[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1435 Introduced in House (IH)]







105th CONGRESS
  1st Session
                                H. R. 1435

To amend the Higher Education Act of 1965 to improve the access to and 
       affordability of higher education, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             April 24, 1997

  Mr. Clay (for himself, Mr. Miller of California, Mr. Martinez, Mr. 
   Owens, Mr. Payne, Mr. Andrews, Mr. Scott, Mr. Romero-Barcelo, Mr. 
   Fattah, Mr. Hinojosa, Mrs. McCarthy of New York, Mr. Tierney, Ms. 
Sanchez, Mr. Ford, Mr. Kucinich, Mr. Lewis of Georgia, Ms. Waters, Mr. 
 Hilliard, Ms. Eddie Bernice Johnson of Texas, Mr. Rangel, Mr. Stokes, 
    Mr. Bishop, Ms. Brown of Florida, Ms. Carson, Mrs. Clayton, Mr. 
Clyburn, Mr. Cummings, Mr. Dixon, Mr. Flake, Ms. McKinney, Mrs. Meek of 
 Florida, Ms. Norton, Mr. Rush, Mr. Towns, Mr. Wynn, Mr. Serrano, Mr. 
 Davis of Illinois, and Ms. Christian-Green) introduced the following 
    bill; which was referred to the Committee on Education and the 
                               Workforce

_______________________________________________________________________

                                 A BILL


 
To amend the Higher Education Act of 1965 to improve the access to and 
       affordability of higher education, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE; REFERENCES; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``College Access and 
Affordability Act of 1997''.
    (b) References.--References in this Act to ``the Act'' shall refer 
to the Higher Education Act of 1965 (20 U.S.C. 1001 et seq.).
    (c) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; references.
Sec. 2. Pell grant extension.
Sec. 3. Loan forgiveness.
Sec. 4. Extension of exemption.
Sec. 5. Cost-of-living increases for independent students.
Sec. 6. Management and recovery of reserves.
Sec. 7. Repayment terms.
Sec. 8. Interest rates.
Sec. 9. Lender and holder risk sharing.
Sec. 10. Fees and insurance premiums.
Sec. 11. Functions of guaranty agencies.
Sec. 12. Repeal of State share of default costs.
Sec. 13. Consolidation loans.
Sec. 14. Contracts with other entities.
Sec. 15. Eligible lender.
Sec. 16. Special allowance.
Sec. 17. Student loan marketing association offset fee.
Sec. 18. Direct loan transition fee.
Sec. 19. Funds for administrative expenses.
Sec. 20. Extension of student aid programs.
Sec. 21. Effective dates.

SEC. 2. PELL GRANT EXTENSION.

    Section 401 of the Act (20 U.S.C. 1070a) is amended--
            (1) by striking paragraph (2)(A) of subsection (b) and 
        inserting the following:
    ``(2)(A) The amount of the basic grant for a student eligible under 
this part shall be--
            ``(i) $3,300 for academic year 1998-1999,
            ``(ii) $3,600 for academic year 1999-2000,
            ``(iii) $3,900 for academic year 2000-2001,
            ``(iv) $4,200 for academic year 2001-2002, and
            ``(v) $4,500 for academic year 2002-2003,
less an amount equal to the amount determined to be the expected family 
contribution with respect to that student for that year.'';
            (2) in paragraph (7) of such subsection, by striking ``the 
        appropriate Appropriation Act for this subpart for such year'' 
        and inserting ``subsection (g)'';
            (3) by striking paragraph (3) of such subsection and 
        redesignating paragraphs (4) through (8) of such subsection as 
        paragraphs (3) through (7), respectively;
            (4) by striking subsections (g) and (h) and inserting the 
        following:
    ``(g) Availability of Funds.--(1) Each fiscal year, there shall be 
available to the Secretary of Education from funds not otherwise 
appropriated, funds to be obligated for the payment of grants under 
this part in the amounts determined under this section, not to exceed 
(from such funds not otherwise appropriated) $8,581,000,000 in fiscal 
year 1998, $9,882,000,000 in fiscal year 1999, $11,022,000,000 in 
fiscal year 2000, $12,183,000,000 in fiscal year 2001, and 
$13,288,000,000 in fiscal year 2002.
    ``(2) If the amount made available under paragraph (1) in a fiscal 
year is not sufficient to pay all grants under this subpart in the 
amounts determined under this section, the Secretary may make such 
reductions in awards as may be necessary, by either a fixed or variable 
percentage reduction or by a fixed dollar reduction.''; and
            (5) by redesignating subsection (i) as subsection (h).

SEC. 3. LOAN FORGIVENESS.

    (a) Guaranteed Loans.--Section 437 of the Act is amended--
            (1) in the section heading, by striking out the period at 
        the end thereof and inserting in lieu thereof a semicolon and 
        ``loan forgiveness for teaching'';
            (2) by amending the heading for subsection (c) to read as 
        follows: ``Discharge Related to School Closure or False 
        Certification.--''; and
            (3) by adding at the end thereof the following new 
        subsection:
    ``(e) Cancellation of Loans for Teaching.--(1) The Secretary shall 
discharge the liability of a borrower of a loan made under section 428, 
428H, or 428C (to the extent that a loan made under section 428C repays 
a loan made under section 428 or 428H) on or after the date of 
enactment of the College Access and Affordability Act of 1997, to 
students who have not previously borrowed under any of such sections, 
by repaying the amount owed on the loan, to the extent specified in 
paragraph (3), for service described in paragraph (2).
    ``(2) A loan shall be discharged under paragraph (1) for service by 
the borrower as a full-time teacher for 1 or more academic years in a 
public elementary or secondary school--
            ``(A)(i) in the school district of a local educational 
        agency that is eligible in that academic year for assistance 
        under title I of the Elementary and Secondary Education Act of 
        1965; and
            ``(ii) that, for that academic year, has been determined by 
        the Secretary to be a school in which the enrollment of 
        children counted under section 1124(c) of that Act exceeds 30 
        percent of the total enrollment of that school; or
            ``(B) as a full-time teacher of mathematics, science, 
        foreign languages, bilingual education, or any other field of 
        expertise where the State educational agency determines to the 
        satisfaction of the Secretary that there is a shortage of 
        qualified teachers.
    ``(3)(A) Loans shall be discharged under subparagraph (A) at the 
rate of--
            ``(i) 15 percent for the first or second complete academic 
        year of service as described in subparagraph (B);
            ``(ii) 20 percent for the third or fourth complete year of 
        such service; and
            ``(iii) 30 percent for the fifth complete year of such 
        service.
    ``(B) If a portion of a loan is discharged under subparagraph (A) 
for any year, the entire amount of interest on that loan that accrues 
for that year shall also be discharged by the Secretary.
    ``(C) Nothing in this section shall be construed to authorize 
refunding of any repayment of a loan.
    ``(4) The amount of a loan, and interest on a loan, that is 
canceled under this subsection shall not be considered income for 
purposes of the Internal Revenue Code of 1986.
    ``(5) No borrower may, for the same volunteer service, receive a 
benefit under both this subsection and subtitle D of title I of the 
National and Community Service Act of 1990 (42 U.S.C. 12571 et seq.).
    ``(6) The Secretary shall specify in regulations the manner in 
which lenders shall be reimbursed for loans made under this part, or 
portions thereof, that are discharged under this subsection.
    ``(7) If the list of schools in which a teacher may perform service 
pursuant to paragraph (2) is not available before May 1 of any year, 
the Secretary may use the list for the year preceding the year for 
which the determination is made to make such service determination.
    ``(8) Any teacher who performs service in a school which--
            ``(A) meets the requirements of paragraph (2) in any year 
        during such service; and
            ``(B) in a subsequent year fails to meet the requirements 
        of such subsection,
may continue to teach in such school and shall be eligible for loan 
cancellation pursuant to paragraph (1) with respect to such subsequent 
years.''.
    (b) Direct Loans.--Part D of title IV of the Act is amended by 
inserting after section 458 (20 U.S.C. 1087h) the following new 
section:

``SEC. 459. CANCELLATION OF LOANS FOR CERTAIN PUBLIC SERVICE.

    ``(a) Cancellation of Percentage of Debt Based on Years of 
Qualifying Service.--
            ``(1) In general.--The percent specified in paragraph (3) 
        of the total amount of any loan made under this part after the 
        date of enactment of the College Access and Affordability Act 
        of 1997, to students who have not previously borrowed under 
        this part, shall be canceled for each complete year of service 
        after such date by the borrower under circumstances described 
        in paragraph (2).
            ``(2) Qualifying service.--Loans shall be canceled under 
        paragraph (1) for service by the borrower as a full-time 
        teacher for 1 or more academic years in a public elementary or 
        secondary school--
                    ``(A)(i) in the school district of a local 
                educational agency that is eligible in that academic 
                year for assistance under title I of the Elementary and 
                Secondary Education Act of 1965; and
                    ``(ii) that, for that academic year, has been 
                determined by the Secretary to be a school in which the 
                enrollment of children counted under section 1124(c) of 
                that Act exceeds 30 percent of the total enrollment of 
                that school; or
                    ``(B) as a full-time teacher of mathematics, 
                science, foreign languages, bilingual education, or any 
                other field of expertise where the State educational 
                agency determines to the satisfaction of the Secretary 
                that there is a shortage of qualified teachers.
            ``(3) Percentage of cancellation.--(A) The percent of a 
        loan which shall be canceled under paragraph (1) of this 
        subsection is--
                    ``(i) at the rate of 15 percent for the first or 
                second year of such service,
                    ``(ii) 20 percent for the third or fourth year of 
                such service, and
                    ``(iii) 30 percent for the fifth year of such 
                service.
            ``(B) If a portion of a loan is canceled under this 
        subsection for any year, the entire amount of interest on such 
        loan which accrues for such year shall be canceled.
            ``(C) Nothing in this section shall be construed to 
        authorize refunding of any repayment of a loan.
            ``(4) Definition.--For the purpose of this section, the 
        term ``year'' where applied to service as a teacher means an 
        academic year as defined by the Secretary.
            ``(5) Treatment of canceled amounts.--The amount of a loan, 
        and interest on a loan, which is canceled under this section 
        shall not be considered income for purposes of the Internal 
        Revenue Code of 1986.
            ``(6) Prevention of double benefits.--No borrower may, for 
        the same volunteer service, receive a benefit under both this 
        section and subtitle D of title I of the National and Community 
        Service Act of 1990 (42 U.S.C. 12571 et seq.).
    ``(b)  Special Rules.--
            ``(1) List.--If the list of schools in which a teacher may 
        perform service pursuant to subsection (a)(2)(A) is not 
        available before May 1 of any year, the Secretary may use the 
        list for the year preceding the year for which the 
        determination is made to make such service determination.
            ``(2) Continuing eligibility.--Any teacher who performs 
        service in a school which--
                    ``(A) meets the requirements of subsection 
                (a)(2)(A) in any year during such service; and
                    ``(B) in a subsequent year fails to meet the 
                requirements of such subsection,
        may continue to teach in such school and shall be eligible for 
        loan cancellation pursuant to subsection (a)(1) with respect to 
        such subsequent years.''.

SEC. 4. EXTENSION OF EXEMPTION.

    Section 435(a) of the Act (20 U.S.C. 1085(a)) is amended--
            (1) in paragraph (2)(C), by striking ``July 1, 1998'' and 
        inserting ``October 1, 2002'';
            (2) by redesignating paragraph (3) as paragraph (4); and
            (3) by inserting after paragraph (2) the following new 
        paragraph:
            ``(3) Exemption from related administrative actions.--An 
        institution that is exempt from the cohort default rate trigger 
        under paragraph (2)(C) shall also be exempt from administrative 
        action by the Secretary based solely on such institution's 
        cohort default rate under sections 668.16(m), 668.17(a)(2), and 
        668.17(a)(3) of title 34 of the Code of Federal Regulations.''.

SEC. 5. ADJUSTMENTS IN NEED ANALYSIS.

    (a) Statutory Adjustment in Income Protection Allowance.--
            (1) Dependent students.--Section 475(g)(2)(D) of the Act 
        (20 U.S.C. 1087oo(g)(2)(D)) is amended by striking ``$1,750'' 
        and inserting ``$4,200''.
            (2) Independent students without dependents (other than a 
        spouse).--Section 476(b)(1)(A)(iv) of such Act (20 U.S.C. 
        1087pp(b)(1)(A)(iv))is amended--
                    (A) by striking ``allowance of--'' and inserting 
                ``allowance of the following amount (or a successor 
                amount prescribed by the Secretary under section 
                478)'';
                    (B) by striking ``$3,000'' each place it appears in 
                subclauses (I) and (II) and inserting ``$6,000''; and
                    (C) by striking ``$6,000'' in subclause (III) and 
                inserting ``$9,000''.
    (b) Administrative Adjustments in Income Protection Allowance.--
Section 478(b) of such Act (20 U.S.C. 1087rr(b)) is amended--
            (1) by striking ``For each academic year'' and inserting 
        the following:
            ``(1) Revised tables.--For each academic year''; and
            (2) by adding at the end the following new paragraph:
            ``(2) Revised amounts.--For each academic year after 
        academic year 1997-1998, the Secretary shall publish in the 
        Federal Register revised income protection allowances for the 
        purpose of sections 475(g)(2)(D) and 476(b)(1)(A)(iv). Such 
        revised allowances shall be developed by increasing each of the 
        dollar amounts contained in such section by a percentage equal 
        to the estimated percentage increase in the Consumer Price 
        Index (as determined by the Secretary) between December 1996 
        and the December next preceding the beginning of such academic 
        year, and rounding the result to the nearest $10.''.

SEC. 6. MANAGEMENT AND RECOVERY OF RESERVES.

    Section 422 of the Act is amended--
            (1) by amending subsection (g)(1) to read as follows:
            ``(1) Authority to recover funds.--(A) Notwithstanding any 
        other provision of law, the reserve funds of the guaranty 
        agencies, and any assets purchased or developed with such 
        reserve funds, regardless of who holds or controls the reserves 
        or assets, shall remain the property of the United States.
            ``(B) The Secretary may direct the guaranty agency to 
        require the return, to the guaranty agency or to the Secretary, 
        of any reserve funds or assets held by, or under the control 
        of, any other entity, that the Secretary determines are 
        required--
                    ``(i) to pay the program expenses and contingent 
                liabilities of the guaranty agency;
                    ``(ii) to satisfy the guaranty agency's 
                requirements under subsection (h); or
                    ``(iii) for the orderly termination of the guaranty 
                agency's operations and the liquidation of its assets.
            ``(C) The Secretary may direct a guaranty agency, or such 
        agency's officers or directors, to cease any activity involving 
        expenditure, use, or transfer of the guaranty agency's reserve 
        funds or assets that the Secretary determines is a 
        misapplication, misuse, or improper expenditure of such funds 
        or assets.''; and
            (2) by adding after subsection (g) the following new 
        subsections:
    ``(h) Recall of Reserves in Fiscal Years 1998 Through 2002; 
Limitations on Use of Reserve Funds and Assets.--(1)(A) Notwithstanding 
any other provision of law, the Secretary shall, except as otherwise 
provided in this subsection, recall from the reserve funds held by 
guaranty agencies (which for purposes of this subsection shall include 
any reserve funds held by, or under the control of, any other entity) 
not less than--
            ``(i) $731,000,000 in fiscal year 1998;
            ``(ii) $127,000,000 in fiscal year 1999;
            ``(iii) $186,000,000 in each of the fiscal years 2000 and 
        2001; and
            ``(iv) $1,271,000,000 in fiscal year 2002.
    ``(B) Funds returned to the Secretary under this subsection shall 
be deposited in the Treasury.
    ``(C) The Secretary shall require each guaranty agency to return 
reserve funds under subparagraph (A) based on its proportionate share, 
as determined by the Secretary, of all reserve funds held by guaranty 
agencies as of September 30, 1996.
    ``(2)(A) Within 45 days of enactment of this subsection, all 
reserve funds held by a guaranty agency that have not yet been recalled 
by the Secretary under paragraph (1) shall be transferred by the 
guaranty agency to a restricted account (of a type specified by the 
Secretary) established by the guaranty agency, and be invested in 
United States Government securities specified by the Secretary. The 
manner and timeframe in which reserve funds so invested are recalled 
shall be specified by the Secretary, consistent with the requirements 
of this subsection. Except as described in subparagraph (B), the 
guaranty agency shall not use the reserve funds in such account, which 
shall include the earnings thereon, for any purpose without the express 
permission of the Secretary.
    ``(B)(i) In order to assist guaranty agencies in meeting program 
expenses, the Secretary shall permit the use of not more than an 
aggregate of $350,000,000 of the reserve funds held in the restricted 
accounts described in subparagraph (A) by guaranty agencies with 
agreements under section 428(c), as working capital to be used for such 
purposes as the Secretary may specify. The Secretary shall specify the 
amount of reserve funds in each guaranty agency's restricted account 
that may be used as working capital, based on the guaranty agency's 
proportionate share of all borrower accounts outstanding on September 
30, 1996. The guaranty agency shall repay such amount to its restricted 
account (or return such amount to the Treasury, if so directed by the 
Secretary) by no later than September 30, 2002, or the date on which 
such agency's agreement under section 428(c) ends (through resignation, 
expiration, or termination), whichever is earlier.
    ``(ii) The guaranty agency may use the earnings from its restricted 
account for fiscal year 1998 to assist in meeting its operational 
expenses for such year.
    ``(C) Nonliquid reserve fund assets, such as buildings and 
equipment purchased or developed by the guaranty agency with reserve 
funds, and any liquid assets remaining in a guaranty agency's 
restricted account after the recalls in paragraph (1)(A), shall--
            ``(i) remain the property of the United States;
            ``(ii) be used only for such purposes as the Secretary 
        determines are appropriate; and
            ``(iii) be subject to recall by the Secretary no later than 
        the date on which such agency's agreement under section 428(c) 
        ends (through resignation, expiration, or termination, as the 
        case may be).''.

SEC. 7. REPAYMENT TERMS.

    (a) Insured Loans.--Section 427 of the Act is amended--
            (1) in subsection (a)(2)--
                    (A) in subparagraph (B), in the matter preceding 
                clause (i), by striking ``over a period'' through ``nor 
                more than 10 years'' and inserting ``in accordance with 
                the repayment plan selected under subsection (d),'';
                    (B) in subparagraph (C), at the end of the 
                subparagraph, by striking out ``the 10-year period 
                described in subparagraph (B);'' and inserting the 
                following: ``the length of the repayment period under a 
                repayment plan described in subsection (d);'';
                    (C) by striking subparagraph (F);
                    (D) by redesignating subparagraphs (G), (H), and 
                (I) as subparagraphs (F), (G), and (H), respectively; 
                and
                    (E) in subparagraph (G) (as redesignated by 
                subparagraph (D)), by striking ``the option'' through 
                the end of the subparagraph and inserting ``the 
                repayment options described in subsection (d); and'';
            (2) in subsection (c), by striking ``in subsection 
        (a)(2)(H),'' and inserting the following: ``by a repayment plan 
        selected by the borrower under subparagraph (C) or (D) of 
        subsection (d)(1),''; and
            (3) by adding after subsection (c) the following new 
        subsection:
    ``(d) Repayment Plans.--
            ``(1) Design and selection.--In accordance with regulations 
        of the Secretary, the lender shall offer a borrower of a loan 
        made under this part the plans described in this subsection for 
        repayment of such loan, including principal and interest 
        thereon. No plan may require a borrower to repay a loan in less 
        than 5 years. The borrower may choose from--
                    ``(A) a standard repayment plan, with a fixed 
                annual repayment amount paid over a fixed period of 
                time, not to exceed 10 years;
                    ``(B) an extended repayment plan, with a fixed 
                annual repayment amount paid over an extended period of 
                time, not to exceed 30 years, except that the borrower 
                shall repay annually a minimum amount determined in 
                accordance with subsection (c);
                    ``(C) a graduated repayment plan, with annual 
                repayment amounts established at 2 or more graduated 
                levels and paid over an extended period of time, not to 
                exceed 30 years, except that the borrower'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 repayment plan; and
                    ``(D) an income-sensitive repayment plan, with 
                income-sensitive repayment amounts paid over a fixed 
                period of time, not to exceed 10 years.
            ``(2) Lender selection of option if borrower does not 
        select.--If a borrower of a loan made under this part does not 
        select a repayment plan described in paragraph (1), the lender 
        shall provide the borrower with a repayment plan described in 
        paragraph (1)(A).
            ``(3) Changes in selections.--The borrower of a loan made 
        under this part may change the borrower's selection of a 
        repayment plan under paragraph (1), or the lender's selection 
        of a plan for the borrower under paragraph (2), as the case may 
        be, under such conditions as may be prescribed by the Secretary 
        in regulation.
            ``(4) Acceleration permitted.--Under any of the plans 
        described in this subsection, the borrower shall be entitled to 
        accelerate, without penalty, repayment on the borrower's loans 
        under this part.''.
    (b) Guaranteed Loans.--Section 428(b) of the Act is amended--
            (1) in paragraph (1)--
                    (A) in subparagraph (D), by striking clauses (i) 
                and (ii) and the clause designation ``(iii)'';
                    (B) in subparagraph (E)--
                            (i) in clause (i)--
                                    (I) by striking ``or section 
                                428A,'' and inserting ``or section 
                                428H,''; and
                                    (II) by striking ``the option'' 
                                through the end of the clause and 
                                inserting ``the repayment options 
                                described in paragraph (9); and''; and
                            (ii) in clause (ii)--
                                    (I) by striking ``over a period'' 
                                through ``nor more than 10 years'' and 
                                inserting ``in accordance with the 
                                repayment plan selected under paragraph 
                                (9), and''; and
                                    (II) by striking ``of this 
                                subsection;'' at the end of clause (ii) 
                                and inserting a semicolon; and
                    (C) in subparagraph (L)(i), by inserting after the 
                clause designation the following: ``except as otherwise 
                provided by a repayment plan selected by the borrower 
                under paragraph (9)(A)(iii) or (iv),''; and
            (2) by adding after paragraph (8) the following new 
        paragraph:
            ``(9) Repayment plans.--
                    ``(A) Design and selection.--In accordance with 
                regulations of the Secretary, the lender shall offer a 
                borrower of a loan made under this part the plans 
                described in this subparagraph for repayment of such 
                loan, including principal and interest thereon. No plan 
                may require a borrower to repay a loan in less than 5 
                years. The borrower may choose from--
                            ``(i) a standard repayment plan, with a 
                        fixed annual repayment amount paid over a fixed 
                        period of time, not to exceed 10 years;
                            ``(ii) an extended repayment plan, with a 
                        fixed annual repayment amount paid over an 
                        extended period of time, not to exceed 30 
                        years, except that the borrower shall repay 
                        annually a minimum amount determined in 
                        accordance with paragraph (2)(L);
                            ``(iii) a graduated repayment plan, with 
                        annual repayment amounts established at 2 or 
                        more graduated levels and paid over an extended 
                        period of time, not to exceed 30 years, except 
                        that the borrower'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 repayment plan; and
                            ``(iv) an income-sensitive repayment plan, 
                        with income-sensitive repayment amounts paid 
                        over a fixed period of time, not to exceed 10 
                        years.
                    ``(B) Lender selection of option if borrower does 
                not select.--If a borrower of a loan made under this 
                part does not select a repayment plan described in 
                subparagraph (A), the lender shall provide the 
borrower with a repayment plan described in subparagraph (A)(i).
                    ``(C) Changes in selections.--The borrower of a 
                loan made under this part may change the borrower's 
                selection of a repayment plan under subparagraph (A), 
                or the lender's selection of a plan for the borrower 
                under subparagraph (B), as the case may be, under such 
                conditions as may be prescribed by the Secretary in 
                regulation.
                    ``(D) Acceleration permitted.--Under any of the 
                plans described in this paragraph, the borrower shall 
                be entitled to accelerate, without penalty, repayment 
                on the borrower's loans under this part.
                    ``(E) Comparable ffel and direct loan repayment 
                plans.--The Secretary shall ensure that the repayment 
                plans offered to borrowers under this part are 
                comparable, to the extent practicable and not otherwise 
                provided in statute, to the repayment plans offered 
                under part D.''.
    (c) Consolidation Loans.--Section 428C of the Act is amended--
            (1) in subsection (b)(3)(F), by striking ``alternative''; 
        and
            (2) in subsection (c) by amending paragraph (2) to read as 
        follows:
            ``(2) Repayment plans.--
                    ``(A) Design and selection.--In accordance with 
                regulations of the Secretary, the lender shall offer a 
                borrower of a loan made under this section the plans 
                described in this paragraph for repayment of such loan, 
                including principal and interest thereon. No plan may 
                require a borrower to repay a loan in less than 5 
                years. The borrower may choose from--
                            ``(i) a standard repayment plan, with a 
                        fixed annual repayment amount paid over a fixed 
                        period of time, not to exceed 10 years;
                            ``(ii) an extended repayment plan, with a 
                        fixed annual repayment amount paid over an 
                        extended period of time, not to exceed 30 
                        years, except that the borrower shall repay 
                        annually a minimum amount determined in 
                        accordance with paragraph (3);
                            ``(iii) a graduated repayment plan, with 
                        annual repayment amounts established at 2 or 
                        more graduated levels and paid over an extended 
                        period of time, not to exceed 30 years, except 
                        that the borrower'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 repayment plan; and
                            ``(iv) an income-sensitive repayment plan, 
                        with income-sensitive repayment amounts paid 
                        over a fixed period of time, not to exceed 10 
                        years.
                    ``(B) Lender selection of option if borrower does 
                not select.--If a borrower of a loan made under this 
                section does not select a repayment plan described in 
                subparagraph (A), the lender shall provide the borrower 
                with a repayment plan described in subparagraph (A)(i).
                    ``(C) Changes in selections.--The borrower of a 
                loan made under this section may change the borrower's 
                selection of a repayment plan under subparagraph (A), 
                or the lender's selection of a plan for the borrower 
                under subparagraph (B), as the case may be, under such 
                conditions as may be prescribed by the Secretary in 
                regulation.''.
    (d) Direct Loans.--Section 455(d) of the Act is amended--
            (1) in paragraph (1)--
                    (A) in subparagraph (B), by inserting after ``an 
                extended period of time,'' the following: ``not to 
                exceed 30 years,''; and
                    (B) in subparagraph (C), by striking ``a fixed or 
                extended period of time,'' and inserting the following: 
                ``an extended period of time, not to exceed 30 
                years,''; and
            (2) in paragraph (2), by striking ``subparagraph (A), (B), 
        or (C) of paragraph (1).'' and inserting ``paragraph (1)(A).''.

SEC. 8. INTEREST RATES.

    (a) Guaranteed Loans.--Section 427A of the Act is amended--
            (1) in subsection (g)(2)--
                    (A) by inserting after the paragraph heading the 
                subparagraph designation ``(A)'';
                    (B) by redesignating subparagraphs (A) and (B) as 
                clauses (i) and (ii), respectively;
                    (C) by striking ``paragraph (1),'' and inserting 
                ``paragraph (1), and except as provided in subparagraph 
                (B),''; and
                    (D) by adding after subparagraph (A) (as 
                redesignated by subparagraph (A)) the following new 
                subparagraph:
            ``(B) In the case of loans made or insured under section 
        428 or 428H for which the first disbursement is made on or 
        after October 1, 1997, for purposes of paragraph (1), the rate 
        determined under this paragraph 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 the bond equivalent 
        rate of the securities with a comparable maturity, as 
        established by the Secretary, except that such rate shall not 
        exceed 8.25 percent.'';
            (2) in subsection (h)--
                    (A) in the heading thereof, by striking ``July 1, 
                1998.--'' and inserting ``October 1, 1997.--'';
                    (B) in paragraph (1)--
                            (i) by striking ``(f), and (g)'' and 
                        inserting ``and (f),''; and
                            (ii) by striking ``July 1, 1998,'' and 
                        inserting ``October 1, 1997,''; and
                    (C) in paragraph (2)--
                            (i) in the heading, by striking ``july 1, 
                        1998.--'' and inserting ``october 1, 1997.--''; 
                        and
                            (ii) by striking ``July 1, 1998,'' and 
                        inserting ``October 1, 1997,''; and
            (3) in subsection (i)(7)(B), by adding at the end the 
        following: ``Notwithstanding any other provision of law, the 
        interest rate determined under this subparagraph shall be used 
        solely to determine the rebate of excess interest required by 
        this paragraph and shall not be used to calculate or pay 
        special allowances under section 438.''.
    (b) Direct Loans.--Section 455(b) of the Act is amended--
            (1) in paragraph (2)(B)--
                    (A) by redesignating clauses (i) and (ii) as 
                subclauses (I) and (II), respectively;
                    (B) by inserting after the subparagraph heading the 
                clause designation ``(i)'';
                    (C) by striking ``subparagraph (A),'' and inserting 
                ``subparagraph (A) and except as provided in clause 
                (ii),''; and
                    (D) by adding after clause (i) (as redesignated by 
                subparagraph (B)) the following new clause:
            ``(ii) In the case of Federal Direct Stafford/Ford Loans or 
        Federal Direct Unsubsidized Stafford/Ford Loans for which the 
        first disbursement is made on or after October 1, 1997, for 
        purposes of subparagraph (A), the rate determined under this 
        subparagraph 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 the bond equivalent rate of the 
        securities with a comparable maturity, as established by the 
        Secretary, except that such rate shall not exceed 8.25 
        percent.'';
            (2) in paragraph (3)--
                    (A) by striking ``and (2),'' and inserting ``, and 
                except as provided in paragraph (2),''; and
                    (B) by striking ``made on or after July 1, 1998,'' 
                and inserting ``for which the first disbursement is 
                made on or after October 1, 1997,''; and
            (3) in paragraph (4)(B), by striking ``July 1, 1998,'' and 
        inserting ``October 1, 1997,''.

SEC. 9. LENDER AND HOLDER RISK SHARING.

    Section 428(b)(1)(G) of the Act is amended by striking ``not less 
than 98 percent'' and inserting ``95 percent''.

SEC. 10. FEES AND INSURANCE PREMIUMS.

    (a) Insurance Premiums.--
            (1) In general.--Section 428(b)(1)(H) of the Act is 
        amended--
                    (A) by inserting the clause designation ``(i)'' 
                following the subparagraph designation;
                    (B) by striking ``the loan,'' and inserting ``any 
                loan made under section 428 or 428B before July 1, 
                1998,''; and
                    (C) after clause (i) (as redesignated by paragraph 
                (1)), by adding ``and'' and the following new clause:
                    ``(ii) provides that no insurance premiums shall be 
                charged to the borrower of any loan made under section 
                428 or 428B on or after July 1, 1998;''.
            (2) Unsubsidized loans.--Section 428H(h) of the Act is 
        amended--
                    (A) by inserting the paragraph designation ``(1)'' 
                following the subsection heading;
                    (B) by striking ``under this section'' and 
                inserting ``of a loan made under this section made 
                before July 1, 1998''; and
                    (C) by adding at the end of paragraph (1) (as 
                redesignated by paragraph (1)) the following new 
                paragraph:
    ``(2) No insurance premium may be charged to the borrower on any 
loan made under this section made on or after July 1, 1998.''.
    (b) Origination Fees.--
            (1) Guaranteed loans.--Section 438(c) of the Act is 
        amended--
                    (A) in paragraph (2), by striking ``paragraph (6)'' 
                and inserting ``paragraphs (6) and (8)''; and
                    (B) by adding after paragraph (7) the following new 
                paragraph:
            ``(8) Phaseout of origination fee on subsidized loans.--In 
        the case of any loan made or insured under section 428, 
        paragraph (2) shall be applied by substituting--
                    ``(A) `2.0 percent' for `3.0 percent' with respect 
                to such a loan made or insured on or after July 1, 
                1998, and before January 1, 2000,
                    ``(B) `1.0 percent' for `3.0 percent' with respect 
                to such a loan made or insured during calendar year 
                2000 or 2001, and
                    ``(C) `0.0 percent' for `3.0 percent' with respect 
                to such a loan made or insured on or after January 1, 
                2002.''.
            (2) Direct loans.--Section 455(c) of the Act is amended--
                    (A) by striking ``The Secretary'' and inserting 
                ``(1) For loans made under this part before July 1, 
                1998, the Secretary'';
                    (B) by striking ``of a loan made under this part''; 
                and
                    (C) by adding at the end thereof the following new 
                paragraphs:
    ``(2) For loans made under this part on or after July 1, 1998, and 
before January 1, 2002, the Secretary shall charge the borrower an 
origination fee of--
            ``(A) in the case of Federal Direct Stafford/Ford Loans--
                    ``(i) 2.0 percent of the principal amount of the 
                loan in the case of loans made on or after July 1, 
                1998, and before January 1, 2000, and
                    ``(ii) 1.0 percent of the principal amount of the 
                loan in the case of loans made during calendar year 
                2000 or 2001; and
            ``(B) in the case of Federal Direct Unsubsidized Stafford/
        Ford Loans or Federal Direct PLUS Loans--
                    ``(i) 3.0 percent of the principal amount of the 
                loan in the case of loans made on or after July 1, 
                1998, and before January 1, 2000,
                    ``(ii) 2.0 percent of the principal amount of the 
                loan in the case of loans made during calendar year 
                2000, and
                    ``(iii) 1.0 percent of the principal amount of the 
                loan in the case of loans made during calendar year 
                2001.
    ``(3) The Secretary shall not charge the borrower an origination 
fee on any loan made under this part on or after January 1, 2002.''.

SEC. 11. FUNCTIONS OF GUARANTY AGENCIES.

    (a) Section 428 of the Act is further amended--
            (1) in subsection (a)--
                    (A) in paragraph (1)(B)--
                            (i) in the matter preceding clause (i), by 
                        striking ``which is insured'' and inserting 
                        ``which, before October 1, 1997, is''; and
                            (ii) in clause (ii), by inserting ``as in 
                        effect the day before the day of enactment of 
                        this section,'' after ``subsection (b),''; and
                    (B) in paragraph (3)--
                            (i) by striking subparagraph (B); and
                            (ii) in subparagraph (A)--
                                    (I) in clause (ii), by striking 
                                ``under any'' through the end of the 
                                clause and inserting a period;
                                    (II) by striking the subparagraph 
                                designation ``(A)'';
                                    (III) by redesignating clauses (i) 
                                and (ii) as subparagraphs (A) and (B), 
                                respectively; and
                                    (IV) by redesignating subclauses 
                                (I) and (II) as clauses (i) and (ii), 
                                respectively;
            (2) in subsection (b)--
                    (A) by amending the heading to read as follows: 
                ``Requirements To Qualify Loans for Insurance and 
                Interest Subsidies.--'';
                    (B) in paragraph (1)--
                            (i) by amending the heading to read as 
                        follows: ``Requirements.--'';
                            (ii) by amending the matter preceding 
                        subparagraph (A) to read as follows: ``A loan 
                        by an eligible lender shall be insurable by the 
                        Secretary, and students who receive such loans 
                        shall be entitled to have made on their behalf 
                        the payments provided for in subsection (a), 
                        under a program of student loan insurance 
                        that--'';
                            (iii) by amending subparagraph (K) to read 
                        as follows:
                    ``(K) provides that the holder of any such loan 
                will be required to submit to the Secretary, at such 
                time or times and in such manner as the Secretary may 
                prescribe, statements containing such information as 
                may be required by regulation for the purpose of 
                enabling the Secretary to determine the amount of the 
                payment which must be made with respect to that 
                loan;'';
                            (iv) by amending subparagraph (O) to read 
                        as follows:
                    ``(O) provides that, if the sale, assignment, or 
                other transfer of a loan made under this part to 
                another holder will result in a change in the identity 
                of the party to whom the borrower must send subsequent 
                payments or direct any communications concerning the 
                loans, then--
                            ``(i) the transferor and the transferee 
                        shall be required, not later than 45 days from 
                        the date the transferee acquires a legally 
                        enforceable right to receive payment from the 
                        borrower on such loan, either jointly or 
                        separately to provide a notice to the borrower 
                        of--
                                    ``(I) the sale, assignment, or 
                                other transfer;
                                    ``(II) the identity of the 
                                transferee;
                                    ``(III) the name and address of the 
                                party to whom subsequent payments or 
                                communications must be sent; and
                                    ``(IV) the telephone numbers of 
                                both the transferor and the transferee; 
                                and
                            ``(ii) the transferee shall be required to 
                        notify the Secretary, and, upon the request of 
                        an institution of higher education, the 
                        Secretary shall notify the last such 
                        institution the student attended prior to the 
                        beginning of the repayment period of any loan 
                        made under this part, of--
                                    ``(I) any sale, assignment, or 
                                other transfer of the loan; and
                                    ``(II) the address and telephone 
                                number by which contact may be made 
                                with the new holder concerning 
                                repayment of the loan;
                        except that this subparagraph shall apply only 
                        if the borrower is in the grace period 
                        described in section 427(a)(2)(B) or 428(b)(7) 
                        or is in repayment status.'';
                            (v) in subparagraph (Q), by striking 
                        ``guarantee'' and ``428A'' and inserting 
                        ``insurance'' and ``428H'', respectively;
                            (vi) by amending subparagraph (R) to read 
                        as follows:
                    ``(R) provides for the making of such reports, in 
                such form and containing such information, including 
                financial information, as the Secretary may reasonably 
require to carry out the Secretary's functions under this part and 
protect the financial interest of the United States, and for keeping 
such records and for affording such access thereto as the Secretary may 
find necessary to ensure the correctness and verification of such 
reports;'';
                            (vii) by amending subparagraph (S) to read 
                        as follows:
                    ``(S) provides that a lender shall pay a default 
                prevention fee in accordance with subsection (g);'';
                            (viii) in subparagraph (T)--
                                    (I) in clause (i), by inserting ``, 
                                by the guaranty agency, in accordance 
                                with regulations prescribed by the 
                                Secretary,'' after ``limitation''; and
                                    (II) in clause (ii)--
                                            (aa) in the matter 
                                        preceding subclause (I), by 
                                        inserting ``, in accordance 
                                        with regulations prescribed by 
                                        the Secretary,'' after 
                                        ``institution'';
                                            (bb) by striking subclauses 
                                        (I) and (II); and
                                            (cc) by redesignating 
                                        subclauses (III), (IV), and (V) 
                                        as subclauses (I), (II), and 
                                        (III), respectively;
                            (ix) by amending subparagraph (U) to read 
                        as follows:
                    ``(U) provides--
                            ``(i) for such additional criteria 
                        concerning the eligibility of lenders described 
                        in section 435(d)(1) as may be permitted by the 
                        Secretary; and
                            ``(ii) an assurance that the guaranty 
                        agency will report to the Secretary concerning 
                        changes in criteria under clause (i), including 
                        any procedures in effect under such program to 
                        take emergency action, limit, suspend, or 
                        terminate lenders; and''; and
                            (x) by striking subparagraphs (V), (W), and 
                        (X);
                    (C) by amending paragraph (2) to read as follows:
            ``(2) Skip-tracing requirement.--In the case of a default 
        claim based on an inability to locate the borrower, a lender 
        shall certify to the Secretary, at the time of submission of 
        the default claim, that diligent attempts have been made to 
        locate the borrower through the use of reasonable skip-tracing 
        techniques in accordance with regulations prescribed by the 
        Secretary.'';
                    (D) in paragraph (3)(B), by striking the 
                parenthetical through the end of the subparagraph and 
                inserting a period; and
                    (E) by striking out paragraph (5) and inserting in 
                lieu thereof the following new paragraph:
            ``(5) Compliance audits.--(A) Except as provided in 
        subparagraph (B) or by the Single Audit Act Amendments of 1996, 
        an eligible lender that originates or holds more than 
        $5,000,000 in loans made under this title during an annual 
        audit period shall submit to the Secretary a compliance audit 
        for that audit period which is conducted by a qualified, 
        independent organization or person in accordance with the 
        Government Auditing Standards issued by the Comptroller 
        General, and the regulations of the Secretary.
            ``(B) The Secretary may permit a lender to submit the 
        results of an audit conducted for other purposes if the 
        Secretary determines that such other audit results provide the 
        same information as required under subparagraph (A).'';
            (3) in subsection (c)--
                    (A) by amending the heading to read as follows: 
                ``Agreements With Guaranty Agencies.--''
                    (B) in paragraph (3)--
                            (i) in the matter preceding subparagraph 
                        (A), by striking ``A guaranty agreement'' and 
                        inserting ``An agreement between the Secretary 
                        and a guaranty agency'';
                            (ii) in the flush left language at the end 
                        of the paragraph, by striking ``Guaranty 
                        agencies'' and inserting ``The Secretary''; and
                            (iii) by redesignating paragraph (3) as 
                        paragraph (11);
                    (C) by striking paragraphs (1), (2), (4), and (5);
                    (D) by inserting after the subsection heading the 
                following new paragraphs:
            ``(1) Authority to enter into agreements.--(A)(i) The 
        Secretary may enter into an agreement with a guaranty agency, 
        under which the Secretary shall insure loans made under this 
section through the guaranty agency as the agent of the Secretary.
            ``(ii) Any guaranty agency that had an agreement with the 
        Secretary under section 428(b) as of the day before the date of 
        enactment of the College Access and Affordability Act of 1997 
        may enter into an initial agreement with the Secretary under 
        this subsection.
            ``(iii) An agreement under this subsection shall be 5 years 
        in duration, and may be renewed by the Secretary for successive 
        5-year periods.
            ``(iv) The Secretary may terminate the agreement prior to 
        its expiration in accordance with paragraph (9).
            ``(2) Effect on prior guaranty agreements and loan 
        insurance by guaranty agencies.--(A) All guaranty agreements 
        made under this subsection as it was in effect on the day 
        before the date of enactment of the College Access and 
        Affordability Act of 1997 shall terminate not later than 180 
        days after the date of enactment of that Act.
            ``(B) Notwithstanding any other provision of law--
                    ``(i) to the extent that a guaranty agency had 
                insured loans under this part, loan insurance by such 
                guaranty agency that is outstanding as of the date of 
                the termination under subparagraph (A) shall be 
                replaced on such date by loan insurance issued by the 
                Secretary, and the guaranty agency shall be relieved of 
                any further liability thereon;
                    ``(ii) the Secretary's liability for any 
                outstanding liabilities of a guaranty agency (other 
                than outstanding loan insurance under this part), shall 
                not exceed the fair market value of the unrestricted 
                funds of the guaranty agency, which shall consist of--
                            ``(I) all accumulated earnings not 
                        otherwise placed in a restricted account in 
                        accordance with section 422(h)(2)(A); and
                            ``(II) any working capital that may be 
                        provided under section 422(h)(2)(B); and
                    ``(iii) for the first year after the date of 
                enactment of the College Access and Affordability Act 
                of 1997, the Secretary may specify such interim 
                administrative measures as the Secretary determines to 
                be necessary for the efficient transfer of the loan 
                insurance function, and to carry out the purposes of 
                this part.
            ``(3) Terms of agreement.--The agreement between the 
        Secretary and a guaranty agency shall include, but not be 
        limited to--
                    ``(A) provisions regarding the responsibilities of 
                the guaranty agency for--
                            ``(i) administering the issuance of 
                        insurance on loans made under this section on 
                        behalf of the Secretary;
                            ``(ii) monitoring insurance commitments 
                        made under this section;
                            ``(iii) default prevention activities;
                            ``(iv) review of default claims made by 
                        lenders;
                            ``(v) payment of default claims;
                            ``(vi) collection of defaulted loans;
                            ``(vii) adoption of internal systems of 
                        accounting and auditing that are acceptable to 
                        the Secretary, and reporting the result thereof 
                        to the Secretary on a timely, accurate, and 
                        auditable basis;
                            ``(viii) timely and accurate collection and 
                        reporting of such other data as the Secretary 
                        may require to carry out the purposes of the 
                        programs under this title;
                            ``(ix) monitoring of institutions and 
                        lenders participating in the program under this 
                        part; and
                            ``(x) such other program functions as the 
                        Secretary may require of the guaranty agency;
                    ``(B) provisions regarding the fees the Secretary 
                shall pay to the guaranty agency under the agreement, 
                and other revenues that the guaranty agency may receive 
                thereunder, as described in paragraphs (4) and (6);
                    ``(C) provisions requiring the guaranty agency to 
                carry out its responsibilities under the agreement in 
                accordance with paragraph (5);
                    ``(D) provisions regarding the use, in accordance 
                with paragraph (10), of net revenues in excess of the 
                guaranty agency's need for working capital, as 
                determined after compliance with section 422(h), for 
                such other activities in support of postsecondary 
                education as may be agreed to by the Secretary and the 
                guaranty agency;
                    ``(E) provisions regarding such other businesses, 
                previously purchased or developed with reserve funds, 
                that relate to the program under this part and in which 
                the Secretary permits the guaranty agency to engage (as 
                determined on a case-by-case basis);
                    ``(F) provisions setting forth such administrative 
                and fiscal procedures as may be necessary to protect 
                the United States from the risk of unreasonable loss 
                thereunder, and to ensure proper and efficient 
                administration of the loan insurance program;
                    ``(G) provisions regarding the submission of the 
                results of audits of the guaranty agency that are 
                conducted--
                            ``(i) at least annually;
                            ``(ii) by a qualified, independent 
                        organization or person in accordance with the 
                        standards established by the Comptroller 
                        General for the audit of governmental 
                        organizations, programs, and functions; and
                            ``(iii) in accordance with the regulations 
                        of the Secretary;
                    ``(H) provisions requiring the making of such 
                reports, in such form and containing such information, 
                including financial information, as the Secretary may 
                reasonably require to carry out the Secretary's 
                functions under this part and to protect the Federal 
                fiscal interest, and for keeping such records and for 
                affording such access thereto as the Secretary may find 
                necessary or appropriate to ensure the correctness and 
                verification of such reports;
                    ``(I) adequate assurances that the guaranty agency 
                will not engage in any pattern or practice which may 
                result in a denial of a borrower's access to loans 
                under this part because of the borrower's race, sex, 
                color, religion, national origin, age, handicapped 
                status, income, attendance at a particular eligible 
                institution, length of the borrower's educational 
                program, or the borrower's academic year in school;
                    ``(J) assurances that--
                            ``(i) upon the request of an eligible 
                        institution, the guaranty agency shall, subject 
                        to clauses (ii) and (iii), furnish to the 
                        institution information with respect to 
                        students (including the names and addresses of 
                        such students) who received loans made or 
                        insured under this part for attendance at the 
                        eligible institution and for whom preclaims 
                        assistance activities have been requested under 
                        subsection (l);
                            ``(ii) the guaranty agency shall require 
                        the payment by the institution of a reasonable 
                        fee (as determined in accordance with 
                        regulations prescribed by the Secretary) for 
                        such information; and
                            ``(iii) the institution may use such 
                        information only to remind students of their 
                        obligation to repay student loans and may not 
                        disseminate the information for any other 
                        purpose; and
                    ``(K) such other provisions as the Secretary may 
                determine to be necessary to protect the United States 
                from the risk of unreasonable loss and to promote the 
                purposes of this part.
            ``(4) Fees and other revenues.--(A)(i) The Secretary shall 
        pay to a guaranty agency with an agreement under this 
        subsection the following uniform fees:
                    ``(I) a 1-time issuance fee for each new loan made 
                under this part that is insured by the Secretary 
                through the guaranty agency; and
                    ``(II) an annual maintenance fee for each active 
                borrower account.
            ``(ii) The fees described in clause (i) shall be paid on a 
        quarterly basis, from the funds available under section 458(a), 
        in such amount as the Secretary determines, for all guaranty 
        agencies with agreements under this subsection.
            ``(B) A guaranty agency with an agreement under this 
        subsection also may receive revenues derived from--
                    ``(i) a default prevention fee paid by lenders in 
                accordance with subsection (g);
                    ``(ii) the collection retention allowance under 
                paragraph (6);
                    ``(iii) the interest earned on working capital 
                provided under section 422(h);
                    ``(iv) such other businesses, previously purchased 
                or developed with reserve funds, that relate to the 
                program under this part and in which the Secretary 
                permits the guaranty agency to engage (as determined on 
                a case-by-case basis); and
                    ``(v) such other fees as may be authorized under 
                this part.
            ``(5) Performance requirements.--(A) A guaranty agency with 
        an agreement under this subsection shall carry out its 
        responsibilities thereunder in accordance with such measurable 
        performance-based standards as the Secretary may specify, and 
        shall submit timely and accurate data to the Secretary in 
        support of its performance.
            ``(B) The Secretary shall apply the performance standards 
        uniformly to guaranty agencies with agreements under this 
        subsection.
            ``(C) The Secretary shall assess the performance of each 
        guaranty agency on the basis of the audits required under 
        paragraph (3)(G), and shall compare such guaranty agency's 
        performance against the performance of other such guaranty 
        agencies and publicly disseminate such comparison.
            ``(D) The Secretary may impose a fine, in accordance with 
        the terms of the agreement, on a guaranty agency that fails to 
        achieve a specified level of performance on 1 or more 
        performance standards. If the guaranty agency's failure to 
        achieve such performance level results in a financial loss to 
        the United States, the guaranty agency shall indemnify the 
        Secretary for such loss.'';
                    (E) by amending paragraph (6) to read as follows:
            ``(6) Collection retention allowance.--
                    ``(A) If, after the Secretary has paid a claim on a 
                loan made under this title, any payments are made in 
                discharge of the obligation incurred by the borrower 
                with respect to such loan (including any payments of 
                interest accruing on such loan after the payment of the 
                default claim by the Secretary), there shall be paid 
                over to the Secretary that portion of the payments 
                remaining after the guaranty agency with which the 
                Secretary has an agreement under this subsection has 
                deducted from such payments an amount for costs related 
                to the student loan insurance program that--
                            ``(i) shall be specified by the Secretary 
                        on the basis of the Secretary's review of 
                        payments for similar services in a competitive 
                        environment; and
                            ``(ii) in no case shall exceed 18.5 percent 
                        of such payments (subject to subparagraph (B)).
                    ``(B) If, after the Secretary has paid a claim on a 
                loan made under this title, and the liability on such 
                loan is discharged by payment of the proceeds of a 
                consolidation loan under this part or under part D, the 
                guaranty agency may not deduct the amount specified in 
                subparagraph (A), but may charge the borrower an amount 
                specified by the Secretary and not to exceed 18.5 
                percent of the principal amount of the defaulted loan 
                at the time of consolidation, to defray the guaranty 
                agency's collection costs on the defaulted loan to be 
                consolidated.'';
                    (F) by amending paragraph (7) to read as follows:
            ``(7) Secretary authorized to renew or make alternate 
        agreements.--Notwithstanding any other provision of law, once 
        the initial agreement with a guaranty agency entered into after 
        the date of enactment of the College Access and Affordability 
        Act of 1997 has ended (through its expiration, the termination 
        of the guaranty agency agreement by the Secretary in accordance 
        with paragraph (9), or the resignation of the guaranty agency, 
        as the case may be), the Secretary, in his discretion, may 
        enter into--
                    ``(A) another agreement with the guaranty agency;
                    ``(B) an alternate agreement under which the 
                functions previously performed by the guaranty agency 
                shall be performed by another State or private 
                nonprofit agency with which the Secretary has an 
                agreement under this subsection; or
                    ``(C) a contract under section 428E.'';
                    (G) by amending paragraph (9) to read as follows:
            ``(9) Termination of guaranty agency agreements.--(A) A 
        guaranty agency's agreement under this subsection may be ended 
        in advance of its expiration date in accordance with 
        subparagraph (B) or (C). If its agreement is so ended, the 
        guaranty agency shall immediately--
                    ``(i) cease to be an agent of the Secretary for 
                purposes of the program under this part; and
                    ``(ii) surrender all remaining liquid and nonliquid 
                reserve funds, and assets purchased or developed with 
                reserve funds, still held by the guaranty agency 
                (including reserves held by, or under the control of, 
                any other entity) to the Secretary or the Secretary's 
                designated agent.
            ``(B) A guaranty agency's agreement under this subsection 
        shall be void, and the Secretary shall immediately so notify 
        such guaranty agency, if--
                    ``(i) the guaranty agency fails to comply in a 
                timely manner with the recall of reserve requirements 
                of section 422(h);
                    ``(ii) the guaranty agency fails to increase the 
                amount of funds in its unrestricted account (as 
                measured by comparing the amount of funds in such 
                account at the beginning and end of a year) for each of 
                2 years (that may or may not be consecutive) in the 5-
                year period of the agreement under this subsection;
                    ``(iii) any other agreement that the guaranty 
                agency has with the Secretary is terminated;
                    ``(iv) the guaranty agency becomes insolvent or 
                declares bankruptcy; or
                    ``(v) there is any legal impediment to the guaranty 
                agency substantially performing its responsibilities 
                under the agreement.
            ``(C) The Secretary shall, after notice and opportunity for 
        a hearing, terminate a guaranty agency that has substantially 
        failed to achieve an acceptable level of performance under its 
        agreement with the Secretary. A substantial performance failure 
        under this subparagraph may include the existence of material 
        internal control weaknesses relating to data quality in the 
        guaranty agency's audits for each of 2 years (that may or may 
        not be consecutive) in the 5-year period of the agreement under 
        this subsection.
            ``(D) Notwithstanding any other provision of Federal or 
        State law, if the Secretary has terminated or is seeking to 
        terminate a guaranty agency's agreement in advance of its 
        expiration date--
                    ``(i) no State court may issue any order affecting 
                the Secretary's actions with respect to such guaranty 
                agency;
                    ``(ii) any contract with respect to the 
                administration of reserve funds held by a guaranty 
                agency, or the administration of any assets purchased 
                or developed with the reserve funds of the guaranty 
                agency, that is entered into or extended by the 
                guaranty agency, or any other party on behalf of or 
                with the concurrence of the guaranty agency, after the 
                date of enactment of the College Access and 
                Affordability Act of 1997 shall provide that the 
                contract is terminable by the Secretary upon 30 days 
                notice to the contracting parties if the Secretary 
                determines that such contract includes an impermissible 
                transfer of the reserve funds or assets, or is 
                otherwise inconsistent with the terms or purposes of 
                this section; and
                    ``(iii) no provision of State law shall apply to 
                the actions of the Secretary in terminating the 
                operations of a guaranty agency.''; and
                    (H) by adding after paragraph (9) the following new 
                paragraph:
            ``(10) Use of surplus funds.--(A) A guaranty agency with an 
        agreement under this subsection may retain the amount 
        determined in accordance with subparagraph (B) for activities 
        in support of postsecondary education that are approved by the 
        Secretary.
            ``(B)(i) A guaranty agency may retain 50 percent of its net 
        revenues for fiscal year 1998 in excess of the guaranty 
        agency's need for working capital for such year, as determined 
        after compliance with section 422(h), for approved activities.
            ``(ii) A guaranty agency may retain for approved activities 
        for fiscal year 1999 and succeeding fiscal years the lesser 
        of--
                    ``(I) 50 percent of its net revenues for such year 
                in excess of its need for working capital, as 
                determined after compliance with section 422(h); or
                    ``(II) the amount of its net revenues for such year 
                in excess of its need for working capital, as 
                determined after compliance with section 422(h), that 
                is equal to a uniform percentage, established annually 
                by the Secretary, of Federal revenues received by the 
                guaranty agency for the preceding year. In determining 
                such percentage, the Secretary shall take into account 
                all guaranty agencies' revenues and costs for the 
                preceding year to determine an adequate level of 
                economic incentive for guaranty agencies to maximize 
                their efficiency.'';
            (4) by amending subsection (g) to read as follows:
    ``(g) Default Prevention Fee Paid by Lenders.--(1) An eligible 
lender shall pay a guaranty agency, to which such lender referred a 
delinquent loan, a default prevention fee of not to exceed $100 per 
borrower account if the guaranty agency succeeds in bringing such loan 
into current repayment status.
    ``(2) The Secretary shall prescribe in regulations the 
circumstances in which a lender may obtain a refund of a default 
prevention fee if the borrower of a loan on which such fee was paid 
subsequently defaults on such loan.''; and
            (5) in subsection (l)--
                    (A) in paragraph (1), by striking the paragraph 
                designation and the paragraph heading; and
                    (B) by striking paragraph (2).
    (b) Section 435(j) of the Act is amended by striking ``section 
428(b).'' and inserting ``section 428(c).''

SEC. 12. REPEAL OF STATE SHARE OF DEFAULT COSTS.

    Section 428 of the Act is further amended by striking subsection 
(n).

SEC. 13. CONSOLIDATION LOANS.

    (a) Section 428C of the Act is further amended--
            (1) in subsection (a)(3)--
                    (A) in subparagraph (A), by inserting ``in an in-
                school period,'' after ``for a consolidation loan is''; 
                and
                    (B) in subparagraph (B), by amending clause (i) to 
                read as follows:
                            ``(i) Eligible student loans received by 
                        the eligible borrower may be added to a 
                        consolidation loan during the 180-day period 
                        following the making of such consolidation 
                        loan.'';
            (2) in subsection (b)(4)(C), by amending clause (ii) to 
        read as follows:
                    ``(ii) provides that interest shall accrue and be 
                paid--
                            ``(I) by the Secretary, in the case of a 
                        consolidation loan made before October 1, 1997, 
                        that consolidated only Federal Stafford Loans 
                        for which the student borrower received an 
                        interest subsidy under section 428;
                            ``(II) by the Secretary, in the case of a 
                        consolidation loan made on or after October 1, 
                        1997, except that the Secretary shall pay such 
                        interest only on that portion of the loan that 
                        repays Federal Stafford Loans for which the 
                        student borrower received an interest subsidy 
                        under section 428; and
                            ``(III) by the borrower, or capitalized, in 
                        the case of a consolidation loan, or portion 
                        thereof, other than one described in subclause 
                        (I) or (II);''; and
            (3) in subsection (c)--
                    (A) in paragraph (1)--
                            (i) in subparagraph (A), by striking 
                        ``subparagraph (B) or (C).'' and inserting 
                        ``subparagraph (B), (C), (D), or (E), and 
                        subject to subparagraph (F).'';
                            (ii) in subparagraph (C), by striking 
                        ``after July 1, 1994,'' and inserting ``after 
                        July 1, 1994 and before October 1, 1997,''; and
                            (iii) by adding after subparagraph (C) the 
                        following new subparagraphs:
            ``(D) A consolidation loan made on or after October 1, 
        1997, that repays loans made under section 428 of 428H, or a 
        combination thereof, shall bear interest at an annual rate on 
        the unpaid principal balance of the loan that is equal to--
                    ``(i) the rate specified in section 427A(g), in the 
                case of a borrower in an in-school or grace period; or
                    ``(ii) the rate specified in section 427A(h)(1) in 
                all other cases.
            ``(E) A consolidation loan made on or after October 1, 
        1997, that repays loans made under section 428B shall bear 
        interest at an annual rate on the unpaid principal balance of 
the loan that is equal to the rate specified in section 427A(h)(2).
            ``(F) Notwithstanding any other provision of this section, 
        the Secretary may prescribe in regulation such procedures as 
        may be necessary to ensure that--
                    ``(i) a borrower of a consolidation loan that 
                repays a combination of loans eligible to be 
                consolidated under this section, shall continue to 
                receive, after consolidation, any interest subsidy 
                benefits associated with a loan, without extending such 
                benefits to any other loans consolidated that do not 
                have interest subsidy benefits;
                    ``(ii) in the case of a consolidation loan that 
                repays a combination of loans described in 
                subparagraphs (D) and (E), the interest rate on such 
                consolidation loan shall be calculated in a manner that 
                reflects the interest rate applicable to loans made 
                under each such subparagraph; and
                    ``(iii) in the case of a consolidation loan that 
                repays a loan eligible to be consolidated under this 
                section other than those described in subparagraphs (D) 
                and (E), the interest rate applicable to such other 
                loan shall be the interest rate described in 
                subparagraph (D) if such other loan is considered by 
                the Secretary to be subsidized, and the interest rate 
                described in subparagraph (E) if such other loan is 
                considered by the Secretary to be unsubsidized.''; and
                    (B) in paragraph (4)--
                            (i) by striking ``Repayment'' and inserting 
                        ``(A) Except as provided in subparagraph (B), 
                        repayment''; and
                            (ii) by adding after subparagraph (A) (as 
                        redesignated by clause (i)) the following new 
                        subparagraph:
            ``(B) In the case of a consolidation loan that repays a 
        loan made under this part for which the borrower is in an in-
        school period at the time the consolidation application is 
        received, the repayment period for such consolidation loan 
        shall commence after the completion of a grace period, as 
        described in section 428(b)(7)(i).''.

SEC. 14. CONTRACTS WITH OTHER ENTITIES.

    Part B of title IV of the Act is amended by inserting after section 
428D the following new section:

``SEC. 428E. CONTRACT AUTHORITY.

    ``The Secretary may enter into 1 or more contracts to carry out any 
of the functions that otherwise would be carried out by a guaranty 
agency with an agreement under section 428(c).''.

SEC. 15. ELIGIBLE LENDER.

    Section 435(d) of the Act is amended--
            (1) in paragraph (1), by striking ``(6),'' and inserting 
        ``(7),''; and
            (2) by adding after paragraph (6) the following new 
        paragraph:
            ``(7) Uniform terms and conditions.--Subject to such 
        exceptions as the Secretary may prescribe in regulations, the 
        term `eligible lender' shall not include any lender that offers 
        different terms and conditions to different borrowers of the 
        same type of loan made or insured under this part.''.

SEC. 16. SPECIAL ALLOWANCE.

    Section 438 of the Act is amended--
            (1) in subsection (a)(3), by striking ``quarterly rate'' 
        each place it appears and inserting ``rate''; and
            (2) in subsection (b)--
                    (A) in paragraph (2)--
                            (i) by striking ``subparagraphs (B), (C), 
                        (D), (E), and (F)'' and inserting 
                        ``subparagraphs (B), (C), (D), (E), (F), and 
                        (G)''; and
                            (ii) by adding after subparagraph (F) the 
                        following new subparagraph:
            ``(G)(i) Notwithstanding any other provision of this 
        section, in the case of loans made or insured under this part 
        for which the first disbursement is made on or after October 1, 
        1997, the special allowance paid pursuant to this subsection 
        shall be computed for any 12-month period beginning on July 1 
        and ending on June 30 by--
                    ``(I) determining the bond equivalent rate on the 
                preceding June 1 of the securities with a comparable 
                maturity, as established by the Secretary; and
                    ``(II) subtracting the applicable interest rate on 
                such loans from such amount.
            ``(ii) The amount of special allowance computed under 
        clause (i) shall be paid in quarterly increments for the 3-
        month periods described in paragraph (1).''; and
                    (B) in paragraph (3), in the second sentence, by 
                striking ``determined for any such 3-month period shall 
                be paid promptly after the close of such period,'' and 
                inserting ``calculated under this subsection shall be 
                paid promptly after the close of the 3-month period for 
which such special allowance payment is due,''.

SEC. 17. STUDENT LOAN MARKETING ASSOCIATION OFFSET FEE.

    Section 439(h)(7) of the Act is amended by adding after 
subparagraph (C) the following new subparagraph:
            ``(D) The calculation of the fee required under 
        subparagraph (A) or (B), as the case may be, shall be 
        determined on the basis of the principal amount of all loans 
        (except for loans made under section 428C, 439(o) or 439(q))--
                    ``(i) owned, in whole or in part, by the 
                Association, any subsidiary of the Association, or any 
                company, trust or other entity owned by, or controlled 
                by, the Association; or
                    ``(ii) held by a trust (including by a trustee on 
                behalf of a trust), or by any other entity in which the 
                Association, or any subsidiary, holds more than a 
                minimal beneficial interest (as determined by the 
                Secretary).''.

SEC. 18. DIRECT LOAN TRANSITION FEE.

    Section 452(b) of the Act is amended to read as follows:
    ``(b) Transition Fees.--The Secretary shall pay fees to 
institutions of higher education (or a consortium of those 
institutions) with agreements under section 454(b), in the 1st year of 
their participation in the program authorized by this part, in order to 
compensate for costs associated with their transition to the program. 
The fees shall not exceed an average of $10 per borrower at all 
institutions receiving the fees.''.

SEC. 19. FUNDS FOR ADMINISTRATIVE EXPENSES.

    Section 458(a) of the Act is amended, in the first sentence, by 
striking ``$260,000,000'' through the end of the sentence and inserting 
the following: ``$532,000,000 in fiscal year 1998, $610,000,000 in 
fiscal year 1999, $705,000,000 in fiscal year 2000, $806,000,000 in 
fiscal year 2001, and $904,000,000 in fiscal year 2002.''.

SEC. 20. EXTENSION OF STUDENT AID PROGRAMS.

    Title IV of the Act is amended--
            (1) in section 401(a)(1), by striking ``September 30, 
        1998,'' and inserting ``September 30, 2002,'';
            (2) in section 424(a), by striking ``1998.'' and ``2002.'' 
        and inserting ``2002.'' and ``2006.'', respectively;
            (3) in section 428(a)(5), by striking ``1998,'' and 
        ``2002.'' and inserting ``2002,'' and ``2006.'', respectively;
            (4) in section 428C(e), by striking ``1998.'' and inserting 
        ``2002.''; and
            (5) in section 466--
                    (A) in subsection (a)--
                            (i) in the matter preceding paragraph (1), 
                        by striking ``September 30, 1996,'' and ``March 
                        31, 1997,'' and inserting ``September 30, 
                        2002,'' and ``March 31, 2003'', respectively; 
                        and
                            (ii) in paragraph (1), by striking 
                        ``September 30, 1996,'' and inserting 
                        ``September 30, 2002,'';
                    (B) in subsection (b), by striking ``September 30, 
                1996,'' and inserting ``September 30, 2002,''; and
                    (C) in subsection (c), by striking out ``October 1, 
                1997,'' and inserting ``October 1, 2002,''.

SEC. 21. EFFECTIVE DATES.

    (a) In General.--Except as otherwise provided in this section, the 
amendments made by this title shall take effect on the date of 
enactment of this Act.
    (b) Pell Grants.--Section 2 is effective for the calculation of 
Pell Grant awards for award years beginning on or after July 1, 1998.
    (c) Repayment Terms.--Section 7 is effective for a loan made under 
part B or part D of title IV of the Act for which the first 
disbursement is made on or after October 1, 1997.
    (d) Interest Rates.--Section 8(a)(3) and section 428(b)(5)(C) of 
the Act (as added by section 11(a)(2)(E)) are effective as if they were 
enacted on July 23, 1992.
    (e) Lender and Holder Risk Sharing; Contracts with Other Entities; 
Eligible Lender.--Sections 9, 14, and 15 take effect on October 1, 
1997.
    (f) Special Allowance.--Section 16 is effective for a loan made or 
insured under part B of title IV of the Act for which the first 
disbursement is made on or after October 1, 1997.
    (g) Student Loan Marketing Association Offset Fee.--Section 17 is 
effective as if it were enacted on August 10, 1993, but does not apply 
to the privatized entity that may be created as a result of the Student 
Loan Marketing Association Reorganization Act of 1996 (title VI of the 
Departments of Labor, Health and Human Services, Education and Related 
Agencies Appropriations Act, 1997, as enacted by section 101(e) of 
division A of Public Law 104-208).
                                 <all>