[Congressional Record Volume 154, Number 52 (Thursday, April 3, 2008)]
[Senate]
[Pages S2440-S2443]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. KENNEDY (for himself, Mr. Sanders, Mrs. Murray, Mr. Dodd, 
        Mr. Reed, and Mr. Levin):
  S. 2815. A bill to amend the Higher Education Act of 1965 in order to 
increase unsubsidized Stafford loan limits for undergraduate students, 
provide for a secondary market for FFEL loans, allow for the in-school 
deferment of PLUS loans, augment the maximum Federal Pell Grant for the 
lowest income students, and expand the number of students eligible to 
obtain loans under the lender-of-last-resort program, and for other 
purposes; to the Committee on Health, Education, Labor, and Pensions.
  Mr. KENNEDY. Mr. President, Americans are facing economic challenges 
at every turn. They see jobs disappearing, homes being foreclosed, 
debts soaring, and benefits worth less and less. Now families are 
finding that the loans they rely on to afford the high cost of college 
may also be at risk.
  Some lenders have stopped making private student loans, and others 
have even temporarily stopped making loans under the Federal program. 
We can't allow problems in the credit market to prevent students from 
going to college.
  We have been working with the Secretary of Education to take steps to 
see that all Federal backstops are in place and operational in order to 
protect students from these problems.
  Today, I am introducing legislation for additional steps to protect 
students by reducing their reliance on loans, and by improving the 
existing Federal student loan programs to give them better terms and 
conditions.
  The legislation does three things. It increases grant aid for the 
neediest students. It expands options for students and parents under 
the Federal loan programs so that fewer of them will have to turn to 
higher cost private loans. It takes steps to shore up the reliability 
of the current Federal loan programs so that families will have timely 
and reliable access to Federal loans.
  Over 6 million students relied on Federal loans last year. It is 
essential to make sure this support is there for them when they need 
it. In the past 20 years, the cost of college has tripled, and more and 
more students are relying on student loans to afford a college 
education. In 1993, less than half of all graduates took out loans, but 
in 2004, nearly \2/3\ did so.
  The average U.S. student now graduates with more than $19,000 of 
student loan debt. As a result, they are under increasing pressure to 
give up lower-paying jobs and careers they may prefer, due to the 
burden of repaying their loan debts.
  Legislation was enacted last year that increased grant aid and made 
Federal loans cheaper for students by reducing interest rates. We also 
provided that no graduates should have to pay more than 15 percent of 
their income in monthly loan payments, and that those who enter public 
service will have their loans completely forgiven. But these benefits 
will be meaningless if students cannot obtain the loans needed to gain 
a degree.
  In recent weeks, the credit market crisis has made it more difficult 
for lenders to obtain capital for student loans. As a result, some 
lenders are leaving the student loan market and those operating outside 
the Federal loan program are cutting back on loans to high risk 
borrowers.
  So far, because of the attractiveness of the Federal guarantee in the 
Federal loan program, other lenders are stepping in to fill the gaps in 
that program.

[[Page S2441]]

Since the interest rates in that program are capped, students are 
protected from inflated interest costs.
  But students who need to go beyond the Federal loan program will have 
a more difficult time finding lenders, and their rates will go up.
  Also, parents who traditionally had various options for borrowing to 
finance college for their children are seeing those options disappear. 
Some no longer have access to low-cost home equity lines of credit. 
Others are being turned down for additional loans as they struggle to 
pay their own mortgages.
  As I mentioned, we are already taking action to ensure that programs 
already in place to protect students and families from credit market 
disruptions are fully operational.
  I have urged Secretary Spellings to make it as easy as possible for 
colleges and families to participate in the existing loan program that 
allows students and parents to borrow directly from the Federal 
Government, without going through a bank. This Direct Loan program uses 
Treasury funds. It does not rely on capital from the private financial 
markets, so it's insulated from the market disruptions now taking 
place.
  I have also urged the Secretary to put in place a plan to activate 
the ``Lender-of-Last-Resort'' program, which enables the Secretary to 
advance capital to designated lenders and guaranty agencies, so they 
can help students who are having trouble finding loans through other 
banks.
  These programs are now in the law, and nearly 2,000 colleges are 
already signed up to use the Direct Loan Program.
  We're also taking steps to help students and parents who must borrow 
outside the Federal loan program, since they are the ones most likely 
to be affected by the credit market decline.
  Currently, however, many students and parents don't know about their 
Federal options. According to Department of Education estimates, 
between 40 and 60 percent of students who turn to high-cost private 
loans are not actually taking full advantage of Federal grants and 
loans first.
  We're taking steps to correct that problem in the Higher Education 
Reauthorization bill that's in conference now.
  But there is much more we can do to reduce families' reliance on 
high-cost private loans. The legislation I am offering today will 
increase access for students and families to low-cost Federal loans. It 
will also strengthen the backstops in the Federal program, to ensure 
students and families will continue to have access to Federal loans.
  The legislation cuts back in several ways on the number of private 
loans that families have to take out:
  It increases Pell Grant aid for the lowest income students.
  It increases the amount that students can borrow under the Federal 
loan program.
  It makes Federal loans for parents more attractive by enabling 
parents to defer payments on the loans while students are in college 
just as students can defer payments on their own loans.
  It also takes steps to shore up the Federal loan program to ensure 
there are no disruptions in access for students.
  It makes it easier for schools to use the ``Lender-of-Last-Resort'' 
program when students or schools have problems finding lenders.
  It provides an additional backstop to give lenders access to the 
capital they need for new loans, if the situation worsens.
  I will take a moment to describe each of these provisions.
  The best way to help students and families afford college is to 
increase grant aid. More aid up front means fewer loans and less debt 
on graduation day. That is why the Democratic Congress delivered on our 
promise last year to raise the Pell Grant. The maximum grant will 
increase to $5,400 by 2012--an increase of $1,350 over the level at 
which it had stagnated under the current administration.
  This increase in up-front aid means that students eligible for the 
maximum Pell grant will have to borrow $6,000 less in loans over the 
course of their college career.
  The legislation I am introducing builds on that progress, and focuses 
on students who need it most. Currently, over 2.6 million students--
half of all Pell Grant recipients--come from families whose income, 
under the Federal formula, makes them eligible for the maximum amount 
of Federal assistance because they are determined to be unable to 
contribute to their children's college bills. Still, after all grant 
aid, these families face an average unmet need of $5,600, which they 
are forced to borrow in order to pay for college. This bill brings 
additional assistance to these students, by increasing the maximum Pell 
Grant for these students by up to $750.
  Because Federal grant aid has not kept pace with the rising cost of 
college in recent decades, many students have been forced to turn to 
loans. The bill helps students who still need to borrow for college by 
guaranteeing their access to additional low-cost federal loans, rather 
than forcing them to turn to the more expensive private loan market.
  Currently, undergraduate students who are dependents of their parents 
can take out loans of between $3,500 and $5,500 annually, depending 
what year of college they're in. The total amount they can borrow is 
$23,000. Independent students can borrow about double that amount.
  Consider what this means for a middle-class family in Massachusetts 
struggling to send a child to college.
  Here is a family that makes $68,700--the median income in our State. 
On average, these families will spend $17,424 a year for college. Based 
on the federal formula, the parents are expected to contribute between 
$8,000 and $10,000 a year from their earnings with the rest to be 
obtained through grants and loans. After accounting for all federal, 
state, and institutional aid, this family still faces over $2,600 in 
unmet costs each year--on top of their expected family contribution. 
The estimate is conservative, because many parents don't have the 
$8,000-10,000 they're expected to contribute.
  To make up the difference, many families can take out federal parent 
``PLUS'' loans at a 7.9 percent interest rate. If they don't qualify 
for such loans because of poor credit, their children may have to turn 
to higher cost private loans.
  The bill increases eligibility for Federal student loans in order to 
give students a better, lower-cost option than relying on private 
lenders.
  It allows undergraduates dependent on their parents to borrow up to 
$1,000 more a year. It tracks current law by allowing independent 
students to borrow twice that amount. It also allows students whose 
parents are not able to borrow under the Federal parent loan program 
because of poor credit to borrow an additional $2,000 per year.
  In addition, the bill increases the total amount that students can 
borrow over the course of their college career. Dependent students will 
be able to borrow up to $29,500. Independent students, and students 
whose parents don't have access to PLUS parent loans, can borrow up to 
$57,500.
  Further, the legislation makes federal parent loans more attractive. 
Currently, most parents have the option of borrowing low-cost federal 
loans--up to the cost of attendance--for their children. In the 2006-
2007 school year, 600,000 parents borrowed approximately $8 billion in 
PLUS loans, and the average loan was $13,600.
  Many parents in recent years have not taken advantage of PLUS loans, 
because they had other options, such as home equity lines of credit, or 
private loans with good terms and conditions. This year, for the first 
time in a decade, the number of PLUS loan borrowers declined--by about 
160,000. At the same time, student and parent dependence on private 
loans has increased. In the 2006-2007 school year, over $17 billion in 
private student loans were used to finance higher education.
  With the credit crunch making it harder and more expensive for 
parents to borrow from private sources, this legislation will make it 
easier for parents to obtain Federal loans. Specifically, it allows 
parents to defer payment on those loans until their children graduate 
from school--just as students are able to do under their own Federal 
loans.
  This provision protects parents from having to make any payments over 
the next few years, and allows them to use that time to meet other 
financial obligations, such as getting their mortgages back on track.

[[Page S2442]]

  In addition to these provisions that significantly reduce families' 
need to turn to the private loan market, the legislation also takes two 
important steps to strengthen the backstops in the Federal loan 
program, to ensure that students and parents can continue to have 
timely, uninterrupted access to Federal loans.
  First, it makes it easier for students and schools to participate in 
the ``Lender-of-Last-Resort'' program. Current law requires designated 
lenders to make loans to students who are having trouble finding a 
Federal student loan elsewhere. But the program requires individual 
students to demonstrate that they can't find a loan before they can 
turn to a ``lender of last resort.''
  If the current market worsens, more lenders may stop making Federal 
student loans, and this ``lender-of-last-resort'' process will become 
untenable. Nationally, 18 million students are enrolled in colleges and 
universities. We can't require each of them to demonstrate they can't 
find another lender before using this safety net.
  The legislation instead allows financial aid officers and colleges to 
make this determination on behalf of all their students, so that 
students can easily obtain a loan through a ``lender of last resort.'' 
Consider the difference this would make at state universities, some of 
which enroll more than 50,000 college and graduate students and 
generally rely on one or two primary lenders.
  The Clinton Administration enacted such a policy in 1998--the last 
time lenders threatened to leave the program. The legislation requires 
the Secretary to make clear that colleges have this option should they 
need it.
  Finally, many lenders who have announced they will not be able to 
make loans for this college year have had to make that decision because 
they cannot obtain capital for those loans through their traditional 
sources in the private financial markets.
  Many of these lenders sell the loans they originate in order to 
replenish their capital and make new loans. But these so-called 
``secondary markets'' have begun to close because of the credit crunch.
  Some lenders can't find a buyer for their loans. They are stuck with 
the loans now on their books, and have no capital for new loans in the 
fall. Over the past month, this has caused some lenders to announce 
that they will stop making new Federal loans.
  This legislation provides a back-up plan for lenders who need it, in 
case the private credit markets are unavailable to lenders. It allows 
the Secretary of Education to act as a ``secondary market of last 
resort,'' by buying the loans that lenders are currently holding on 
their books and cannot sell.
  This will not cause students any greater complexity--under the 
program established by this legislation, student loans will continue to 
be serviced under the same terms and conditions that the borrower 
signed up for. The Department can contract with the same loan servicers 
that private banks use, and the transition will be seamless for 
borrowers.
  We hope that these additional protections for students and families 
will not be needed. But given the uncertainties in the overall economy 
and the credit markets, Congress has an obligation to shore up programs 
on which millions of students heavily depend. Few things are more 
important than ensuring that families can afford a college degree for 
their children, and the goal of this legislation is to make that 
possible. I urge my colleagues to support it.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                S. 2815

       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 ``Strengthening Student Aid 
     for All Act''.

     SEC. 2. INCREASING UNSUBSIDIZED STAFFORD LOAN LIMITS FOR 
                   UNDERGRADUATE STUDENTS.

       (a) Amendments.--Section 428H(d) of the Higher Education 
     Act of 1965 (20 U.S.C. 1078-8(d)) is amended--
       (1) in paragraph (1), by striking ``paragraphs (2) and 
     (3)'' and inserting ``paragraphs (2) through (5)''; and
       (2) by adding at the end the following:
       ``(4) Annual and aggregate limits for undergraduate 
     dependent students.--
       ``(A) Annual limits.--The maximum annual amount of loans 
     under this section an undergraduate dependent student (except 
     an undergraduate dependent student whose parents are unable 
     to borrow under section 428B or the Federal Direct PLUS Loan 
     Program) may borrow in any academic year (as defined in 
     section 481(a)(2)) or its equivalent shall be the sum of the 
     amount determined under paragraph (1), plus $1,000.
       ``(B) Aggregate limits.--The maximum aggregate amount of 
     loans under this section a student described in subparagraph 
     (A) may borrow shall be $29,500. Interest capitalized shall 
     not be deemed to exceed such maximum aggregate amount.
       ``(5) Annual and aggregate limits for undergraduate 
     independent students.--
       ``(A) Annual limits.--The maximum annual amount of loans 
     under this section an undergraduate independent student, or 
     an undergraduate dependent student whose parents are unable 
     to borrow under section 428B or the Federal Direct PLUS Loan 
     Program, may borrow in any academic year (as defined in 
     section 481(a)(2)) or its equivalent shall be the sum of the 
     amount determined under paragraph (1), plus--
       ``(i) in the case of such a student attending an eligible 
     institution who has not completed such student's first 2 
     years of undergraduate study--

       ``(I) $6,000, if such student is enrolled in a program 
     whose length is at least one academic year in length; or
       ``(II) if such student is enrolled in a program of 
     undergraduate education which is less than one academic year, 
     the maximum annual loan amount that such student may receive 
     may not exceed the amount that bears the same ratio to the 
     amount specified in clause (i) as the length of such program 
     measured in semester, trimester, quarter, or clock hours 
     bears to one academic year;

       ``(ii) in the case of such a student at an eligible 
     institution who has successfully completed such first and 
     second years but has not successfully completed the remainder 
     of a program of undergraduate education--

       ``(I) $7,000; or
       ``(II) if such student is enrolled in a program of 
     undergraduate education, the remainder of which is less than 
     one academic year, the maximum annual loan amount that such 
     student may receive may not exceed the amount that bears the 
     same ratio to the amount specified in subclause (I) as such 
     remainder measured in semester, trimester, quarter, or clock 
     hours bears to one academic year; and

       ``(iii) in the case of such a student enrolled in 
     coursework specified in sections 484(b)(3)(B) and 
     484(b)(4)(B), $6,000 for coursework necessary for enrollment 
     in an undergraduate degree or certificate program.
       ``(B) Aggregate limits.--The maximum aggregate amount of 
     loans under this section a student described in subparagraph 
     (A) may borrow shall be $57,500. Interest capitalized shall 
     not be deemed to exceed such maximum aggregate amount.''.
       (b) Conforming Amendments.--Section 428H(d) of the Higher 
     Education Act of 1965 (as amended by subsection (a)) (20 
     U.S.C. 1078-8(d)) is further amended--
       (1) in paragraph (2)--
       (A) in the paragraph heading, by striking ``independent, 
     graduate,'' and inserting ``graduate'';
       (B) in the matter preceding subparagraph (A), by striking 
     ``an independent student'' and all that follows through 
     ``Program)'' and inserting ``a student who is a graduate or 
     professional student'';
       (C) by striking subparagraphs (A) and (B);
       (D) in subparagraph (D)--
       (i) in the matter preceding clause (i), by inserting 
     ``graduate'' before ``student'';
       (ii) in clause (i), by striking ``$4,000'' and all that 
     follows through ``degree,''; and
       (iii) in clause (ii), by striking ``in the case'' and all 
     that follows through ``degree,''; and
       (E) by redesignating subparagraphs (C) and (D) (as amended 
     by subparagraph (D)) as subparagraphs (A) and (B), 
     respectively; and
       (2) in the paragraph heading of paragraph (3), by striking 
     ``independent, graduate,'' and inserting ``graduate''.

     SEC. 3. IN-SCHOOL DEFERMENT OF PLUS LOANS.

       Section 428B(d)(1) of the Higher Education Act of 1965 (20 
     U.S.C. 1078-2(d)(1)) is amended--
       (1) by striking ``deferral during'' and inserting 
     ``deferral--
       ``(B) during''; and
       (2) by inserting before subparagraph (B) (as added by 
     paragraph (1)) the following:
       ``(A) in the case of the parents of a dependent student, 
     until the student ceases to be enrolled in an undergraduate 
     program of study at an institution of higher education on at 
     least a half-time basis; or''.

     SEC. 4. SECONDARY MARKET OF LAST RESORT.

       (a) In General.--Part B of title IV of the Higher Education 
     Act of 1965 (20 U.S.C. 1071 et seq.) is amended by adding at 
     the end the following:

     ``SEC. 440B. SECONDARY MARKET OF LAST RESORT.

       ``(a) In General.--Notwithstanding any other provision of 
     this Act and subject to subsections (b), (c), and (d), the 
     Secretary--
       ``(1) shall serve as the secondary market of last resort 
     for loans under section 428, 428B, 428C, or 428H;
       ``(2) shall buy any such loan that an eligible lender 
     wishes to sell to the Secretary, at a price equal to the sum 
     of--

[[Page S2443]]

       ``(A) the total of the outstanding principal of such loan 
     and any accrued, unpaid interest due on such loan; and
       ``(B) a premium in the amount equal to the cost of 
     originating a similar loan under part D;
       ``(3) shall hold and service such loan under section 428, 
     428B, 428C or 428H in the same manner as the Secretary holds 
     and services similar loans under part D; and
       ``(4) may not alter the terms and conditions of a 
     promissory note of such loan under section 428, 428B, 428C, 
     or 428H except as necessary to comply with paragraphs (1) 
     through (3), and shall not require the execution of a new 
     promissory note.
       ``(b) Representative Subset of Loans.--An eligible lender 
     that wishes to sell to the Secretary loans under section 428, 
     428B, 428C, or 428H, that do not represent 100 percent of all 
     loans under such sections that are held by the lender, shall 
     offer for sale to the Secretary a subset of the loans under 
     such sections held by the lender that is representative 
     (including representative with respect to risk of default) of 
     the lender's total portfolio of loans under such sections.
       ``(c) Sunset Provision.--
       ``(1) In general.--Except as provided in paragraph (2), the 
     authority provided to the Secretary under subsection (a) 
     shall expire on July 1, 2009.
       ``(2) Extension.--If the Secretary determines that economic 
     circumstances necessitate extending the authority provided 
     under subsection (a) in order to continue to ensure timely, 
     uninterrupted access to student loans, the Secretary may 
     extend the sunset provision under paragraph (1). The 
     Secretary may make multiple extensions under this paragraph, 
     except that each such extension may not be for a period of 
     more than 12 months.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall take effect on the date of enactment of this Act.

     SEC. 5. NEGATIVE EXPECTED FAMILY CONTRIBUTION.

       (a) Dependent Students.--Section 475 of the Higher 
     Education Act of 1965 (20 U.S.C. 1087oo) is amended--
       (1) in subsection (b)(3)--
       (A) in subparagraph (C)--
       (i) by striking ``dividing the assessment resulting under 
     paragraph (2)'' and inserting ``if the amount of the 
     assessment resulting under paragraph (2) is a positive 
     number, dividing such assessment''; and
       (ii) by striking the semicolon and inserting a period; and
       (B) by striking the matter following subparagraph (C); and
       (2) in subsection (g)(6), by inserting ``and the absolute 
     value of the amount of the lowest assessment of adjusted 
     available income in the table described in section 475(e) (or 
     a successor table prescribed by the Secretary under section 
     478),'' after ``subsection (c)(1)''.
       (b) Independent Students Without Dependents Other Than a 
     Spouse.--Section 476 of the Higher Education Act of 1965 (20 
     U.S.C. 1087pp) is amended--
       (1) in subsection (a)--
       (A) in paragraph (2), by striking ``dividing the sum 
     resulting under paragraph (1)'' and inserting ``if the sum 
     resulting under paragraph (1) is a positive number, dividing 
     such sum''; and
       (B) in the matter following paragraph (3)(B), by striking 
     ``less than zero'' and inserting ``less than the amount of 
     the lowest assessment of adjusted available income in the 
     table described in section 477(d) (or a successor table 
     prescribed by the Secretary under section 478)''; and
       (2) in paragraph (b)(5), by inserting before the period at 
     the end ``, except that in no case shall the assessed amount 
     be less than the amount of the lowest assessment of adjusted 
     available income in the table described in section 477(d) (or 
     a successor table prescribed by the Secretary under section 
     478).''.
       (c) Independent Students With Dependents Other Than a 
     Spouse.--Section 477(a) of the Higher Education Act of 1965 
     (20 U.S.C. 1087qq(a)) is amended--
       (1) in paragraph (3), by striking ``dividing the assessment 
     resulting under paragraph (2)'' and inserting ``if the amount 
     of the assessment resulting under paragraph (2) is a positive 
     number, dividing such assessment'';
       (2) in paragraph (4)(B), by striking the semicolon and 
     inserting a period; and
       (3) by striking the matter following paragraph (4)(B).
       (d) Assessment Schedules and Rates.--Section 478(e)(1) of 
     the Higher Education Act of 1965 (20 U.S.C. 1087rr(e)(1)) is 
     amended by striking ``increasing'' and inserting 
     ``adjusting''.
       (e) Simplified Needs Tests.---
       (1) Simplified needs tests.--Section 479(c) of the Higher 
     Education Act of 1965 (20 U.S.C. 1087ss) is further amended--
       (A) in the subsection heading, by striking ``Expected''; 
     and
       (B) in the matter preceding paragraph (1), by striking 
     ``equal to zero'' and inserting ``equal to the amount of the 
     lowest assessment of adjusted available income in the table 
     described in section 477(d) (or a successor table prescribed 
     by the Secretary under section 478)''.
       (2) Conforming amendments to the college cost reduction and 
     access act.--
       (A) Amendment.--Section 602(a)(3) of the College Cost 
     Reduction and Access Act (Public Law 110-84) is amended in 
     the quoted material inserted by subparagraph (C), by striking 
     ``zero expected family contribution'' and inserting 
     ``expected family contribution under this subsection.''.
       (B) Effective date.--The amendment made by subparagraph (A) 
     shall take effect on July 1, 2009, as if enacted on the date 
     of enactment of the College Cost Reduction and Access Act 
     (Public Law 110-84).
       (f) Federal Pell Grants.--Section 401(b) of the Higher 
     Education Act of 1965 (20 U.S.C. 1070a(b)) is amended by 
     inserting after paragraph (7) the following:
       ``(8) Increased Amount for Students With Negative Expected 
     Family Contribution.--
       ``(A) In general.--Notwithstanding paragraph (2)(A) and any 
     other provision of law and subject to subparagraph (B) and 
     (C), in the case of a student whose expected family 
     contribution is a negative number, such student shall be 
     eligible for a Federal Pell Grant under this section in the 
     amount equal to the sum of--
       ``(i) the maximum Federal Pell Grant for which a student 
     shall be eligible during an award year, as specified in the 
     last enacted appropriation Act applicable to that award year;
       ``(ii) the Federal Pell Grant increase described in 
     paragraph (9) applicable to that award year; and
       ``(iii) an additional amount equal to the absolute value of 
     the student's expected family contribution.
       ``(B) Cost of attendance limit.--Notwithstanding paragraph 
     (3), in the case of a student whose expected family 
     contribution is a negative number, the student's Federal Pell 
     Grant under this subpart, as calculated under subparagraph 
     (A), shall not exceed the student's cost of attendance at 
     such institution, and if the amount of the student's Federal 
     Pell Grant exceeds such cost of attendance for that year, 
     such amount shall be reduced accordingly.
       ``(C) Formula otherwise unaffected.--Except as provided in 
     subparagraphs (A) and (B), nothing in this paragraph shall be 
     construed to alter the requirements of this section, or 
     authorize the imposition of additional requirements, for the 
     determination and allocation of Federal Pell Grants under 
     this section.''.

     SEC. 6. LENDER-OF-LAST-RESORT.

       (a) In General.--Section 428(j) of the Higher Education Act 
     of 1965 (20 U.S.C. 1078(j)) is amended--
       (1) in the first sentence of paragraph (1), by striking 
     ``part.'' and inserting ``part or who attend an institution 
     of higher education in the State that is designated under 
     paragraph (4).'';
       (2) in paragraph (2)(B), by inserting ``, in the case of 
     students applying for loans under this subsection because of 
     an inability to otherwise obtain loans under this part,'' 
     after ``lender, nor'';
       (3) in paragraph (3)(C)--
       (A) in the first sentence, by inserting ``or designates an 
     institution of higher education for participation in the 
     program under this subsection under paragraph (4),'' after 
     ``under this part''; and
       (B) in the third sentence, by inserting ``or to eligible 
     borrowers who attend an institution in the State that is 
     designated under paragraph (4)'' after ``problems''; and
       (4) by adding at the end the following:
       ``(4) Institution-wide student qualification.--Upon the 
     request of an institution of higher education, the Secretary 
     shall designate such institution for participation in the 
     lender-of-last-resort program under this paragraph in the 
     State where the institution is located. If the Secretary 
     designates an institution under this paragraph, the guaranty 
     agency shall make loans, in the same manner as such loans are 
     made under paragraph (1), to students of the designated 
     institution who are eligible to receive interest benefits 
     paid on the students' behalf under subsection (a) of this 
     section, regardless of whether the students are otherwise 
     unable to obtain loans under this part.''.
       (b) Effective Date.--The amendments made by subsection (a) 
     shall take effect on the date of enactment of this Act.

     SEC. 7. MANDATORY ADVANCES.

       (a) In General.--Section 421(b) of the Higher Education Act 
     of 1965 (20 U.S.C. 1071(b)) is amended--
       (1) in paragraph (4), by striking ``programs, and'' and 
     inserting ``programs,'';
       (2) in paragraph (5), by striking ``agencies.'' and 
     inserting ``agencies, and''; and
       (3) by adding at the end the following:
       ``(6) there is authorized to be appropriated, and there are 
     appropriated, out of any money in the Treasury not otherwise 
     appropriated, such sums as may be necessary for the purpose 
     of carrying out section 427(c)(7).''.
       (b) Effective Date.--The amendments made by subsection (a) 
     shall take effect on the date of enactment of this Act.

     SEC. 8. EFFECTIVE DATE.

       Except as otherwise provided, the amendments made by this 
     Act shall take effect on July 1, 2008.
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