[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[S. 1762 Engrossed in Senate (ES)]

  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
107th CONGRESS
  1st Session
                                S. 1762

_______________________________________________________________________

                                 AN ACT


 
 To amend the Higher Education Act of 1965 to establish fixed interest 
  rates for student and parent borrowers, to extend current law with 
   respect to special allowances for lenders, 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. INTEREST RATE PROVISIONS.

    (a) FFEL Fixed Interest Rates.--
            (1) Amendment.--Section 427A of the Higher Education Act of 
        1965 (20 U.S.C. 1077a) is amended--
                    (A) by redesignating subsections (l) and (m) as 
                subsections (m) and (n), respectively; and
                    (B) by inserting after subsection (k) the following 
                new subsection:
    ``(l) Interest Rates for New Loans on or After July 1, 2006.--
            ``(1) In general.--Notwithstanding subsection (h), with 
        respect to any loan made, insured, or guaranteed under this 
        part (other than a loan made pursuant to section 428B or 428C) 
        for which the first disbursement is made on or after July 1, 
        2006, the applicable rate of interest shall be 6.8 percent on 
        the unpaid principal balance of the loan.
            ``(2) PLUS loans.--Notwithstanding subsection (h), with 
        respect to any loan under section 428B for which the first 
        disbursement is made on or after July 1, 2006, the applicable 
        rate of interest shall be 7.9 percent on the unpaid principal 
        balance of the loan.
            ``(3) Consolidation loans.--With respect to any 
        consolidation loan under section 428C for which the application 
        is received by an eligible lender on or after July 1, 2006, the 
        applicable rate of interest shall be at an annual rate on the 
        unpaid principal balance of the loan that is equal to the 
        lesser of--
                    ``(A) the weighted average of the interest rates on 
                the loans consolidated, rounded to the nearest higher 
                one-eighth of 1 percent; or
                    ``(B) 8.25 percent.''.
            (2) Conforming amendment.--Section 428C(c)(1)(A) of such 
        Act (20 U.S.C. 1078-3(c)(1)(A)) is amended to read as follows:
            ``(1) Interest rate.--(A) Notwithstanding subparagraphs (B) 
        and (C), with respect to any loan made under this section for 
        which the application is received by an eligible lender--
                    ``(i) on or after October 1, 1998, and before July 
                1, 2006, the applicable interest rate shall be 
                determined under section 427A(k)(4); or
                    ``(ii) on or after July 1, 2006, the applicable 
                interest rate shall be determined under section 
                427A(l)(3).''.
    (b) Direct Loans Fixed Interest Rates.--
            (1) Technical correction.--Paragraph (6) of section 455(b) 
        of the Higher Education Act of 1965 (20 U.S.C. 1087e(b)), as 
        redesignated by section 8301(c)(1) of the Transportation Equity 
        Act for the 21st Century (Public Law 105-178; 112 Stat. 498) is 
        redesignated as paragraph (9) and is transferred to follow 
        paragraph (7) of section 455(b) of the Higher Education Act of 
        1965.
            (2) Amendments.--Section 455(b) of the Higher Education Act 
        of 1965 (20 U.S.C. 1087e(b)) is amended--
                    (A) by redesignating paragraph (7) as paragraph 
                (8); and
                    (B) by inserting after paragraph (6) the following 
                new paragraph:
            ``(7) Interest rate provision for new loans on or after 
        july 1, 2006.--
                    ``(A) Rates for fdsl and fdusl.--Notwithstanding 
                the preceding paragraphs of this subsection, for 
                Federal Direct Stafford Loans and Federal Direct 
                Unsubsidized Stafford Loans for which the first 
                disbursement is made on or after July 1, 2006, the 
                applicable rate of interest shall be 6.8 percent on the 
                unpaid principal balance of the loan.
                    ``(B) PLUS loans.--Notwithstanding the preceding 
                paragraphs of this subsection, with respect to any 
                Federal Direct PLUS loan for which the first 
                disbursement is made on or after July 1, 2006, the 
                applicable rate of interest shall be 7.9 percent on the 
                unpaid principal balance of the loan.
                    ``(C) Consolidation loans.--Notwithstanding the 
                preceding paragraphs of this subsection, any Federal 
                Direct Consolidation loan for which the application is 
                received on or after July 1, 2006, shall bear interest 
                at an annual rate on the unpaid principal balance of 
                the loan that is equal to the lesser of--
                            ``(i) the weighted average of the interest 
                        rates on the loans consolidated, rounded to the 
                        nearest higher one-eighth of one percent; or
                            ``(ii) 8.25 percent.''.
    (c) Extension of Current Interest Rate Provisions for Three 
Years.--Sections 427A(k) and 455(b)(6) of the Higher Education Act of 
1965 (20 U.S.C. 1077a(k), 1087e(b)(6)) are each amended--
            (1) by striking ``2003'' in the heading and inserting 
        ``2006''; and
            (2) by striking ``July 1, 2003,'' each place it appears and 
        inserting ``July 1, 2006,''.

SEC. 2. EXTENSION OF SPECIAL ALLOWANCE PROVISION.

    Section 438(b)(2)(I) of the Higher Education Act of 1965 (20 U.S.C. 
1087-1(b)(2)(I)) is amended--
            (1) by striking ``, and before july 1, 2003'' in the 
        heading;
            (2) by striking ``and before July 1, 2003,'' each place it 
        appears, other than in clauses (ii) and (v);
            (3) by striking clause (ii) and inserting the following:
                            ``(ii) In school and grace period.--In the 
                        case of any loan--
                                    ``(I) for which the first 
                                disbursement is made on or after 
                                January 1, 2000, and before July 1, 
                                2006, and for which the applicable rate 
                                of interest is described in section 
                                427A(k)(2); or
                                    ``(II) for which the first 
                                disbursement is made on or after July 
                                1, 2006, and for which the applicable 
                                rate of interest is described in 
                                section 427A(l)(1), but only with 
                                respect to (aa) periods prior to the 
                                beginning of the repayment period of 
                                the loan; or (bb) during the periods in 
                                which principal need not be paid 
                                (whether or not such principal is in 
                                fact paid) by reason of a provision 
                                described in section 427(a)(2)(C) or 
                                428(b)(1)(M);
                        clause (i)(III) of this subparagraph shall be 
                        applied by substituting `1.74 percent' for 
                        `2.34 percent'.'';
            (4) in clause (iii), by inserting ``or (l)(2)'' after 
        ``427A(k)(3)'';
            (5) in clause (iv), by inserting ``or (l)(3)'' after 
        ``427A(k)(4)'';
            (6) in clause (v)--
                    (A) in the heading, by inserting ``before july 1, 
                2006'' after ``plus loans''; and
                    (B) by striking ``July 1, 2003,'' and inserting 
                ``July 1, 2006,'';
            (7) in clause (vi)--
                    (A) by inserting ``or (l)(3)'' after ``427A(k)(4)'' 
                the first place it appears; and
                    (B) by inserting ``or (l)(3), whichever is 
                applicable'' after ``427A(k)(4)'' the second place it 
                appears; and
            (8) by adding at the end the following new clause:
                            ``(vii) Limitation on special allowances 
                        for plus loans on or after july 1, 2006.--In 
                        the case of PLUS loans made under section 428B 
                        and first disbursed on or after July 1, 2006, 
                        for which the interest rate is determined under 
                        section 427A(l)(2), a special allowance shall 
                        not be paid for such loan during any 12-month 
                        period beginning on July 1 and ending on June 
                        30 unless--
                                    ``(I) the average of the bond 
                                equivalent rates of the quotes of the 
                                3-month commercial paper (financial), 
                                as published by the Board of Governors 
                                of the Federal Reserve System in 
                                Publication H-15 (or its successor), 
                                for the last calendar week ending on or 
                                before such July 1; plus
                                    ``(II) 2.64 percent,
                        exceeds 9.0 percent.''.

            Passed the Senate December 14, 2001.

            Attest:

                                                             Secretary.
107th CONGRESS

  1st Session

                                S. 1762

_______________________________________________________________________

                                 AN ACT

 To amend the Higher Education Act of 1965 to establish fixed interest 
  rates for student and parent borrowers, to extend current law with 
   respect to special allowances for lenders, and for other purposes.