Short title

This Act may be cited as the

Higher Education Affordability Resource Act

Hope scholarship credit expanded to cover expenses for other educational expenses

(a)

In general

Sections 25A and 6050S of the Internal Revenue Code of 1986 are each amended by striking qualified tuition and related expenses each place it appears and inserting qualified higher education expenses. (b)

Qualified higher education expenses

Section 25A(f)(1) of such Code is amended to read as follows:

(1)

Qualified higher education expenses

The term qualified higher education expenses means the qualified higher education expenses (as defined by section 529(e)(3) without regard to subparagraph (B) thereof) required for the enrollment or attendance of— (A)the taxpayer, (B)the taxpayer’s spouse, or (C)any dependent of the taxpayer with respect to whom the taxpayer is allowed a deduction under section 151,

at an eligible educational institution for courses of instruction of such individual at such institution.

(c)

Effective date

The amendments made by this section shall apply to expenses paid after December 31, 2005 (in taxable years ending after such date), for education furnished in academic periods beginning after such date.

Loan forgiveness for public service employees

Section 428K (20 U.S.C. 1078–11) is amended to read as follows:

428K.

Loan forgiveness for public service employees

(a)

Purposes

The purposes of this section are— (1)to reduce the burden of student debt, particularly for Americans who dedicate their careers to meeting certain urgent national needs; and (2)to attract more excellent individuals into important public service careers. (b)

Loan forgiveness

(1)

In general

The Secretary shall assume the obligation to repay, pursuant to subsection (c), a loan made under section 428 or 428H, a Federal Direct Stafford Loan or Federal Direct Unsubsidized Stafford Loan, a Federal Direct Consolidation Loan, or a Federal Perkins Loan for any new borrower after the date of enactment of the Higher Education Amendments of 1998, who— (A)is employed full time in a qualified public service position described in paragraph (2); and (B)is not in default on a loan for which the borrower seeks forgiveness. (2)

Qualified public service positions

For purposes of this section, an individual shall be treated as employed in a qualified public service position if the individual is any of the following: (A)

Highly qualified teachers in low-income communities and of mathematics, science, and bilingual and special education

An individual who— (i)is highly qualified as such term is defined in section 9101 of the Elementary and Secondary Education Act of 1965; and (ii) (I)has obtained employment as a teacher for service in a public or nonprofit private elementary or secondary school which is in the school district of a local educational agency which is eligible in such year for assistance pursuant to title I of the Elementary and Secondary Education Act of 1965, and which for the purpose of this paragraph and for that year has been determined by the Secretary (pursuant to regulations and after consultation with the State educational agency of the State in which the school is located) to be a school in which the enrollment of children counted under section 1113(a)(5) of the Elementary and Secondary Education Act of 1965 exceeds 40 percent of the total enrollment of that school; or (II)has obtained employment as a full-time teacher of mathematics, science, or bilingual or special education. (B)

Nurses in low income communities

An individual who has obtained employment — (i) (I)in a clinical setting; or (II)as a member of the nursing faculty at an accredited school of nursing (as those terms are defined in section 801 of the Public Health Service Act (42 U.S.C. 296)); and (ii)serves a low-income or needy community. (C)

Child welfare workers

An individual who— (i)has completed a degree in social work or related field with a focus on serving children and families (as determined in accordance with regulations prescribed by the Secretary); and (ii)has obtained employment in public or private child welfare services. (D)

First responders in low-income communities

An individual who, as determined by the Secretary of Education by regulation— (i)has obtained employment as a firefighter, police officer, or emergency medical technician; and (ii)serves a low-income community. (c)

Loan repayment

(1)

In general

The Secretary shall assume the obligation to repay— (A)after each of the first or second years of service by an individual in a qualified public service position, 15 percent of the total amount of principal and interest of the loans described in subsection (b)(1) to such individual that are outstanding immediately preceding such first year of such service; (B)after each of the third or fourth years of such service, 20 percent of such total amount; and (C)after the fifth year of such service, 30 percent of such total amount. (2)

Treatment of consolidation loans

A loan amount for a loan made under section 428C or for a Federal Direct Consolidation Loan may be a qualified loan amount for the purposes of this subsection only to the extent that such loan amount was used to repay a loan described in subsection (b)(1) for a borrower who meets the requirements of subsection (b), as determined in accordance with regulations prescribed by the Secretary. (3)

Construction

Nothing in this section shall be construed to authorize the refunding of any repayment of a loan made under section 428 or 428H, a Federal Direct Stafford Loan or Federal Direct Unsubsidized Stafford Loan, a Federal Direct Loan, or a Federal Perkins Loan. (4)

Interest

If a portion of a loan is repaid by the Secretary under this section for any year, the proportionate amount of interest on such loan that accrues for such year shall be repaid by the Secretary. (5)

Ineligibility of national service award recipients

No student borrower may, for the same 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. 12601 et seq.). (6)

Ineligibility for double benefits

No borrower may receive a reduction of loan obligations under both this section and section 428J or 460. (7)

Continued eligibility of teachers

Any teacher who performs service in a school that— (A)meets the requirements of subsection (b)(2)(A)(ii)(I) 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 forgiveness pursuant to subsection (b).

(d)

Repayment to eligible lenders and holders

The Secretary shall pay to each eligible lender or holder for each fiscal year an amount equal to the aggregate amount of the lender’s or holder’s loans that are subject to repayment pursuant to this section for such year. (e)

Application for repayment

(1)

In general

Each eligible individual desiring loan repayment under this section shall submit a complete and accurate application to the Secretary at such time, in such manner, and containing such information as the Secretary may require. (2)

Conditions

An eligible individual may apply for loan repayment under this section after completing each of the consecutive years of qualifying service described in subsection (c)(1). The borrower may elect to receive forbearance while engaged in qualifying service described in subsection (c)(1) unless the borrower is in deferment while so engaged. (f)

Regulations

The Secretary is authorized to prescribe such regulations as may be necessary to carry out the provisions of this section. (g)

Definitions

In this section: (1)

Child welfare services

The term child welfare services has the meaning given the term in section 425 of the Social Security Act. (2)

Degree

The term degree means an associate’s or bachelor’s degree awarded by an institution of higher education. (3)

Eligible nurse

The term eligible nurse means a nurse who meets all of the following: (A)The nurse graduated from— (i)an accredited school of nursing (as those terms are defined in section 801 of the Public Health Service Act (42 U.S.C. 296)); (ii)a nursing center; or (iii)an academic health center that provides nurse training. (B)The nurse holds a valid and unrestricted license to practice nursing in the State in which the nurse practices in a clinical setting. (C)The nurse holds 1 or more of the following: (i)A graduate degree in nursing, or an equivalent degree. (ii)A nursing degree from a collegiate school of nursing (as defined in section 801 of the Public Health Service Act (42 U.S.C. 296)). (iii)A nursing degree from an associate degree school of nursing (as defined in section 801 of the Public Health Service Act (42 U.S.C. 296)). (iv)A nursing degree from a diploma school of nursing (as defined in section 801 of the Public Health Service Act (42 U.S.C. 296)). (4)

Low-income community

In this subsection, the term low-income community means a community in which 70 percent of households earn less than 85 percent of the State median household income. (5)

Year

The term year, where applied to service as a teacher (or service as a member of an accredited school of nursing (as those terms are defined in section 801 of the Public Health Service Act (42 U.S.C. 296))), means an academic year as defined by the Secretary.

Year-round pell grants

Section 401(b)(6) (20 U.S.C. 1070a(b)(6)) is amended by striking may allow, on a case-by-case basis, and inserting shall allow.

Treatment of prepayment and savings plans under student financial aid needs analysis

(a)

Definition of assets

Subsection (f) of section 480 of the Higher Education Act of 1965 (20 U.S.C. 1087vv(j)) is amended— (1)in paragraph (1), by inserting qualified education benefit (except as provided in paragraph (3)), after tax shelters,; and (2)by adding at the end the following new paragraphs:

(3)A qualified education benefit shall not be considered an asset of the student under section 475 of this part. (4)For purposes of this subsection, the term qualified education benefit means— (A)a program which is described in clause (i) of section 529(b)(1)(A) of the Internal Revenue Code of 1986 and which meets the requirements of section 529(b)(1)(B) of such Code; (B)a State tuition program described in clause (ii) of section 529(b)(1)(A) of the Internal Revenue Code of 1986 which meets the requirements of section 529(b)(1)(B) of such Code; and (C)a Coverdell education savings account (as defined in section 530(b)(1) of the Internal Revenue Code of 1986).

(b)

Definition of other financial assistance

Subsection (j) of section 480 of the Higher Education Act of 1965 (20 U.S.C. 1087vv(j)) is amended— (1)by striking ; Tuition Prepayment Plans in the heading of such subsection; (2)by striking (1) For purposes and inserting For purposes; and (3)by striking paragraph (2). (c)

Effective date

The amendments made by this section shall apply with respect to determinations of need under part F of title IV of the Higher Education Act of 1965 for academic years beginning on or after July 1, 2005.

Special transition assistance plans for borrowers

(a)

Plans authorized

Section 428(b)(9) (20 U.S.C. 1078(b)(9)) is amended by adding at the end the following new subparagraph:

(C)

Special transition assistance plans

In addition to the plans required by subparagraph (A), the lender shall provide a borrower who has not yet completed 12 months in the repayment period with the option to repay a loan made under this section in accordance with a special transition assistance plan. The interest rate on a loan for which the borrower elected a special transition assistance plan shall be determined in accordance with section 427A(k) or 427A(l), as applicable. If a borrower participates in a special transition assistance plan for 24 or more months, and then repays the outstanding balance of the loan more than 24 months prior to the last scheduled payment on the loan, the borrower shall repay the Secretary the amount of interest that accrued on the loan during the 24 months beginning on the effective date of the plan.

(b)

Interest rates

(1)

Pre-2006 loans

Section 427A(k) (20 U.S.C. 1077a(k)) is amended— (A)by redesignating paragraph (6) as paragraph (7); and (B)by inserting after paragraph (5) the following new paragraph:

(6)

Special transition assistance plans interest rates

(A)

In general

Notwithstanding paragraph (1), with respect to any loan for which the borrower elected a special transition assistance plan as provided in section 428(b)(9)(C)— (i)for 24 months beginning on the effective date of the plan the applicable rate of interest shall be 3.4 percent; and (ii)for the last 24 months of the scheduled repayment period the applicable rate of interest shall be computed for each calendar quarter beginning January 1, April 1, July 1, and October 1 of each year— (I)by determining the average of the bond equivalent rates of the quotes of the 3-month commercial paper (financial) rates in effect for each of the days in such quarter as reported by the Federal Reserve in Publication H–15 (or its successor) for such 3-month period; (II)by subtracting the applicable interest rates on such loans from such average bond equivalent rate; (III)by adding 2.34 percent to the resultant percent; and by dividing the resultant percent by 4. (B)

Exception

The interest rate on a loan for which the borrower elected a special transition assistance plan for the period beginning the first day of the last 24 months of the scheduled repayment period until the beginning of the first calendar quarter thereafter will be computed using the average of the bond equivalent rates of the quotes of the 3-month commercial paper (financial) rates in effect for the quarter ending the previous March 31, June 30, September 30, or December 31.

(2)

Post-2006 loans

Section 427A(l) (20 U.S.C. 1077a(l)) is amended by adding at the end the following new paragraph:

(4)

Special transition assistance plans interest rates

(A)

In general

Exception

(c)

Additional conforming amendments

(1)Section 427(a)(2)(H) (20 U.S.C. 1077(a)(2)(H)) is amended by inserting after regulations of the Secretary the following: or in accordance with a special transition assistance plan as provided in section 428(b)(9)(C). (2)Section 428(b)(1)(E)(i) (20 U.S.C. 1078(b)(1)(E)(i)) is amended by inserting after regulations of the Secretary the following: or in accordance with a special transition assistance plan as provided in section 428(b)(9)(C). (3)Section 428(b)(1)(L)(i) (20 U.S.C. 1078(b)(1)(L)(i)) is amended by inserting before , be less than $600 the following: or the borrower is in the first 24 months after the borrower elected a special transition assistance plan as provided in section 428(b)(9)(C). (4)Section 428C(a)(4)(A) (20 U.S.C. 1078–3(a)(4)(A)) is amended by inserting before the semicolon the following: except a loan for which the borrower elected a special transition assistance plan as provided in section 428(b)(9)(C). (5)Section 428J(e)(1) (20 U.S.C. 1078–10(e)(1)) is amended by adding at the end the following new sentence: A loan for which the borrower elected a special transition assistance plan as provided in section 428(b)(9)(C) is not eligible for repayment under this section..

Support for academic credit transfers

Subpart 2 of part A of title IV of the Higher Education Act of 1965 is amended— (1)by redesignating section 407E as section 406E; and (2)by inserting after chapter 3 (20 U.S.C. 1070a–31 et seq.) the following new chapter:

Support for academic credit transfers

407A.

Purpose

It is the purpose of this chapter to enhance opportunities of students to transfer between institutions in order to complete bachelor’s degrees by supporting the development and implementation of articulation and guaranteed transfer agreements.

407B.

Activities

(a)

Grants authorized

From the amounts appropriated under section 407C, the Secretary shall award grants to a partnership that includes two or more institutions of higher education, at least one of which offers a baccalaureate or postbaccalaureate degree. (b)

Use of funds

Grants awarded under this part shall be used for— (1)the development of policies to promote the transfer of academic credits between institutions and expanding articulation and guaranteed transfer agreements; (2)support services to students participating in the program, such as tutoring, mentoring, and academic and personal counseling, as well as any service that facilitates the transition of students between the partner institutions; (3)academic program enhancements at the community or technical college that result in increasing the quality of the program offered and the number of student participants in the dual degree program offered in conjunction with a baccalaureate degree granting institution; and (4)programs to identify barriers that inhibit student transfers. (c)

Applications

Any partnership that desires to obtain a grant under this section shall submit to the Secretary an application at such time, in such manner, and containing such information or assurances as the Secretary may require. (d)

Regulations

The Secretary shall prescribe such regulations as may be necessary to carry out this section.

407C.

Authorization of appropriations

There are authorized to be appropriated $70,000,000 to carry out this chapter for fiscal year 2004 and such sums as may be necessary for each of the 3 succeeding fiscal years.

Financial aid administrator discretion

Section 479A(a) (20 U.S.C. 1087tt(a)) is amended— (1)by inserting as described in paragraph (1) after on the basis of adequate documentation; and (2)by inserting on a case-by-case basis to after on a case-by-case basis to the cost of attendance or.

Prevention of excessive debt

Section 479A(c) (20 U.S.C. 1087tt(c)) is amended— (1)by inserting or on a program, class-year, or institution-wide basis after On a case-by-case basis; and (2)by adding at the end the following new sentences: An institution may not refuse to certify, or reduce the amount certified for, a loan under part B in order to require the student to borrow a loan under part D if the student has remaining loan eligibility under part B. An institution that refuses or reduces a certification under this subsection may subsequently certify or increase the amount certified, subject to the remaining loan eligibility of the student borrower..