[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1425 Introduced in House (IH)]






109th CONGRESS
  1st Session
                                H. R. 1425

 To ensure that the Federal student loans are delivered as efficiently 
       as possible, so that there is more grant aid for students.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             March 17, 2005

 Mr. Petri (for himself, Mr. George Miller of California, Mr. Doggett, 
Mr. Brown of Ohio, Mr. Sanders, Mr. Bishop of New York, Mr. Filner, Mr. 
   McDermott, Ms. Kilpatrick of Michigan, Ms. Lee, Mr. Grijalva, Mr. 
    Hinchey, Mr. Kucinich, Mr. Wu, Mr. Van Hollen, Ms. Watson, Mr. 
   Etheridge, Ms. Moore of Wisconsin, Mr. Cummings, Ms. McCollum of 
 Minnesota, Mr. Israel, Mrs. Jones of Ohio, Ms. Bordallo, Mr. Crowley, 
 Ms. Schakowsky, Mr. Hastings of Florida, Mr. Tierney, Mr. Kildee, Mr. 
Brown of South Carolina, Ms. Pelosi, and Mr. Alexander) introduced the 
 following bill; which was referred to the Committee on Education and 
                             the Workforce

_______________________________________________________________________

                                 A BILL


 
 To ensure that the Federal student loans are delivered as efficiently 
       as possible, so that there is more grant aid for students.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Student Aid Reward Act of 2005''.

SEC. 2. STUDENT AID REWARD PROGRAM.

    Part G of title IV of the Higher Education Act of 1965 is amended 
by inserting after section 489 (20 U.S.C. 1096) the end the following:

``SEC. 489A. STUDENT AID REWARD PROGRAM.

    ``(a) Program Authorized.--The Secretary shall carry out a Student 
Aid Reward Program to encourage institutions of higher education to 
participate in the student loan program under this title that is most 
cost-effective for taxpayers.
    ``(b) Program Requirements.--In carrying out the Student Aid Reward 
Program, the Secretary shall--
            ``(1) provide to each institution of higher education 
        participating in the student loan program under this title that 
        is most cost-effective for taxpayers a Student Aid Reward 
        Payment, in an amount determined in accordance with subsection 
        (c), to encourage the institution to participate in that 
        student loan program;
            ``(2) require each institution of higher education 
        receiving a payment under this section to provide student loans 
        under that student loan program for a period of 5 years from 
        the date the payment is made;
            ``(3) where appropriate, 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;
            ``(4) permit such funds to also be used to award lower and 
        middle income graduate students need-based grants; and
            ``(5) encourage all institutions of higher education to 
        participate in the Student Aid Reward Program.
    ``(c) Amount.--The amount of a Student Aid Reward Payment under 
this section shall be not less than 50 percent of the savings to the 
Federal Government generated by the institution's participation in the 
student loan program under this title that is most cost-effective for 
taxpayers instead of the institution's participation in the student 
loan program not cost-effective for taxpayers.
    ``(d) Trigger to Ensure Cost Neutrality.--
            ``(1) Limit to ensure cost neutrality.--Notwithstanding 
        subsection (c), the Secretary shall not distribute Student Aid 
        Reward Payments under the Student Aid Reward Program that, in 
        the aggregate, exceed the Federal savings resulting from 
        implementation of the Student Aid Reward Program.
            ``(2) Federal savings.--In calculating Federal savings, as 
        used in paragraph (1), the Secretary shall determine Federal 
        savings on loans made to students at institutions of higher 
        education that participate the student loan program under this 
        title that is most cost-effective for taxpayers and that, on 
        the date of enactment of the Student Aid Reward Program, 
        participated in the student loan program that is not the most 
        cost-effective for taxpayers, resulting from the difference 
        of--
                    ``(A) the Federal cost of loan volume made under 
                the student loan program under this title that is most 
                cost-effective for taxpayers; and
                    ``(B) the Federal cost of an equivalent type and 
                amount of loan volume made, insured, or guaranteed 
                under the student loan program under this title that is 
                not the most cost-effective for taxpayers.
            ``(3) Distribution rules.--If the Federal savings 
        determined under paragraph (2) is not sufficient to distribute 
        full Student Aid Reward Payments under the Student Aid Reward 
        Program, the Secretary shall--
                    ``(A) first make Student Aid Reward Payments to 
                those institutions of higher education that 
                participated in the student loan program under this 
                title that is not the most cost-effective for taxpayers 
                on the date of enactment of the Student Aid Reward 
                Program; and
                    ``(B) with any remaining Federal savings after 
                making Payments under subparagraph (A), make Student 
                Aid 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 Student Aid Reward Payment under this 
        section--
                    ``(A) shall distribute, where appropriate, part or 
                all of such payment among the students of such 
                institution who are Pell Grant recipients by awarding 
                such students a supplemental grant; and
                    ``(B) may distribute part of such payment as a 
                supplemental grant to graduate students in financial 
                need.
            ``(5) Estimates, adjustments, and carry over.--
                    ``(A) Estimates and adjustments.--The Secretary may 
                make Student Aid Reward Payments to institutions of 
                higher education on the basis of estimates, using the 
                best data available at the beginning of an academic/
                fiscal year. If the Secretary determines thereafter 
                that loan program costs for that academic/fiscal year 
                were different than such estimate, the Secretary shall 
                adjust (reduce or increase) subsequent Student Aid 
                Reward Payments rewards paid to such institutions of 
                higher education to reflect such difference.
                    ``(B) Carry over.--Any institution of higher 
                education that receives a reduced Student Aid 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 academic or fiscal years.
    ``(e) Definition.--For purposes of this section--
            ``(1) the student loan program under this title that is 
        most cost-effective for taxpayers is the loan program under 
        part B or D of this title that has the lowest overall cost to 
        the Federal Government (including administrative costs) for the 
        loans authorized by such parts; and
            ``(2) the student loan program under this title that is not 
        most cost-effective for taxpayers is the loan program under 
        part B or D of this title that does not have the lowest overall 
        cost to the Federal Government (including administrative costs) 
        for the loans authorized by such parts.''.
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