of the Workforce Investment Act of 1998 (29 U.S.C. 2801)),’’ 
after ‘‘recent unemployment of a family member,’’. 
(c) EFFECTIVE DATE.—The amendments made by this 
section shall be effective on July 1, 2009. 
SEC. 104. DEFINITIONS. 
(a) TOTAL INCOME.—Section 480(a)(2) (20 U.S.C. 
1087vv(a)(2)) is amended— 
(1) by striking ‘‘and no portion’’ and inserting 
‘‘no portion’’; and 
(2) by inserting ‘‘and no distribution from any 
qualified education benefit described in subsection 
(f)(3) that is not subject to Federal income tax,’’ after 
‘‘1986,’’. 
(b) UNTAXED INCOME AND BENEFITS.—Section 480(b) 
(20 U.S.C. 1087vv(b)) is amended to read as follows: 
‘‘(b) UNTAXED INCOME AND BENEFITS.— 
‘‘(1) The term ‘untaxed income and benefits’ 
means— 
‘‘(A) child support received; 
‘‘(B) workman’s compensation; 
‘‘(C) veteran’s benefits such as death pen-
sion, dependency, and indemnity compensation, 
but excluding veterans’ education benefits as de-
fined in subsection (c); 
‘‘(D) interest on tax-free bonds; 
VerDate Aug 31 2005 
02:37 Jun 26, 2007
Jkt 059200
PO 00000
Frm 00018
Fmt 6652
Sfmt 6203
E:\BILLS\H2669.RH
H2669
bajohnson on PROD1PC77 with BILLS
‘‘(E) housing, food, and other allowances 
(excluding rent subsidies for low-income housing) 
for military, clergy, and others (including cash 
payments and cash value of benefits); 
‘‘(F) cash support or any money paid on 
the student‘s behalf, except, for dependent stu-
dents, funds provided by the student’s parents; 
‘‘(G) untaxed portion of pensions; 
‘‘(H) payments to individual retirement ac-
counts and Keogh accounts excluded from income 
for Federal income tax purposes; and 
‘‘(I) any other untaxed income and benefits, 
such as Black Lung Benefits, Refugee Assistance, 
railroad retirement benefits, or Job Training 
Partnership Act noneducational benefits or bene-
fits received through participation in employ-
ment and training activities under title I of the 
Workforce Investment Act of 1998 (29 U.S.C. 
2801 et seq.). 
‘‘(2) The term ‘untaxed income and benefits’ 
shall not include the amount of additional child tax 
credit claimed for Federal income tax purposes.’’. 
(c) ASSETS.—Section 480(f) (20 U.S.C. 1087vv(f)) is 
amended— 
VerDate Aug 31 2005 
02:37 Jun 26, 2007
Jkt 059200
PO 00000
Frm 00019
Fmt 6652
Sfmt 6203
E:\BILLS\H2669.RH
H2669
bajohnson on PROD1PC77 with BILLS
(1) in paragraph (3), by striking ‘‘shall not be 
considered an asset of a student for purposes of sec-
tion 475’’ and inserting ‘‘shall be considered an asset 
of the parent for purposes of section 475’’; 
(2) by redesignating paragraphs (4) and (5) as 
paragraphs (5) and (6), respectively; and 
(3) by inserting after paragraph (3) the fol-
lowing: 
‘‘(4) A qualified education benefit shall be con-
sidered an asset of the student for purposes of section 
476 and 477.’’. 
(d) 
OTHER
FINANCIAL
ASSISTANCE.—Section 
480(j)(2) (20 U.S.C. 1087vv(j)(2)) is amended by inserting 
‘‘, or a distribution that is not includable in gross income 
under section 529 of such Code, under another prepaid tui-
tion plan offered by a State, or under a Coverdell education 
savings account under section 530 of such Code,’’ after 
‘‘1986’’. 
(e) EFFECTIVE DATE.—The amendments made by this 
section shall be effective on July 1, 2009. 
PART B—MAKING STUDENT LOANS MORE 
AFFORDABLE 
SEC. 111. INTEREST RATE REDUCTIONS. 
(a) FFEL INTEREST RATES.— 
VerDate Aug 31 2005 
02:37 Jun 26, 2007
Jkt 059200
PO 00000
Frm 00020
Fmt 6652
Sfmt 6203
E:\BILLS\H2669.RH
H2669
bajohnson on PROD1PC77 with BILLS
(1) Section 427A(l) (20 U.S.C. 1077a(l)) is 
amended by adding at the end the following new 
paragraph: 
‘‘(4) REDUCED
RATES
FOR
UNDERGRADUATE 
SUBSIDIZED LOANS.—Notwithstanding subsection (h) 
and paragraph (1) of this subsection, with respect to 
any loan to an undergraduate student made, insured, 
or guaranteed under this part (other than a loan 
made pursuant to section 428B, 428C, or 428H) for 
which the first disbursement is made on or after July 
1, 2006, and before July 1, 2013, the applicable rate 
of interest shall be as follows: 
‘‘(A) For a loan for which the first disburse-
ment is made on or after July 1, 2006, and be-
fore July 1, 2008, 6.80 percent on the unpaid 
principal balance of the loan. 
‘‘(B) For a loan for which the first disburse-
ment is made on or after July 1, 2008, and be-
fore July 1, 2009, 6.12 percent on the unpaid 
principal balance of the loan. 
‘‘(C) For a loan for which the first disburse-
ment is made on or after July 1, 2009, and be-
fore July 1, 2010, 5.44 percent on the unpaid 
principal balance of the loan. 
VerDate Aug 31 2005 
02:37 Jun 26, 2007
Jkt 059200
PO 00000
Frm 00021
Fmt 6652
Sfmt 6203
E:\BILLS\H2669.RH
H2669
bajohnson on PROD1PC77 with BILLS
‘‘(D) For a loan for which the first dis-
bursement is made on or after July 1, 2010, and 
before July 1, 2011, 4.76 percent on the unpaid 
principal balance of the loan. 
‘‘(E) For a loan for which the first disburse-
ment is made on or after July 1, 2011, and be-
fore July 1, 2012, 4.08 percent on the unpaid 
principal balance of the loan. 
‘‘(F) For a loan for which the first disburse-
ment is made on or after July 1, 2012 and before 
July 1, 2013, 3.40 percent on the unpaid prin-
cipal balance of the loan.’’. 
(2) SPECIAL ALLOWANCE CROSS REFERENCE.— 
Section 
438(b)(2)(I)(ii)(II) 
(20 
U.S.C. 
1086(b)(2)(I)(ii)(II)) is amended by striking ‘‘section 
427A(l)(1)’’ and inserting ‘‘section 427A(l)(1) or 
(l)(4)’’. 
(b) 
DIRECT
LOAN
INTEREST
RATES.—Section 
455(b)(7) (20 U.S.C. 1087e(b)(7)) is amended by adding 
at the end the following new subparagraph: 
‘‘(D) 
REDUCED
RATES
FOR
UNDER-
GRADUATE
FDSL.—Notwithstanding the pre-
ceding paragraphs of this subsection, for Federal 
Direct Stafford Loans made to undergraduate 
students for which the first disbursement is made 
VerDate Aug 31 2005 
02:37 Jun 26, 2007
Jkt 059200
PO 00000
Frm 00022
Fmt 6652
Sfmt 6203
E:\BILLS\H2669.RH
H2669
bajohnson on PROD1PC77 with BILLS
on or after July 1, 2006, and before July 1, 
2013, the applicable rate of interest shall be as 
follows: 
‘‘(i) For a loan for which the first dis-
bursement is made on or after July 1, 2006, 
and before July 1, 2008, 6.80 percent on the 
unpaid principal balance of the loan. 
‘‘(ii) For a loan for which the first dis-
bursement is made on or after July 1, 2008, 
and before July 1, 2009, 6.12 percent on the 
unpaid principal balance of the loan. 
‘‘(iii) For a loan for which the first 
disbursement is made on or after July 1, 
2009, and before July 1, 2010, 5.44 percent 
on the unpaid principal balance of the loan. 
‘‘(iv) For a loan for which the first dis-
bursement is made on or after July 1, 2010, 
and before July 1, 2011, 4.76 percent on the 
unpaid principal balance of the loan. 
‘‘(v) For a loan for which the first dis-
bursement is made on or after July 1, 2011, 
and before July 1, 2012, 4.08 percent on the 
unpaid principal balance of the loan. 
‘‘(vi) For a loan for which the first dis-
bursement is made on or after July 1, 2012, 
VerDate Aug 31 2005 
02:37 Jun 26, 2007
Jkt 059200
PO 00000
Frm 00023
Fmt 6652
Sfmt 6203
E:\BILLS\H2669.RH
H2669
bajohnson on PROD1PC77 with BILLS
and before July 1, 2013, 3.40 percent on the 
unpaid principal balance of the loan.’’. 
SEC. 112. INCREASES IN LOAN LIMITS. 
(a) INCREASE IN THIRD AND SUBSEQUENT YEAR LIM-
ITS.— 
(1) 
FEDERAL
INSURANCE
LIMITS.—Section 
425(a)(1)(A)(iii) (20 U.S.C. 1075(a)(1)(A)(iii)) is 
amended 
by 
striking 
‘‘$5,500’’ 
and 
inserting 
‘‘$7,500’’. 
(2) 
GUARANTY
LIMITS.—Section 
428(b)(1)(A)(iii)(I) (20 U.S.C. 1078(b)(1)(A)(iii)(I)) 
is amended by striking ‘‘$5,500’’ and inserting 
‘‘$7,500’’. 
(b) INCREASE IN AGGREGATE LIMITS.— 
(1) 
FEDERAL
INSURANCE
LIMITS.—Section 
425(a)(2)(A) (20 U.S.C. 1075(a)(2)(A)(i)) is amend-
ed— 
(A) in clause (i), by striking ‘‘$23,000’’ and 
inserting ‘‘$30,500’’; and 
(B) in clause (ii), by striking ‘‘$65,500’’ 
and inserting ‘‘$73,000’’. 
(2) GUARANTY
LIMITS.—Section 428(b)(1)(B) 
(20 U.S.C. 1078(b)(1)(A)(iii)(I)) is amended— 
(A) in clause (i), by striking ‘‘$23,000’’ and 
inserting ‘‘$30,500’’; and 
VerDate Aug 31 2005 
02:37 Jun 26, 2007
Jkt 059200
PO 00000
Frm 00024
Fmt 6652
Sfmt 6203
E:\BILLS\H2669.RH
H2669
bajohnson on PROD1PC77 with BILLS
(B) in clause (ii), by striking ‘‘$65,500’’ 
and inserting ‘‘$73,000’’. 
(c) EFFECTIVE DATE.—The amendments made by this 
section shall be effective July 1, 2008. 
SEC. 113. REDUCTION OF LENDER SPECIAL ALLOWANCE 
PAYMENTS. 
Section 438(b)(2)(I) (20 U.S.C. 1087–1(b)(2)(I)) is 
amended— 
(1) in clause (i), by striking ‘‘clauses (ii), (iii), 
and (iv)’’ and inserting ‘‘the following clauses’’; 
(2) in clause (v)(III), by striking ‘‘clauses (ii), 
(iii), and (iv)’’ and inserting ‘‘clauses (ii), (iii), (iv), 
and (vi)’’; and 
(3) by adding at the end the following new 
clause: 
‘‘(vi) REDUCTION FOR LOANS ON OR 
AFTER OCTOBER 1, 2007.—With respect to a 
loan on which the applicable interest rate is 
determined under section 427A(l), the per-
centage to be added under clause (i)(III) in 
computing the special allowance payment 
pursuant to this subparagraph shall be the 
following: 
‘‘(I) IN
GENERAL
AND
PLUS 
LOANS.—1.79 percent in the case of a 
VerDate Aug 31 2005 
02:37 Jun 26, 2007
Jkt 059200
PO 00000
Frm 00025
Fmt 6652
Sfmt 6203
E:\BILLS\H2669.RH
H2669
bajohnson on PROD1PC77 with BILLS
loan described in clause (i) or (iii) for 
which the first disbursement of prin-
cipal is made on or after October 1, 
2007. 
‘‘(II) IN SCHOOL AND GRACE PE-
RIOD.—1.19 percent in the case of a 
loan described in clause (ii)(II) for 
which the first disbursement of prin-
cipal is made on or after October 1, 
2007. 
‘‘(III) CONSOLIDATION
LOANS.— 
2.09 percent in the case of a loan de-
scribed in clause (iv) for which the 
first disbursement of principal is made 
on or after October 1, 2007.’’. 
SEC. 114. ELIMINATION OF EXCEPTIONAL PERFORMER STA-
TUS FOR LENDERS. 
(a) ELIMINATION OF STATUS.—Part B of title IV (20 
U.S.C. 1071 et seq.) is amended by striking section 428I 
(20 U.S.C. 1078–9). 
(b) CONFORMING AMENDMENTS.—Part B of title IV is 
further amended— 
(1) in section 428(c)(1) (20 U.S.C. 1078(c)(1))— 
(A) by striking subparagraph (D); and 
VerDate Aug 31 2005 
02:37 Jun 26, 2007
Jkt 059200
PO 00000
Frm 00026
Fmt 6652
Sfmt 6203
E:\BILLS\H2669.RH
H2669
bajohnson on PROD1PC77 with BILLS
(B) by redesignating subparagraphs (E) 
through (H) as subparagraphs (D) through (G), 
respectively; and 
(2) in section 438(b)(5) (20 U.S.C. 1087– 
1(b)(5)), by striking the matter following subpara-
graph (B). 
SEC. 115. REDUCTION OF LENDER INSURANCE PERCENT-
AGE. 
(a) AMENDMENT.—Subparagraph (G) of section 
428(b)(1) (20 U.S.C. 1078(b)(1)(G)) is amended to read as 
follows: 
‘‘(G) insures 95 percent of the unpaid prin-
cipal of loans insured under the program, except 
that— 
‘‘(i) such program shall insure 100 
percent of the unpaid principal of loans 
made with funds advanced pursuant to sec-
tion 428(j) or 439(q); and 
‘‘(ii) notwithstanding the preceding 
provisions of this subparagraph, such pro-
gram shall insure 100 percent of the unpaid 
principal amount of exempt claims as de-
fined in subsection (c)(1)(G);’’. 
VerDate Aug 31 2005 
02:37 Jun 26, 2007
Jkt 059200
PO 00000
Frm 00027
Fmt 6652
Sfmt 6203
E:\BILLS\H2669.RH
H2669
bajohnson on PROD1PC77 with BILLS
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall take effect with respect to loans made on 
or after October 1, 2007. 
SEC. 116. GUARANTY AGENCY COLLECTION RETENTION. 
Clause (ii) of section 428(c)(6)(A) (20 U.S.C. 
1078(c)(6)(A)(ii)) is amended to read as follows: 
‘‘(ii) an amount equal to 23 percent of 
such payments for use in accordance with 
section 422B, except that beginning October 
1, 2007, this subparagraph shall be applied 
by substituting ‘16 percent’ for ‘23 per-
cent’.’’. 
SEC. 117. UNIT COSTS FOR ACCOUNT MAINTENANCE FEES. 
Section 458(b) (20 U.S.C. 1087h(b)) is amended— 
(1) by striking ‘‘Account’’ and inserting the fol-
lowing: 
‘‘(1) FOR FISCAL YEARS 2006 AND 2007.—For fis-
cal years 2006 and 2007, account’’; and 
(2) by adding at the end the following new para-
graph: 
‘‘(2) FOR FISCAL YEAR 2008 AND SUCCEEDING 
FISCAL YEARS.— 
‘‘(A) UNIT
COST
BASIS.—For fiscal year 
2008 and each succeeding fiscal year, the Sec-
retary shall calculate the account maintenance 
VerDate Aug 31 2005 
02:37 Jun 26, 2007
Jkt 059200
PO 00000
Frm 00028
Fmt 6652
Sfmt 6203
E:\BILLS\H2669.RH
H2669
bajohnson on PROD1PC77 with BILLS
fees payable to guaranty agencies under sub-
section (a)(3), on a per-loan cost basis in accord-
ance with subparagraph (B) of this paragraph. 
‘‘(B) DETERMINATIONS.—To determine the 
amount that shall be paid under subsection 
(a)(3) per outstanding loan guaranteed by a 
guaranty agency for fiscal year 2008 and suc-
ceeding fiscal years, the Secretary shall— 
‘‘(i) establish the per-loan cost basis 
amount by— 
‘‘(I) dividing the total amount of 
account maintenance fees paid under 
subsection (a)(3) in fiscal year 2006, 
by 
‘‘(II) the number of loans under 
part B that were outstanding in that 
fiscal year; and 
‘‘(ii) determine on October 1 of fiscal 
year 2008 and each subsequent fiscal year, 
and pay to each guaranty agency, an 
amount equal to the product of the number 
of loans under part B that are outstanding 
on October 1 of that fiscal year and insured 
by that guaranty agency, multiplied by— 
VerDate Aug 31 2005 
02:37 Jun 26, 2007
Jkt 059200
PO 00000
Frm 00029
Fmt 6652
Sfmt 6203
E:\BILLS\H2669.RH
H2669
bajohnson on PROD1PC77 with BILLS
‘‘(I) the amount determined under 
clause (i); increased by 
‘‘(II) a percentage equal to the 
percentage increase in the GDP price 
index (as determined by the Bureau of 
Labor Statistics of the Department of 
Labor) between the calendar quarter 
ending on June 30, 2006, and the cal-
endar quarter ending on the June 30 
preceding such October 1 of such fiscal 
year.’’. 
SEC. 118. INCREASED LOAN FEES FROM LENDERS. 
Paragraph (2) of section 438(d) (20 U.S.C. 1087– 
1(d)(2)) is amended to read as follows: 
‘‘(2) AMOUNT OF LOAN FEES.— 
‘‘(A) AMOUNT.—The amount of the loan fee 
which shall be deducted under paragraph (1), 
but which may not be collected from the bor-
rower, shall be equal to— 
‘‘(i) except as provided in clauses (ii) 
and (iii), 0.50 percent of the principal 
amount of the loan with respect to any loan 
under this part for which the first disburse-
ment was made on or after October 1, 1993; 
VerDate Aug 31 2005 
02:37 Jun 26, 2007
Jkt 059200
PO 00000
Frm 00030
Fmt 6652
Sfmt 6203
E:\BILLS\H2669.RH
H2669
bajohnson on PROD1PC77 with BILLS
‘‘(ii) 1.0 percent of the principal 
amount of the loan with respect to any loan 
under this part for which the first disburse-
ment was made on or after October 1, 2007, 
that is held by any holder other than a 
holder described in subclause (I) or (II) of 
clause (iii); and 
‘‘(iii) 0.0 percent of the principal 
amount of the loan with respect to any loan 
under this part for which the first disburse-
ment was made on or after October 1, 2007, 
that is held by— 
‘‘(I) any holder that, together with 
its affiliated holders, is designated by 
the Secretary as a small lender under 
subparagraph (B); or 
‘‘(II) any holder that— 
‘‘(aa) is a unit of State or 
local government or a nonprofit 
private entity; and 
‘‘(bb) is not owned in whole 
or in part by, or controlled or op-
erated by, or otherwise affiliated 
with, a for-profit entity. 
VerDate Aug 31 2005 
02:37 Jun 26, 2007
Jkt 059200
PO 00000
Frm 00031
Fmt 6652
Sfmt 6203
E:\BILLS\H2669.RH
H2669
bajohnson on PROD1PC77 with BILLS
‘‘(B) DESIGNATION OF SMALL LENDERS.— 
In determining which holders of eligible loans 
qualify as small lenders for purposes of subpara-
graph (A)(iii)(I), the Secretary shall, using the 
most recently available data with respect to the 
total principal amount of eligible loans held by 
holders— 
‘‘(i) rank all holders of eligible loans 
(combined with their affiliated holders) in 
descending order by total principal amount 
of eligible loans held; 
‘‘(ii) calculate the total principal 
amount of eligible loans held by all holders; 
and 
‘‘(iii) identify the subset of consecu-
tively ranked holders under clause (i), start-
ing with the lowest ranked holder, that to-
gether hold a total principal amount of such 
loans equal to 15 percent of the total 
amount calculated under clause (ii), but ex-
cluding the holder, if any, whose holdings 
when added cause the total holdings of the 
subset to equal but not exceed such 15 per-
cent of such total amount calculated; and 
VerDate Aug 31 2005 
02:37 Jun 26, 2007
Jkt 059200
PO 00000
Frm 00032
Fmt 6652
Sfmt 6203
E:\BILLS\H2669.RH
H2669
bajohnson on PROD1PC77 with BILLS
‘‘(iv) designate as small lenders any 
holder identified as a member of the subset 
under clause (iii).’’. 
SEC. 119. STUDENT LOAN INFORMATION. 
Section 428(k) (20 U.S.C. 1078(k)) is amended by 
adding at the end the following new paragraph: 
‘‘(4) STUDENT LOAN INFORMATION.— 
‘‘(A) Notwithstanding any other provision 
of law or regulation, a lender, secondary market, 
holder, or guaranty agency shall provide, free of 
charge and in a timely and effective manner, 
any student loan information maintained by 
that entity that is requested by an institution of 
higher education or any third-party servicer (as 
defined in section 481(c)) working on behalf of 
that institution to prevent student loan defaults. 
‘‘(B) An institution and any third-party 
servicer obtaining access to information under 
subparagraph (A) shall safeguard that informa-
tion in order to prevent potential abuses of that 
information, including identity theft. 
‘‘(C) Any third party servicer that obtains 
information under this paragraph— 
‘‘(i) shall only use the information in 
a manner directly related to the default pre-
VerDate Aug 31 2005 
02:37 Jun 26, 2007
Jkt 059200
PO 00000
Frm 00033
Fmt 6652
Sfmt 6203
E:\BILLS\H2669.RH
H2669
bajohnson on PROD1PC77 with BILLS
vention work the servicer is performing on 
behalf of the institution of higher education; 
and 
‘‘(ii) shall be subject to any regulations 
established by the Secretary pursuant to sec-
tion 432 concerning the misuse of such in-
formation, including any penalties for such 
misuse.’’. 
SEC. 120. MARKET-BASED DETERMINATION OF LENDER RE-
TURNS. 
(a) JOINT PLANNING STUDY TO SELECT AUCTION 
MECHANISMS FOR TESTING.— 
(1) PLANNING STUDY.—The Secretaries of Edu-
cation and Treasury jointly shall conduct a planning 
study, in consultation with the Office of Management 
and Budget, the Congressional Budget Office, the Gen-
eral Accounting Office, and other individuals and en-
tities the Secretaries determines appropriate, to— 
(A) examine the matters described in para-
graph (2) in order to determine which market- 
based mechanisms for determining lender returns 
on loans made, insured, or guaranteed under 
part B of title IV of the Higher Education Act 
of 1965 (20 U.S.C. 1071 et seq.) shall be tested 
VerDate Aug 31 2005 
02:37 Jun 26, 2007
Jkt 059200
PO 00000
Frm 00034
Fmt 6652
Sfmt 6203
E:\BILLS\H2669.RH
H2669
bajohnson on PROD1PC77 with BILLS
under the pilot programs described in subsection 
(c); and 
(B) determine what related administrative 
and other changes will be required in order to 
ensure that high-quality services are provided 
under a successful implementation of market- 
based determinations of lender returns for all 
loans made, insured, or guaranteed under such 
part. 
(2) MATTERS EXAMINED.—The planning study 
under this subsection shall examine— 
(A) whether it is most appropriate to auc-
tion existing loans under part B of title IV of 
such Act, to auction the rights to originate loans 
under such part, or whether the sale of securities 
backed by federally-owned student loan assets 
originated by banks acting as agents of the Fed-
eral Government would provide the most efficient 
market-based alternative; 
(B) matters related to efficient financial or-
ganization of any auctions or sales of loans 
under such part, including how loans and origi-
nation rights are bundled, the capital structure 
of any securitization plan, and issues related to 
servicing; and 
VerDate Aug 31 2005 
02:37 Jun 26, 2007
Jkt 059200
PO 00000
Frm 00035
Fmt 6652
Sfmt 6203
E:\BILLS\H2669.RH
H2669
bajohnson on PROD1PC77 with BILLS
(C) how to ensure that statutory, regu-
latory, and administrative requirements do not 
impede separate management and ownership of 
loans or assets backed by loans under part B of 
title IV of such Act. 
(3) MECHANISMS.—In determining which mar-
ket-based mechanisms are the most promising models 
to test the pilot programs under subsection (b), the 
planning study shall take into account whether a par-
ticular market-based mechanism will— 
(A) ensure loan availability under part B 
of title IV of such Act to all eligible students at 
all participating institutions; 
(B) minimize administrative complexity for 
borrowers, institutions, lenders, and the Federal 
Government; and 
(C) reduce Federal costs if used on a pro-
gram-wide basis. 
(4) REPORT.—A report on the results of the 
planning study, together with a plan for implementa-
tion of one or more pilot programs using promising 
market-based approaches for determining lender re-
turns, shall be transmitted to Congress not later than 
6 months after the date of enactment of this Act. 
(b) PILOT PROGRAMS TO BE TESTED.— 
VerDate Aug 31 2005 
02:37 Jun 26, 2007
Jkt 059200
PO 00000
Frm 00036
Fmt 6652
Sfmt 6203
E:\BILLS\H2669.RH
H2669
bajohnson on PROD1PC77 with BILLS
(1) AUTHORIZATION.— 
(A) IN
GENERAL.—Notwithstanding any 
other provision of law, after the report described 
in subsection (a)(4) is transmitted to Congress, 
the Secretary of Education shall, in consultation 
with the Secretary of the Treasury, begin prep-
arations necessary to carry out pilot programs 
meeting the requirements of this subsection in 
accordance with the implementation plan in-
cluded in such report. 
(B) IMPLEMENTATION
DATE.—The Sec-
retary of Education shall commence implementa-
tion of the pilot programs under this subsection 
not earlier than July 1, 2008. 
(C) DURATION
AND
LOAN
VOLUME.—The 
pilot programs under this subsection shall be not 
more than two academic years in duration, and 
the Secretary of Education may use the pilot 
programs to determining the lender returns for 
not more than— 
(i) 10 percent of the annual loan vol-
ume under part B of title IV of the Higher 
Education Act of 1965 during the first year 
of the pilot programs under this subsection; 
and 
VerDate Aug 31 2005 
02:37 Jun 26, 2007
Jkt 059200
PO 00000
Frm 00037
Fmt 6652
Sfmt 6203
E:\BILLS\H2669.RH
H2669
bajohnson on PROD1PC77 with BILLS
(ii) 20 percent of the annual loan vol-
ume under part B of title IV of such Act 
during the second year of the pilot pro-
grams under this subsection. 
(2) VOLUNTARY PARTICIPATION.— 
(A) Participation in any auction-based 
pilot program under this subsection shall be vol-
untary for eligible institutions and eligible lend-
ers participating under part B of title IV of such 
Act prior to July 1, 2006. 
(B) All savings to the United States Treas-
ury generated by such auctions shall be distrib-
uted to institutions participating under this sub-
section on a basis proportionate to loan volume 
under such part for supplemental, need-based fi-
nancial aid, except that an institution that is 
operating as an eligible lender under section 
435(d)(2) of such Act shall not be eligible for any 
such distribution. 
(3) INDEPENDENT
EVALUATION.—The Govern-
ment Accountability Office shall conduct an inde-
pendent evaluation of the pilot programs under this 
subsection, which evaluation shall be completed, and 
the results of such submitted to the Secretary of Edu-
cation, the Secretary of the Treasury, and Congress, 
VerDate Aug 31 2005 
02:37 Jun 26, 2007
Jkt 059200
PO 00000
Frm 00038
Fmt 6652
Sfmt 6203
E:\BILLS\H2669.RH
H2669
bajohnson on PROD1PC77 with BILLS
not later than 120 days after the termination of such 
pilot programs. 
(c) 
PROGRAM-WIDE
IMPLEMENTATION.—Notwith-
standing any other provision of part B of title IV of the 
Higher Education Act of 1965, for the first academic year 
beginning not less than 120 days after the independent eval-
uation described in subsection (b)(3) has been transmitted 
to Congress, and succeeding academic years, the Secretary 
of Education is authorized to implement for all loans made 
under such part, a program-wide, market-based system to 
determine returns to all lenders as the Secretary of Edu-
cation determines appropriate, provided that— 
(1) the Secretary of Education, in consultation 
with the Secretary of the Treasury, has certified that 
the auction-based system that the Secretary of Edu-
cation intends to implement on a program-wide basis 
would— 
(A) ensure loan availability under such 
part to all eligible students at all participating 
institutions; 
(B) minimize administrative complexity for 
borrowers, institutions, lenders, and the Federal 
Government, including the enhancement of the 
modernization of the student financial aid sys-
tem; and 
VerDate Aug 31 2005 
02:37 Jun 26, 2007
Jkt 059200
PO 00000
Frm 00039
Fmt 6652
Sfmt 6203
E:\BILLS\H2669.RH
H2669
bajohnson on PROD1PC77 with BILLS
(C) reduce Federal costs when used on a 
program-wide basis; and 
(2) the Secretary of Education has notified Con-
gress of the Secretary’s intent to implement a pro-
gram-wide auction based system, and has provided a 
description of the structure of such auction-based sys-
tem, at least 120 days before implementing such sys-
tem. 
(d) CONSULTATION.— 
(1) IN
GENERAL.—As part of the planning 
study, pilot programs, and program-wide implemen-
tation phases described in this section, the Secretary 
of Education shall consult with representatives of in-
vestment banks, ratings agencies, lenders, institutions 
of higher education, and students, as well as individ-
uals or other entities with pertinent technical exper-
tise. The Secretary of Education shall engage in such 
consultations using such methods as, and to the extent 
that, the Secretary determines appropriate to the time 
constraints associated with the study, programs, and 
implementation. 
(2) SERVICES OF OTHER FEDERAL AGENCIES.— 
In carrying out the planning study and pilot pro-
grams described in this section, the Secretary of Edu-
cation may use, on a reimbursable basis, the services 
VerDate Aug 31 2005 
02:37 Jun 26, 2007
Jkt 059200
PO 00000
Frm 00040
Fmt 6652
Sfmt 6203
E:\BILLS\H2669.RH
H2669
bajohnson on PROD1PC77 with BILLS
(including procurement authorities and services), 
equipment, personnel, and facilities of other agencies 
and instrumentalities of the Federal Government. 
PART C—REWARDING SERVICE IN REPAYMENT 
SEC. 131. LOAN FORGIVENESS FOR SERVICE IN AREAS OF 
NATIONAL NEED. 
Section 428K (20 U.S.C. 1078–11) is amended to read 
as follows: 
‘‘SEC. 428K. LOAN FORGIVENESS FOR SERVICE IN AREAS OF 
NATIONAL NEED. 
‘‘(a) PROGRAM AUTHORIZED.— 
‘‘(1) LOAN
FORGIVENESS
AUTHORIZED.—The 
Secretary shall forgive, in accordance with this sec-
tion, the student loan obligation of a borrower in the 
amount specified in subsection (c), for any new bor-
rower after the date of enactment of the College Cost 
Reduction Act of 2007, who— 
‘‘(A) is employed full-time in an area of na-
tional need described in subsection (b); and 
‘‘(B) is not in default on a loan for which 
the borrower seeks forgiveness. 
‘‘(2) METHOD OF LOAN FORGIVENESS.—To pro-
vide loan forgiveness under paragraph (1), the Sec-
retary is authorized to carry out a program— 
VerDate Aug 31 2005 
02:37 Jun 26, 2007
Jkt 059200
PO 00000
Frm 00041
Fmt 6652
Sfmt 6203
E:\BILLS\H2669.RH
H2669
bajohnson on PROD1PC77 with BILLS