I 108th CONGRESS 2d Session H. R. 4370 IN THE HOUSE OF REPRESENTATIVES May 17, 2004 Mr. Petri (for himself and Mr. George Miller of California) introduced the following bill; which was referred to the Committee on Education and the Workforce A BILL To ensure that the Direct Loan Program is a competitive alternative to the Federal Family Education Loan Program for schools and students.

1.

Short title

This Act may be cited as the &short-title1;.

2.

Direct Loan Reward Program

Part D of title IV of the Higher Education Act of 1965 (20 U.S.C. 1087a et seq.) is amended by adding at the end the following:

460A.

Direct Loan Reward Program

(a)

Program authorized

The Secretary shall carry out a Direct Loan Reward Program to encourage institutions of higher education to participate in the student loan program under this part. (b)

Program requirements

In carrying out the Direct Loan Reward Program, the Secretary shall— (1)provide to each institution of higher education participating in the student loan program under this part a financial reward payment, in an amount determined in accordance with subsection (c), to encourage the institution to provide student loans under this part; (2)require each institution of higher education receiving a payment under this section to provide student loans under this part for a period of 5 years from the date the payment is made; (3)require that funds paid to institutions of higher education under this section be used to award students a supplement to such students’ Pell Grants under subpart 1 of part A; and (4)for a period of 2 years beginning on the date of enactment of this section, encourage all institutions of higher education to participate in the Direct Loan Reward Program. (c)

Amount

The amount of a financial reward payment under this section shall be an amount equal to 50 percent of the savings to the Federal Government generated by the institution’s participation in the student loan program under this part instead of the institution’s participation in the student loan program under part B. (d)

Trigger to ensure cost neutrality

(1)

Limit to ensure cost neutrality

Notwithstanding subsection (c), the Secretary shall not distribute financial reward payments under the Direct Loan Reward Program that, in the aggregate, exceed the Federal savings resulting from implementation of the Direct Loan Reward Program. (2)

Federal savings

In calculating Federal savings, as used in paragraph (1), the Secretary shall determine any Federal savings on loans made to students at institutions of higher education that participate in the Direct Loan Reward Program and that, on the date of enactment of the Direct Loan Reward Program, participated in the student loan program under part B, resulting from the difference of— (A)the Federal cost of loan volume made under this part; and (B)the Federal cost of an equivalent type and amount of loan volume made, insured, or guaranteed under part B. (3)

Distribution rules

If the Federal savings determined under paragraph (2) is not sufficient to distribute full financial reward payments under the Direct Loan Reward Program, the Secretary shall— (A)first make financial reward payments to those institutions of higher education that participated in the student loan program under part B on the date of enactment of the Direct Loan Reward Program; and (B)with any remaining Federal savings after making payments under subparagraph (A), make financial reward payments to the institutions of higher education not described in subparagraph (A) on a pro-rata basis. (4)

Distribution to students

Any institution of higher education that receives a financial reward payment under this section shall distribute such payment among the students of such institution who are Pell Grant recipients by awarding each such student an equal supplemental grant. Such supplemental grant shall be known as a Pell Reward. (5)

Carry over

Any institution of higher education that receives a reduced financial reward payment under paragraph (3)(B), shall remain eligible for the unpaid portion of such institution’s financial reward payment, as well as any additional financial reward payments for which the institution is otherwise eligible, in subsequent fiscal years.

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