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which no payment has been made prior to such effec-
tive date.
(2) PARTIAL
DEPOSIT.—For any deposit re-
quired under section 8339(j) (3) and (5), 8339(k)(2),
or 8418 of title 5, United States Code, or section 4
(b) and (c) of the Civil Service Retirement Spouse
Equity Act of 1984 that has been partially, but not
fully, paid before the effective date of this Act, the Of-
fice shall by regulation provide for determining the
remaining portion of the deposit and for payment of
the remaining portion of the deposit by a prospective
reduction in the annuity of the employee or Member.
The reduction shall be similar to the reductions pro-
vided pursuant to the amendments made under this
section.
TITLE XI—JUDICIARY
SEC. 11001. PATENT AND TRADEMARK FEES.
Section 10101 of the Omnibus Budget Reconciliation
Act of 1990 (35 U.S.C. 41 note) is amended—
(1) in subsection (a) by striking ‘‘1995’’ and in-
serting ‘‘1998’’;
(2) in subsection (b)(2) by striking ‘‘1995’’ and
inserting ‘‘1998’’; and
(3) in subsection (c)—
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(A) by striking ‘‘through 1995’’ and insert-
ing ‘‘through 1998’’; and
(B) by adding at the end the following:
‘‘(6) $111,000,000 in fiscal year 1996.
‘‘(7) $115,000,000 in fiscal year 1997.
‘‘(8) $119,000,000 in fiscal year 1998.’’.
TITLE XII—COMMITTEE ON
LABOR AND HUMAN RESOURCES
Subtitle A—Student Loan
Provisions
SEC. 12001. SHORT TITLE; REFERENCES.
(a) SHORT TITLE.—This subtitle may be cited as the
‘‘Student Loan Reform Act of 1993’’.
(b) REFERENCES.—References in this subtitle to ‘‘the
Act’’ are references to the Higher Education Act of 1965
(20 U.S.C. 1001 et seq.).
CHAPTER 1—FEDERAL DIRECT STUDENT
LOAN PROGRAM
SEC. 12011. FEDERAL DIRECT STUDENT LOAN PROGRAM.
Part D of title IV (20 U.S.C. 1087a) is amended to
read as follows:
‘‘PART D—FEDERAL DIRECT STUDENT
LOAN PROGRAM
‘‘SEC. 451. PURPOSE; PROGRAM AUTHORIZATION.
‘‘(a) PURPOSE.—It is the purpose of this part—
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‘‘(1) to simplify the delivery of student loans to
borrowers and eliminate borrower confusion;
‘‘(2) to provide a variety of repayment plans, in-
cluding income contingent repayment, to borrowers so
that borrowers have flexibility in managing their stu-
dent loan repayment obligations, and so that those ob-
ligations do not foreclose careers in community or
public service for those borrowers;
‘‘(3) to replace, through an orderly transition,
the Federal Family Education Loan Program under
part B of this title with the Federal Direct Student
Loan Program under this part;
‘‘(4) to avoid the unnecessary cost, to taxpayers
and borrowers, and administrative complexity associ-
ated with the Federal Family Education Loan Pro-
gram under part B of this title through the use of a
direct student loan program; and
‘‘(5) to create a more streamlined student loan
program that can be managed more effectively at the
Federal level.
‘‘(b) PROGRAM AUTHORITY.—There are hereby made
available, in accordance with the provisions of this part,
such sums as may be necessary to make loans to all eligible
students in attendance at participating institutions of high-
er education selected by the Secretary (and the eligible par-
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ents of such students), to enable such students to pursue
their courses of study at such institutions during the period
beginning July 1, 1994. Such loans shall be made by par-
ticipating institutions, or consortia thereof, that have agree-
ments with the Secretary to originate loans, or by alter-
native originators designated by the Secretary to make
loans for students in attendance at participating institu-
tions (and their parents).
‘‘SEC. 452. FUNDS FOR ORIGINATION OF DIRECT STUDENT
LOANS.
‘‘(a) IN GENERAL.—The Secretary shall provide funds
for student and parent loans under this part—
‘‘(1) directly to an institution of higher edu-
cation that has an agreement with the Secretary
under section 454(a) to participate in the direct stu-
dent loan program under this part and that also has
an agreement with the Secretary under section 454(b)
to originate loans under this part; or
‘‘(2) through an alternative originator des-
ignated by the Secretary, on the basis of the need and
the eligibility of students at each participating insti-
tution, and parents of such students, for such loans.
‘‘(b) FEES FOR ORIGINATION SERVICES.—
‘‘(1) FEES
FOR
INSTITUTIONS.—The Secretary
shall pay fees to institutions of higher education or
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consortia thereof having agreements under section
454(b), in an amount established by the Secretary, to
assist in meeting the costs of loan origination. Such
fees—
‘‘(A) shall be paid by the Secretary based on
all the loans made under this part to a particu-
lar borrower in the same academic year;
‘‘(B) shall be subject to a sliding scale that
decreases the amount of such fees as the number
of borrowers increases; and
‘‘(C)(i) for academic year 1994–1995, shall
not exceed a program-wide average of $10 per
borrower for all the loans made under this part
to such borrower in the same academic year; and
‘‘(ii) for succeeding academic years, the Sec-
retary shall establish such average fee pursuant
to regulations.
‘‘(2) FEES
FOR
ALTERNATIVE
ORIGINATORS.—
The Secretary shall pay fees for loan origination serv-
ices to alternative originators of loans made under
this part in an amount established by the Secretary
in accordance with the terms of the contract described
in section 456(b) between the Secretary and each such
alternative originator.
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‘‘(c) NO ENTITLEMENT TO PARTICIPATE OR ORIGI-
NATE.—No institution of higher education shall have a
right to participate in the program authorized by this part,
originate loans, or perform any program function under
this part. Nothing in this subsection shall be construed so
as to limit the entitlement of an eligible student attending
a participating institution (or the eligible parent of such
student) to borrow under this part nor limit the borrower’s
contractual right against the United States to receive any
loan for which the student (or parent) is eligible.
‘‘(d) DELIVERY OF LOAN FUNDS.—Loan funds shall
be paid and delivered to an institution by the Secretary
prior to the beginning of the payment period established
by the Secretary in a manner that is consistent with pay-
ment and delivery of basic grants under subpart 1 of part
A.
‘‘SEC. 453. SELECTION OF INSTITUTIONS FOR PARTICIPA-
TION AND ORIGINATION.
‘‘(a) PHASE-IN OF PROGRAM.—
‘‘(1) GENERAL AUTHORITY.—The Secretary shall
enter into agreements pursuant to section 454(a) with
institutions of higher education to participate in the
direct student loan program under this part, and
agreements pursuant to section 454(b) with institu-
tions of higher education, or consortia thereof, to
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originate loans in such program, for academic years
beginning on or after July 1, 1994. Alternative origi-
nation services, through which an entity other than
the participating institution at which the student is
in attendance originates the loan, shall be provided
by the Secretary, through 1 or more contracts under
section 456(b) or such other means as the Secretary
may provide, for students attending participating in-
stitutions that do not originate direct student loans
under this part. Such agreements for the academic
year 1994–1995 shall, to the extent feasible, be entered
into not later than January 1, 1994.
‘‘(2) TRANSITION PROVISIONS.—In order to en-
sure an expeditious but orderly transition from the
loan programs under part B of this title to the direct
student loan program under this part, the Secretary
shall, in the exercise of the Secretary’s discretion, de-
termine the number of institutions with which the
Secretary whall enter into agreements under sub-
sections (a) and (b) of section 454 for any academic
year, except that the Secretary shall exercise such dis-
cretion so as to achieve the following goals:
‘‘(A) For academic year 1994–1995, loans
made under this part shall represent 5 percent of
the new student loan volume for such year.
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‘‘(B) For academic year 1995–1996, loans
made under this part shall represent 30 percent
of the new student loan volume for such year.
‘‘(C) For academic year 1996–1997, loans
made under this part shall represent 40 percent
of the new student loan volume for such year.
‘‘(D) For academic year 1997–1998 and fis-
cal year 1998, loans made under this part shall
represent 50 percent of the new student loan vol-
ume for such years.
‘‘(3) NEW
STUDENT
LOAN
VOLUME.—For the
purpose of this part, the term ‘new student loan vol-
ume’ means the estimated sum of all loans that will
be made, insured or guaranteed under this part and
part B in the year for which the determination is
made. The Secretary shall base the estimate described
in the preceding sentence on the most recent program
data available.
‘‘(4) CASH MANAGEMENT.—The requirements of
sections 3335, 6501, and 6503 of title 31, United
States Code (the Cash Management Improvement Act
of 1990) shall apply to the program under this part
only to the extent specified in a schedule established
by the Secretaries of Education and the Treasury, ex-
cept that such schedule shall provide for the applica-
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tion of all such requirements not later than July 1,
1998.
‘‘(b) SELECTION CRITERIA.—
‘‘(1) APPLICATION.—Each institution of higher
education desiring to participate in the direct student
loan program under this part shall submit an appli-
cation satisfactory to the Secretary containing such
information and assurances as the Secretary may re-
quire.
‘‘(2) SELECTION CRITERIA.—The Secretary shall
select institutions for participation in the direct stu-
dent loan program under this part, and shall enter
into agreements with such institutions under section
454(a), from among those institutions that submit the
applications described in paragraph (1), and meet
such other eligibility requirements as the Secretary
shall prescribe, by, to the extent possible—
‘‘(A)(i) categorizing such institutions ac-
cording to anticipated loan volume, length of
academic program, control of the institution,
highest degree offered, size of student enrollment,
percentage of students borrowing under part B,
geographic location, annual loan volume, default
experience and composition of the student body;
and
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‘‘(ii) beginning in academic year 1995–
1996 selecting institutions that are reasonably
representative of each of the categories described
pursuant to clause (i); and
‘‘(B) if the Secretary determines it nec-
essary to carry out the purposes of this part, se-
lecting additional institutions.
‘‘(c) SELECTION CRITERIA FOR ORIGINATION.—
‘‘(1) IN
GENERAL.—The Secretary may enter
into a supplemental agreement with an institution
(or a consortium of such institutions) that—
‘‘(A) has an agreement under subsection
454(a);
‘‘(B) desires to originate loans under this
part; and
‘‘(C) meets the criteria described in para-
graph (2).
‘‘(2) TRANSITION
SELECTION
CRITERIA.—For
academic year 1994–1995, the Secretary may approve
an institution to originate loans only if such institu-
tion—
‘‘(A) made loans under part E of this title
in academic year 1993–1994 and did not exceed
the applicable maximum default rate under sec-
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tion 462(g) for the most recent fiscal year for
which data are available;
‘‘(B) is not on the reimbursement system of
payment for any of the programs under subpart
1 or 3 of part A, part C, or part E;
‘‘(C) is not overdue on program or financial
reports or audits required under this title;
‘‘(D) is not subject to an emergency action,
or a limitation, suspension, or termination
under section 428(b)(1)(T), 432(h), or 487(c);
‘‘(E) in the opinion of the Secretary, has
not had significant deficiencies identified by a
State postsecondary review entity under subpart
1 of part H of this title;
‘‘(F) in the opinion of the Secretary, has
not had severe performance deficiencies for any
of the programs under this title, including such
deficiencies demonstrated by audits or program
reviews submitted or conducted during the 5 cal-
endar years immediately preceding the date of
application;
‘‘(G) provides an assurance that such insti-
tution has no delinquent outstanding debts to the
Federal Government, unless such debts are being
repaid under or in accordance with a repayment
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arrangement satisfactory to the Federal Govern-
ment, or the Secretary in the Secretary’s discre-
tion determines that the existence or amount of
such debts has not been finally determined by the
cognizant Federal agency; and
‘‘(H) meets such other criteria as the Sec-
retary may establish to protect the financial in-
terest of the United States and to promote the
purposes of this part.
‘‘(3) REGULATIONS GOVERNING APPROVAL AFTER
TRANSACTION.—For academic year 1995–1996 and
subsequent academic years, the Secretary shall pro-
mulgate and publish in the Federal Register regula-
tions governing the approval of institutions to origi-
nate loans under this part in accordance with section
458(a)(2).
‘‘(d) CONSORTIA.—Subject to such requirements as the
Secretary may prescribe, eligible institutions of higher edu-
cation with agreements under section 454(a) may apply to
the Secretary as consortia to originate loans under this part
for students in attendance at such institutions. Such insti-
tutions shall each be required to meet the requirements of
subsection (c) with respect to loan origination.
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‘‘SEC. 454. AGREEMENTS WITH INSTITUTIONS.
‘‘(a) PARTICIPATION AGREEMENTS.—An agreement
with any institution of higher education for participation
in the direct student loan program under this part shall—
‘‘(1) provide for the establishment and mainte-
nance of a direct student loan program at the institu-
tion under which the institution will—
‘‘(A) identify eligible students who seek stu-
dent financial assistance at such institution in
accordance with section 484;
‘‘(B) estimate the need of each such student
as required by part F of this title for an aca-
demic year, except that, any loan obtained by a
student under this part with the same terms as
loans made under section 428H (except as other-
wise provided in this part), or a loan obtained
by a parent under this part with the same terms
as loans made under section 428B (except as oth-
erwise provided in this part), or obtained under
any State-sponsored or private loan program,
may be used to offset the expected family con-
tribution of the student for that year;
‘‘(C) provide a statement that certifies the
eligibility of any student to receive a loan under
this part that is not in excess of the annual or
aggregate limit applicable to such loan, except
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that the institution may, in exceptional cir-
cumstances identified by the Secretary, refuse to
certify a statement that permits a student to re-
ceive a loan under this part, or certify a loan
amount that is less than the student’s determina-
tion of need (as determined under part F of this
title), if the reason for such action is documented
and provided in written form to such student;
‘‘(D) set forth a schedule for disbursement of
the proceeds of the loan in installments, consist-
ent with the requirements of section 428G (other
than subsection (b)(1) of such section); and
‘‘(E) provide timely and accurate informa-
tion—
‘‘(i) concerning the status of student
borrowers (and students on whose behalf
parents borrow under this part) while such
students are in attendance at the institution
and concerning any new information of
which the institution becomes aware for
such students (or their parents) after such
borrowers leave the institution, to the Sec-
retary for the servicing and collecting of
loans made under this part; and
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‘‘(ii) if the institution does not have an
agreement with the Secretary under sub-
section (b), concerning student eligibility
and need, as determined under subpara-
graphs (A) and (B), to the Secretary as
needed for the alternative origination of
loans to eligible students and parents in ac-
cordance with this part;
‘‘(2) provide assurances that the institution will
comply with requirements established by the Secretary
relating to student loan information with respect to
loans made under this part;
‘‘(3) provide that the institution accepts respon-
sibility and financial liability stemming from its fail-
ure to perform its functions pursuant to the agree-
ment;
‘‘(4) provide that students at the institution and
their parents (with respect to such students) will be
eligible to participate in the programs under part B
of this title at the discretion of the Secretary for the
period during which such institution participates in
the direct student loan program under this part;
‘‘(5) provide for the implementation of a quality
assurance system, as established by the Secretary and
developed in consultation with institutions of higher
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education, to ensure that the institution is complying
with program requirements and meeting program ob-
jectives;
‘‘(6) provide that the institution will not charge
any fees of any kind, however described, to student or
parent borrowers for origination activities or the pro-
vision of any information necessary for a student or
parent to receive a loan under this part, or any bene-
fits associated with such loan; and
‘‘(7) include such other provisions as the Sec-
retary determines are necessary to protect the inter-
ests of the United States and to promote the purposes
of this part.
‘‘(b) ORIGINATION.—An agreement with any institu-
tion of higher education, or consortia thereof, for the origi-
nation of loans under this part shall—
‘‘(1) supplement the agreement entered into in
accordance with subsection (a);
‘‘(2) include provisions established by the Sec-
retary that are similar to the participation agreement
provisions described in paragraphs (1)(E)(ii), (2),
(3), (4), (5), (6), and (7) of subsection (a), as modi-
fied to relate to the origination of loans by the insti-
tution or consortium;
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‘‘(3) provide that the institution or consortium
will originate loans to eligible students and parents
in accordance with this part; and
‘‘(4) provide that the note or evidence of obliga-
tion on the loan shall be the property of the Secretary.
‘‘(c) 
WITHDRAWAL
AND
TERMINATION
PROCE-
DURES.—The Secretary shall establish procedures by which
institutions or consortia may withdraw or be terminated
from the program under this part.
‘‘SEC. 455. TERMS AND CONDITIONS OF LOANS.
‘‘(a) IN GENERAL.—
‘‘(1) PARALLEL TERMS, CONDITIONS, BENEFITS,
AND
AMOUNTS.—Unless otherwise specified in this
part, loans made to borrowers under this part shall
have the same terms, conditions, and benefits as loans
made to borrowers under sections 428, 428B, and
428H of this title.
‘‘(2) DESIGNATION OF LOANS.—Loans made to
borrowers under this part that, except as otherwise
specified in this part, have the same terms, condi-
tions, and benefits as loans made to borrowers
under—
‘‘(A) section 428 shall be known as ‘Federal
Direct Stafford Loans’;
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‘‘(B) section 428B shall be known as ‘Fed-
eral Direct PLUS Loans’; and
‘‘(C) section 428H shall be known as ‘Fed-
eral Direct Unsubsidized Stafford Loans’.
‘‘(b) INTEREST RATE.—
‘‘(1) RATES
FOR
FDSL
AND
FDUSL.—(A) For
Federal Direct Stafford Loans and Federal Direct
Unsubsidized Stafford Loans for which the first dis-
bursement is made on or after July 1, 1994, the ap-
plicable 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—
‘‘(i) the bond equivalent rate of 91-day
Treasury bills auctioned at the final auction held
prior to such June 1; plus
‘‘(ii) 3.1 percent,
except that such rate shall not exceed 8.25 percent.
‘‘(B)(i) Notwithstanding the provisions of sub-
paragraph (A), with respect to any Federal Direct
Stafford Loan or Federal Direct Unsubsidized Staf-
ford Loan for which the first disbursement is made on
or after July 1, 1994, the applicable rate of interest
for interest which accrues—
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‘‘(I) prior to the beginning of the repayment
period of the loan; or
‘‘(II) 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 clause (ii).
‘‘(ii) For purposes of clause (i) the rate deter-
mined under this clause 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—
‘‘(I) the bond equivalent rate of 91-day
Treasury bills auctioned at the final auction
prior to such June 1; plus
‘‘(II) 2.5 percent,
except that such rate shall not exceed 8.25 percent.
‘‘(2) RATES FOR FDPLUS.—For Federal Direct
PLUS Loans for which the first disbursement is made
on or after July 1, 1994, the applicable rate of inter-
est shall, during any 12-month period beginning on
July 1 and ending on June 30, be determined on the
preceding June 1 and be equal to—
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‘‘(A) the bond equivalent rate of 52-week
Treasury bills auctioned at final auction held
prior to such June 1; plus
‘‘(B) 3.1 percent,
except that such rate shall not exceed 9 percent.
‘‘(3) PUBLICATION.—The Secretary shall deter-
mine the applicable rates of interest under this sub-
section after consultation with the Secretary of Treas-
ury and shall publish such rate in the Federal Reg-
ister as soon as practicable after the date of deter-
mination.
‘‘(c) ORIGINATION FEE.—The Secretary shall charge
the borrower of a loan made under this part an origination
fee of 4.0 percent of the principal amount of the loan.
‘‘(d) REPAYMENT PLANS.—
‘‘(1) DESIGN AND SELECTION.—Consistent with
criteria established by the Secretary, the Secretary
shall offer a borrower of a loan made under this part
a variety of plans for repayment of such loan, includ-
ing principal and interest on the loan. The borrower
shall be entitled to accelerate, without penalty, repay-
ment on the borrowers loans under this part. The bor-
rower may choose—
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‘‘(A) a standard repayment plan, with a
fixed annual repayment amount paid over a
fixed period of time;
‘‘(B) an extended repayment plan, with a
fixed annual repayment amount paid over an
extended period of time, except that the borrower
shall annually repay a minimum amount deter-
mined by the Secretary in accordance with sec-
tion 428(b)(1)(L);
‘‘(C) a graduated repayment plan, with an-
nual repayment amounts established at 2 or
more graduated levels and paid over a fixed or
extended period of time, except that the borrow-
er’s scheduled payments shall not be less than 50
percent, nor more than 150 percent, of what the
amortized payment on the amount owed would
be if the loan were repaid under the standard re-
payment plan; and
‘‘(D) an income contingent repayment plan,
with varying annual repayment amounts based
on the income of the borrower, paid over an ex-
tended period of time, not to exceed 20 years, ex-
cept that the plan described in this subpara-
graph shall not be available to the borrower of a
Federal Direct PLUS loan.
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‘‘(2) SELECTION BY SECRETARY.—If a borrower
of a loan made under this part does not select a re-
payment plan described in paragraph (1), the Sec-
retary may provide the borrower with a repayment
plan described in subparagraph (A), (B), or (C) of
paragraph (1).
‘‘(3) CHANGES IN SELECTIONS.—The borrower of
a loan made under this part may change the borrow-
er’s selection of a repayment plan under paragraph
(1), or the Secretary’s selection of a plan for the bor-
rower under paragraph (2), as the case may be, under
such terms and conditions as may be established by
the Secretary.
‘‘(4) ALTERNATIVE
REPAYMENT
PLANS.—The
Secretary may provide, on a case by case basis, an
alternative repayment plan to a borrower of a loan
made under this part who demonstrates to the satis-
faction of the Secretary that the terms and conditions
of the repayment plans available under paragraph (1)
are not adequate to accommodate the borrower’s ex-
ceptional circumstances. In designing such alternative
repayment plans, the Secretary shall ensure that such
plans do not exceed the cost to the Federal Govern-
ment, as determined on the basis of the present value
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of future payments by such borrowers, of loans made
using the plans available under paragraph (1).
‘‘(5) REPAYMENT
AFTER
DEFAULT.—The Sec-
retary may require any borrower who has defaulted
on a loan made under this part to—
‘‘(A) pay all reasonable collection costs asso-
ciated with such loan; and
‘‘(B) repay the loan pursuant to an income
contingent repayment plan.
‘‘(e) INCOME CONTINGENT REPAYMENT.—
‘‘(1) INFORMATION AND PROCEDURES.—The Sec-
retary may obtain such information as is reasonably
necessary regarding the income of a borrower (and the
borrower’s spouse, if applicable) of a loan made under
this part that is, or may be, repaid pursuant to in-
come contingent repayment, for the purpose of deter-
mining the annual repayment obligation of the bor-
rower. Return and return information (as defined in
section 6103 of the Internal Revenue Code of 1986)
may be obtained under the preceding sentence only to
the extent authorized by section 6103(l)(13) of such
Code. The Secretary shall establish procedures for de-
termining the borrower’s repayment obligation on
that loan for such year, and such other procedures as
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are necessary to implement effectively income contin-
gent repayment.
‘‘(2) REPAYMENT BASED ON ADJUSTED GROSS
INCOME.—A repayment schedule for a loan made
under this part and repaid pursuant to income con-
tingent repayment shall be based on the adjusted gross
income (as defined in section 62 of the Internal Reve-
nue Code of 1986) of the borrower or, if the borrower
is married and files a Federal income tax return
jointly with the borrower’s spouse, on the adjusted
gross income of the borrower and the borrower’s
spouse.
‘‘(3) ADDITIONAL DOCUMENTS.—A borrower who
chooses, or is required, to repay a loan made under
this part pursuant to income contingent repayment,
and for whom adjusted gross income is unavailable or
does not reasonably reflect the borrower’s current in-
come, shall provide to the Secretary other documenta-
tion of income satisfactory to the Secretary, which
documentation the Secretary may use to determine an
appropriate repayment schedule.
‘‘(4) REPAYMENT SCHEDULES.—Income contin-
gent repayment schedules shall be established by regu-
lations promulgated by the Secretary and shall re-
quire payments that vary in relation to the appro-
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priate portion of the annual income of the borrower
(and the borrower’s spouse, if applicable) as deter-
mined by the Secretary.
‘‘(5) CALCULATION OF BALANCE DUE.—The bal-
ance due on a loan made under this part that is re-
paid pursuant to income contingent repayment shall
equal the unpaid principal amount of the loan, any
accrued interest, and any fees, such as late charges,
assessed on such loan. The Secretary may promulgate
regulations limiting the amount of interest that may
be capitalized on such loan, and the timing of any
such capitalization.
‘‘(6) NOTIFICATION TO BORROWERS.—The Sec-
retary shall establish procedures under which a bor-
rower of a loan made under this part who chooses or
is required to repay such loan pursuant to income
contingent repayment is notified of the terms and
conditions of such plan, including notification of such
borrower—
‘‘(A) that the Internal Revenue Service will
disclose to the Secretary tax return information
as authorized under section 6103(l)(13) of the
Internal Revenue Code of 1986; and
‘‘(B) that if a borrower considers that spe-
cial circumstances, such as a loss of employment
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by the borrower or the borrower’s spouse, war-
rant an adjustment in the borrower’s loan repay-
ment as determined using the information de-
scribed in subparagraph (A), or the alternative
documentation described in paragraph (3), the
borrower may contact the Secretary, who shall
determine whether such adjustment is appro-
priate, in accordance with criteria established by
the Secretary.
‘‘(f) DEFERMENT.—
‘‘(1) EFFECT ON PRINCIPAL AND INTEREST.—A
borrower of a loan made under this part who meets
the requirements described in paragraph (2) shall be
eligible for a deferment, during which periodic in-
stallments of principal need not be paid, and inter-
est—
‘‘(A) shall not accrue, in the case of a Fed-
eral Direct Stafford Loan or a Federal Direct
Consolidation Loan that consolidated only Fed-
eral Direct Stafford Loans, or a combination of
such loans and Federal Stafford Loans for which
the student borrower received an interest subsidy
under section 428; or
‘‘(B) shall accrue and be capitalized or paid
by the borrower, in the case of a Federal Direct
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PLUS Loan, a Federal Direct Unsubsidized
Stafford Loan, or a Federal Direct Consolidation
Loan other than loans described in subparagraph
(A).
‘‘(2) ELIGIBILITY.—A borrower of a loan made
under this part shall be eligible for a deferment dur-
ing any period—
‘‘(A) during which the borrower—
‘‘(i) is carrying at least one-half the
normal full-time work load for the course of
study that the borrower is pursuing, as de-
termined by the eligible institution (as such
term is defined in section 435) the borrower
is attending; or
‘‘(ii) is pursuing a course of study
pursuant to a graduate fellowship program
approved by the Secretary, or pursuant to
a rehabilitation training program for indi-
viduals with disabilities approved by the
Secretary,
except that no borrower shall be eligible for a
deferment under this subparagraph, or a loan
made under this part (other than a Federal Di-
rect PLUS Loan or a Federal Direct Consolida-
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tion Loan), while serving in a medical intern-
ship or residency program;
‘‘(B) not in excess of 3 years during which
the borrower is seeking and unable to find full-
time employment;
‘‘(C) not in excess of 3 years during which
the Secretary determines, in accordance with
regulations prescribed under section 435(o), that
the borrower has experienced or will experience
an economic hardship, regardless of the reason
for such hardship.
‘‘(g) FEDERAL DIRECT CONSOLIDATION LOANS.—A
borrower of a loan made under this part may consolidate
such loan with the loans described in section 428C(a)(4)
and section 428C(d)(1)(C) only under such terms and con-
ditions as the Secretary shall establish pursuant to regula-
tions promulgated under this part. Loans made under this
subsection shall be known as ‘Federal Direct Consolidation
Loans’.
‘‘(h) BORROWER DEFENSES.—Notwithstanding any
other provision of law, the Secretary shall specify in regula-
tions (except as authorized under section 458(a)), which
acts or omissions of an institution of higher education a
borrower may assert as a defense to repayment of a loan
made under this part, except that in no event may a bor-
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rower recover from the Secretary, in any action arising
from or relating to a loan made under this part, an amount
in excess of the amount such borrower has repaid on such
loan.
‘‘(i) OPTICALLY IMAGED DOCUMENTS.—Records main-
tained in accordance with section 484A(c) may be used in
any proceeding, as permitted pursuant to section 484A(c),
with respect to a loan made under this part.
‘‘(j) NONDISCHARGEABILITY
IN BANKRUPTCY.—Not-
withstanding any other provision of law, a loan made
under this part shall not be dischargeable in any Federal
or State bankruptcy proceeding.
‘‘(k) LOAN APPLICATION AND PROMISSORY NOTE.—
The common financial reporting form required in 483(a)(1)
shall constitute the application for loans made under this
part. The Secretary shall develop, print, and distribute to
participating institutions a standard promissory note and
loan disclosure form.
‘‘(l) LOAN DISBURSEMENT.—
‘‘(1) IN GENERAL.—Payments of loan proceeds to
students under this part shall be made by crediting
the student’s account for tuition and fees, and, in the
case of institutionally owned housing, room and
board. The student may elect to have the institution
provide other such goods and services by crediting the
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student’s account. Loan proceeds that remain after
the application of the previous sentences shall be de-
livered to the borrower in accordance with section
427(a)(3).
‘‘(2) PAYMENT
PERIODS.—The Secretary shall
establish periods for the payments described in para-
graph (2) in a manner that is consistent with pay-
ment of basic grants under subpart 1 of part A.
‘‘(m) FISCAL CONTROL AND FUND ACCOUNTABILITY.—
‘‘(1) IN
GENERAL.—(A) An institution shall
maintain financial records in a manner consistent
with records maintained for other programs under
title IV.
‘‘(B) An institution may maintain loan funds
under this part in the same account as other Federal
student financial assistance.
‘‘(2) PAYMENTS; REFUNDS; ENROLLMENT
STA-
TUS.—Payments, refunds and enrollment status shall
be reconciled in a manner and schedule that is con-
sistent with the manner and schedule set forth for the
quarterly submission of a payment summary report
required of institutions participating in the program
assisted under subpart 1 of part A.
‘‘(3) TRANSACTION HISTORIES.—All transaction
histories under this part shall be maintained using
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the same system designated by the Secretary for the
provision of basic grants under subpart 1 of part A.
‘‘(n) ENTITLEMENT PROVISION.—Except as provided
in section 454(a)(1)(C), an eligible student in attendance
at a participating institution (or a parent borrower) shall
have a contractual right against the United States to receive
any loan under this part for which such student (or parent)
is eligible.
‘‘SEC. 456. CONTRACTS.
‘‘(a) CONTRACTS FOR SUPPLIES AND SERVICES.—
‘‘(1) IN GENERAL.—The Secretary may award 1
or more contracts for services and supplies described
in subsection (b). The entities with which the Sec-
retary may enter into such contracts shall include en-
tities which the Secretary determines are qualified to
provide such services and supplies and will comply
with the procedures applicable to the award of such
contracts. In the case of awarding contracts for the
servicing of loans under this part, the Secretary shall
only enter into contracts with entities that have ex-
tensive experience and a demonstrated record in loan
servicing and collection.
‘‘(2) EXEMPTION.—The Secretary may award,
through June 30, 1998, contracts under this section
without regard to the requirements in section 303 of
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the Federal Property and Administrative Services Act
of 1949, section 18 of the Office of Federal Procure-
ment Policy Act, and section 8(e) of the Small Busi-
ness Act, and the corresponding requirements of the
Federal Acquisition Regulations, if the Secretary de-
termines, on a case-by-case basis, that exemption from
such requirements is in the public interest and nec-
essary for the orderly transition from the loan pro-
grams under part B to the direct student loan pro-
gram under this part.
‘‘(3) APPLICATION OF REQUIREMENTS.—On and
after July 1, 1998, all statutory and regulatory re-
quirements described in paragraph (2) shall apply to
the award of a contract under this section.
‘‘(b) CONTRACTS FOR ORIGINATION, SERVICING, AND
DATA SYSTEMS.—The Secretary may enter into 1 or more
contracts for—
‘‘(1) the alternative origination of loans to stu-
dents attending institutions with agreements to par-
ticipate in the program under this part (or their par-
ents), if such institutions do not have agreements with
the Secretary under section 454(b);
‘‘(2) the servicing and collection of loans made
under this part;
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‘‘(3) the establishment and operation of 1 or
more data systems for the maintenance of records on
all loans made under this part;
‘‘(4) services to assist in the orderly transition
from the loan programs under part B to the direct
student loan program under this part; and
‘‘(5) such other aspects of the direct student loan
program as the Secretary determines are necessary to
ensure the successful operation of the program.
‘‘SEC. 457. PLAN FOR IRS PARTICIPATION AND OTHER RE-
PAYMENT OPTIONS.
‘‘(a) IN GENERAL.—The Secretaries of Education and
the Treasury shall, within 6 months of the date of enact-
ment of this part, submit a plan to the President that—
‘‘(1) provides for—
‘‘(A) repayment of loans made under this
part through wage withholding by the Internal
Revenue Service;
‘‘(B) procedures for the resolution of dis-
putes through the Secretary of Education; and
‘‘(C) an alternate system of fees and pen-
alties, which shall not include the seizure of real
property, by the Internal Revenue Service for the
nonpayment of amounts due; and
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‘‘(2) evaluates the feasibility of other wage-with-
holding repayment options for such loans.
‘‘(b) PRESIDENTIAL DETERMINATION.—If the Presi-
dent determines that the implementation of 1 or more re-
payment options contained in the plan described in sub-
section (a) would further the purposes of this part, the Sec-
retaries of Education and the Treasury shall be authorized
to take such actions as are reasonable and necessary to im-
plement such repayment options, including entering into
an agreement pursuant to section 6306 of the Internal Reve-
nue Code of 1986.
‘‘(c) FUNDING.—The Secretary of Education may use
such amounts as the Secretary of Education determines nec-
essary from the funds made available under section 460 to
implement the repayment options selected by the President
under subsection (b) and shall make available to the Sec-
retary of the Treasury such amounts from the funds made
available under section 460 as the Secretaries determine to
be necessary to implement the repayment options carried
out by the Internal Revenue Service.
‘‘SEC. 458. SECRETARIAL ACTIVITIES.
‘‘(a) REGULATORY ACTIVITIES.—
‘‘(1) NOTICE
IN
LIEU
OF
REGULATIONS
FOR
FIRST YEAR OF PROGRAM.—The Secretary shall pub-
lish in the Federal Register whatever standards, cri-
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teria, and procedures, consistent with the provisions
of this part, that the Secretary, in consultation with
members of the higher education community, deter-
mine are reasonable and necessary to the successful
implementation of the direct student loan program
under this part in academic year 1994–1995. Section
431 of the General Education Provisions Act shall not
apply to the publication of such standards, criteria,
and procedures.
‘‘(2) 
NEGOTIATED
RULEMAKING.—Beginning
with academic year 1995–1996, all standards, cri-
teria, procedures and regulations implementing this
part shall be subject to negotiated rulemaking, includ-
ing all such standards, criteria, procedures and regu-
lations promulgated from the date of enactment of
this part.
‘‘(b) CLOSING DATE FOR APPLICATIONS FROM INSTI-
TUTIONS.—The Secretary shall establish a date not later
than October 1, 1993, as the closing date for receiving ap-
plications from institutions of higher education desiring to
participate in the direct loan program under this part in
academic year 1994–1995.
‘‘(c) PUBLICATION OF LIST OF PARTICIPATING INSTI-
TUTIONS AND CONTROL GROUP.—Not later than January
1, 1994, the Secretary shall publish in the Federal Register
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a list of the institutions of higher education selected to par-
ticipate in the direct loan program under this part in aca-
demic year 1994–1995.
‘‘SEC. 459. REPORTS.
‘‘(a) ANNUAL REPORTS.—The Secretary shall submit
to the Congress not later than July 1, 1994, and each July
1 for the 4 succeeding years an annual report describing
the progress and status of the direct loan program.
‘‘(b) RESEARCH, DEMONSTRATION, 
AND
EVALUA-
TION.—The Secretary may use a portion of the funds made
available pursuant to section 460 for research on, or the
demonstration or evaluation of, any aspects of the program
authorized by this part, including flexible repayment plans.
‘‘(c) GAO INTERIM FINAL REPORT.—The Comptroller
General shall submit to the Congress not later than January
1, 1997, an interim final report evaluating the experience
of the Department of Education, the participating institu-
tions of higher education, students, and parents with respect
to the direct student loan program. The report shall in-
clude—
‘‘(1) the administrative costs, including costs per
loan, incurred by participating institutions of higher
education in administering the direct student loan
program;
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‘‘(2) the administrative costs, including costs per
loan, incurred by the Department of Education and
its contractors in carrying out its responsibilities, in-
cluding the costs of origination, data systems, servic-
ing, and collection;
‘‘(3) an evaluation of the effectiveness of the di-
rect student loan program in providing services to
students and parents, including loan application,
loan origination, student financial aid packaging,
tracking of student status, responsiveness to student
inquiries and processing of deferments, forbearances,
and repayments;
‘‘(4) the frequency and cost of borrower delin-
quency and default under the direct student loan pro-
gram and losses incurred by institutions of higher
education and servicers, including losses caused by
improper origination or servicing of loans;
‘‘(5) the timeliness of capital availability to in-
stitutions of higher education and of loans to students
and parents and the cost of loan capital;
‘‘(6) an evaluation of the effectiveness of the in-
come contingent repayment option;
‘‘(7) a comparison of the experience of institu-
tions of higher education, students, and parents par-
ticipating in direct student loan program with the ex-
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perience of institutions, students, and parents in the
control group described in subsection (e) with respect
to the subjects indicated in paragraphs (1) through
(6) of this subsection;
‘‘(8) an evaluation of the administrative per-
formance of the Department;
‘‘(9) an analysis of the reasons institutions se-
lected by the Secretary to participate in the direct
student loan program chose not to participate and the
reasons institutions withdrew or were terminated
from such program;
‘‘(10) an analysis of the experience of borrowers
with loans under both this part and part B and rec-
ommendations for the most effective repayment proce-
dures for such borrowers;
‘‘(11) a comparison of the cost of loan capital for
loans for the direct student loan program with the
cost of loan capital for the comparable programs in
part B of this title;
‘‘(12) an analysis, where practicable, of the expe-
rience of institutions which participate as part of a
consortia; and
‘‘(13) recommendations for modifications, con-
tinuation, expansion, suspension, or termination of
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the direct student loan program or replacement of all
or some of the programs authorized by part B.
‘‘(d) GAO FINAL REPORT.—The Comptroller General
shall submit to the Congress not later than May 1, 1998,
a final report evaluating the experience of the Department
of Education, the participating institutions of higher edu-
cation, and students with respect to the direct student loan
program. The report shall include the same matters pro-
vided for in subsection (c) of this section.
‘‘(e) CONTROL GROUP.—To assist the Comptroller
General in preparing the reports required by subsections
(c) and (d) of this section, the Secretary shall select a con-
trol group of institutions of higher education, which rep-
resent a cross-section of all institutions of higher education
participating in part B of this title and which is com-
parable to the cross-section of institutions of higher edu-
cation selected for participating in the direct student loan
program. The Secretary shall select the control groups in
the same manner that the institutions of higher education
are selected to participate in the direct student loan pro-
gram.
‘‘(f) TREATMENT OF COSTS.—In reporting with re-
spect to costs in the reports required by subsections (c) and
(d) of this section, the Comptroller General shall report sep-
arately the nonrecurrent costs such as start-up costs associ-
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ated with the direct student loan program, the administra-
tive costs incurred by institutions of higher education in
providing information to enable the Comptroller General to
prepare the reports required by subsections (c) and (d) of
this section and the normal costs of operating the direct
student loan program.
‘‘SEC. 460. FUNDS FOR ADMINISTRATIVE EXPENSES.
‘‘(a) IN GENERAL.—In each fiscal year beginning with
fiscal year 1994, there shall be available to the Secretary
of Education from funds not otherwise appropriated, funds
to be obligated for administrative costs under this part, in-
cluding the costs of the transition from the loan programs
under part B to the direct student loan program under this
part and transition support for the expenses of guaranty
agencies in servicing outstanding loans in their portfolios
and in guaranteeing new loans, not to exceed $20,000,000
in fiscal year 1994, $70,000,000 in fiscal year 1995,
$170,000,000 in fiscal year 1996, $305,000,000 in fiscal
year 1997, and $480,000,000 in fiscal year 1998. If in any
fiscal year, the Secretary determines that additional funds
for administrative expenses are needed as a result of such
transition, or the expansion of the direct student loan pro-
gram under this part, the Secretary is authorized to use
funds available under this section for any succeeding fiscal
year for such expenses, except that the total expenditures
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by the Secretary shall not exceed $1,045,000,000 in fiscal
years 1994 through 1998.
‘‘(b) AVAILABILITY.—Funds made available under sub-
section (a) shall remain available until expended.
‘‘(c) BUDGET JUSTIFICATION.—The Secretary shall in-
clude in the Department of Education’s annual budget jus-
tification to Congress a detailed description of the specific
activities for which the funds made available by this section
have been used in the prior and current years (if applica-
ble), the activities and costs planned for the budget year,
and the projection of activities and costs for each remaining
year for which administrative expenses under this section
are made available.
‘‘(d) NOTIFICATION.—In the event the Secretary finds
it necessary to use the authority provided to the Secretary
under subsection (a) to draw funds for administrative ex-
penses from a future year’s funds, the Secretary shall imme-
diately notify the Committees on Appropriations of the Sen-
ate and of the House of Representatives, and the Labor and
Human Resources Committee of the Senate and the Edu-
cation and Labor Committee of the House of Representa-
tives, of such action and explain the reasons for such action.
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‘‘SEC. 460A. NATIONAL STUDENT LOAN REFORM COMMIS-
SION.
‘‘(a) ESTABLISHMENT.—There is hereby established a
bipartisan commission to be known as the National Student
Loan Reform Commission (hereafter in this section referred
to as the ‘Commission’).
‘‘(b) MEMBERSHIP.—
‘‘(1) IN
GENERAL.—The Commission shall be
composed of 15 members appointed by the President
with the advice and consent of the Senate who are
representative of a broad combination of types of in-
stitutions of higher education, of whom at least 8
members shall be financial aid administrators.
‘‘(2) PERIOD
OF
APPOINTMENT; VACANCIES.—
Members shall be appointed for the life of the Com-
mission. Any vacancy in the Commission shall not af-
fect its powers, but shall be filled in the same manner
as the original appointment.
‘‘(3) INITIAL MEETING.—Not later than 30 days
after the date on which all members of the Commis-
sion have been appointed, the Commission shall hold
its first meeting.
‘‘(4) MEETINGS.—The Commission shall meet at
the call of the Chairman.
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‘‘(5) QUORUM.—A majority of the members of
the Commission shall constitute a quorum, but a less-
er number of members may hold hearings.
‘‘(6) CHAIRMAN AND VICE CHAIRMAN.—The Com-
mission shall select a Chairman and Vice Chairman
from among its members.
‘‘(c) DUTIES.—The Commission shall—
‘‘(1) advise the President and the Congress on
the operation of the Federal Direct Student Loan Pro-
gram and the Federal Family Education Loan Pro-
gram;
‘‘(2) evaluate and report to the Congress regard-
ing such programs on not less than an annual basis;
and
‘‘(3) not later than January 1, 1997, report to
the President and the Congress with final rec-
ommendations on the advisability of replacing the
Federal Family Education Loan Program with direct
lending.
‘‘(d) POWERS OF THE COMMISSION.—
‘‘(1) HEARINGS.—The Commission may hold
such hearings, sit and act at such times and places,
take such testimony, and receive such evidence as the
Commission considers advisable to carry out the pur-
poses of this section.