any 
12-month period beginning on July 1 and 
ending on June 30, be determined on the 
preceding June 1 and be equal, for such 
12-month period, to—
‘‘(I) the bond equivalent rate of 
91-day Treasury bills auctioned at the 
final auction held prior to such June 
1; plus 
‘‘(II) 2.3 percent, 
except that such rate shall not exceed 6.8 
percent.
‘‘(iii) FIXED RATE.—Except as pro-
vided in clause (iv), the rate determined 
under this subparagraph shall be deter-
mined on the date on which the obligation 
to repay the loan is signed, and be equal, 
for the duration of the term of the loan, to 
the lesser of—
‘‘(I) the weighted average of the 
interest rates on the loans consoli-
dated, rounded to the nearest higher 
one-eighth of 1 percent; or 
‘‘(II) 6.8 percent. 
‘‘(iv) 
CONSOLIDATION
OF
PLUS 
LOANS.—In the case of any such Federal 
Direct Consolidation Loan that is used to 
repay loans each of which was made under 
section 428B or was a Federal Direct 
PLUS Loan, the rates determined under 
clauses (ii) and (iii) shall be determined—
‘‘(I) by substituting ‘3.1 percent’ 
for ‘2.3 percent’ in clause (ii)(II); and 
‘‘(II) by substituting ‘7.9 per-
cent’ for ‘6.8 percent’ each place it 
appears.’’.