A bill to amend title IV of the Higher Education Act of 1965 to provide for variable interest rates on student loans.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Higher Education Loan Plan Act of 
2003''.

SEC. 2. INTEREST RATES ON STUDENT LOANS.

    (a) Interest Rate Changes.--Section 427A of the Higher Education 
Act of 1965 (20 U.S.C. 1077a) is amended by striking subsections (k) 
and (l) and inserting the following:
    ``(k) Interest Rates for New Loans on or After October 1, 1998, and 
Before the Date of Enactment of the Higher Education Loan Plan Act of 
2003.--
            ``(1) In general.--Notwithstanding subsection (h) and 
        subject to paragraph (2), with respect to any loan made, 
        insured, or guaranteed under this part (other than a loan made 
        pursuant to section 428B or 428C) for which the first 
        disbursement is made on or after October 1, 1998, and before 
        the date of enactment of the Higher Education Loan Plan Act of 
        2003, 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) 2.3 percent,
        except that such rate shall not exceed 8.25 percent.
            ``(2) In school and grace period rules.--Notwithstanding 
        subsection (h), with respect to any loan under this part (other 
        than a loan made pursuant to section 428B or 428C) for which 
        the first disbursement is made on or after October 1, 1998, and 
        before the date of enactment of the Higher Education Loan Plan 
        Act of 2003, the applicable rate of interest for interest which 
        accrues--
                    ``(A) prior to the beginning of the repayment 
                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 described in section 
                427(a)(2)(C) or 428(b)(1)(M),
        shall be determined under paragraph (1) by substituting `1.7 
        percent' for `2.3 percent'.
            ``(3) PLUS loans.--Notwithstanding subsection (h), with 
        respect to any loan under section 428B for which the first 
        disbursement is made on or after October 1, 1998, and before 
        the date of enactment of the Higher Education Loan Plan Act of 
        2003, the applicable rate of interest shall be determined under 
        paragraph (1)--
                    ``(A) by substituting `3.1 percent' for `2.3 
                percent'; and
                    ``(B) by substituting `9.0 percent' for `8.25 
                percent'.
            ``(4) Consolidation loans.--With respect to any 
        consolidation loan under section 428C for which the application 
        is received by an eligible lender on or after October 1, 1998, 
        and before the date of enactment of the Higher Education Loan 
        Plan Act of 2003, the applicable rate of interest shall be at 
        an annual rate on the unpaid principal balance of the loan that 
        is equal to the lesser of--
                    ``(A) the weighted average of the interest rates on 
                the loans consolidated, rounded to the nearest higher 
                one-eighth of 1 percent; or
                    ``(B) 8.25 percent.
            ``(5) Consultation.--The Secretary shall determine the 
        applicable rate of interest under this subsection after 
        consultation with the Secretary of the Treasury and shall 
        publish such rate in the Federal Register as soon as 
        practicable after the date of determination.
    ``(l) Interest Rates for New Loans on or After the Date of 
Enactment of the Higher Education Loan Plan Act of 2003.--
            ``(1) In general.--Notwithstanding subsection (h) and 
        subject to paragraph (2), with respect to any loan made, 
        insured, or guaranteed under this part (other than a loan made 
        pursuant to section 428B or 428C) for which the first 
        disbursement is made on or after the date of enactment of the 
        Higher Education Loan Plan Act of 2003, 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) 2.3 percent,
        except that such rate shall not exceed 7.75 percent.
            ``(2) In school and grace period rules.--Notwithstanding 
        subsection (h), with respect to any loan under this part (other 
        than a loan made pursuant to section 428B or 428C) for which 
        the first disbursement is made on or after the date of 
        enactment of the Higher Education Loan Plan Act of 2003, the 
        applicable rate of interest for interest which accrues--
                    ``(A) prior to the beginning of the repayment 
                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 described in section 
                427(a)(2)(C) or 428(b)(1)(M),
        shall be determined under paragraph (1) by substituting `1.7 
        percent' for `2.3 percent'.
            ``(3) PLUS loans.--Notwithstanding subsection (h), with 
        respect to any loan under section 428B for which the first 
        disbursement is made on or after the date of enactment of the 
        Higher Education Loan Plan Act of 2003, the applicable rate of 
        interest shall be determined under paragraph (1)--
                    ``(A) by substituting `3.1 percent' for `2.3 
                percent'; and
                    ``(B) by substituting `8.5 percent' for `7.75 
                percent'.
            ``(4) Consolidation loans.--With respect to any 
        consolidation loan under section 428C for which the application 
        is received by an eligible lender on or after the date of 
        enactment of the Higher Education Loan Plan Act of 2003, 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) 2.3 percent,
        except that such rate shall not exceed 7.75 percent.''.
    (b) Special Allowance Conforming Changes.--Section 438(b)(2) of the 
Higher Education Act of 1965 (20 U.S.C. 1087-1(b)(2)) is amended by 
striking ``July 1, 2006'' each place it appears in clauses (ii), (v), 
and (vii) of subparagraph (I), including in the headings of such 
clauses, and inserting ``the date of enactment of the Higher Education 
Loan Plan Act of 2003''.
    (c) Additional Conforming Amendments.--Section 428C(c)(1) of the 
Higher Education Act of 1965 (20 U.S.C. 1078-3(c)(1)) is amended by 
striking ``July 1, 2006'' each place it appears and inserting ``the 
date of enactment of the Higher Education Loan Plan Act of 2003''.

Summary: Higher Education Loan Plan Act of 2003 - Amends the Higher Education Act of 1965 to provide for variable interest rates on student (Stafford) loans, consolidation loans (which currently have fixed rates), and parent (PLUS) loans.

Revises formulas for determining such variable interest rates for student loans, consolidation, loans, and parent loans based on the bond equivalent rate for 91-day Treasury bills and specified additional percentages.

Caps at specified levels interest rates for new loans during an interim period from October 1, 1998, up to the enactment of this Act. Caps the interest rates for new loans on or after such enactment date for: (1) student loans and consolidation loans at 7.75 percent; and (2) parent loans at 8.5 percent.