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sure that veteran students are referred to 
such providers if needed; and 
‘‘(B) organizing and advising veteran stu-
dent organizations and hosting veterans-ori-
ented group functions on campus; 
‘‘(C) distributing news and information to 
all veteran students, including through main-
taining newsletters and listserves; and 
‘‘(D) assisting in the training of Depart-
ment of Veterans Affairs certifying officials, 
when applicable.’’. 
SEC. 107. OFFICER DANIEL FAULKNER CHILDREN OF FALL-
EN HEROES SCHOLARSHIP. 
(a) SHORT TITLE.—This section may be cited as the 
‘‘Officer Daniel Faulkner Children of Fallen Heroes 
Scholarship Act of 2009’’. 
(b) CALCULATION OF ELIGIBILITY.—Section 473(b) 
(20 U.S.C. 1087mm(b)(2)) is amended— 
(1) in paragraph (2)— 
(A) in the matter preceding subparagraph 
(A), by inserting ‘‘(in the case of a student who 
meets the requirement of subparagraph (B)(i)), 
or academic year 2010–2011 (in the case of a 
student who meets the requirement of subpara-
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graph (B)(ii)),’’ after ‘‘academic year 2009– 
2010’’; and 
(B) by amending subparagraph (B) to read 
as follows: 
‘‘(B) whose parent or guardian was— 
‘‘(i) a member of the Armed Forces of 
the United States and died as a result of 
performing military service in Iraq or Af-
ghanistan after September 11, 2001; or 
‘‘(ii) was actively serving as a public 
safety officer and died in the line of duty 
while performing as a public safety officer; 
and’’; 
(2) in paragraph (3)— 
(A) by striking ‘‘Notwithstanding’’ and in-
serting the following: 
‘‘(A) ARMED FORCES.—Notwithstanding’’; 
(B) by striking ‘‘paragraph (2)’’ and in-
serting ‘‘subparagraphs (A), (B)(i), and (C) of 
paragraph (2)’’; and 
(C) by adding at the end the following: 
‘‘(B) PUBLIC
SAFETY
OFFICERS.—Not-
withstanding any other provision of law, unless 
the Secretary establishes an alternate method 
to adjust the expected family contribution, a fi-
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nancial aid administrator shall adjust the ex-
pected family contribution in accordance with 
this subsection for each student who meets the 
requirements of subparagraphs (A), (B)(ii), and 
(C) of paragraph (2).’’; and 
(3) by adding at the end the following: 
‘‘(4) TREATMENT OF PELL AMOUNT.—Notwith-
standing section 1212 of the Omnibus Crime Control 
and Safe Streets Act of 1968, in the case of a stu-
dent who receives an increased Federal Pell Grant 
amount under this section, the total amount of such 
Federal Pell Grant, including the increase under 
subparagraph (A), shall not be considered in calcu-
lating that student’s educational assistance benefits 
under the Public Safety Officer’s Benefits program. 
‘‘(5) DEFINITIONS.—For purposes of this sub-
section— 
‘‘(A) the term ‘public safety officer’ means 
an individual serving a public agency in an offi-
cial capacity, with or without compensation, as 
a law enforcement officer, as a firefighter, or as 
a member of a rescue squad or ambulance crew; 
‘‘(B) the term ‘law enforcement officer’ 
means an individual who— 
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‘‘(i) is authorized by law to engage in 
or supervise the prevention, detection, in-
vestigation, or prosecution of, or the incar-
ceration of any person for, any violation of 
law; and 
‘‘(ii) has statutory powers of arrest or 
apprehension; 
‘‘(C) the term ‘firefighter’ means an indi-
vidual who is trained in the suppression of fire 
or hazardous-materials response and has the 
legal authority to engage in these duties; 
‘‘(D) the term ‘member of a rescue squad 
or ambulance crew’ means an individual who is 
an officially recognized or designated public em-
ployee member of a rescue squad or ambulance 
crew; and 
‘‘(E) the term ‘public agency’ means the 
United States, any State of the United States, 
the District of Columbia, the Commonwealth of 
Puerto Rico, the Virgin Islands of the United 
States, Guam, American Samoa, the Trust Ter-
ritory of the Pacific Islands, the Commonwealth 
of the Northern Mariana Islands, any territory 
or possession of the United States, or any unit 
of local government, department, agency, or in-
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strumentality of any of the foregoing, and the 
Amtrak Police and Federal Reserve Police de-
partments.’’. 
SEC. 108. TEACHER EXCELLENCE. 
(a) ESTABLISHMENT.—The Secretary of Education 
may make grants to local educational agencies for the pur-
pose of improving teacher excellence in public elementary 
and secondary schools. 
(b) USE OF FUNDS.—Grants under this section shall 
be used for the establishment, expansion, or improvement 
of— 
(1) professional development activities that are 
aligned to the curriculum and student academic 
needs; 
(2) mentoring and induction programs for new 
teachers and principals; or 
(3) career ladders that allow teachers to take 
on new professional roles, such as career teachers, 
mentor teachers, and master teachers. 
(c) APPLICATION.—A local educational agency desir-
ing a grant under this section shall submit to the Sec-
retary of Education an application at such time, in such 
manner, and accompanied by such information as the Sec-
retary may reasonably require. 
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(d) AUTHORIZATION
OF APPROPRIATIONS.—There 
are authorized to be appropriated to carry out this section 
such sums as may be necessary for fiscal year 2010 and 
each of the 5 succeeding fiscal years. 
Subtitle B—Student Financial Aid 
Form Simplification 
SEC. 121. GENERAL EFFECTIVE DATE. 
Except as otherwise provided in this subtitle, amend-
ments made by this subtitle shall be effective with respect 
to determinations of need for assistance under title IV of 
the Higher Education Act of 1965 (20 U.S.C. 1070 et 
seq.) for award years beginning on or after July 1, 2011. 
SEC. 122. TREATMENT OF ASSETS IN NEED ANALYSIS. 
(a) AMOUNT OF NEED.—Section 471 (20 U.S.C. 
1087kk) is amended— 
(1) by striking ‘‘Except’’ and inserting the fol-
lowing: 
‘‘(a) IN GENERAL.—Except’’; 
(2) by inserting ‘‘and subject to subsection (b)’’ 
after ‘‘therein’’; and 
(3) by adding at the end the following: 
‘‘(b) ASSET CAP FOR NEED-BASED AID.—Notwith-
standing any other provision of this title, a student shall 
not be eligible to receive a Federal Pell Grant or a Federal 
Direct Stafford Loan under this title if— 
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‘‘(1) in the case of a dependent student, the 
combined net assets of the student and the student’s 
parents are equal to an amount greater than 
$150,000 (or a successor amount prescribed by the 
Secretary under section 478(c)); or 
‘‘(2) in the case of an independent student, the 
net assets of the student (and the student’s spouse, 
if applicable) are equal to an amount greater than 
$150,000 (or a successor amount prescribed by the 
Secretary under section 478(c)).’’. 
(b) DATA ELEMENTS.—Section 474(b) (20 U.S.C. 
1087nn(b)) is amended— 
(1) by striking paragraph (4); and 
(2) by redesignating paragraphs (5), (6), and 
(7) as paragraphs (4), (5), and (6), respectively. 
(c) DEPENDENT
STUDENTS.—Section 475 (20 
U.S.C. 1087oo) is amended— 
(1) in subsection (a)— 
(A) in paragraph (1)— 
(i) by striking ‘‘adjusted’’; and 
(ii) by inserting ‘‘and’’ after the semi-
colon; 
(B) in paragraph (2), by striking ‘‘; and’’ 
and inserting a period; and 
(C) by striking paragraph (3); 
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(2) in subsection (b)— 
(A) in the header, by striking ‘‘AD-
JUSTED’’; 
(B) in the matter preceding paragraph (1), 
by striking ‘‘adjusted’’; 
(C) by striking paragraph (1); 
(D) by redesignating paragraphs (2) and 
(3) as paragraphs (1) and (2), respectively; 
(E) in paragraph (1) (as redesignated by 
subparagraph (D) of this paragraph), by strik-
ing ‘‘adjusted’’; and 
(F) in paragraph (2) (as redesignated by 
subparagraph (D) of this paragraph), by strik-
ing ‘‘paragraph (2)’’ and inserting ‘‘paragraph 
(1)’’; 
(3) by repealing subsection (d); 
(4) in subsection (e)— 
(A) by striking ‘‘The adjusted available’’ 
and inserting ‘‘The available’’; 
(B) by striking ‘‘to as ‘AAI’)’’ and insert-
ing ‘‘to as ‘AI’)’’; 
(C) by striking ‘‘From Adjusted Available 
Income (AAI)’’ and inserting ‘‘From Available 
Income (AI)’’; and 
(D) in the table— 
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(i) by striking ‘‘If AAI’’ and inserting 
‘‘If AI’’; and 
(ii) by striking ‘‘of AAI’’ each place it 
appears and inserting ‘‘of AI’’; 
(5) in subsection (f)— 
(A) by striking ‘‘and assets’’ each place it 
appears; 
(B) in paragraph (2)(B), by striking ‘‘or 
assets’’; and 
(C) in paragraph (3)— 
(i) by striking ‘‘are taken into’’ and 
inserting ‘‘is taken into’’; and 
(ii) by striking ‘‘adjusted’’; 
(6) in subsection (g)(6), by striking ‘‘exceeds 
the sum of’’ and all that follows and inserting ‘‘ex-
ceeds the parents’ total income (as defined in section 
480).’’; 
(7) by repealing subsection (h); and 
(8) in subsection (i), by striking ‘‘adjusted’’ 
each place it appears. 
(d) FAMILY CONTRIBUTION FOR INDEPENDENT STU-
DENTS
WITHOUT
DEPENDENTS
OTHER
THAN
A 
SPOUSE.—Section 476 (20 U.S.C. 1087pp) is amended— 
(1) in subsection (a)— 
(A) by striking paragraph (1); 
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(B) by redesignating paragraphs (2) and 
(3) as paragraphs (1) and (2), respectively; 
(C) in paragraph (1) (as redesignated by 
subparagraph (B)), by striking ‘‘the sum result-
ing under paragraph (1)’’ and inserting ‘‘the 
family’s contribution from available income (de-
termined in accordance with subsection (b))’’; 
and 
(D) in paragraph (2)(A) (as redesignated 
by subparagraph (B)), by striking ‘‘paragraph 
(2)’’ and inserting ‘‘paragraph (1)’’; 
(2) by repealing subsection (c); and 
(3) in subsection (d)— 
(A) by striking ‘‘and assets’’; and 
(B) by striking ‘‘or assets’’. 
(e) FAMILY CONTRIBUTION FOR INDEPENDENT STU-
DENTS WITH DEPENDENTS OTHER THAN A SPOUSE.— 
Section 477 (20 U.S.C. 1087qq) is amended— 
(1) in subsection (a)— 
(A) by striking paragraph (1); 
(B) by redesignating paragraphs (2), (3), 
and (4) as paragraphs (1), (2), and (3), respec-
tively; 
(C) in paragraph (1) (as redesignated by 
subparagraph (B)), by striking ‘‘such adjusted 
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available income’’ and inserting ‘‘the family’s 
available income (determined in accordance with 
subsection (b))’’; 
(D) in paragraph (2) (as redesignated by 
subparagraph (B)), by striking ‘‘paragraph (2)’’ 
and inserting ‘‘paragraph (1)’’; and 
(E) in paragraph (3)(A) (as redesignated 
by subparagraph (B)), by striking ‘‘paragraph 
(3)’’ and inserting ‘‘paragraph (2)’’; 
(2) by repealing subsection (c); and 
(3) in subsection (d)— 
(A) by striking ‘‘The adjusted available’’ 
and inserting ‘‘The available’’; 
(B) by striking ‘‘to as ‘AAI’)’’ and insert-
ing ‘‘to as ‘AI’)’’; 
(C) by striking ‘‘From Adjusted Available 
Income (AAI)’’ and inserting ‘‘From Available 
Income (AI)’’; and 
(D) in the table— 
(i) by striking ‘‘If AAI’’ and inserting 
‘‘If AI’’; and 
(ii) by striking ‘‘of AAI’’ each place it 
appears and inserting ‘‘of AI’’; and 
(E) in subsection (e)— 
(i) by striking ‘‘and assets’’; and 
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(ii) by striking ‘‘or assets’’. 
(f) REGULATIONS; UPDATED TABLES.—Section 478 
(20 U.S.C. 1087rr) is amended— 
(1) in subsection (a), by inserting ‘‘or amounts, 
as the case may be,’’ after ‘‘tables’’ each place the 
term appears; 
(2) by amending subsection (c) to read as fol-
lows: 
‘‘(c) ASSET CAP FOR NEED-BASED AID.—For each 
award year after award year 2011–2012, the Secretary 
shall publish in the Federal Register a revised net asset 
cap for the purposes of section 471(b). Such revised cap 
shall be determined by increasing the dollar amount in 
such section by a percentage equal to the estimated per-
centage change in the Consumer Price Index (as deter-
mined by the Secretary) between December 2010 and the 
December preceding the beginning of such award year, 
and rounding the result to the nearest $5.’’; 
(3) by repealing subsection (d); and 
(4) in subsection (e), by striking ‘‘adjusted’’ 
both places it appears. 
SEC. 123. CHANGES TO TOTAL INCOME; AID ELIGIBILITY. 
(a) DEFINITION OF UNTAXED INCOME AND BENE-
FITS.—Section 480(b)(1) (20 U.S.C. 1087vv(b)(1)), as 
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amended by the Higher Education Opportunity Act (Pub-
lic Law 110–315), is amended— 
(1) by striking subparagraphs (A), (B), (C), 
(E), (F), and (I); 
(2) by redesignating subparagraphs (D), (G), 
and (H) as subparagraphs (A), (B), and (C), respec-
tively; 
(3) in subparagraph (B) (as redesignated by 
paragraph (2)), by inserting ‘‘and’’ after the semi-
colon; and 
(4) in subparagraph (C) (as redesignated by 
paragraph (2)), by striking ‘‘; and’’ and inserting a 
period. 
(b) DEFINITION OF ASSETS.—Section 480(f)(2) (20 
U.S.C. 1087vv(f)(2)) is amended— 
(1) by striking ‘‘or’’ at the end of subparagraph 
(B); 
(2) by striking the period at the end of sub-
paragraph (C) and inserting ‘‘; or’’; and 
(3) by adding at the end the following: 
‘‘(D) an employee pension benefit plan (as 
defined in section 3(2) of the Employee Retire-
ment Income Security Act of 1974 (29 U.S.C. 
1002(2))).’’. 
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(c) FINANCIAL ADMINISTRATOR DISCRETION.—Sec-
tion 479A(b) (20 U.S.C. 1087tt) is amended in the sub-
section heading, by striking ‘‘TO ASSETS’’. 
(d) SUSPENSION
OF ELIGIBILITY
FOR DRUG-RE-
LATED
OFFENSES.—Section 
484(r)(1) 
(20 
U.S.C. 
1091(r)(1)) is amended to read as follows: 
‘‘(1) IN GENERAL.—A student who is convicted 
of any offense under any Federal or State law in-
volving the sale of a controlled substance for conduct 
that occurred during a period of enrollment for 
which the student was receiving any grant, loan, or 
work assistance under this title shall not be eligible 
to receive any grant, loan, or work assistance under 
this title from the date of that conviction for the pe-
riod of time specified in the following subpara-
graphs: 
‘‘(A) For a first offense, the period of in-
eligibility shall be 2 years. 
‘‘(B) For a second offense, the period of 
ineligibility shall be indefinite.’’. 
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TITLE II—STUDENT LOAN 
REFORM 
Subtitle A—Stafford Loan Reform 
SEC. 201. FEDERAL FAMILY EDUCATION LOAN APPROPRIA-
TIONS. 
Section 421 (20 U.S.C. 1071) is amended— 
(1) in subsection (b), in the matter following 
paragraph (6), by inserting ‘‘, except that no sums 
may be expended after June 30, 2010, with respect 
to loans under this part for which the first disburse-
ment would be made after such date’’ after ‘‘ex-
pended’’; and 
(2) by adding at the end the following new sub-
section: 
‘‘(d) TERMINATION OF AUTHORITY TO MAKE OR IN-
SURE NEW LOANS.—Notwithstanding paragraphs (1) 
through (6) of subsection (b) or any other provision of 
law— 
‘‘(1) no new loans (including consolidation 
loans) may be made or insured under this part after 
June 30, 2010; and 
‘‘(2) no funds are authorized to be appro-
priated, or may be expended, under this Act or any 
other Act to make or insure loans under this part 
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(including consolidation loans) for which the first 
disbursement would be made after June 30, 2010, 
except as expressly authorized by an Act of Congress en-
acted after the date of enactment of the Student Aid and 
Fiscal Responsibility Act of 2009.’’. 
SEC. 202. SCOPE AND DURATION OF FEDERAL LOAN INSUR-
ANCE PROGRAM. 
Section 424(a) (20 U.S.C. 1074(a)) is amended by 
striking ‘‘September 30, 1976,’’ and all that follows and 
inserting ‘‘September 30, 1976, for each of the succeeding 
fiscal years ending prior to October 1, 2009, and for the 
period from October 1, 2009, to June 30, 2010, for loans 
first disbursed on or before June 30, 2010.’’. 
SEC. 203. APPLICABLE INTEREST RATES. 
Section 427A(l) (20 U.S.C. 1077a(l)) is amended— 
(1) in paragraph (1), by inserting ‘‘and before 
July 1, 2010,’’ after ‘‘July 1, 2006,’’; 
(2) in paragraph (2), by inserting ‘‘and before 
July 1, 2010,’’ after ‘‘July 1, 2006,’’; 
(3) in paragraph (3), by inserting ‘‘and that 
was disbursed before July 1, 2010,’’ after ‘‘July 1, 
2006,’’; and 
(4) in paragraph (4)— 
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(A) in the matter preceding subparagraph 
(A), by striking ‘‘July 1, 2012’’ and inserting 
‘‘July 1, 2010’’; and 
(B) by repealing subparagraphs (D) and 
(E). 
SEC. 204. FEDERAL PAYMENTS TO REDUCE STUDENT IN-
TEREST COSTS. 
(a) HIGHER EDUCATION ACT OF 1965.—Section 428 
(20 U.S.C. 1078) is amended— 
(1) in subsection (a)— 
(A) in paragraph (1), in the matter pre-
ceding subparagraph (A), by inserting ‘‘for 
which the first disbursement is made before 
July 1, 2010, and’’ after ‘‘eligible institution’’; 
and 
(B) in paragraph (5), by striking ‘‘Sep-
tember 30, 2014,’’ and all that follows through 
the period and inserting ‘‘June 30, 2010.’’; 
(2) in subsection (b)(1)— 
(A) in subparagraph (G)(ii), by inserting 
‘‘and before July 1, 2010,’’ after ‘‘July 1, 
2006,’’; and 
(B) in subparagraph (H)(ii), by inserting 
‘‘and that are first disbursed before July 1, 
2010,’’ after ‘‘July 1, 2006,’’; 
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(3) in subsection (f)(1)(A)(ii)— 
(A) by striking ‘‘during fiscal years begin-
ning’’; and 
(B) by inserting ‘‘and first disbursed be-
fore July 1, 2010,’’ after ‘‘October 1, 2003,’’; 
and 
(4) in subsection (j)(1), by inserting ‘‘, before 
July 1, 2010,’’ after ‘‘section 435(d)(1)(D) of this 
Act shall’’. 
(b) COLLEGE COST REDUCTION AND ACCESS ACT.— 
Section 303 of the College Cost Reduction and Access Act 
(Public Law 110–84) is repealed. 
SEC. 205. FEDERAL PLUS LOANS. 
Section 428B(a)(1) (20 U.S.C. 1078–2(a)(1)) is 
amended by striking ‘‘A graduate’’ and inserting ‘‘Prior 
to July 1, 2010, a graduate’’. 
SEC. 206. FEDERAL CONSOLIDATION LOAN. 
(a) AMENDMENTS.—Section 428C (20 U.S.C. 1078– 
3) is amended— 
(1) in subsection (a)(4)(A), by inserting ‘‘, and 
first disbursed before July 1, 2010’’ after ‘‘under 
this part’’; 
(2) in subsection (b)— 
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(A) by striking ‘‘428C or 455(g)’’ and in-
serting ‘‘428C that is disbursed before July 1, 
2010, or section 455(g)’’; and 
(B) in subclause (II), by inserting ‘‘for 
which the first disbursement is made before 
July 1, 2010’’ after ‘‘or 428H’’. 
SEC. 209. SPECIAL ALLOWANCES. 
Section 438 (20 U.S.C. 1087–1) is amended— 
(1) in subsection (b)(2)(I)— 
(A) in the header, by inserting ‘‘, AND BE-
FORE JULY 1, 2010’’ after ‘‘2000’’; 
(B) in clause (i), by inserting ‘‘and before 
July 1, 2010,’’ after ‘‘2000,’’; 
(C) in clause (ii)(II), by inserting ‘‘and be-
fore July 1, 2010,’’ after ‘‘2006,’’; 
(D) in clause (iii), by inserting ‘‘and before 
July 1, 2010,’’ after ‘‘2000,’’; 
(E) in clause (iv), by inserting ‘‘and that 
is disbursed before July 1, 2010,’’ after 
‘‘2000,’’; 
(F) in clause (v)(I), by inserting ‘‘and be-
fore July 1, 2010,’’ after ‘‘2006,’’; and 
(G) in clause (vi)— 
(i) in the header, by inserting ‘‘, AND 
BEFORE JULY 1, 2010’’ after ‘‘2007’’; and 
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(ii) in the matter preceding subclause 
(I), by inserting ‘‘and before July 1, 
2010,’’ after ‘‘2007,’’; 
(2) in subsection (c)— 
(A) in paragraph (2)(B)— 
(i) in clause (iii), by inserting ‘‘and’’ 
after the semicolon; 
(ii) in clause (iv), by striking ‘‘; and’’ 
and inserting a period; and 
(iii) by striking clause (v); and 
(B) in paragraph (6), by inserting ‘‘and 
first disbursed before July 1, 2010,’’ after 
‘‘1992,’’; and 
(3) in subsection (d)(2)(B), by inserting ‘‘, and 
before July 1, 2010’’ after ‘‘2007’’. 
SEC. 210. REVISED SPECIAL ALLOWANCE CALCULATION. 
(a) 
REVISED
CALCULATION
RULE.—Section 
438(b)(2)(I) of the Higher Education Act of 1965 (20 
U.S.C. 1087–1(b)(2)(I)) is amended by adding at the end 
the following new clause: 
‘‘(vii) REVISED
CALCULATION
RULE 
TO REFLECT FINANCIAL MARKET CONDI-
TIONS.— 
‘‘(I) CALCULATION
BASED
ON 
LIBOR.—For the calendar quarter be-
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ginning on October 1, 2009, and each 
subsequent calendar quarter, in com-
puting the special allowance paid pur-
suant to this subsection with respect 
to loans described in subclause (II), 
clause (i)(I) of this subparagraph 
shall be applied by substituting ‘of the 
1-month London Inter Bank Offered 
Rate (LIBOR) for United States dol-
lars in effect for each of the days in 
such quarter as compiled and released 
by the British Bankers Association’ 
for ‘of the quotes of the 3-month com-
mercial paper (financial) rates in ef-
fect for each of the days in such quar-
ter as reported by the Federal Reserve 
in Publication H–15 (or its successor) 
for such 3-month period’. 
‘‘(II) 
LOANS
ELIGIBLE
FOR 
LIBOR-BASED
CALCULATION.—The 
special allowance paid pursuant to 
this subsection shall be calculated as 
described in subclause (I) with respect 
to special allowance payments for the 
3-month period ending December 31, 
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2009, and each succeeding 3-month 
period, on loans for which the first 
disbursement is made— 
‘‘(aa) on or after the date of 
enactment of the Student Aid 
and Fiscal Responsibility Act of 
2009, and before July 1, 2010; 
or 
‘‘(bb) on or after January 1, 
2000, and before the date of en-
actment of the Student Aid and 
Fiscal 
Responsibility 
Act 
of 
2009, if, not later than the last 
day of the second full fiscal quar-
ter after the date of enactment of 
such Act, the holder of the loan 
(or, if the holder acts as eligible 
lender trustee for the beneficial 
owner of the loan, the beneficial 
owner of the loan), affirmatively 
and permanently waives all con-
tractual, statutory or other legal 
rights to a special allowance paid 
pursuant to this subsection that 
is calculated using the formula in 
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effect at the time the loans were 
first disbursed. 
‘‘(III) TERMS OF WAIVER.— 
‘‘(aa) 
IN
GENERAL.—A 
waiver pursuant to subclause 
(II)(bb) shall be in a form (print-
ed or electronic) prescribed by 
the Secretary, and shall be appli-
cable to— 
‘‘(AA) all loans de-
scribed in such subclause 
that the lender holds solely 
in its own right under any 
lender identification number 
associated with the holder 
(pursuant to section 487B); 
‘‘(BB) all loans de-
scribed in such subclause for 
which the beneficial owner 
has the authority to make 
an election of a waiver under 
such subclause, regardless of 
the 
lender 
identification 
number associated with the 
loan or the lender that holds 
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the loan as eligible lender 
trustee on behalf of such 
beneficial owner; and 
‘‘(CC) all future cal-
culations of the special al-
lowance on loans that, on 
the date of such waiver, are 
loans described in subitem 
(AA) or (BB), or that, after 
such date, become loans de-
scribed in subitem (AA) or 
(BB). 
‘‘(bb) 
EXCEPTIONS.—Any 
waiver pursuant to subclause 
(II)(bb) that is elected for loans 
described in subitem (AA) or 
(BB) of item (aa) shall not apply 
to any loan described in such 
subitem for which the lender or 
beneficial owner of the loan dem-
onstrates to the satisfaction of 
the Secretary that— 
‘‘(AA) 
in 
accordance 
with an agreement entered 
into before the date of en-
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section 3(a)(62) of the Secu-
rities 
Exchange 
Act 
of 
1934), and such rating orga-
nization provided a written 
opinion 
that 
the 
agency 
would downgrade the rating 
applicable to such obligation 
if the lender or owner elect-
ed such a waiver. 
‘‘(IV) PARTICIPANT’S
YIELD.— 
For the calendar quarter beginning on 
October 1, 2009, and each subsequent 
calendar quarter, the Secretary’s par-
ticipant yield in any loan in which the 
Secretary has purchased a participa-
tion interest and for which the first 
disbursement is made on or after Jan-
uary 1, 2000, and before October 1, 
2009, shall be determined by using 
the LIBOR-based rate described in 
subclause (I) as the substitute rate 
(for the commercial paper rate) re-
ferred to in the participation agree-
ment between the Secretary and such 
lender.’’. 
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(b) 
CONFORMING
AMENDMENT.—Section 
438(b)(2)(I) (20 U.S.C. 1087–1(b)(2)(I)) is further 
amended— 
(1) in clause (i)(II), by striking ‘‘such average 
bond equivalent rate’’ and inserting ‘‘the rate deter-
mined under subclause (I)’’; and 
(2) in clause (v)(III) by striking ‘‘(iv), and (vi)’’ 
and inserting ‘‘(iv), (vi), and (vii)’’. 
SEC. 211. ORIGINATION OF DIRECT LOANS AT INSTITU-
TIONS 
LOCATED 
OUTSIDE 
THE 
UNITED 
STATES. 
(a) LOANS
FOR STUDENTS ATTENDING INSTITU-
TIONS LOCATED OUTSIDE THE UNITED STATES.—Sec-
tion 452 (20 U.S.C. 1087b) is amended by adding at the 
end the following: 
‘‘(d) INSTITUTIONS LOCATED OUTSIDE THE UNITED 
STATES.—Loan funds for students (and parents of stu-
dents) attending institutions located outside the United 
States shall be disbursed through a financial institution 
located in the United States and designated by the Sec-
retary to serve as the agent of such institutions with re-
spect to the receipt of the disbursements of such loan 
funds and the transfer of such funds to such institutions. 
To be eligible to receive funds under this part, an other-
wise eligible institution located outside the United States 
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shall make arrangements, subject to regulations by the 
Secretary, with the agent designated by the Secretary 
under this subsection to receive funds under this part.’’. 
(b) CONFORMING AMENDMENTS.— 
(1) AMENDMENTS.—Section 102 (20 U.S.C. 
1002), as amended by section 102 of the Higher 
Education Opportunity Act (Public Law 110–315) 
and section 101 of Public Law 111–39, is amend-
ed— 
(A) by striking ‘‘part B’’ each place it ap-
pears and inserting ‘‘part D’’; 
(B) in subsection (a)(1)(C), by inserting ‘‘, 
consistent with the requirements of section 
452(d)’’ before the period at the end; and 
(C) in subsection (a)(2)(A)— 
(i) in the matter preceding clause (i), 
by striking ‘‘made, insured, or guaranteed’’ 
and inserting ‘‘made’’; and 
(ii) in clause (iii)— 
(I) in subclause (III), by striking 
‘‘only Federal Stafford’’ and all that 
follows through ‘‘section 428B’’ and 
inserting ‘‘only Federal Direct Staf-
ford 
Loans 
under 
section 
455(a)(2)(A), Federal Direct Unsub-
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sidized Stafford Loans under section 
455(a)(2)(D), 
or 
Federal 
Direct 
PLUS 
Loans 
under 
section 
455(a)(2)(B)’’; and 
(II) in subclause (V), by striking 
‘‘a Federal Stafford’’ and all that fol-
lows through ‘‘section 428B’’ and in-
serting ‘‘a Federal Direct Stafford 
Loan under section 455(a)(2)(A), a 
Federal Direct Unsubsidized Stafford 
Loan under section 455(a)(2)(D), or a 
Federal Direct PLUS Loan under 
section 455(a)(2)(B)’’. 
(2) EFFECTIVE DATE.—The amendments made 
by subparagraph (C) of paragraph (1) shall be effec-
tive as if enacted as part of section 102(a)(1) of the 
Higher Education Opportunity Act, in accordance 
with section 102(e) of such Act, as amended by sec-
tion 101(a)(2) of Public Law 111–39. 
SEC. 212. AGREEMENTS WITH INSTITUTIONS. 
Section 454 (20 U.S.C. 1087d) is amended— 
(1) in subsection (a), by striking paragraph (4) 
and redesignating the succeeding paragraphs accord-
ingly; and 
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(2) in subsection (b)(2), by striking ‘‘(5), (6), 
and (7)’’ and inserting ‘‘(5), and (6)’’. 
SEC. 213. TERMS AND CONDITIONS OF LOANS. 
(a) AMENDMENTS.—Section 455 (20 U.S.C. 1087e) 
is amended— 
(1) in subsection (a)(1), by inserting ‘‘, and 
first disbursed on June 30, 2010,’’ before ‘‘under 
sections 428’’; and 
(2) in subsection (g)— 
(A) by inserting ‘‘, including any loan 
made under part B and first disbursed before 
July 1, 2010’’ after ‘‘section 428C(a)(4)’’; and 
(B) by striking the third sentence. 
(b) EFFECTIVE DATE.—The amendment made by 
subsection (a)(1) shall apply with respect to loans first dis-
bursed under part D of title IV of the Higher Education 
Act of 1965 (20 U.S.C. 1087a et seq.) on or after July 
1, 2010. 
SEC. 214. CONTRACTS. 
Section 456 (20 U.S.C. 1087f) is amended— 
(1) in subsection (a)— 
(A) in paragraph (1)— 
(i) in the header, by striking ‘‘IN 
GENERAL’’ and inserting ‘‘AWARDING OF 
CONTRACTS’’; 
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(ii) by striking ‘‘The Secretary’’ and 
inserting the following: 
‘‘(A) IN GENERAL.—The Secretary’’; and 
(iii) by adding at the end the fol-
lowing: 
‘‘(B) AWARDING
CONTRACTS
FOR
SERV-
ICING
LOANS.—The Secretary shall, if prac-
ticable, award multiple contracts, through a 
competitive bidding process, to entities, includ-
ing eligible not-for-profit servicers, to service 
loans originated under this part. The competi-
tive bidding process shall take into account 
price, servicing capacity, and capability, and 
may take into account the capacity and capa-
bility to provide default aversion activities and 
outreach services. 
‘‘(C) JOB
RETENTION
INCENTIVE
PAY-
MENT.—(i) In a contract with an entity under 
subparagraph (B) for the servicing of loans, the 
Secretary shall provide a job retention incentive 
payment, in an amount and manner determined 
by the Secretary, if such entity agrees to give 
priority for hiring for positions created as a re-
sult of such a contract to those geographical lo-
cations located in the United States at which 
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the entity performed student loan origination or 
servicing activities under the Federal Family 
Education Loan Program as of the date of en-
actment of the Student Aid and Fiscal Respon-
sibility Act of 2009. 
‘‘(ii) In determining the allocation of loans 
to be serviced by an entity awarded such a con-
tract, the Secretary shall consider the retention 
of highly qualified employees (employed in the 
United States) of such entity a positive factor 
in determining such allocation.’’; 
(B) in paragraph (2)— 
(i) in the first sentence, by inserting 
‘‘, 
including 
eligible 
not-for-profit 
servicers,’’ after ‘‘The entities’’; 
(ii) by amending the third sentence to 
read as follows: ‘‘The entities with which 
the Secretary may enter into such con-
tracts shall include, where practicable, 
agencies with agreements with the Sec-
retary under sections 428(b) and (c) on 
the date of the enactment of the Student 
Aid and Fiscal Responsibility Act of 2009, 
nonprofit subsidiaries of such an agency, 
and eligible not-for-profit servicers, if such 
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agencies, subsidiaries, or servicers meet the 
qualifications as determined by the Sec-
retary under this subsection and if those 
agencies, subsidiaries, or servicers have 
such experience and demonstrated effec-
tiveness.’’; and 
(iii) by striking the last sentence and 
inserting the following: ‘‘In awarding con-
tracts to such agencies, subsidiaries, and 
such eligible not-for-profit servicers, the 
Secretary shall, to the extent practicable 
and consistent with the purposes of this 
part, give special consideration to such 
agencies, subsidiaries, and servicers with a 
history of high quality performance and 
demonstrated integrity in conducting oper-
ations with institutions of higher education 
and the Secretary.’’; 
(C) by redesignating paragraph (3) as 
paragraph (4), and by inserting in such para-
graph ‘‘, or of any eligible not-for-profit servicer 
to enter into an agreement for the purposes of 
this section as a member of a consortium of 
such entities’’ before the period at the end; and 
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(D) by inserting after paragraph (2) the 
following new paragraph: 
‘‘(3) SERVICING BY ELIGIBLE NOT-FOR-PROFIT 
SERVICERS.— 
‘‘(A) IN GENERAL.—Notwithstanding any 
other provision of this section, in each State 
where at least one eligible not-for-profit servicer 
has its principal place of business, the Secretary 
shall contract with each such servicer to service 
loans originated under this part on behalf of 
borrowers attending institutions located within 
such State, provided that the servicer dem-
onstrates that it meets the standards for serv-
icing Federal assets and providing quality serv-
ice and agrees to service the loans at a competi-
tive market rate, as determined by the Sec-
retary. In determining such a competitive mar-
ket rate, the Secretary shall set such rate so 
that (i) the rate is commercially reasonable in 
relation to the volume of loans being serviced by 
the eligible not-for-profit servicers, and (ii) in 
the Secretary’s judgment, the eligible not-for- 
profit servicers can reasonably provide any ad-
ditional services, such as default aversion or 
outreach, provided for in the contracts awarded 
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under this paragraph. Contracts awarded under 
this paragraph shall be subject to the same re-
quirements for quality, performance, and ac-
countability as contracts awarded under para-
graph (2) for similar activities. 
‘‘(B) 
ALLOCATIONS.—(i) 
ONE 
SERVICER.—In the case of a State with only 
one eligible not-for-profit servicer with a con-
tract described in subparagraph (A), the Sec-
retary shall, at a minimum, allocate to such 
servicer, each year and subject to such contract, 
the servicing rights for the lesser of— 
‘‘(I) the loans of 100,000 borrowers 
(including borrowers who borrowed loans 
in a prior year that were serviced by the 
servicer) attending institutions located 
within the State; or 
‘‘(II) the loans of all the borrowers at-
tending institutions located within the 
State. 
‘‘(ii) MULTIPLE SERVICERS.—In the case 
of a State with more than one eligible not-for- 
profit servicer with a contract described in sub-
paragraph (A), the Secretary shall, at a min-
imum, allocate to each such servicer, each year 
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and subject to such contract, the servicing 
rights for the lesser of— 
‘‘(I) the loans of 100,000 borrowers 
(including borrowers who borrowed loans 
in a prior year that were serviced by the 
servicer) attending institutions located 
within the State; or 
‘‘(II) an equal share of the loans of all 
borrowers attending institutions located 
within the State, except the Secretary shall 
adjust such shares as necessary to ensure 
that the loans of any single borrower re-
main with a single servicer. 
‘‘(iii) ADDITIONAL ALLOCATION.—The Sec-
retary may allocate additional servicing rights 
to an eligible not-for-profit servicer based on 
the performance of such servicer, as determined 
by the Secretary, including performance in the 
areas of customer service and default aversion. 
‘‘(C) LOAN SERVICING RETENTION.— 
‘‘(i) IN GENERAL.—In addition to any 
new loans allocated to a servicers under 
subparagraph (B)(ii), an eligible not-for- 
profit servicer shall retain the servicing of 
loans allocated to such servicer in previous 
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years, except as provided in clause (ii), or 
as otherwise provided for in accordance 
with the terms of a contract under this 
paragraph. 
‘‘(ii) 
TRANSFERS
FOR
MULTIPLE 
LOANS.—Notwithstanding clause (i) and 
the allocations required by subparagraph 
(B), the Secretary may transfer loans 
among servicers who are awarded contracts 
to service loans pursuant to this section to 
ensure that the loans of any single bor-
rower remain with a single servicer.’’; 
(2) in subsection (b)— 
(A) in the subsection header, by striking 
‘‘ORIGINATION, SERVICING, AND DATA SYS-
TEMS’’ and inserting ‘‘ORIGINATION, SERV-
ICING, DELINQUENCY PREVENTION
AND DE-
FAULT AVERSION SERVICES, DEFAULT COL-
LECTIONS, OUTREACH, AND DATA SYSTEMS’’; 
(B) in the matter preceding paragraph (1), 
by striking ‘‘The Secretary may’’ and inserting 
‘‘(1) IN GENERAL.—The Secretary may’’; 
(C) 
by 
redesignating 
paragraphs 
(1) 
through (4) as subparagraphs (A) through (D), 
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and moving such subparagraphs two ems to the 
right; 
(D) in subparagraph (C) (as redesignated 
by subparagraph (C) of this paragraph), by 
striking ‘‘and’’ after the semicolon; 
(E) by redesignating subparagraph (D) (as 
redesignated by subparagraph (C) of this para-
graph) as subparagraph (E); 
(F) by inserting after subparagraph (C) 
(as so redesignated) the following new subpara-
graph: 
‘‘(D) delinquency prevention and default 
aversion services, default collections, financial 
aid counseling, career and education counseling, 
financial literacy, guidance counselor and finan-
cial aid officer training services, and other out-
reach services; and’’; and 
(G) by adding at the end the following: 
‘‘(2) LIMITATION.—The Secretary may enter into 
contracts for the services described in paragraph (1)(D) 
with— 
‘‘(A) agencies with agreements with the Sec-
retary under subsections (b) and (c) of section 428 
on the date of enactment of the Student Aid and 
Fiscal Responsibility Act of 2009, that are providing 
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such services on such date and that meet the quali-
fications determined by the Secretary; or 
‘‘(B) nonprofit subsidiaries of agencies de-
scribed in subparagraph (A), if such subsidiaries 
were established, pursuant to State law, on or before 
January 1, 1998, and meet the qualifications deter-
mined by the Secretary.’’; and 
(3) by adding at the end the following: 
‘‘(c) REPORT TO CONGRESS.—Not later than 5 years 
after the date of the enactment of the Student Aid and 
Fiscal Responsibility Act of 2009, the Secretary shall pre-
pare and submit to the authorizing committees, a report 
evaluating the performance of all eligible not-for-profit 
servicers awarded a contract under this section to service 
loans originated under this part. Such report shall give 
consideration to— 
‘‘(1) customer satisfaction of borrowers and in-
stitutions with respect to the loan servicing provided 
by the servicers; 
‘‘(2) compliance with applicable regulations by 
the servicers; and 
‘‘(3) the effectiveness of default aversion activi-
ties, and outreach services, including financial lit-
eracy programs, (if any), provided by the servicers. 
‘‘(d) DEFINITIONS.—In this section: 
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‘‘(1) DEFAULT
AVERSION
ACTIVITIES.—The 
term ‘default aversion activities’ means activities 
that are directly related to providing collection as-
sistance to the Secretary on a delinquent loan, prior 
to the loan being legally in a default status. 
‘‘(2) ELIGIBLE NOT-FOR-PROFIT SERVICER.— 
‘‘(A) IN GENERAL.—The term ‘eligible not- 
for-profit servicer’ means an entity— 
‘‘(i) that is not owned or controlled in 
whole or in part by— 
‘‘(I) a for profit entity; or 
‘‘(II) a nonprofit entity having its 
principal place of business in another 
State; and 
‘‘(ii) that— 
‘‘(I) as of July 1, 2009— 
‘‘(aa) meets the definition of 
an eligible not-for-profit holder 
under section 435(p), except that 
such term does not include eligi-
ble lenders described in para-
graph (1)(D) of such section; and 
‘‘(bb) was performing, or 
had entered into a contract with 
a third party servicer (as such 
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term is defined in section 481(c)) 
who was performing, student 
loan servicing functions for loans 
made under part B of this title; 
‘‘(II) notwithstanding subclause 
(I), as of July 1, 2009— 
‘‘(aa) is the sole beneficial 
owner of a loan for which the 
special allowance rate is cal-
culated 
under 
section 
438(b)(2)(I)(vi)(II) because the 
loan is held by an eligible lender 
trustee that is an eligible not-for- 
profit holder as defined under 
section 435(p)(1)(D); and 
‘‘(bb) was performing, or 
had entered into a contract with 
a third party servicer (as such 
term is defined in section 481(c)) 
who was performing, student 
loan servicing functions for loans 
made under part B of this title; 
or 
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‘‘(III) is an affiliated entity of an 
eligible 
not-for-profit 
servicer 
de-
scribed in subclause (I) or (II) that— 
‘‘(aa) directly employs, or 
will directly employ (on or before 
the date the entity begins serv-
icing loans under a contract 
awarded by the Secretary pursu-
ant to subsection (a)(3)(A)), the 
majority of individuals who per-
form borrower-specific student 
loan servicing functions; and 
‘‘(bb) as of July 1, 2009, 
was performing, or had entered 
into a contract with a third party 
servicer (as such term is defined 
in section 481(c)) who was per-
forming, student loan servicing 
functions for loans made under 
part B of this title. 
‘‘(B) AFFILIATED ENTITY.—For the pur-
poses of subparagraph (A), the term ‘affiliated 
entity’— 
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‘‘(i) means an entity contracted to 
perform services for an eligible not-for- 
profit servicer that— 
‘‘(I) is a nonprofit entity or is 
wholly owned by a nonprofit entity; 
and 
‘‘(II) is not owned or controlled, 
in whole or in part, by— 
‘‘(aa) a for-profit entity; or 
‘‘(bb) an entity having its 
principal place of business in an-
other State; and 
‘‘(ii) may include an affiliated entity 
that is established by an eligible not-for- 
profit servicer after the date of enactment 
of the Student Aid and Fiscal Responsi-
bility Act of 2009, if such affiliated entity 
is otherwise described in subparagraph 
(A)(ii)(III) and clause (i) of this subpara-
graph. 
‘‘(3) OUTREACH
SERVICES.—The term ‘out-
reach services’ means programs offered to students 
and families, including programs delivered in coordi-
nation with institutions of higher education that— 
‘‘(A) encourage— 
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‘‘(i) students to attend and complete a 
degree or certification program at an insti-
tution of higher education; and 
‘‘(ii) students and families to obtain 
financial aid, but minimize the borrowing 
of education loans; and 
‘‘(B) deliver a wide range of financial lit-
eracy and counseling tools to equip students 
with the information necessary to make prudent 
decisions concerning their educational success 
and financial well-being.’’. 
SEC. 215. INTEREST RATES. 
Section 455(b)(7) (20 U.S.C. 1087e(b)(7)) is amend-
ed by adding at the end the following new subparagraph: 
‘‘(E) 
REDUCED
RATES
FOR
UNDER-
GRADUATE
FDSL
ON
AND
AFTER
JULY
1, 
2012.—Notwithstanding the preceding para-
graphs of this subsection and subparagraph (A) 
of this paragraph, for Federal Direct Stafford 
Loans made to undergraduate students for 
which the first disbursement is made on or 
after July 1, 2012, the applicable rate of inter-
est shall, during any 12-month period beginning 
on July 1 and ending on June 30, be deter-
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mined on the preceding June 1 and be equal 
to— 
‘‘(i) the bond equivalent rate of 91- 
day Treasury bills auctioned at the final 
auction held prior to such June 1; plus 
‘‘(ii) 2.5 percent, 
except that such rate shall not exceed 6.8 per-
cent.’’. 
SEC. 216. TECHNICAL ASSISTANCE TO INSTITUTIONS OF 
HIGHER EDUCATION. 
Section 458(a) (20 U.S.C. 1087h(a)) is amended— 
(1) by redesignating paragraph (5) as para-
graph (6); and 
(2) by inserting after paragraph (4) the fol-
lowing new paragraph: 
‘‘(5) TECHNICAL ASSISTANCE TO INSTITUTIONS 
OF HIGHER EDUCATION.— 
‘‘(A) PROVISION
OF
ASSISTANCE.—The 
Secretary shall provide institutions of higher 
education participating, or seeking to partici-
pate, in the loan programs under this part with 
technical assistance in establishing and admin-
istering such programs, including assistance for 
an institution of higher education during such 
institution’s transition into such programs. 
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