SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Student Loan Fairness Consolidation 
Act of 2003''.

SEC. 2. AUTHORITY TO REFINANCE EXISTING CONSOLIDATION LOANS.

    (a) FFEL Consolidation Loans.--Section 428C(a)(3)(B) of the Higher 
Education Act of 1965 (20 U.S.C. 1078-3(a)(3)(B)) is amended by adding 
at the end the following new clause:
            ``(ii) Notwithstanding clause (i) of this subparagraph, a 
        borrower of a consolidation loan on which the interest is 
        established at a fixed rate under section 427A, 428C(c), or 455 
        may obtain a subsequent consolidation loan for the purposes of 
        refinancing such earlier consolidation loan at a variable rate 
        of interest under section 427A(m) or 455(b)(8), except that the 
        authority to refinance a consolidation loan under this clause 
        shall not apply to a consolidation loan that was used 
        exclusively to repay loans made under section 428B or Federal 
        Direct PLUS Loans (or both such loans).''.
    (b) Parallel Terms for Federal Direct Consolidation Loans.--Section 
455(a) of the Higher Education Act of 1965 (20 U.S.C. 1087e(a)) is 
amended--
            (1) in paragraph (1), by inserting ``428C,'' after 
        ``428B,''; and
            (2) in paragraph (2)--
                    (A) by striking ``and'' at the end of subparagraph 
                (B);
                    (B) by redesignating subparagraph (C) as 
                subparagraph (D); and
                    (C) by inserting after subparagraph (B) the 
                following:
                    ``(C) section 428C shall be known as `Federal 
                Direct Consolidation Loans'.''.

SEC. 3. AVAILABILITY OF VARIABLE INTEREST RATE CONSOLIDATION LOANS.

    (a) FFEL Consolidation Loans.--Section 427A of the Higher Education 
Act of 1965 (20 U.S.C. 1077a) is amended--
            (1) by redesignating subsection (m) and (n) as subsections 
        (n) and (o), respectively; and
            (2) by inserting after subsection (l) the following:
    ``(m) Variable Interest Rate Consolidation Loans.--
            ``(1) Variable rate.--Notwithstanding subsections (h), (k), 
        and (l), with respect to any loan made pursuant to section 428C 
        for which the first disbursement is made on or after the date 
        of enactment of the Student Loan Fairness Consolidation 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) Recovery of excess interest.--If, with respect to a 
        consolidation loan on which the applicable interest rate is 
        determined under this subsection, the applicable interest rate 
        for any 3-month period exceeds the special allowance rate 
        applicable to such loan under section 438(b)(2)(I) for such 
        period, then an adjustment shall be made--
                    ``(A) by calculating the excess interest in the 
                amount computed under paragraph (3) of this subsection; 
                and
                    ``(B) by crediting the excess interest to the 
                Government.
            ``(3) Amount of adjustment.--The amount of any adjustment 
        of interest on a loan to be made under this subsection for any 
        quarter shall be equal to--
                    ``(A) the applicable interest rate minus the 
                special allowance rate determined under section 
                438(a)(2)(I); multiplied by
                    ``(B) the average daily principal balance of the 
                loan (not including unearned interest added to 
                principal) during such calendar quarter; divided by
                    ``(C) four.
            ``(4) Inapplicability to consolidation loans used to repay 
        plus loans.--The provisions of paragraph (1) of this subsection 
        shall not apply to a consolidation loan that was used 
        exclusively to repay loans made under section 428B or Federal 
        Direct PLUS Loans (or both such loans).''.
    (b) Federal Direct Consolidation Loans.--Section 455(b) of the 
Higher Education Act of 1965 (20 U.S.C. 1087e(b)) is amended--
            (1) by redesignating paragraphs (8) and (9) as paragraphs 
        (9) and (10), respectively; and
            (2) by inserting after paragraph (7) the following:
            ``(8) Variable interest rate consolidation loans.--
                    ``(A) Variable rate.--Notwithstanding the preceding 
                paragraphs of this subsection, with respect to any 
                Federal Direct Consolidation Loan for which the first 
                disbursement is made on or after the date of enactment 
                of the Student Loan Fairness Consolidation 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--
                            ``(i) the bond equivalent rate of 91-day 
                        Treasury bills auctioned at the final auction 
                        held prior to such June 1; plus
                            ``(ii) 2.3 percent,
                except that such rate shall not exceed 8.25 percent.
                    ``(B) Inapplicability to consolidation loans used 
                to repay plus loans.--The provisions of this subsection 
                shall not apply to a consolidation loan that was used 
                exclusively to repay loans made under section 428B or 
                Federal Direct PLUS Loans (or both such loans).''.
    (c) Conforming Amendment.--Section 438(b)(2)(I) is amended by 
striking ``section 427A(k)(4) or (l)(3)'' each place it appears in 
clauses (iv) and (vi) and inserting ``section 427A(k)(4), (l)(3), or 
(m)''.
Output: Student Loan Fairness Consolidation Act of 2003 - Amends the Higher Education Act of 1965 to revise student aid requirements for Federal consolidation loans under the Federal Family Education Loan program, and establish parallel requirements under a Federal Direct Consolidation Loan program, to: (1) allow borrowers to refinance existing consolidation loans; and (2) make available variable interest rate consolidation loans. Excludes consolidation loans for repaying Federal PLUS loans (taken out by parents of students) from such provisions for refinancing and variable interest rates.