To amend the Higher Education Act of 1965 to reduce interest rates for student borrowers.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``College Student Relief Act of 
2007''.

SEC. 2. INTEREST RATE REDUCTIONS.

    (a) FFEL Interest Rates.--
            (1) Section 427A(l) of the Higher Education Act of 1965 (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 January 1, 2012, the applicable rate of interest 
        shall be as follows:
                    ``(A) For a loan for which the first disbursement 
                is made on or after July 1, 2006, and before July 1, 
                2007, 6.80 percent on the unpaid principal balance of 
                the loan.
                    ``(B) For a loan for which the first disbursement 
                is made on or after July 1, 2007, and before July 1, 
                2008, 6.12 percent on the unpaid principal balance of 
                the loan.
                    ``(C) For a loan for which the first disbursement 
                is made on or after July 1, 2008, and before July 1, 
                2009, 5.44 percent on the unpaid principal balance of 
                the loan.
                    ``(D) For a loan for which the first disbursement 
                is made on or after July 1, 2009, and before July 1, 
                2010, 4.76 percent on the unpaid principal balance of 
                the loan.
                    ``(E) For a loan for which the first disbursement 
                is made on or after July 1, 2010, and before July 1, 
                2011, 4.08 percent on the unpaid principal balance of 
                the loan.
                    ``(F) For a loan for which the first disbursement 
                is made on or after July 1, 2011, and before January 1, 
                2012, 3.40 percent on the unpaid principal balance of 
                the loan.''.
            (2) Special allowance cross reference.--Section 
        438(b)(2)(I)(ii)(II) of such Act 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) of the Higher 
Education Act of 1965 (20 U.S.C. 1087e(b)(7)) is amended by adding at 
the end the following new subparagraph:
                    ``(D) Reduced rates for undergraduate fdsl.--
                Notwithstanding the preceding paragraphs of this 
                subsection, for Federal Direct Stafford Loans made to 
                undergraduate students for which the first disbursement 
                is made on or after July 1, 2006, and before January 1, 
                2012, the applicable rate of interest shall be as 
                follows:
                            ``(i) For a loan for which the first 
                        disbursement is made on or after July 1, 2006, 
                        and before July 1, 2007, 6.80 percent on the 
                        unpaid principal balance of the loan.
                            ``(ii) For a loan for which the first 
                        disbursement is made on or after July 1, 2007, 
                        and before July 1, 2008, 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, 2008, 
                        and before July 1, 2009, 5.44 percent on the 
                        unpaid principal balance of the loan.
                            ``(iv) For a loan for which the first 
                        disbursement is made on or after July 1, 2009, 
                        and before July 1, 2010, 4.76 percent on the 
                        unpaid principal balance of the loan.
                            ``(v) For a loan for which the first 
                        disbursement is made on or after July 1, 2010, 
                        and before July 1, 2011, 4.08 percent on the 
                        unpaid principal balance of the loan.
                            ``(vi) For a loan for which the first 
                        disbursement is made on or after July 1, 2011, 
                        and before January 1, 2012, 3.40 percent on the 
                        unpaid principal balance of the loan.''.

SEC. 3. REDUCTION OF LENDER INSURANCE PERCENTAGE.

    (a) Amendment.--Subparagraph (G) of section 428(b)(1) of the Higher 
Education Act of 1965 (20 U.S.C. 1078(b)(1)(G)) is amended to read as 
follows:
                    ``(G) insures 95 percent of the unpaid principal 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 section 428(j) or 
                        439(q); and
                            ``(ii) notwithstanding the preceding 
                        provisions of this subparagraph, such program 
                        shall insure 100 percent of the unpaid 
                        principal amount of exempt claims as defined in 
                        subsection (c)(1)(G);''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
take effect with respect to loans made on or after July 1, 2007.

SEC. 4. GUARANTEE AGENCY COLLECTION RETENTION.

    Clause (ii) of section 428(c)(6)(A) of the Higher Education Act of 
1965 (20 U.S.C. 1078(c)(6)(A)(ii)) is amended to read as follows:
                            ``(ii) an amount equal to 24 percent of 
                        such payments for use in accordance with 
                        section 422B, except that--
                                    ``(I) beginning October 1, 2003 and 
                                ending September 30, 2007, this 
                                subparagraph shall be applied by 
                                substituting `23 percent' for `24 
                                percent';
                                    ``(II) beginning October 1, 2007 
                                and ending September 30, 2008, this 
                                subparagraph shall be applied by 
                                substituting `20 percent' for `24 
                                percent';
                                    ``(III) beginning October 1, 2008 
                                and ending September 30, 2010, this 
                                subparagraph shall be applied by 
                                substituting `18 percent' for `24 
                                percent'; and
                                    ``(IV) beginning October 1, 2010, 
                                this subparagraph shall be applied by 
                                substituting for `24 percent' a 
                                percentage determined in accordance 
                                with the regulations of the Secretary 
                                and equal to the average rate paid to 
                                collection agencies that have contracts 
                                with the Secretary.''.

SEC. 5. ELIMINATION OF EXCEPTIONAL PERFORMER STATUS FOR LENDERS.

    (a) Elimination of Status.--Part B of title IV of the Higher 
Education Act of 1965 (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 of such Act is 
further amended--
            (1) in section 428(c)(1) (20 U.S.C. 1078(c)(1))--
                    (A) by striking subparagraph (D); and
                    (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 subparagraph (B).
    (c) Effective Date.--The amendments made by subsections (a) and (b) 
shall take effect on July 1, 2007.

SEC. 6. REDUCTION OF LENDER SPECIAL ALLOWANCE PAYMENTS.

    Section 438(b)(2)(I) of the Higher Education Act of 1965 (20 U.S.C. 
1087-1(b)(2)(I)) is amended by adding at the end the following new 
clauses:
                            ``(vi) Reduction for loans disbursed on or 
                        after july 1, 2007.--With respect to a loan on 
                        which the applicable interest rate is 
                        determined under section 427A(l) and for which 
                        the first disbursement of principal is made on 
                        or after July 1, 2007, the special allowance 
                        payment computed pursuant to this subparagraph 
                        shall be computed--
                                    ``(I) by substituting `2.24 
                                percent' for `2.34 percent' each place 
                                it appears in this subparagraph;
                                    ``(II) by substituting `1.64 
                                percent' for `1.74 percent' in clause 
                                (ii); and
                                    ``(III) by substituting `2.54 
                                percent' for `2.64 percent' each place 
                                it appears in clauses (iii) and (iv).
                            ``(vii) Smaller lender exemption.--Clause 
                        (vi) shall not apply to the calculation of the 
                        special allowance payment with respect to any 
                        3-month period for any holder of eligible loans 
                        that, together with its affiliated holders, is 
                        designated by the Secretary as a small lender.
                            ``(viii) Designation of small lenders.--In 
                        determining which holders of eligible loans 
                        qualify for the exemption provided under clause 
                        (vii), 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 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 
                                consecutively ranked holders under 
                                subclause (I), starting with the lowest 
                                ranked holder, that together hold a 
                                total principal amount of such loans 
                                equal to 10 percent of the total amount 
                                calculated under subclause (II), but 
                                excluding the holder, if any, whose 
                                holdings when added cause the total 
                                holdings of the subset to both equal 
                                and then exceed such 10 percent of such 
                                total amount calculated; and
                                    ``(IV) designate as small lenders 
                                any holder identified as a member of 
                                the subset under subclause (III).''.

SEC. 7. INCREASED LOAN FEES FROM LENDERS.

    Paragraph (2) of section 438(d) of the Higher Education Act of 1965 
(20 U.S.C. 1087-1(d)(2)) is amended to read as follows:
            ``(2) Amount of loan fees.--The amount of the loan fee 
        which shall be deducted under paragraph (1), but which may not 
        be collected from the borrower, shall be equal to--
                    ``(A) 0.50 percent of the principal amount of the 
                loan with respect to any loan under this part for which 
                the first disbursement was made on or after October 1, 
                1993, and before July 1, 2007; and
                    ``(B) 1.0 percent of the principal amount of the 
                loan with respect to any loan under this part for which 
                the first disbursement was made on or after July 1, 
                2007.''.

SEC. 8. INTEREST PAYMENT REBATE FEE.

    Section 428C(f)(2) of the Higher Education Act of 1965 (20 U.S.C. 
1078-2(f)(2)) is amended--
            (1) by striking ``Special rule--'' and inserting ``Special 
        rules--(A)''; and
            (2) by adding at the end the following new subparagraph:
            ``(B) For consolidation loans based on applications 
        received on or after July 1, 2007, if 90 percent or more of the 
        total principal and accrued unpaid interest outstanding on the 
        loans held, directly or indirectly, by any holder is comprised 
        of principal and accrued unpaid interest owed on consolidation 
        loans, the rebate described in paragraph (1) for such

holder shall be equal to 1.30 percent of the principal plus accrued 
unpaid interest on such loans.''.

            Passed the House of Representatives January 17, 2007.

            Attest:

                                                 KAREN L. HAAS,

                                                                 Clerk.

Summary: College Student Relief Act of 2007 - Amends the Higher Education Act of 1965 to phase-in cuts in the interest rate charged undergraduate student borrowers under the Federal Family Education Loan (FFEL) and Direct Loan (DL) programs, thereby reducing such rate from 6.8% in July 2006 to 3.4% in July 2011.

Limits FFEL lender insurance to 95% of the unpaid balance of such loans. (Currently, 97% of a FFEL issued after June 2006 is federally-insured.)

Provides for graduated reductions in the percentage of defaulted FFEL loan collections a guaranty agency is allowed to retain until, beginning in October 2010, it is equal to the average rate paid to collection agencies that have contracts with the Secretary of Education.

Eliminates exceptional performer status for lenders, servicers, and guaranty agencies, which rewards such entities for high due diligence in FFEL collection.

Reduces special allowance payments made to FFEL lenders to compensate them for the difference between FFEL interest rates and market rates. Exempts small lenders from such reduction.

Increases the loan fee charged FFEL lenders from .5% to 1% of the principal amount of loans disbursed after June 2007. Prohibits its collection from borrowers.

Increases, after June 2007, the rebate fee charged a holder of FFEL consolidated loans, provided that at least 90% of the total principal and accrued unpaid interest outstanding on loans held by such holder are such loans.