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‘‘(2) INFORMATION FROM FEDERAL AGENCIES.—
The Commission may secure directly from any Fed-
eral department or agency such information as the
Commission considers necessary to carry out the pro-
visions of this section. Upon request of the Chairman
of the Commission, the head of such department or
agency shall furnish such information to the Commis-
sion.
‘‘(3) POSTAL SERVICES.—The Commission may
use the United States mails in the same manner and
under the same conditions as other departments and
agencies of the Federal Government.
‘‘(4) GIFTS.—The Commission may accept, use,
and dispose of gifts or donations of services or prop-
erty.
‘‘(e) COMMISSION PERSONNEL MATTERS.—
‘‘(1) COMPENSATION OF MEMBERS.—Each mem-
ber of the Commission who is not an officer or em-
ployee of the Federal Government shall be com-
pensated at a rate equal to the daily equivalent of the
annual rate of basic pay prescribed for level IV of the
Executive Schedule under section 5315 of title 5,
United States Code, for each day (including travel
time) during which such member is engaged in the
performance of the duties of the Commission. All
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members of the Commission who are officers or em-
ployees of the United States shall serve without com-
pensation in addition to that received for their serv-
ices as officers or employees of the United States.
‘‘(2) TRAVEL EXPENSES.—The members of the
Commission shall be allowed travel expenses, includ-
ing per diem in lieu of subsistence, at rates author-
ized for employees of agencies under subchapter I of
chapter 57 of title 5, United States Code, while away
from their homes or regular places of business in the
performance of services for the Commission.
‘‘(3) STAFF.—
‘‘(A) IN GENERAL.—The Chairman of the
Commission may, without regard to the civil
service laws and regulations, appoint and termi-
nate an executive director and such other addi-
tional personnel as may be necessary to enable
the Commission to perform its duties. The em-
ployment of an executive director shall be subject
to confirmation by the Commission.
‘‘(B) COMPENSATION.—The Chairman of
the Commission may fix the compensation of the
executive director and other personnel without
regard to the provisions of chapter 51 and sub-
chapter III of chapter 53 of title 5, United States
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Code, relating to classification of positions and
General Schedule pay rates, except that the rate
of pay for the executive director and other per-
sonnel may not exceed the rate payable for level
V of the Executive Schedule under section 5316
of such title.
‘‘(4) DETAIL
OF
GOVERNMENT
EMPLOYEES.—
Any Federal Government employee may be detailed to
the Commission without reimbursement, and such de-
tail shall be without interruption or loss of civil serv-
ice status or privilege.
‘‘(5) PROCUREMENT OF TEMPORARY AND INTER-
MITTENT SERVICES.—The Chairman of the Commis-
sion may procure temporary and intermittent services
under section 3109(b) of title 5, United States Code,
at rates for individuals which do not exceed the daily
equivalent of the annual rate of basic pay prescribed
for level V of the Executive Schedule under section
5316 of such title.
‘‘(6) AUTHORITY TO CONTRACT.—Subject to the
Federal Property and Administrative Services Act of
1949, the Commission is authorized to enter into con-
tracts with Federal and State agencies, private firms,
institutions and individuals for the conduct of activi-
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ties necessary to the discharge of its duties and re-
sponsibilities.
‘‘(7) SOURCE OF ADMINISTRATIVE SUPPORT.—
Financial and administrative support services (in-
cluding those related to budget and accounting, finan-
cial reporting, payroll, and personnel) shall be pro-
vided to the Commission by the General Services Ad-
ministration (or other organization the Commission
determines appropriate) for which payment shall be
made in advance or by reimbursement, from funds of
the Commission, in such amounts as may be agreed
by the Chairman of the Commission and the Admin-
istrator of General Services (or head of another orga-
nization the Commission determines appropriate).
‘‘(f) TERMINATION OF THE COMMISSION.—The Com-
mission shall terminate 18 months after the date on which
the Commission submits its report under subsection (c)(3).
‘‘(g) FUNDS FOR EXPENSES OF THE COMMISSION.—
In each fiscal year beginning with fiscal year 1994, there
shall be available to the Secretary from funds not otherwise
appropriated, funds to be obligated for the costs of activities
assisted under this section, not to exceed $2,000,000 in each
of the fiscal years 1994, 1995, 1996, 1997 and 1998.’’.
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CHAPTER 2—STUDENT LOAN SAVINGS
SEC. 12021. SECRETARY’S EQUITABLE SHARE.
Section 428(c)(6)(A)(ii) of the Act (20 U.S.C.
1078(c)(6)(A)(ii)) is amended by striking ‘‘30 percent’’ and
inserting ‘‘27 percent’’.
SEC. 12022. INTEREST RATES.
Section 427A of the Higher Education Act of 1965 (20
U.S.C. 1077a) is amended—
(1) in subsection (c)(4), by adding at the end the
following new subparagraph:
‘‘(E) Notwithstanding subparagraphs (A)
and (D) for any loan made pursuant to section
428B for which the first disbursement is made
on or after July 1, 1994—
‘‘(i) subparagraph (B) shall be applied
by substituting ‘‘3.1’’ for ‘‘3.25’’; and
‘‘(ii) the interest rate shall not exceed
9 percent.’’;
(2) by redesignating subsections (f), (g) and (h)
as subsections (g), (h) and (j), respectively;
(3) by adding after subsection (e) the following
new subsection:
‘‘(f) INTEREST RATES FOR NEW LOANS AFTER JULY
1, 1994.—
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‘‘(1) IN GENERAL.—Notwithstanding subsections
(a), (b), (d) and (e) of this section, with respect to
any loan made, insured, or guaranteed under this
part (other than a loan made pursuant to sections
428B and 428C) for which the first disbursement is
made on or after July 1, 1994, the applicable rate of
interest 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) 3.10 percent,
except that such rate shall not exceed 8.25 percent.
‘‘(2) CONSULTATION.—The Secretary shall deter-
mine the applicable rate of interest under paragraph
(1) after consultation with the Secretary of the Treas-
ury and shall publish such rate in the Federal Reg-
ister as soon as practicable after the date of deter-
mination.’’; and
(4) by inserting after subsection (h) (as redesig-
nated in paragraph (2)) the following new subsection:
‘‘(i) IN-SCHOOL
AND
GRACE
PERIOD
INTEREST
RATES.—
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‘‘(1) APPLICABLE RATE.—Notwithstanding any
other provision of this section, with respect to any
loan for which the first disbursement is made on or
after October 1, 1993, the applicable rate of interest
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 428(b)(1)(M) or 427(a)(2)(C),
shall not exceed the rate determined under paragraph
(2).
‘‘(2) METHOD OF CALCULATION.—For purposes
of paragraph (1) the rate determined under this para-
graph 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
prior to such June 1; plus
‘‘(B) 2.5 percent,
except that such rate shall not exceed 8.25 percent.’’.
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SEC. 12023. LENDER AND STUDENT LOAN FEES.
Section 438 of the Act (20 U.S.C. 1087–1) is amend-
ed—
(1) in the heading of subsection (c) by inserting
‘‘FROM STUDENTS’’ after ‘‘ORIGINATION FEES’’;
(2) in subsection (c)—
(A) in paragraph (2)—
(i) by striking ‘‘428B,’’;
(ii) by inserting ‘‘, and part D’’ after
‘‘439(o)’’; and
(iii) by striking ‘‘5 percent’’ and in-
serting ‘‘3.0 percent’’;
(B) in paragraph (6), by striking ‘‘5 per-
cent’’ and inserting ‘‘3.0 percent’’;
(3) by redesignating subsections (d) and (e) as
subsections (e) and (f), respectively; and
(4) by inserting after subsection (c) the following
new subsection:
‘‘(d) LOAN FEES FROM LENDERS.—
‘‘(1) DEDUCTION FROM INTEREST AND SPECIAL
ALLOWANCE SUBSIDIES.—Notwithstanding subsection
(b), the total amount of interest and special allowance
payable under section 428(a)(3)(A) and subsection (b)
of this section, respectively, to any holder shall be re-
duced by the Secretary by a loan fee in an amount
determined in accordance with paragraph (2) of this
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subsection. If the total amount of interest and special
allowance payable under section 428(a)(3)(A) and
subsection (b) of this section, respectively, is less than
the amount of such loan fee, then the Secretary shall
deduct such excess amount from subsequent quarters’
payments until the total amount has been deducted.
‘‘(2) AMOUNT OF LOAN FEES.—With respect to
any loan under this part (other than loans made
under sections 428B, 428C and 439(o)) for which a
note or other written evidence of the loan was sent or
delivered to the borrower for signing on or after Octo-
ber 1, 1993, the amount of the loan fee which shall
be deducted under paragraph (1) shall be equal to .50
percent of the principal amount of the loan.
‘‘(3) PLUS, CONSOLIDATION, SLMA
LOANS.—
With respect to any loans made under section 428B,
428C, and 439 on or after October 1, 1993, each eligi-
ble lender under this part shall pay to the Secretary
a loan fee of .50 percent of the principal amount of
the loan.
‘‘(4) DISTRIBUTION OF LOAN FEES.—The Sec-
retary shall deposit all fees collected pursuant to
paragraph (3) into the insurance fund established in
section 431.’’.
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SEC. 12024. OFFSET FEE.
Subsection (h) of section 439 of the Act (20 U.S.C.
1087–2(h)) is amended by adding at the end the following
new paragraph:
‘‘(6) OFFSET
FEE.—(A) The Association shall
pay to the Secretary, on a monthly basis, an offset fee
calculated on an annual basis in an amount equal to
0.30 percent of the principal amount of each loan
made, insured or guaranteed under this part which
the Association holds on or after the date of enactment
of this paragraph.
‘‘(B) The Secretary shall deposit all fees collected
pursuant to subparagraph (A) into the insurance
fund established in section 431.’’.
SEC. 12025. ELIMINATION OF TAX EXEMPT FLOOR.
Section 438(b)(2)(B) of the Act (20 U.S.C. 1087–
1(b)(2)(B)) is amended by adding at the end the following
new clause:
‘‘(iv) Notwithstanding clauses (i) and (ii), the
quarterly rate of the special allowance for holders of
loans which are financed with funds obtained by the
holder from the issuance of obligations originally is-
sued on or after October 1, 1993, the income from
which is excluded from gross income under the Inter-
nal Revenue Code of 1986, shall be 85 percent of the
quarterly rate of the special allowance established
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under subparagraph (A). Such rate shall also apply
to holders of loans which were made or purchased
with funds obtained by the holder from collections or
default reimbursements on, or interests or other in-
come pertaining to, eligible loans made or purchased
with funds described in the preceding sentence of this
subparagraph or from income on the investment of
such funds.’’.
SEC. 12026. REDUCTION IN INTEREST RATE FOR CONSOLI-
DATION LOANS; REBATE FEE.
(a) AMENDMENT.—Section 428C of the Act (20 U.S.C.
1078–3) is amended—
(1) in paragraph (1) of subsection (c)—
(A) in subparagraph (A), by striking ‘‘or
(C)’’;
(B) by amending subparagraph (B) to read
as follows:
‘‘(B) A consolidation loan made on or after
October 1, 1993, shall bear interest on the un-
paid principal balance of the loan, during any
12-month period beginning on July 1 and end-
ing on June 30, determined on the preceding
June 1, which interest shall be equal to—
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‘‘(i) the bond equivalent rate of 91-day
Treasury bills auctioned at the final auc-
tion held prior to such June 1; plus
‘‘(ii) 3.10 percent,
except that such rate shall not exceed 9 percent.’’;
and
(C) by striking subparagraph (C); and
(2) by adding at the end the following new sub-
section:
‘‘(f) INTEREST PAYMENT REBATE FEE.—
‘‘(1) IN GENERAL.—Each holder of a consolida-
tion loan under this section shall pay to the Sec-
retary, on a monthly basis and in such manner as the
Secretary shall prescribe, a rebate fee calculated on an
annual basis equal to 0.70 percent of the principal
plus accrued unpaid interest on such loan.
‘‘(2) DEPOSIT.—The Secretary shall deposit all
fees collected pursuant to subsection (a) into the in-
surance fund established in section 431.’’.
(b) ENFORCEMENT.—Subsection (d) of section 435 of
the Act (20 U.S.C. 1085(d)) is amended—
(1) in the matter preceding subparagraph (A) of
paragraph (1), by striking ‘‘(5)’’ and inserting ‘‘(6)’’;
and
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(2) by adding at the end the following new para-
graph:
‘‘(6) REBATE FEE REQUIREMENT.—To be an eli-
gible lender under this part, an eligible lender shall
pay rebate fees in accordance with section 428C(f).’’.
SEC. 12027. INSURANCE PREMIUM.
(a) INSURANCE PREMIUM.—Section 428(b)(1)(H) of
the Act (20 U.S.C. 1078(b)(1)(H)) is amended by striking
‘‘3 percent’’ and inserting ‘‘1 percent’’.
(b) REINSURANCE FEES.—Section 428(c) of the Act is
amended—
(1) by striking paragraph (9); and
(2) by redesignating paragraph (10) as para-
graph (9).
(c) EFFECTIVE DATE.—The amendments made by this
section shall be effective on July 1, 1994.
SEC. 12028. LOAN TRANSFER FEE.
Section 428(b)(2) of the Act (20 U.S.C. 1078(b)(2)) is
amended—
(1) by striking ‘‘and’’ at the end of subpara-
graph (E);
(2) by striking the period at the end of subpara-
graph (F) and inserting ‘‘; and’’; and
(3) by adding at the end thereof the following
new subparagraph:
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‘‘(G) provide that, if a lender or holder, on
or after October 1, 1993, sells, transfers, or as-
signs a loan under this part, then the transferee
shall pay to the Secretary a transfer fee in an
amount equal to 0.25 percent the principal and
accrued unpaid interest of the loan, which trans-
fer fee shall be deposited into the insurance fund
established in section 431, except that the provi-
sions of this subparagraph shall not apply to
any such sale, transfer or assignment by a lender
or holder to such lender’s or holder’s affiliate or
pursuant to—
‘‘(i) a merger or other consolidation
transaction; or
‘‘(ii) a sale or other transfer of all or
any substantial portion of such lender’s or
holder’s business or student lending busi-
ness.’’.
SEC. 12029. RISK SHARING.
(a) GUARANTY
AGENCY
REINSURANCE
PERCENT-
AGE.—Section 428(c)(1) of the Act (20 U.S.C. 1078(c)(1))
is amended—
(1) in subparagraph (A), by striking ‘‘100 per-
cent’’ and inserting ‘‘98 percent’’;
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(2) in subparagraph (B)(i), by striking ‘‘90 per-
cent’’ and inserting ‘‘88 percent’’;
(3) in subparagraph (B)(ii), by striking ‘‘80 per-
cent’’ and inserting ‘‘78 percent’’; and
(4) by adding at the end the following new sub-
paragraphs:
‘‘(E) Notwithstanding any other provisions
of this section, in the case of a loan made pursu-
ant to a lender of last resort program, the Sec-
retary shall apply the provisions of—
‘‘(i) the fourth sentence of subpara-
graph (A) by substituting ‘100 percent’ for
‘98 percent’;
‘‘(ii) subparagraph (B)(i) by substitut-
ing ‘100 percent’ for ‘88 percent’; and
‘‘(iii) subparagraph (B)(ii) by sub-
stituting ‘100 percent’ for ‘78 percent’.
‘‘(F) Notwithstanding any other provisions
of this section, in the case of an outstanding loan
transferred to a guaranty agency from another
guaranty agency pursuant to a plan approved
by the Secretary in response to the insolvency of
the latter such guarantee agency, the Secretary
shall apply the provision of—
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‘‘(i) the fourth sentence of subpara-
graph (A) by substituting ‘100 percent’ for
‘98 percent’;
‘‘(ii) subparagraph (B)(i) by substitut-
ing ‘90 percent’ for ‘88 percent’; and
‘‘(iii) subparagraph (B)(ii) by sub-
stituting ‘80 percent’ for ‘78 percent’.’’.
(b) RISK SHARING BY THE STUDENT LOAN MARKET-
ING ASSOCIATION.—Section 428(b)(1)(G) of the Act (20
U.S.C. 1078(b)(1)(G)) is amended by inserting before the
semicolon at the end thereof the following: ‘‘, except that
for loans held by the Student Loan Marketing Association
(other than loans made with advances to guaranty agencies
pursuant to section 439(p)) such percentage shall be 95 per-
cent’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to any loan made on or after October
1, 1993.
SEC. 12030. PLUS LOAN AMOUNTS AND DISBURSEMENTS.
(a) LOAN AMOUNTS.—
(1) AMENDMENT.—Section 428B(b) of the Act
(20 U.S.C. 1078–2(b)) is amended to read as follows:
‘‘(b) LIMITATIONS ON AMOUNTS OF LOANS.—
‘‘(1) ANNUAL LIMIT.—Subject to paragraph (2),
the maximum amount parents may borrow for one
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student in any academic year or its equivalent (as
defined by regulation of the Secretary) is $10,000.
‘‘(2) LIMITATION BASED ON NEED.—Any loan
under this section may be counted as part of the ex-
pected family contribution in the determination of
need under this title, but no loan may be made to any
parent under this section for any academic year in
excess of (A) the student’s estimated cost of attend-
ance, minus (B) other financial aid as certified by the
eligible institution under section 428(a)(2)(A). The
annual insurable limit on account of any student
shall not be deemed to be exceeded by a line of credit
under which actual payments to the borrower will not
be made in any year in excess of the annual limit.’’.
(2) EFFECTIVE DATE.—The amendment made by
paragraph (1) shall be effective for loans made on or
after July 1, 1994.
(b) MULTIPLE DISBURSEMENT REQUIRED.—
(1) AMENDMENT.—The matter preceding para-
graph (1) of section 428B(c) of the Act (20 U.S.C.
1078–2(c)) is amended by inserting ‘‘shall be dis-
bursed in accordance with the requirements of section
428G and’’ after ‘‘under this section’’.
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(2) 
CONFORMING
AMENDMENTS.—Section
428G(e) of the Act (20 U.S.C. 1078–7(e) is amend-
ed—
(A) by striking ‘‘PLUS, CONSOLIDATION,’’
and inserting ‘‘CONSOLIDATION’’; and
(B) by striking ‘‘section 428B or 428C’’ and
inserting ‘‘section 428C’’.
CHAPTER 3—CONFORMING AMENDMENTS
Subchapter A—Conforming Amendments to
the Higher Education Act of 1965
SEC. 12041. PRESERVING LOAN ACCESS.
(a) PURPOSE.—It is the purpose of the amendments
made by this section to provide the Secretary with flexible
authority as needed to preserve access to student and parent
loans under part B of title IV of the Act during the transi-
tion from the Federal Family Education Loan Program
under such part to the Federal Direct Student Loan Pro-
gram under part D of such title.
(b) ADVANCES TO GUARANTY AGENCIES FOR LENDER-
OF-LAST-RESORT SERVICES.—
(1) AMENDMENT.—Section 428(j) of the Act (20
U.S.C. 1078(j)) is amended by adding at the end the
following new paragraph:
‘‘(4) ADVANCES TO GUARANTY AGENCIES FOR LENDER-
OF-LAST-RESORT SERVICES DURING TRANSITION TO DIRECT
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LENDING.—(A) In order to ensure the availability of loan
capital during the transition from the Federal Family Edu-
cation Loan Program under this part to the Federal Direct
Student Loan Program under part D of this title, the Sec-
retary is authorized to provide a guaranty agency with ad-
ditional advance funds in accordance with section
422(c)(7), with such restrictions on the use of such funds
as are determined appropriate by the Secretary, in order
to ensure that the guaranty agency will make loans as the
lender-of-last-resort. Such agency shall make such loans in
accordance with this subsection and the requirements of the
Secretary.
‘‘(B) Notwithstanding any other provision in this
part, a guaranty agency serving as a lender-of-last-resort
under this paragraph shall be paid a fee, established by the
Secretary, for making such loans in lieu of interest and spe-
cial allowance subsidies, and shall be required to assign
such loans to the Secretary on demand. Upon such assign-
ment, the portion of the advance represented by the loans
assigned shall be considered repaid by such guaranty agen-
cy.’’.
(2) 
CONFORMING
AMENDMENT.—Section
422(c)(7) of the Act (20 U.S.C. 1072(c)(7)) is amend-
ed by striking all beginning with ‘‘to a guaranty
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agency’’ through the period and inserting ‘‘to a guar-
anty agency—
‘‘(A) in accordance with section 428(j), in order
to ensure that the guaranty agency shall make loans
as the lender-of-last-resort during the transition from
the Federal Family Education Loan Program under
this part to the Federal Direct Student Loan Pro-
gram under part D of this title; or
‘‘(B) if the Secretary is seeking to terminate the
guaranty agency’s agreement, or assuming the guar-
anty agency’s functions, in accordance with section
428(c)(10)(F)(v), in order to assist the agency in
meeting its immediate cash needs, ensure the uninter-
rupted payment of claims, or ensure that the guar-
anty agency shall make loans as described in sub-
paragraph (A);’’.
(c) LENDER REFERRAL SERVICES.—Section 428(e) of
the Act (20 U.S.C. 1078(e)) is amended—
(1) in paragraph (1)—
(A) by amending the paragraph heading to
read as follows: ‘‘IN
GENERAL; AGREEMENTS
WITH GUARANTY AGENCIES.—’’;
(B) by inserting the subparagraph designa-
tion ‘‘(A)’’ immediately before ‘‘The Secretary’’;
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(C) by striking ‘‘in any State’’ and insert-
ing ‘‘with which the Secretary has an agreement
under subparagraph (B)’’; and
(D) by adding at the end the following new
subparagraph:
‘‘(B)(i) The Secretary may enter into agree-
ments with guaranty agencies that meet stand-
ards established by the Secretary to provide lend-
er referral services in geographic areas specified
by the Secretary. Such guaranty agencies shall
be paid in accordance with paragraph (3) for
such services.
‘‘(ii) The Secretary shall publish in the
Federal Register whatever standards, criteria,
and procedures, consistent with the provisions of
this part and part D of this title, the Secretary
determines are reasonable and necessary to pro-
vide lender referral services under this subsection
and ensure loan access to student and parent
borrowers during the transition from the loan
programs under this part to the direct student
loan programs under part D of this title. Section
431 of the General Education Provisions Act
shall not apply to the publication of such stand-
ards, criteria, and procedures.’’;
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(2) in paragraph (2)—
(A) in the matter preceding subparagraph
(A), by striking ‘‘in a State’’ and inserting
‘‘with which the Secretary has an agreement
under paragraph (1)(B)’’;
(B) by amending subparagraph (A) to read
as follows:
‘‘(A)(i) such student is either a resident of,
or is accepted for enrollment in, or is attending,
an eligible institution located in a geographic
area for which the Secretary (I) determines that
loans are not available to all eligible students,
and (II) has entered into an agreement with a
guaranty agency under paragraph (1)(B) to pro-
vide lender referral services; and’’;
(3) in paragraph (3), by striking ‘‘The’’ and in-
serting ‘‘From funds available for costs of transition
under section 460 of the Act, the’’; and
(4) by striking paragraph (5).
(d) STUDENT LOAN MARKETING ASSOCIATION.—Sec-
tion 439(q) of the Act (20 U.S.C. 1087–2(q)) is amended—
(1) in paragraph (1)(A)—
(A) in the first sentence, by striking ‘‘the
Association or its designated agent may begin
making loans’’ and inserting ‘‘the Association or
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its designated agent shall, not later than July 1,
1994, begin making loans to such eligible bor-
rowers’’; and
(B) by striking the second sentence;
(2) in paragraph (2)(A), by striking ‘‘the Asso-
ciation or its designated agent may’’ and inserting
‘‘the Association or its designated agent shall, not
later than July 1, 1994,’’; and
(3) in paragraph (3), by striking all beginning
with ‘‘that—’’ through the period at the end of sub-
paragraph (B) and inserting ‘‘that the conditions
that caused the implementation of this subsection
have ceased to exist.’’.
SEC. 12042. GUARANTY AGENCY RESERVES.
Section 422 of the Act (20 U.S.C. 1072) is amended
by adding at the end the following new subsection:
‘‘(g) PRESERVATION
OF
GUARANTY
AGENCY
RE-
SERVES.—
‘‘(1) AUTHORITY TO RECOVER FUNDS.—Notwith-
standing any other provision of law, the reserve funds
of the guaranty agencies, and any assets purchased
with such reserve funds, regardless of who holds or
controls the reserves or assets, shall be considered to
be the property of the United States to be used in the
operation of the program authorized by this part or
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the program authorized by part D of this title. How-
ever, the Secretary may not require the return of all
reserve funds of a guaranty agency to the Secretary
unless the Secretary determines that such return is in
the best interest of the operation of the program au-
thorized by this part or the program authorized by
part D of this title, or to ensure the proper mainte-
nance of such agency’s funds or assets or the orderly
termination of the guaranty agency’s operations and
the liquidation of its assets. The reserves shall be
maintained by each guaranty agency to pay program
expenses and contingent liabilities, as authorized by
the Secretary, except that the Secretary may—
‘‘(A) direct a guaranty agency to return to
the Secretary a portion of its reserve fund which
the Secretary determines is unnecessary to pay
the program expenses and contingent liabilities
of the guaranty agency;
‘‘(B) direct the guaranty agency to require
the return, to the guaranty agency or to the Sec-
retary, of any reserve funds or assets held by, or
under the control of, any other entity, which the
Secretary determines are necessary to pay the
program expenses and contingent liabilities of
the guaranty agency, or which are required for
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the orderly termination of the guaranty agency’s
operations and the liquidation of its assets; and
‘‘(C) direct a guaranty agency, or such
agency’s officers or directors, to cease any activi-
ties involving expenditure, use or transfer of the
guaranty agency’s reserve funds or assets which
the Secretary determines is a misapplication,
misuse, or improper expenditure of such funds or
assets.
‘‘(2) TERMINATION PROVISIONS IN CONTRACTS.—
(A) To ensure that the funds and assets of the guar-
anty agency are preserved, any contract with respect
to the administration of a guaranty agency’s reserve
funds, or the administration of any assets purchased
or acquired with the reserve funds of the guaranty
agency, that is entered into or extended by the guar-
anty agency, or any other party on behalf of or with
the concurrence of the guaranty agency, after the date
of enactment of this subsection shall provide that the
contract is terminable by the Secretary upon 30 days
notice to the contracting parties if the Secretary de-
termines that such contract includes an impermissible
transfer of the reserve funds or assets, or is otherwise
inconsistent with the terms or purposes of this section.
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‘‘(B) The Secretary may direct a guaranty agen-
cy to suspend or cease activities under any contract
entered into by or on behalf of such agency after Jan-
uary 1, 1993, if the Secretary determines that the
misuse or improper expenditure of such guaranty
agency’s funds or assets or such contract provides un-
necessary or improper benefits to such agency’s offi-
cers or directors.
‘‘(3) PENALTIES.—Violation of any direction is-
sued by the Secretary under this subsection may be
subject to the penalties described in section 490 of this
Act.’’.
SEC. 12043. TERMS OF LOANS.
(a) AMENDMENT.—Section 428 of the Act (20 U.S.C.
1078) is amended—
(1) in subsection (b)(1)(D), by striking ‘‘be sub-
ject to’’ through the semicolon and inserting ‘‘be sub-
ject to income contingent repayment in accordance
with subsection (m);’’; and
(2) in subsection (m)—
(A) by amending paragraph (1) to read as
follows:
‘‘(1) AUTHORITY OF SECRETARY TO REQUIRE.—
The Secretary may require any borrower who has de-
faulted on a loan made under this part that is as-
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signed to the Secretary under subsection (c)(8) to
repay that loan under an income contingent repay-
ment plan, the terms and conditions of which shall be
established by the Secretary and the same as, or simi-
lar to, an income contingent repayment plan estab-
lished for purposes of part D of this title.’’; and
(B) by striking paragraphs (2), (3), and (4)
and inserting the following new paragraph:
‘‘(2) LOANS
FOR
WHICH
INCOME
CONTINGENT
REPAYMENT MAY BE REQUIRED.—A loan made under
this part may be required to be repaid under this sub-
section if the note or other evidence of the loan has
been assigned to the Secretary pursuant to subsection
(c)(8).’’.
(b) EFFECTIVE DATE.—The amendments made by this
section shall be effective for loans made in accordance with
section 428 for periods of instruction beginning on or after
July 1, 1993, or made on or after July 1, 1993, in the case
of loans made in accordance with section 428B or 428C
of the Act.
SEC. 12044. ASSIGNMENT OF LOANS.
Section 428(c)(8) of the Act (20 U.S.C. 1078(c)(8)) is
amended—
(1) in the first sentence, by inserting the sub-
paragraph designation ‘‘(A)’’ before ‘‘If the’’;
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(2) by striking the second and third sentences;
and
(3) by adding at the end the following new sub-
paragraph:
‘‘(B) An orderly transition from the Federal
Family Education Loan Program under this
part to the Federal Direct Student Loan Pro-
gram under part D of this title shall be deemed
to be in the Federal fiscal interest, and a guar-
anty agency shall promptly assign loans to the
Secretary under this paragraph upon the Sec-
retary’s request.’’.
SEC. 12045. TERMINATION OF GUARANTY AGENCY AGREE-
MENTS; ASSUMPTION OF GUARANTY AGENCY
FUNCTIONS BY THE SECRETARY.
Section 428(c)(9) of the Act (as redesignated by section
12027(b)(2)) (20 U.S.C. 1078(c)(10)) is amended—
(1) in subparagraph (C), by inserting ‘‘, as ap-
propriate,’’ after ‘‘the Secretary shall require’’;
(2) in subparagraph (D)—
(A) by inserting the clause designation ‘‘(i)’’
before ‘‘Each’’;
(B) by striking ‘‘Each’’ and inserting ‘‘If
the Secretary is not seeking to terminate the
guaranty agency’s agreement under subpara-
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graph (E), or assuming the guaranty agency’s
functions under subparagraph (F), a’’;
(C) by adding at the end the following new
clause:
‘‘(ii) If the Secretary is seeking to ter-
minate the guaranty agency’s agreement
under subparagraph (E), or assuming the
guaranty agency’s functions under subpara-
graph (F), a management plan described in
subparagraph (C) shall include the means
by which the Secretary and the guaranty
agency shall work together to ensure the or-
derly termination of the operations, and liq-
uidation of the assets, of the guaranty agen-
cy.’’;
(3) in subparagraph (E)—
(A) in clause (ii), by striking ‘‘or’’ after the
semicolon;
(B) in clause (iii), by striking the period
and inserting a semicolon; and
(C) by adding at the end the following new
clauses:
‘‘(iv) the Secretary determines that
such action is necessary to protect the Fed-
eral fiscal interest;
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‘‘(v) the Secretary determines that such
action is necessary to ensure the continued
availability of loans to student or parent
borrowers; or
‘‘(vi) the Secretary determines that
such action is necessary to ensure an or-
derly transition from the loan programs
under this part to the direct student loan
programs under part D of this title.’’;
(4) in subparagraph (F)—
(A) in the matter preceding clause (i), by
striking ‘‘Except as provided in subparagraph
(G), if’’ and inserting ‘‘If’’;
(B) by amending clause (v) to read as fol-
lows:
‘‘(v) provide the guaranty agency with
additional advance funds in accordance
with section 422(c)(7), with such restric-
tions on the use of such funds as is deter-
mined appropriate by the Secretary, in
order to—
‘‘(I) meet the immediate cash
needs of the guaranty agency;
‘‘(II) ensure the uninterrupted
payment of claims; or
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‘‘(III) ensure that the guaranty
agency will make loans as the lender-
of-last-resort, in accordance with sub-
section (j)(4);’’;
(C) in clause (vi)—
(i) by striking ‘‘and to avoid’’ and in-
serting ‘‘, to avoid’’;
(ii) by striking the period and insert-
ing a comma and ‘‘and to ensure an orderly
transition from the loan programs under
this part to the direct student loan pro-
grams under part D of this title.’’; and
(iii) by redesignating such clause as
clause (vii); and
(D) by inserting after clause (v) the follow-
ing new clause:
‘‘(vi) use all funds and assets of the
guaranty agency to assist in the activities
undertaken in accordance with this sub-
paragraph and take appropriate action to
require the return, to the guaranty agency
or the Secretary, of any funds or assets pro-
vided by the guaranty agency, under con-
tract or otherwise, to any person or organi-
zation; or’’;
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(5) by striking subparagraph (G);
(6) by redesignating subparagraphs (H), (I), and
(J) as subparagraphs (I), (J), and (K), respectively;
(7) by inserting after subparagraph (F) the fol-
lowing new subparagraphs:
‘‘(G) Notwithstanding any other provision
of law, if the Secretary has terminated or is seek-
ing to terminate a guaranty agency’s agreement
under subparagraph (E), or has assumed a guar-
anty agency’s functions under subparagraph
(F)—
‘‘(i) such guaranty agency may not file
for bankruptcy;
‘‘(ii) no State court may issue any
order affecting the Secretary’s actions with
respect to such guaranty agency;
‘‘(iii) any contract with respect to the
administration of a guaranty agency’s re-
serve funds, or the administration of any
assets purchased or acquired with the re-
serve funds of the guaranty agency, that is
entered into or extended by the guaranty
agency, or any other party on behalf of or
with the concurrence of the guaranty agen-
cy, after the date of enactment of this sub-
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paragraph shall provide that the contract is
terminable by the Secretary upon 30 days
notice to the contracting parties if the Sec-
retary determines that such contract in-
cludes an impermissible transfer of the re-
serve funds or assets, or is otherwise incon-
sistent with the terms or purposes of this
section; and
‘‘(iv) no provision of State law shall
apply to the actions of the Secretary in ter-
minating the operations of a guaranty
agency;
‘‘(H) Notwithstanding any other provision
of law, the Secretary’s liability for any outstand-
ing liabilities of a guaranty agency (other than
outstanding student loan guarantees under this
part), the functions of which the Secretary has
assumed, shall not exceed the fair market value
of the reserves of the guaranty agency, minus
any necessary liquidation or other administra-
tive costs.’’; and
(8) in subparagraph (K) (as redesignated by
paragraph (5)), by striking all beginning with ‘‘sys-
tem, together’’ through the period and inserting ‘‘sys-
tem and the progress of the transition from the loan
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programs under this part to the direct student loan
programs under part D of this title.’’.
SEC. 12046. CONSOLIDATION LOANS.
(a) AMENDMENT.—Section 428C of the Act (20 U.S.C.
1078–3) is amended—
(1) in subsection (a)(3)(A), by striking all begin-
ning with ‘‘(A)’’ through the period at the end of
clause (ii) and inserting ‘‘(A) For the purpose of this
section, the term ‘eligible borrower’ means a borrower
who, at the time of application for a consolidation
loan is in repayment status, or in a grace period pre-
ceding repayment, or is a delinquent or defaulted bor-
rower who will reenter repayment through loan con-
solidation.’’;
(2) in subsection (b)—
(A) in paragraph (1)—
(i) in subparagraph (A)(ii), by insert-
ing 
‘‘with 
income-sensitive 
repayment
terms’’ after ‘‘obtain a consolidation loan’’;
(ii) by redesignating subparagraph (E)
as subparagraph (F); and
(iii) by inserting after subparagraph
(D) the following new subparagraph:
‘‘(E) that the lender shall offer an income-
sensitive repayment schedule, established by the
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lender in accordance with the regulations pro-
mulgated by the Secretary, to the borrower of
any consolidation loan made by the lender on or
after July 1, 1994; and’’;
(B) in paragraph (4), by amending sub-
paragraph (C) to read as follows:
‘‘(C)(i) provides that periodic installments
of principal need not be paid, but interest shall
accrue and be paid in accordance with clause
(ii), during any period for which the borrower
would be eligible for a deferral under section
428(b)(1)(M), and that any such period shall not
be included in determining the repayment sched-
ule pursuant to subsection (c)(2) of this section;
and
‘‘(ii) provides that interest shall accrue and
be paid—
‘‘(I) by the Secretary, in the case of a
consolidation loan that consolidated only
Federal Stafford Loans for which the stu-
dent borrower received an interest subsidy
under section 428: or
‘‘(II) by the borrower, or capitalized,
in the case of a consolidation loan other