[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4035 Introduced in House (IH)]







110th CONGRESS
  1st Session
                                H. R. 4035

  To study, pilot, and implement a comprehensive, structural, market-
  based reform to the Federal Family Education Loan Program to reduce 
           costs to taxpayers and improve program efficiency.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            October 31, 2007

  Mr. Petri introduced the following bill; which was referred to the 
                    Committee on Education and Labor

_______________________________________________________________________

                                 A BILL


 
  To study, pilot, and implement a comprehensive, structural, market-
  based reform to the Federal Family Education Loan Program to reduce 
           costs to taxpayers and improve program efficiency.

    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 the ``Student Loan Auction Market Act''.

SEC. 2. MARKET-BASED DETERMINATION OF LENDER RETURNS.

    (a) Joint Planning Study To Select Auction Mechanisms for 
Testing.--
            (1) Planning study.--The Secretaries of Education and 
        Treasury jointly shall conduct a planning study, in 
        consultation with the Office of Management and Budget, the 
        Congressional Budget Office, the Government Accountability 
        Office, and other individuals and entities the Secretaries 
        determine appropriate, to--
                    (A) examine the matters described in paragraph (2) 
                in order to determine which market-based mechanisms for 
                determining lender returns on loans made, insured, or 
                guaranteed under part B of title IV of the Higher 
                Education Act of 1965 (20 U.S.C. 1071 et seq.) shall be 
                tested under the pilot programs described in subsection 
                (c); and
                    (B) determine what related administrative and other 
                changes will be required in order to ensure that high-
                quality services are provided under a successful 
                implementation of market-based determinations of lender 
                returns for all loans made, insured, or guaranteed 
                under such part.
            (2) Matters examined.--The planning study under this 
        subsection shall examine--
                    (A) whether it is most appropriate to auction 
                existing loans under part B of title IV, to auction the 
                rights to originate loans under such part, or whether 
                the sale of securities backed by federally owned 
                student loan assets originated by banks acting as 
                agents of the Federal Government would provide the most 
                efficient market-based alternative;
                    (B) matters related to efficient financial 
                organization of any auctions or sales, including how 
                loans and origination rights are bundled, the capital 
                structure of any securitization plan, and issues 
                related to servicing; and
                    (C) how to ensure that statutory, regulatory, and 
                administrative requirements do not impede separate 
                management and ownership of loans or assets backed by 
                loans under part B of title IV.
            (3) Mechanisms.--In determining which market-based 
        mechanisms are the most promising models to test the pilot 
        programs under subsection (b), the planning study shall take 
        into account whether a particular market-based mechanism will--
                    (A) ensure loan availability under part B of title 
                IV to all eligible students at all participating 
                institutions;
                    (B) minimize administrative complexity for 
                borrowers, institutions, lenders, and the Federal 
                Government; and
                    (C) reduce Federal costs if used on a program-wide 
                basis.
            (4) Report.--A report on the results of the planning study, 
        together with a plan for implementation of one or more pilot 
        programs using promising market-based approaches for 
        determining lender returns, shall be transmitted to Congress 
        not later than 6 months following the date of enactment of this 
        Act.
            (5) Exclusion.--In conducting the planning study, and 
        proposing pilot programs for testing under this section, the 
        Secretaries of Education and the Treasury shall exclude from 
        consideration the Federal PLUS loans described in section 428B 
        that are the subject of the competitive loan auction pilot 
        program under section 499 of the Higher Education Act of 1965 
        (as added by section 701 of the College Cost Reduction and 
        Access Act).
    (b) Pilot Programs To Be Tested.--
            (1) Authorization.--
                    (A) In general.--Notwithstanding any other 
                provision of law, after the report described in 
                subsection (a)(4) is transmitted to Congress, the 
                Secretary of Education shall, in consultation with the 
                Secretary of the Treasury, begin preparations necessary 
                to carry out pilot programs meeting the requirements of 
                this subsection in accordance with the implementation 
                plan included in the report.
                    (B) Implementation date.--The Secretary of 
                Education shall commence implementation of the pilot 
                programs under this subsection not earlier than July 1, 
                2009.
                    (C) Duration and loan volume.--The pilot programs 
                under this subsection shall be not more than two 
                academic years in duration, and the Secretary of 
                Education may use the pilot programs to determine the 
                lender returns for not more than--
                            (i) 10 percent of the annual loan volume 
                        under this part B of title IV during the first 
                        year of the pilot programs under this 
                        subsection; and
                            (ii) 20 percent of the annual loan volume 
                        under this part B of title IV during the second 
                        year of the pilot programs under this 
                        subsection.
            (2) Voluntary participation.--
                    (A) Participation in any auction-based pilot 
                program under this subsection shall be voluntary for 
                eligible institutions and eligible lenders 
                participating under part B of title IV prior to July 1, 
                2006.
                    (B) All savings to the United States Treasury 
                generated by such auctions shall be distributed to 
                institutions participating under this section on a 
                basis proportionate to loan volume under such part for 
                supplemental, need-based financial aid, except that an 
                institution that is operating as an eligible lender 
                under section 435(d)(2) shall not be eligible for any 
                such distribution.
            (3) Independent evaluation.--The Government Accountability 
        Office shall conduct an independent evaluation of the pilot 
        programs conducted under this section and under section 499 of 
        the Higher Education Act of 1965 (as added by section 701 of 
        the College Cost Reduction and Access Act). Such evaluation 
        shall be completed, and the results of such submitted to the 
        Secretary of Education, the Secretary of the Treasury, and 
        Congress, not later than 120 days after the termination of the 
        pilot programs under this subsection.
    (c) Program-Wide Implementation.--Notwithstanding any other 
provision of part B of title IV, for the first academic year beginning 
not less than 120 days after the independent evaluation described in 
subsection (b)(3) has been transmitted to Congress, and succeeding 
academic years, the Secretary of Education is authorized to implement 
for all loans made under such part (other than loans made under the 
William D. Ford Direct Loan Program), a program-wide, market-based 
system to determine returns to all lenders as the Secretary of 
Education determines appropriate, provided that--
            (1) the Secretary of Education, in consultation with the 
        Secretary of the Treasury, has certified that the auction-based 
        system that the Secretary of Education intends to implement on 
        a program-wide basis would--
                    (A) ensure loan availability under such part to all 
                eligible students at all participating institutions;
                    (B) minimize administrative complexity for 
                borrowers, institutions, lenders, and the Federal 
                Government, including the enhancement of the 
                modernization of the student financial aid system; and
                    (C) reduce Federal costs when used on a program-
                wide basis; and
            (2) the Secretary of Education has notified Congress of the 
        Secretary's intent to implement a program-wide auction-based 
        system, and provided a description of the structure of the 
        auction-based system, at least 120 days before implementing 
        such a system.
    (d) Consultation.--
            (1) In general.--As part of the planning study, pilot 
        programs, and program-wide implementation phases described in 
        this section, the Secretary of Education shall consult with 
        representatives of investment banks, ratings agencies, lenders, 
        institutions of higher education and students, as well as 
        individuals or other entities with pertinent technical 
        expertise. The Secretary of Education shall engage in such 
        consultations using such methods as, and to the extent that, 
        the Secretary determines appropriate to the time constraints 
        associated with the study and programs.
            (2) Services of other federal agencies.--In carrying out 
        the planning study and pilot programs described in this 
        section, the Secretary of Education may use, on a reimbursable 
        basis, the services (including procurement authorities and 
        services), equipment, personnel, and facilities of other 
        agencies and instrumentalities of the Federal Government.
                                 <all>