SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Student Loan Fairness 
Act of 2003’’. 
SEC. 2. REMOVAL OF PROHIBITION ON REFINANCING CON-
SOLIDATION LOANS. 
Section 428C(a)(3) the Higher Education Act of 
1965 (20 U.S.C. 1078–3(a)(3)) is amended—
(1) by striking subparagraph (B); 
(2) in subparagraph (C), by striking ‘‘subpara-
graphs (A) and (B)’’ and inserting ‘‘subparagraph 
(A)’’; and 
(3) by redesignating subparagraph (C) as sub-
paragraph (B). 
SEC. 3. STUDENT LOAN BORROWER CHOICE OF LOAN 
CONSOLIDATOR. 
(a) SELECTION OF LENDER.—Section 428C(b)(1)(A) 
of the Higher Education Act of 1965 (20 U.S.C. 1078–
3(b)(1)(A)) is amended by striking ‘‘and (i) the lender 
holds’’ and all that follows through ‘‘selected for consolida-
tion)’’. 
(b) INFORMATION ABOUT CONSOLIDATION LOANS.—
(1) INFORMATION
FROM
LENDERS.—Section 
428C(b)(1) of such Act is further amended—
(A) by striking ‘‘and’’ at the end of sub-
paragraph (E);
(B) by redesignating subparagraph (F) as 
subparagraph (G); and 
(C) by inserting after subparagraph (E) 
the following new subparagraph: 
‘‘(F) that the lender will provide to each 
applicant for a consolidation loan a clear and 
conspicuous notice, in such form as the Sec-
retary shall prescribe, describing, in relation to 
the borrower’s reported current loan balance 
and the likely interest rate estimated by the 
lender for the consolidation loan—
‘‘(i) the effects of a consolidation loan 
and its available repayment plans on the 
borrower’s interest rate, the amount of his 
or her monthly and total payments, total 
interest accrued, the length of the repay-
ment term; 
‘‘(ii) the ability of the student bor-
rower to pre-pay loans; and 
‘‘(iii) the differences between variable 
and fixed interest rates; and’’. 
(2) INFORMATION
FROM
INSTITUTIONS.—Sec-
tion 485(b)(1)(A) of such Act (20 U.S.C. 1092(b)) 
is amended—
(A) by striking ‘‘and’’ at the end of clause 
(i); 
(B) by striking the period at the end of 
clause (ii) and inserting ‘‘; and’’; and 
(C) by adding at the end the following new 
clause: 
‘‘(iii) providing to the borrower of a loan made 
under part B, D, or E, a clear and conspicuous no-
tice, in such form as the Secretary shall prescribe, 
describing the effect of using a consolidation loan to 
discharge the borrower’s student loans, and includ-
ing, with respect to a series of loan amounts 
ranges—
‘‘(I) the differences between fixed and vari-
able interest rates; 
‘‘(II) the effects of consolidation loan and 
its available repayment plans on the borrower’s 
interest rate, the amount of his or her monthly 
and total payments, total interest accrued, and 
the length of repayment term; and 
‘‘(III) the ability of the student borrower 
to prepay loans.’’.
SEC. 4. INTEREST RATES ON CONSOLIDATED AND RE-
CONSOLIDATED LOANS. 
(a) INTEREST RATE CHANGES.—Section 427A of the 
Higher Education Act of 1965 (20 U.S.C. 1077a) is 
amended by striking subsections (k) and (l) and inserting 
the following: 
‘‘(k) INTEREST RATES
FOR NEW LOANS
ON
OR 
AFTER OCTOBER 1, 1998, AND BEFORE JANUARY 1, 
2004.—
‘‘(1) IN GENERAL.—Notwithstanding subsection 
(h) and subject to paragraph (2) of this subsection, 
with respect to any loan made, insured, or guaran-
teed under this part (other than a loan made pursu-
ant to section 428B or 428C) for which the first dis-
bursement is made on or after October 1, 1998, and 
before January 1, 2004, the applicable rate of inter-
est 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 to—
‘‘(A) the bond equivalent rate of 91-day 
Treasury bills auctioned at the final auction 
held prior to such June 1; plus 
‘‘(B) 2.3 percent, 
except that such rate shall not exceed 8.25 percent. 
‘‘(2) IN SCHOOL AND GRACE PERIOD RULES.—
Notwithstanding subsection (h), with respect to any
loan under this part (other than a loan made pursu-
ant to section 428B or 428C) for which the first dis-
bursement is made on or after October 1, 1998, and 
before January 1, 2004, the applicable rate of inter-
est for interest which accrues—
‘‘(A) prior to the beginning of the repay-
ment period of the loan; or 
‘‘(B) during the period in which principal 
need not be paid (whether or not such principal 
is in fact paid) by reason of a provision de-
scribed 
in 
section 
427(a)(2)(C) 
or 
428(b)(1)(M), 
shall be determined under paragraph (1) by sub-
stituting ‘1.7 percent’ for ‘2.3 percent’. 
‘‘(3) PLUS 
LOANS.—Notwithstanding sub-
section (h), with respect to any loan under section 
428B for which the first disbursement is made on or 
after October 1, 1998, and before January 1, 2004, 
the applicable rate of interest shall be determined 
under paragraph (1)—
‘‘(A) by substituting ‘3.1 percent’ for ‘2.3 
percent’; and 
‘‘(B) by substituting ‘9.0 percent’ for ‘8.25 
percent’.
month period beginning on July 1 and ending on 
June 30, be determined on the preceding June 1 
and be equal to—
‘‘(A) the bond equivalent rate of 91-day 
Treasury bills auctioned at the final auction 
held prior to such June 1; plus 
‘‘(B) 2.3 percent, 
except that such rate shall not exceed 6.8 percent. 
‘‘(2) PLUS 
LOANS.—Notwithstanding sub-
section (h), with respect to any loan under section 
428B for which the first disbursement is made on or 
after January 1, 2004, the applicable rate of interest 
shall be determined under paragraph (1)—
‘‘(A) by substituting ‘3.1 percent’ for ‘2.3 
percent’; and 
‘‘(B) by substituting ‘7.5 percent’ for ‘6.8 
percent’. 
‘‘(3) CONSOLIDATION LOANS.—With respect to 
any consolidation loan under section 428C for which 
the application is received by an eligible lender on or 
after January 1, 2004, the applicable rate of interest 
shall, during any 12-month period beginning on July 
1 and ending on June 30, be determined on the pre-
ceding June 1 and be equal to—
‘‘(A) the bond equivalent rate of 91-day 
Treasury bills auctioned at the final auction 
held prior to such June 1; plus 
‘‘(B) 2.3 percent, 
except that such rate shall not exceed 6.8 percent.’’. 
(b) 
OFFSETTING
ORIGINATION
FEES.—Section 
438(c) of the Higher Education Act of 1965 (20 U.S.C. 
1087–1(c)) is amended—
(1) in paragraph (1), by inserting ‘‘or para-
graph (7)’’ after ‘‘paragraph (2)’’; 
(2) in paragraph (2), by striking ‘‘paragraph 
(8)’’ and inserting ‘‘paragraph (9)’’; 
(3) by redesignating paragraphs (7) and (8) as 
paragraphs (8) and (9), respectively; and 
(4) by inserting after paragraph (6) the fol-
lowing new paragraph: 
‘‘(7) CONSOLIDATION LOANS.—With respect to 
any loans made under section 428C on or after Jan-
uary 1, 2004, each eligible lender under this part is 
authorized to charge the borrower an origination fee 
of not to exceed 0.5 percent of the principal amount 
of the loan. Except as provided in paragraph (9), a 
lender that charges an origination fee under this 
paragraph shall assess the same fee to all bor-
rowers.’’.
(c) SPECIAL ALLOWANCE CONFORMING CHANGES.—
Section 438(b)(2) of the Higher Education Act of 1965 
(20 U.S.C. 1087–1(b)(2)) is amended by striking ‘‘July 
1, 2006’’ each place it appears in clauses (ii), (v), and 
(vii) of subparagraph (I), including in the headings of such 
clauses, and inserting ‘‘January 1, 2004’’. 
(d) ADDITIONAL CONFORMING AMENDMENTS.—Sec-
tion 428C(c)(1) of the Higher Education Act of 1965 (20 
U.S.C. 1078–3(c)(1)) is amended by striking ‘‘July 1, 
2006’’ each place it appears and inserting ‘‘January 1, 
2004’’.
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