[House Report 110-317]
[From the U.S. Government Publishing Office]



110th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 1st Session                                                    110-317

======================================================================



 
                 COLLEGE COST REDUCTION AND ACCESS ACT

                                _______
                                

               September 6, 2007.--Ordered to be printed

                                _______
                                

  Mr. George Miller of California, from the committee of conference, 
                        submitted the following

                           CONFERENCE REPORT

                        [To accompany H.R. 2669]

    The committee of conference on the disagreeing votes of the 
two Houses on the amendment of the Senate to the bill (H.R. 
2669), to provide for reconciliation pursuant to section 601 of 
the concurrent resolution on the budget for fiscal year 2008, 
having met, after full and free conference, have agreed to 
recommend and do recommend to their respective Houses as 
follows:
      That the House recede from its disagreement to the 
amendment of the Senate and agree to the same with an amendment 
as follows:
      In lieu of the matter proposed to be inserted by the 
Senate amendment, insert the following:

SECTION 1. SHORT TITLE; REFERENCES.

    (a) Short Title.--This Act may be cited as the ``College 
Cost Reduction and Access Act''.
    (b) References.--Except as otherwise expressly provided, 
whenever in this Act an amendment or repeal is expressed in 
terms of an amendment to, or repeal of, a section or other 
provision, the reference shall be considered to be made to a 
section or other provision of the Higher Education Act of 1965 
(20 U.S.C. 1001 et seq.).
    (c) Effective Date.--Except as otherwise expressly 
provided, the amendments made by this Act shall be effective on 
October 1, 2007.

  TITLE I--GRANTS TO STUDENTS IN ATTENDANCE AT INSTITUTIONS OF HIGHER 
                               EDUCATION

SEC. 101. TUITION SENSITIVITY.

    (a) Amendment.--Section 401(b) (20 U.S.C. 1070a(b)) is 
amended--
            (1) by striking paragraph (3); and
            (2) by redesignating paragraphs (4) through (9) as 
        paragraphs (3) through (8), respectively.
    (b) Effective Date.--The amendments made by subsection (a) 
shall be effective with respect to determinations of Federal 
Pell Grant amounts for award years beginning on or after July 
1, 2007.
    (c) Authorization and Appropriation of Funds.--There is 
authorized to be appropriated, and there is appropriated, out 
of any money in the Treasury not otherwise appropriated, for 
the Department of Education to carry out the amendment made by 
subsection (a), $11,000,000 for fiscal year 2008.

SEC. 102. MANDATORY PELL GRANT INCREASES.

    (a) Extension of Authority.--Section 401(a) (20 U.S.C. 
1070a(a)) is amended by striking ``fiscal year 2004'' and 
inserting ``fiscal year 2017''.
    (b) Funding for Increases.--Section 401(b) (20 U.S.C. 
1070a(b)) is amended by adding at the end the following new 
paragraph:
            ``(9) Additional funds.--
                    ``(A) In general.--There are authorized to 
                be appropriated, and there are appropriated, to 
                carry out subparagraph (B) of this paragraph 
                (in addition to any other amounts appropriated 
                to carry out this section and out of any money 
                in the Treasury not otherwise appropriated) the 
                following amounts:
                            ``(i) $2,030,000,000 for fiscal 
                        year 2008;
                            ``(ii) $2,090,000,000 for fiscal 
                        year 2009;
                            ``(iii) $3,030,000,000 for fiscal 
                        year 2010;
                            ``(iv) $3,090,000,000 for fiscal 
                        year 2011;
                            ``(v) $5,050,000,000 for fiscal 
                        year 2012;
                            ``(vi) $105,000,000 for fiscal year 
                        2013;
                            ``(vii) $4,305,000,000 for fiscal 
                        year 2014;
                            ``(viii) $4,400,000,000 for fiscal 
                        year 2015;
                            ``(ix) $4,600,000,000 for fiscal 
                        year 2016; and
                            ``(x) $4,900,000,000 for fiscal 
                        year 2017.
                    ``(B) Increase in federal pell grants.--The 
                amounts made available pursuant to subparagraph 
                (A) of this paragraph shall be used to increase 
                the amount of 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, by--
                            ``(i) $490 for each of the award 
                        years 2008-2009 and 2009-2010;
                            ``(ii) $690 for each of the award 
                        years 2010-2011 and 2011-2012; and
                            ``(iii) $1,090 for award year 2012-
                        2013.
                    ``(C) Eligibility.--The Secretary shall 
                only award an increased amount of a Federal 
                Pell Grant under this section for any award 
                year pursuant to the provisions of this 
                paragraph to students who qualify for a Federal 
                Pell Grant award under the maximum grant award 
                enacted in the annual appropriation Act for 
                such award year without regard to the 
                provisions of this paragraph.
                    ``(D) Formula otherwise unaffected.--Except 
                as provided in subparagraphs (B) and (C), 
                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.
                    ``(E) Ratable increases and decreases.--The 
                amounts specified in subparagraph (B) shall be 
                ratably increased or decreased to the extent 
                that funds available under subparagraph (A) 
                exceed or are less than (respectively) the 
                amount required to provide the amounts 
                specified in subparagraph (B).
                    ``(F) Use of fiscal year funds for award 
                years.--The amounts made available by 
                subparagraph (A) for any fiscal year shall be 
                available and remain available for use under 
                subparagraph (B) for the award year that begins 
                in such fiscal year.''.

SEC. 103. UPWARD BOUND.

    Section 402C is further amended by adding at the end the 
following new subsection:
    ``(f) Additional Funds.--
            ``(1) Authorization and appropriation.--There are 
        authorized to be appropriated, and there are 
        appropriated to the Secretary, from funds not otherwise 
        appropriated, $57,000,000 for each of the fiscal years 
        2008 through 2011 to carry out paragraph (2), except 
        that any amounts that remain unexpended for such 
        purpose for each of such fiscal years may be available 
        for technical assistance and administration costs for 
        the Upward Bound program. The authority to award grants 
        under this subsection shall expire at the end of fiscal 
        year 2011.
            ``(2) Use of funds.--The amounts made available by 
        paragraph (1) shall be available to provide assistance 
        to all Upward Bound projects that did not receive 
        assistance in fiscal year 2007 and that have a grant 
        score above 70. Such assistance shall be made available 
        in the form of 4-year grants.''.

SEC. 104. TEACH GRANTS.

    Part A of title IV (20 U.S.C. 1070 et seq.) is amended by 
adding at the end the following new subpart:

                       ``Subpart 9--TEACH Grants

``SEC. 420L. DEFINITIONS.

    ``For the purposes of this subpart:
            ``(1) Eligible institution.--The term `eligible 
        institution' means an institution of higher education, 
        as defined in section 102, that the Secretary 
        determines--
                    ``(A) provides high quality teacher 
                preparation and professional development 
                services, including extensive clinical 
                experience as a part of pre-service 
                preparation;
                    ``(B) is financially sound;
                    ``(C) provides pedagogical course work, or 
                assistance in the provision of such coursework, 
                including the monitoring of student 
                performance, and formal instruction related to 
                the theory and practices of teaching; and
                    ``(D) provides supervision and support 
                services to teachers, or assistance in the 
                provision of such services, including mentoring 
                focused on developing effective teaching skills 
                and strategies.
            ``(2) Post-baccalaureate.--The term `post-
        baccalaureate' means a program of instruction for 
        individuals who have completed a baccalaureate degree, 
        that does not lead to a graduate degree, and that 
        consists of courses required by a State in order for a 
        teacher candidate to receive a professional 
        certification or licensing credential that is required 
        for employment as a teacher in an elementary school or 
        secondary school in that State, except that such term 
        shall not include any program of instruction offered by 
        an eligible institution that offers a baccalaureate 
        degree in education.
            ``(3) Teacher candidate.--The term `teacher 
        candidate' means a student or teacher described in 
        subparagraph (A) or (B) of section 420N(a)(2).

``SEC. 420M. PROGRAM ESTABLISHED.

    ``(a) Program Authority.--
            ``(1) Payments required.--The Secretary shall pay 
        to each eligible institution such sums as may be 
        necessary to pay to each teacher candidate who files an 
        application and agreement in accordance with section 
        420N, and who qualifies under paragraph (2) of section 
        420N(a), a TEACH Grant in the amount of $4,000 for each 
        academic year during which that teacher candidate is in 
        attendance at the institution.
            ``(2) References.--Grants made under paragraph (1) 
        shall be known as `Teacher Education Assistance for 
        College and Higher Education Grants' or `TEACH Grants'.
    ``(b) Payment Methodology.--
            ``(1) Prepayment.--Not less than 85 percent of any 
        funds provided to an eligible institution under 
        subsection (a) shall be advanced to the eligible 
        institution prior to the start of each payment period 
        and shall be based upon an amount requested by the 
        institution as needed to pay teacher candidates until 
        such time as the Secretary determines and publishes in 
        the Federal Register with an opportunity for comment, 
        an alternative payment system that provides payments to 
        institutions in an accurate and timely manner, except 
        that this sentence shall not be construed to limit the 
        authority of the Secretary to place an institution on a 
        reimbursement system of payment.
            ``(2) Direct payment.--Nothing in this section 
        shall be interpreted to prohibit the Secretary from 
        paying directly to teacher candidates, in advance of 
        the beginning of the academic term, an amount for which 
        teacher candidates are eligible, in cases where the 
        eligible institution elects not to participate in the 
        disbursement system required by paragraph (1).
            ``(3) Distribution of grants to teacher 
        candidates.--Payments under this subpart shall be made, 
        in accordance with regulations promulgated by the 
        Secretary for such purpose, in such manner as will best 
        accomplish the purposes of this subpart. Any 
        disbursement allowed to be made by crediting the 
        teacher candidate's account shall be limited to tuition 
        and fees and, in the case of institutionally-owned 
        housing, room and board. The teacher candidate may 
        elect to have the institution provide other such goods 
        and services by crediting the teacher candidate's 
        account.
    ``(c) Reductions in Amount.--
            ``(1) Part-time students.--In any case where a 
        teacher candidate attends an eligible institution on 
        less than a full-time basis (including a teacher 
        candidate who attends an eligible institution on less 
        than a half-time basis) during any academic year, the 
        amount of a grant under this subpart for which that 
        teacher candidate is eligible shall be reduced in 
        proportion to the degree to which that teacher 
        candidate is not attending on a full-time basis, in 
        accordance with a schedule of reductions established by 
        the Secretary for the purposes of this subpart, 
        computed in accordance with this subpart. Such schedule 
        of reductions shall be established by regulation and 
        published in the Federal Register in accordance with 
        section 482 of this Act.
            ``(2) No exceeding cost.--The amount of a grant 
        awarded under this subpart, in combination with Federal 
        assistance and other student assistance, shall not 
        exceed the cost of attendance (as defined in section 
        472) at the eligible institution at which that teacher 
        candidate is in attendance. If, with respect to any 
        teacher candidate for any academic year, it is 
        determined that the amount of a TEACH Grant exceeds the 
        cost of attendance for that year, the amount of the 
        TEACH Grant shall be reduced until such grant does not 
        exceed the cost of attendance at the eligible 
        institution.
    ``(d) Period of Eligibility for Grants.--
            ``(1) Undergraduate and post-baccalaureate 
        students.--The period during which an undergraduate or 
        post-baccalaureate student may receive grants under 
        this subpart shall be the period required for the 
        completion of the first undergraduate baccalaureate or 
        post-baccalaureate course of study being pursued by the 
        teacher candidate at the eligible institution at which 
        the teacher candidate is in attendance, except that--
                    ``(A) any period during which the teacher 
                candidate is enrolled in a noncredit or 
                remedial course of study as described in 
                paragraph (3) shall not be counted for the 
                purpose of this paragraph; and
                    ``(B) the total amount that a teacher 
                candidate may receive under this subpart for 
                undergraduate or post-baccalaureate study shall 
                not exceed $16,000.
            ``(2) Graduate students.--The period during which a 
        graduate student may receive grants under this subpart 
        shall be the period required for the completion of a 
        master's degree course of study pursued by the teacher 
        candidate at the eligible institution at which the 
        teacher candidate is in attendance, except that the 
        total amount that a teacher candidate may receive under 
        this subpart for graduate study shall not exceed 
        $8,000.
            ``(3) Remedial course; study abroad.--Nothing in 
        this section shall be construed to exclude from 
        eligibility courses of study which are noncredit or 
        remedial in nature (including courses in English 
        language acquisition) which are determined by the 
        eligible institution to be necessary to help the 
        teacher candidate be prepared for the pursuit of a 
        first undergraduate baccalaureate or post-baccalaureate 
        degree or certificate or, in the case of courses in 
        English language instruction, to be necessary to enable 
        the teacher candidate to utilize already existing 
        knowledge, training, or skills. Nothing in this section 
        shall be construed to exclude from eligibility programs 
        of study abroad that are approved for credit by the 
        home institution at which the teacher candidate is 
        enrolled.

``SEC. 420N. APPLICATIONS; ELIGIBILITY.

    ``(a) Applications; Demonstration of Eligibility.--
            ``(1) Filing required.--The Secretary shall 
        periodically set dates by which teacher candidates 
        shall file applications for grants under this subpart. 
        Each teacher candidate desiring a grant under this 
        subpart for any year shall file an application 
        containing such information and assurances as the 
        Secretary may determine necessary to enable the 
        Secretary to carry out the functions and 
        responsibilities of this subpart.
            ``(2) Demonstration of teach grant eligibility.--
        Each application submitted under paragraph (1) shall 
        contain such information as is necessary to demonstrate 
        that--
                    ``(A) if the applicant is an enrolled 
                student--
                            ``(i) the student is an eligible 
                        student for purposes of section 484;
                            ``(ii) the student--
                                    ``(I) has a grade point 
                                average that is determined, 
                                under standards prescribed by 
                                the Secretary, to be comparable 
                                to a 3.25 average on a zero to 
                                4.0 scale, except that, if the 
                                student is in the first year of 
                                a program of undergraduate 
                                education, such grade point 
                                average shall be determined on 
                                the basis of the student's 
                                cumulative secondary school 
                                grade point average; or
                                    ``(II) displayed high 
                                academic aptitude by receiving 
                                a score above the 75th 
                                percentile on at least one of 
                                the batteries in an 
                                undergraduate, post-
                                baccalaureate, or graduate 
                                school admissions test; and
                            ``(iii) the student is completing 
                        coursework and other requirements 
                        necessary to begin a career in 
                        teaching, or plans to complete such 
                        coursework and requirements prior to 
                        graduating; or
                    ``(B) if the applicant is a current or 
                prospective teacher applying for a grant to 
                obtain a graduate degree--
                            ``(i) the applicant is a teacher or 
                        a retiree from another occupation with 
                        expertise in a field in which there is 
                        a shortage of teachers, such as 
                        mathematics, science, special 
                        education, English language 
                        acquisition, or another high-need 
                        subject; or
                            ``(ii) the applicant is or was a 
                        teacher who is using high-quality 
                        alternative certification routes, such 
                        as Teach for America, to get certified.
    ``(b) Agreements To Serve.--Each application under 
subsection (a) shall contain or be accompanied by an agreement 
by the applicant that--
            ``(1) the applicant will--
                    ``(A) serve as a full-time teacher for a 
                total of not less than 4 academic years within 
                8 years after completing the course of study 
                for which the applicant received a TEACH Grant 
                under this subpart;
                    ``(B) teach in a school described in 
                section 465(a)(2)(A);
                    ``(C) teach in any of the following fields:
                            ``(i) mathematics;
                            ``(ii) science;
                            ``(iii) a foreign language;
                            ``(iv) bilingual education;
                            ``(v) special education;
                            ``(vi) as a reading specialist; or
                            ``(vii) another field documented as 
                        high-need by the Federal Government, 
                        State government, or local educational 
                        agency, and approved by the Secretary;
                    ``(D) submit evidence of such employment in 
                the form of a certification by the chief 
                administrative officer of the school upon 
                completion of each year of such service; and
                    ``(E) comply with the requirements for 
                being a highly qualified teacher as defined in 
                section 9101 of the Elementary and Secondary 
                Education Act of 1965; and
            ``(2) in the event that the applicant is determined 
        to have failed or refused to carry out such service 
        obligation, the sum of the amounts of any TEACH Grants 
        received by such applicant will be treated as a loan 
        and collected from the applicant in accordance with 
        subsection (c) and the regulations thereunder.
    ``(c) Repayment for Failure To Complete Service.--In the 
event that any recipient of a grant under this subpart fails or 
refuses to comply with the service obligation in the agreement 
under subsection (b), the sum of the amounts of any TEACH 
Grants received by such recipient shall, upon a determination 
of such a failure or refusal in such service obligation, be 
treated as a Federal Direct Unsubsidized Stafford Loan under 
part D of title IV, and shall be subject to repayment, together 
with interest thereon accruing from the date of the grant 
award, in accordance with terms and conditions specified by the 
Secretary in regulations under this subpart.

``SEC. 420O. PROGRAM PERIOD AND FUNDING.

    ``Beginning on July 1, 2008, there shall be available to 
the Secretary to carry out this subpart, from funds not 
otherwise appropriated, such sums as may be necessary to 
provide TEACH Grants in accordance with this subpart to each 
eligible applicant.''.

         TITLE II--STUDENT LOAN BENEFITS, TERMS, AND CONDITIONS

SEC. 201. INTEREST RATE REDUCTIONS.

    (a) FFEL Interest Rates.--
            (1) Section 427A(l) (20 U.S.C. 1077a(l)) is amended 
        by adding at the end the following new paragraph:
            ``(4) Reduced rates for undergraduate subsidized 
        loans.--Notwithstanding subsection (h) and paragraph 
        (1) of this subsection, with respect to any loan to an 
        undergraduate student made, insured, or guaranteed 
        under this part (other than a loan made pursuant to 
        section 428B, 428C, or 428H) for which the first 
        disbursement is made on or after July 1, 2006, and 
        before July 1, 2012, the applicable rate of interest 
        shall be as follows:
                    ``(A) For a loan for which the first 
                disbursement is made on or after July 1, 2006, 
                and before July 1, 2008, 6.8 percent on the 
                unpaid principal balance of the loan.
                    ``(B) For a loan for which the first 
                disbursement is made on or after July 1, 2008, 
                and before July 1, 2009, 6.0 percent on the 
                unpaid principal balance of the loan.
                    ``(C) For a loan for which the first 
                disbursement is made on or after July 1, 2009, 
                and before July 1, 2010, 5.6 percent on the 
                unpaid principal balance of the loan.
                    ``(D) For a loan for which the first 
                disbursement is made on or after July 1, 2010, 
                and before July 1, 2011, 4.5 percent on the 
                unpaid principal balance of the loan.
                    ``(E) For a loan for which the first 
                disbursement is made on or after July 1, 2011, 
                and before July 1, 2012, 3.4 percent on the 
                unpaid principal balance of the loan.''.
            (2) Special allowance cross reference.--Section 
        438(b)(2)(I)(ii)(II) (20 U.S.C. 1087-
        1(b)(2)(I)(ii)(II)) is amended by striking ``section 
        427A(l)(1)'' and inserting ``section 427A(l)(1) or 
        (l)(4)''.
    (b) Direct Loan Interest Rates.--Section 455(b)(7) (20 
U.S.C. 1087e(b)(7)) is amended by adding at the end the 
following new subparagraph:
                    ``(D) Reduced rates for undergraduate 
                fdsl.--Notwithstanding the preceding paragraphs 
                of this subsection and subparagraph (A) of this 
                paragraph, for Federal Direct Stafford Loans 
                made to undergraduate students for which the 
                first disbursement is made on or after July 1, 
                2006, and before July 1, 2012, the applicable 
                rate of interest shall be as follows:
                            ``(i) For a loan for which the 
                        first disbursement is made on or after 
                        July 1, 2006, and before July 1, 2008, 
                        6.8 percent on the unpaid principal 
                        balance of the loan.
                            ``(ii) For a loan for which the 
                        first disbursement is made on or after 
                        July 1, 2008, and before July 1, 2009, 
                        6.0 percent on the unpaid principal 
                        balance of the loan.
                            ``(iii) For a loan for which the 
                        first disbursement is made on or after 
                        July 1, 2009, and before July 1, 2010, 
                        5.6 percent on the unpaid principal 
                        balance of the loan.
                            ``(iv) For a loan for which the 
                        first disbursement is made on or after 
                        July 1, 2010, and before July 1, 2011, 
                        4.5 percent on the unpaid principal 
                        balance of the loan.
                            ``(v) For a loan for which the 
                        first disbursement is made on or after 
                        July 1, 2011, and before July 1, 2012, 
                        3.4 percent on the unpaid principal 
                        balance of the loan.''.

SEC. 202. STUDENT LOAN DEFERMENT FOR CERTAIN MEMBERS OF THE ARMED 
                    FORCES.

    (a) Federal Family Education Loans.--Section 
428(b)(1)(M)(iii) (20 U.S.C. 1078(b)(1)(M)(iii)) is amended--
            (1) in the matter preceding subclause (I), by 
        striking ``not in excess of 3 years'';
            (2) in subclause (II), by striking ``; or'' and 
        inserting a comma; and
            (3) by adding at the end the following:

                        ``and for the 180-day period following 
                        the demobilization date for the service 
                        described in subclause (I) or (II); 
                        or''.
    (b) Direct Loans.--Section 455(f)(2)(C) (20 U.S.C. 
1087e(f)(2)(C)) is amended--
            (1) in the matter preceding clause (i), by striking 
        ``not in excess of 3 years'';
            (2) in clause (ii), by striking ``; or'' and 
        inserting a comma; and
            (3) by adding at the end the following:
                ``and for the 180-day period following the 
                demobilization date for the service described 
                in clause (i) or (ii); or''.
    (c) Perkins Loans.--Section 464(c)(2)(A)(iii) (20 U.S.C. 
1087dd(c)(2)(A)(iii)) is amended--
            (1) in the matter preceding subclause (I), by 
        striking ``not in excess of 3 years'';
            (2) in subclause (II), by striking the semicolon 
        and inserting a comma; and
            (3) by adding at the end the following:
``and for the 180-day period following the demobilization date 
for the service described in subclause (I) or (II);''.
    (d) Applicability.--Section 8007(f) of the Higher Education 
Reconciliation Act of 2005 (20 U.S.C. 1078 note) is amended by 
striking ``loans for which'' and all that follows through the 
period at the end and inserting ``all loans under title IV of 
the Higher Education Act of 1965.''.

SEC. 203. INCOME-BASED REPAYMENT.

    (a) Amendment.--Part G of title IV (20 U.S.C. 1088 et seq.) 
is amended by adding at the end the following:

``SEC. 493C. INCOME-BASED REPAYMENT.

    ``(a) Definitions.--In this section:
            ``(1) Excepted plus loan.--The term `excepted PLUS 
        loan' means a loan under section 428B, or a Federal 
        Direct PLUS Loan, that is made, insured, or guaranteed 
        on behalf of a dependent student.
            ``(2) Excepted consolidation loan.--The term 
        `excepted consolidation loan' means a consolidation 
        loan under section 428C, or a Federal Direct 
        Consolidation Loan, if the proceeds of such loan were 
        used to discharge the liability on an excepted PLUS 
        loan.
            ``(3) Partial financial hardship.--The term 
        `partial financial hardship', when used with respect to 
        a borrower, means that for such borrower--
                    ``(A) the annual amount due on the total 
                amount of loans made, insured, or guaranteed 
                under part B or D (other than an excepted PLUS 
                loan or excepted consolidation loan) to a 
                borrower as calculated under the standard 
                repayment plan under section 428(b)(9)(A)(i) or 
                455(d)(1)(A), based on a 10-year repayment 
                period; exceeds
                    ``(B) 15 percent of the result obtained by 
                calculating, on at least an annual basis, the 
                amount by which--
                            ``(i) the borrower's, and the 
                        borrower's spouse's (if applicable), 
                        adjusted gross income; exceeds
                            ``(ii) 150 percent of the poverty 
                        line applicable to the borrower's 
                        family size as determined under section 
                        673(2) of the Community Services Block 
                        Grant Act (42 U.S.C. 9902(2)).
    ``(b) Income-Based Repayment Program Authorized.--
Notwithstanding any other provision of this Act, the Secretary 
shall carry out a program under which--
            ``(1) a borrower of any loan made, insured, or 
        guaranteed under part B or D (other than an excepted 
        PLUS loan or excepted consolidation loan) who has a 
        partial financial hardship (whether or not the 
        borrower's loan has been submitted to a guaranty agency 
        for default aversion or is already in default) may 
        elect, during any period the borrower has the partial 
        financial hardship, to have the borrower's aggregate 
        monthly payment for all such loans not exceed the 
        result described in subsection (a)(3)(B) divided by 12;
            ``(2) the holder of such a loan shall apply the 
        borrower's monthly payment under this subsection first 
        toward interest due on the loan, next toward any fees 
        due on the loan, and then toward the principal of the 
        loan;
            ``(3) any interest due and not paid under paragraph 
        (2)--
                    ``(A) shall, on subsidized loans, be paid 
                by the Secretary for a period of not more than 
                3 years after the date of the borrower's 
                election under paragraph (1), except that such 
                period shall not include any period during 
                which the borrower is in deferment due to an 
                economic hardship described in section 435(o); 
                and
                    ``(B) be capitalized--
                            ``(i) in the case of a subsidized 
                        loan, subject to subparagraph (A), at 
                        the time the borrower--
                                    ``(I) ends the election to 
                                make income-based repayment 
                                under this subsection; or
                                    ``(II) begins making 
                                payments of not less than the 
                                amount specified in paragraph 
                                (6)(A); or
                            ``(ii) in the case of an 
                        unsubsidized loan, at the time the 
                        borrower--
                                    ``(I) ends the election to 
                                make income-based repayment 
                                under this subsection; or
                                    ``(II) begins making 
                                payments of not less than the 
                                amount specified in paragraph 
                                (6)(A);
            ``(4) any principal due and not paid under 
        paragraph (2) shall be deferred;
            ``(5) the amount of time the borrower makes monthly 
        payments under paragraph (1) may exceed 10 years;
            ``(6) if the borrower no longer has a partial 
        financial hardship or no longer wishes to continue the 
        election under this subsection, then--
                    ``(A) the maximum monthly payment required 
                to be paid for all loans made to the borrower 
                under part B or D (other than an excepted PLUS 
                loan or excepted consolidation loan) shall not 
                exceed the monthly amount calculated under 
                section 428(b)(9)(A)(i) or 455(d)(1)(A), based 
                on a 10-year repayment period, when the 
                borrower first made the election described in 
                this subsection; and
                    ``(B) the amount of time the borrower is 
                permitted to repay such loans may exceed 10 
                years;
            ``(7) the Secretary shall repay or cancel any 
        outstanding balance of principal and interest due on 
        all loans made under part B or D (other than a loan 
        under section 428B or a Federal Direct PLUS Loan) to a 
        borrower who--
                    ``(A) at any time, elected to participate 
                in income-based repayment under paragraph (1); 
                and
                    ``(B) for a period of time prescribed by 
                the Secretary, not to exceed 25 years, meets 1 
                or more of the following requirements:
                            ``(i) has made reduced monthly 
                        payments under paragraph (1) or 
                        paragraph (6);
                            ``(ii) has made monthly payments of 
                        not less than the monthly amount 
                        calculated under section 
                        428(b)(9)(A)(i) or 455(d)(1)(A), based 
                        on a 10-year repayment period, when the 
                        borrower first made the election 
                        described in this subsection;
                            ``(iii) has made payments of not 
                        less than the payments required under a 
                        standard repayment plan under section 
                        428(b)(9)(A)(i) or 455(d)(1)(A) with a 
                        repayment period of 10 years;
                            ``(iv) has made payments under an 
                        income-contingent repayment plan under 
                        section 455(d)(1)(D);
                            ``(v) has been in deferment due to 
                        an economic hardship described in 
                        section 435(o);
            ``(8) a borrower who is repaying a loan made under 
        part B or D pursuant to income-based repayment may 
        elect, at any time, to terminate repayment pursuant to 
        income-based repayment and repay such loan under the 
        standard repayment plan; and
            ``(9) the special allowance payment to a lender 
        calculated under section 438(b)(2)(I), when calculated 
        for a loan in repayment under this section, shall be 
        calculated on the principal balance of the loan and on 
        any accrued interest unpaid by the borrower in 
        accordance with this section.
    ``(c) Eligibility Determinations.--The Secretary shall 
establish procedures for annually determining the borrower's 
eligibility for income-based repayment, including verification 
of a borrower's annual income and the annual amount due on the 
total amount of loans made, insured, or guaranteed under part B 
or D (other than an excepted PLUS loan or excepted 
consolidation loan), and such other procedures as are necessary 
to effectively implement income-based repayment under this 
section. The Secretary shall consider, but is not limited to, 
the procedures established in accordance with section 455(e)(1) 
or in connection with income sensitive repayment schedules 
under section 428(b)(9)(A)(iii) or 428C(b)(1)(E).''.
    (b) Conforming Amendments.--
            (1) Section 428C (20 U.S.C. 1078-3) is amended--
                    (A) in subsection (a)(3)(B)(i), by amending 
                subclause (V) to read as follows:
                                    ``(V) an individual may 
                                obtain a subsequent 
                                consolidation loan under 
                                section 455(g) only--
                                            ``(aa) for the 
                                        purposes of obtaining 
                                        an income contingent 
                                        repayment plan, and 
                                        only if the loan has 
                                        been submitted to the 
                                        guaranty agency for 
                                        default aversion; or
                                            ``(bb) for the 
                                        purposes of using the 
                                        public service loan 
                                        forgiveness program 
                                        under section 
                                        455(m).'';
                    (B) in the first sentence of subsection 
                (b)(5), by inserting ``or chooses to obtain a 
                consolidation loan for the purposes of using 
                the public service loan forgiveness program 
                offered under section 455(m),'' after ``from 
                such a lender,''; and
                    (C) in the second sentence of such 
                subsection, by inserting before the period the 
                following: ``, except that if a borrower 
                intends to be eligible to use the public 
                service loan forgiveness program under section 
                455(m), such loan shall be repaid using one of 
                the repayment options described in section 
                455(m)(1)(A)''.
            (2) Section 428C (20 U.S.C. 1078-3) (as amended by 
        paragraph (1) of this subsection) is amended--
                    (A) in subsection (a)(3)(B)(i)(V)(aa)--
                            (i) by striking ``an income 
                        contingent repayment plan,'' and 
                        inserting ``income contingent repayment 
                        or income-based repayment,''; and
                            (ii) by inserting ``or if the loan 
                        is already in default'' before the 
                        semicolon;
                    (B) in the first sentence of subsection 
                (b)(5), by inserting ``or income-based 
                repayment terms'' after ``income-sensitive 
                repayment terms''; and
                    (C) in the second sentence of such 
                subsection, by inserting ``, pursuant to 
                income-based repayment under section 493C,'' 
                after ``part D of this title''.
            (3) Section 455(d)(1)(D) (20 U.S.C. 1087e(d)(1)(D)) 
        is amended by inserting ``made on behalf of a dependent 
        student'' after ``PLUS loan''.
    (c) Effective Date.--
            (1) In general.--Except as provided in paragraph 
        (2), the amendments made by this section shall be 
        effective on July 1, 2009.
            (2) Exception.--The amendments made by subsection 
        (b)(1) shall be effective on July 1, 2008.

SEC. 204. DEFERRAL OF LOAN REPAYMENT FOLLOWING ACTIVE DUTY.

    Part G of title IV is further amended by adding after 
section 493C (as added by section 203 of this Act) the 
following new section:

``SEC. 493D. DEFERRAL OF LOAN REPAYMENT FOLLOWING ACTIVE DUTY.

    ``(a) Deferral of Loan Repayment Following Active Duty.--In 
addition to any deferral of repayment of a loan made under this 
title pursuant to section 428(b)(1)(M)(iii), 455(f)(2)(C), or 
464(c)(2)(A)(iii), a borrower of a loan under this title who is 
a member of the National Guard or other reserve component of 
the Armed Forces of the United States, or a member of such 
Armed Forces in a retired status, is called or ordered to 
active duty, and is enrolled, or was enrolled within six months 
prior to the activation, in a program of instruction at an 
eligible institution, shall be eligible for a deferment during 
the 13 months following the conclusion of such service, except 
that a deferment under this subsection shall expire upon the 
borrower's return to enrolled student status.
    ``(b) Active Duty.--Notwithstanding section 481(d), in this 
section, the term `active duty' has the meaning given such term 
in section 101(d)(1) of title 10, United States Code, except 
that such term--
            ``(1) does not include active duty for training or 
        attendance at a service school; but
            ``(2) includes, in the case of members of the 
        National Guard, active State duty.''.

SEC. 205. MAXIMUM REPAYMENT PERIOD.

    Section 455(e) (20 U.S.C. 1087e(e)) is amended by adding at 
the end the following:
            ``(7) Maximum repayment period.--In calculating the 
        extended period of time for which an income contingent 
        repayment plan under this subsection may be in effect 
        for a borrower, the Secretary shall include all time 
        periods during which a borrower of loans under part B, 
        part D, or part E--
                    ``(A) is not in default on any loan that is 
                included in the income contingent repayment 
                plan; and
                    ``(B)(i) is in deferment due to an economic 
                hardship described in section 435(o);
                    ``(ii) makes monthly payments under 
                paragraph (1) or (6) of section 493C(b);
                    ``(iii) makes monthly payments of not less 
                than the monthly amount calculated under 
                section 428(b)(9)(A)(i) or subsection 
                (d)(1)(A), based on a 10-year repayment period, 
                when the borrower first made the election 
                described in section 493C(b)(1);
                    ``(iv) makes payments of not less than the 
                payments required under a standard repayment 
                plan under section 428(b)(9)(A)(i) or 
                subsection (d)(1)(A) with a repayment period of 
                10 years; or
                    ``(v) makes payments under an income 
                contingent repayment plan under subsection 
                (d)(1)(D).''.

            TITLE III--FEDERAL FAMILY EDUCATION LOAN PROGRAM

SEC. 301. GUARANTY AGENCY COLLECTION RETENTION.

    Clause (ii) of section 428(c)(6)(A) (20 U.S.C. 
1078(c)(6)(A)(ii)) is amended to read as follows:
                            ``(ii) an amount equal to 24 
                        percent of such payments for use in 
                        accordance with section 422B, except 
                        that--
                                    ``(I) beginning October 1, 
                                2003 and ending September 30, 
                                2007, this clause shall be 
                                applied by substituting `23 
                                percent' for `24 percent'; and
                                    ``(II) beginning October 1, 
                                2007, this clause shall be 
                                applied by substituting `16 
                                percent' for `24 percent'.''.

SEC. 302. ELIMINATION OF EXCEPTIONAL PERFORMER STATUS FOR LENDERS.

    (a) Elimination of Status.--Part B of title IV (20 U.S.C. 
1071 et seq.) is amended by striking section 428I (20 U.S.C. 
1078-9).
    (b) Conforming Amendments.--Part B of title IV is further 
amended--
            (1) in section 428(c)(1) (20 U.S.C. 1078(c)(1))--
                    (A) by striking subparagraph (D); and
                    (B) by redesignating subparagraphs (E) 
                through (H) as subparagraphs (D) through (G), 
                respectively; and
            (2) in section 438(b)(5) (20 U.S.C. 1087-1(b)(5)), 
        by striking the matter following subparagraph (B).
    (c) Effective Date.--The amendments made by subsections (a) 
and (b) shall be effective on October 1, 2007, except that 
section 428I of the Higher Education Act of 1965 (as in effect 
on the day before the date of enactment of this Act) shall 
apply to eligible lenders that received a designation under 
subsection (a) of such section prior to October 1, 2007, for 
the remainder of the year for which the designation was made.

SEC. 303. REDUCTION OF LENDER INSURANCE PERCENTAGE.

    (a) Amendment.--Subparagraph (G) of section 428(b)(1) (20 
U.S.C. 1078(b)(1)(G)) is amended to read as follows:
                    ``(G) insures 95 percent of the unpaid 
                principal of loans insured under the program, 
                except that--
                            ``(i) such program shall insure 100 
                        percent of the unpaid principal of 
                        loans made with funds advanced pursuant 
                        to section 428(j) or 439(q); and
                            ``(ii) notwithstanding the 
                        preceding provisions of this 
                        subparagraph, such program shall insure 
                        100 percent of the unpaid principal 
                        amount of exempt claims as defined in 
                        subsection (c)(1)(G);''.
    (b) Effective Date.--The amendment made by subsection (a) 
shall be effective on October 1, 2012, and shall apply with 
respect to loans made on or after such date.

SEC. 304. DEFINITIONS.

    Section 435 (20 U.S.C. 1085) is amended--
            (1) in subsection (o)(1)--
                    (A) in subparagraph (A)(ii)--
                            (i) by striking ``100 percent of 
                        the poverty line for a family of 2'' 
                        and inserting ``150 percent of the 
                        poverty line applicable to the 
                        borrower's family size''; and
                            (ii) by inserting ``or'' after the 
                        semicolon;
                    (B) by striking subparagraph (B); and
                    (C) by redesignating subparagraph (C) as 
                subparagraph (B);
            (2) in subsection (o)(2), by striking ``(1)(C)'' 
        and inserting ``(1)(B)''; and
            (3) by adding at the end the following:
    ``(p) Eligible Not-for-Profit Holder.--
            ``(1) Definition.--Subject to the limitations in 
        paragraph (2) and the prohibition in paragraph (3), the 
        term `eligible not-for-profit holder' means an eligible 
        lender under subsection (d) (except for an eligible 
        lender described in subsection (d)(1)(E)) that requests 
        a special allowance payment under section 
        438(b)(2)(I)(vi)(II) or a payment under section 771 and 
        that is--
                    ``(A) a State, or a political subdivision, 
                authority, agency, or other instrumentality 
                thereof, including such entities that are 
                eligible to issue bonds described in section 
                1.103-1 of title 26, Code of Federal 
                Regulations, or section 144(b) of the Internal 
                Revenue Code of 1986;
                    ``(B) an entity described in section 
                150(d)(2) of such Code that has not made the 
                election described in section 150(d)(3) of such 
                Code;
                    ``(C) an entity described in section 
                501(c)(3) of such Code; or
                    ``(D) a trustee acting as an eligible 
                lender on behalf of a State, political 
                subdivision, authority, agency, 
                instrumentality, or other entity described in 
                subparagraph (A), (B), or (C).
            ``(2) Limitations.--
                    ``(A) Existing on date of enactment.--
                            ``(i) In general.--An eligible 
                        lender shall not be an eligible not-
                        for-profit holder under this Act unless 
                        such lender--
                                    ``(I) was a State, 
                                political subdivision, 
                                authority, agency, 
                                instrumentality, or other 
                                entity described in paragraph 
                                (1)(A), (B), or (C) that was, 
                                on the date of the enactment of 
                                the College Cost Reduction and 
                                Access Act, acting as an 
                                eligible lender under 
                                subsection (d) (other than an 
                                eligible lender described in 
                                subsection (d)(1)(E)); or
                                    ``(II) is a trustee acting 
                                as an eligible lender under 
                                this Act on behalf of such a 
                                State, political subdivision, 
                                authority, agency, 
                                instrumentality, or other 
                                entity described in subclause 
                                (I) of this clause.
                            ``(ii) Exception.--Notwithstanding 
                        clause (i), a State may elect, in 
                        accordance with regulations of the 
                        Secretary, to waive the requirements of 
                        this subparagraph for a new not-for-
                        profit holder determined by the State 
                        to be necessary to carry out a public 
                        purpose of such State, except that a 
                        State may not make such election with 
                        respect to the requirements of clause 
                        (i)(II).
                    ``(B) No for-profit ownership or control.--
                No political subdivision, authority, agency, 
                instrumentality, or other entity described in 
                paragraph (1)(A), (B), or (C) shall be an 
                eligible not-for-profit holder under this Act 
                if such entity is owned or controlled, in whole 
                or in part, by a for-profit entity.
                    ``(C) Sole ownership of loans and income.--
                No State, political subdivision, authority, 
                agency, instrumentality, or other entity 
                described in paragraph (1)(A), (B), or (C) 
                shall be an eligible not-for-profit holder 
                under this Act with respect to any loan, or 
                income from any loan, unless the State, 
                political subdivision, authority, agency, 
                instrumentality, or other entity described in 
                paragraph (1)(A), (B), or (C) is the sole owner 
                of the beneficial interest in such loan and the 
                income from such loan.
                    ``(D) Trustee compensation limitations.--A 
                trustee described in paragraph (1)(D) shall not 
                receive compensation as consideration for 
                acting as an eligible lender on behalf of an 
                entity described in paragraph (1)(A), (B), or 
                (C) in excess of reasonable and customary fees.
                    ``(E) Rule of construction.--For purposes 
                of subparagraphs (B), (C), and (D) of this 
                paragraph, a State, political subdivision, 
                authority, agency, instrumentality, or other 
                entity described in paragraph (1)(A), (B), or 
                (C) shall not--
                            ``(i) be deemed to be owned or 
                        controlled, in whole or in part, by a 
                        for-profit entity, or
                            ``(ii) lose its status as the sole 
                        owner of a beneficial interest in a 
                        loan and the income from a loan by that 
                        political subdivision, authority, 
                        agency, instrumentality, or other 
                        entity,
                by granting a security interest in, or 
                otherwise pledging as collateral, such loan, or 
                the income from such loan, to secure a debt 
                obligation in the operation of an arrangement 
                described in paragraph (1)(D).
            ``(3) Prohibition.--In the case of a loan for which 
        the special allowance payment is calculated under 
        section 438(b)(2)(I)(vi)(II) and that is sold by the 
        eligible not-for-profit holder holding the loan to an 
        entity that is not an eligible not-for-profit holder 
        under this Act, the special allowance payment for such 
        loan shall, beginning on the date of the sale, no 
        longer be calculated under section 438(b)(2)(I)(vi)(II) 
        and shall be calculated under section 
        438(b)(2)(I)(vi)(I) instead.
            ``(4) Regulations.--Not later than 1 year after the 
        date of enactment of the College Cost Reduction and 
        Access Act, the Secretary shall promulgate regulations 
        in accordance with the provisions of this 
        subsection.''.

SEC. 305. SPECIAL ALLOWANCES.

    (a) Reduction of Lender Special Allowance Payments.--
Section 438(b)(2)(I) (20 U.S.C. 1087-1(b)(2)(I)) is amended--
            (1) in clause (i), by striking ``clauses (ii), 
        (iii), and (iv)'' and inserting ``the following 
        clauses'';
            (2) in clause (v)(III), by striking ``clauses (ii), 
        (iii), and (iv)'' and inserting ``clauses (ii), (iii), 
        (iv), and (vi)''; and
            (3) by adding at the end the following:
                            ``(vi) Reduction for loans 
                        disbursed on or after october 1, 
                        2007.--With respect to a loan on which 
                        the applicable interest rate is 
                        determined under section 427A(l) and 
                        for which the first disbursement of 
                        principal is made on or after October 
                        1, 2007, the special allowance payment 
                        computed pursuant to this subparagraph 
                        shall be computed--
                                    ``(I) for loans held by an 
                                eligible lender not described 
                                in subclause (II)--
                                            ``(aa) by 
                                        substituting `1.79 
                                        percent' for `2.34 
                                        percent' each place the 
                                        term appears in this 
                                        subparagraph;
                                            ``(bb) by 
                                        substituting `1.19 
                                        percent' for `1.74 
                                        percent' in clause 
                                        (ii);
                                            ``(cc) by 
                                        substituting `1.79 
                                        percent' for `2.64 
                                        percent' in clause 
                                        (iii); and
                                            ``(dd) by 
                                        substituting `2.09 
                                        percent' for `2.64 
                                        percent' in clause 
                                        (iv); and
                                    ``(II) for loans held by an 
                                eligible not-for-profit 
                                holder--
                                            ``(aa) by 
                                        substituting `1.94 
                                        percent' for `2.34 
                                        percent' each place the 
                                        term appears in this 
                                        subparagraph;
                                            ``(bb) by 
                                        substituting `1.34 
                                        percent' for `1.74 
                                        percent' in clause 
                                        (ii);
                                            ``(cc) by 
                                        substituting `1.94 
                                        percent' for `2.64 
                                        percent' in clause 
                                        (iii); and
                                            ``(dd) by 
                                        substituting `2.24 
                                        percent' for `2.64 
                                        percent' in clause 
                                        (iv).''.
    (b) Increased Loan Fees From Lenders.--Paragraph (2) of 
section 438(d) (20 U.S.C. 1087-1(d)(2)) is amended to read as 
follows:
            ``(2) Amount of loan fees.--The amount of the loan 
        fee which shall be deducted under paragraph (1), but 
        which may not be collected from the borrower, shall be 
        equal to--
                    ``(A) except as provided in subparagraph 
                (B), 0.50 percent of the principal amount of 
                the loan with respect to any loan under this 
                part for which the first disbursement was made 
                on or after October 1, 1993; and
                    ``(B) 1.0 percent of the principal amount 
                of the loan with respect to any loan under this 
                part for which the first disbursement was made 
                on or after October 1, 2007.''.

SEC. 306. ACCOUNT MAINTENANCE FEES.

    Section 458(b) (20 U.S.C. 1087h(b)) is amended by striking 
``0.10 percent'' and inserting ``0.06 percent''.

                       TITLE IV--LOAN FORGIVENESS

SEC. 401. LOAN FORGIVENESS FOR PUBLIC SERVICE EMPLOYEES.

    Section 455 (20 U.S.C. 1087e) is further amended by adding 
at the end the following:
    ``(m) Repayment Plan for Public Service Employees.--
            ``(1) In general.--The Secretary shall cancel the 
        balance of interest and principal due, in accordance 
        with paragraph (2), on any eligible Federal Direct Loan 
        not in default for a borrower who--
                    ``(A) has made 120 monthly payments on the 
                eligible Federal Direct Loan after October 1, 
                2007, pursuant to any one or a combination of 
                the following:
                            ``(i) payments under an income-
                        based repayment plan under section 
                        493C;
                            ``(ii) payments under a standard 
                        repayment plan under subsection 
                        (d)(1)(A), based on a 10-year repayment 
                        period;
                            ``(iii) monthly payments under a 
                        repayment plan under subsection (d)(1) 
                        or (g) of not less than the monthly 
                        amount calculated under subsection 
                        (d)(1)(A), based on a 10-year repayment 
                        period;
                            ``(iv) payments under an income 
                        contingent repayment plan under 
                        subsection (d)(1)(D); and
                    ``(B)(i) is employed in a public service 
                job at the time of such forgiveness; and
                    ``(ii) has been employed in a public 
                service job during the period in which the 
                borrower makes each of the 120 payments 
                described in subparagraph (A).
            ``(2) Loan cancellation amount.--After the 
        conclusion of the employment period described in 
        paragraph (1), the Secretary shall cancel the 
        obligation to repay the balance of principal and 
        interest due as of the time of such cancellation, on 
        the eligible Federal Direct Loans made to the borrower 
        under this part.
            ``(3) Definitions.--In this subsection:
                    ``(A) Eligible federal direct loan.--The 
                term `eligible Federal Direct Loan' means a 
                Federal Direct Stafford Loan, Federal Direct 
                PLUS Loan, or Federal Direct Unsubsidized 
                Stafford Loan, or a Federal Direct 
                Consolidation Loan.
                    ``(B) Public service job.--The term `public 
                service job' means--
                            ``(i) a full-time job in emergency 
                        management, government, military 
                        service, public safety, law 
                        enforcement, public health, public 
                        education (including early childhood 
                        education), social work in a public 
                        child or family service agency, public 
                        interest law services (including 
                        prosecution or public defense or legal 
                        advocacy in low-income communities at a 
                        nonprofit organization), public child 
                        care, public service for individuals 
                        with disabilities, public service for 
                        the elderly, public library sciences, 
                        school-based library sciences and other 
                        school-based services, or at an 
                        organization that is described in 
                        section 501(c)(3) of the Internal 
                        Revenue Code of 1986 and exempt from 
                        taxation under section 501(a) of such 
                        Code; or
                            ``(ii) teaching as a full-time 
                        faculty member at a Tribal College or 
                        University as defined in section 316(b) 
                        and other faculty teaching in high-
                        needs areas, as determined by the 
                        Secretary.''.

                     TITLE V--FEDERAL PERKINS LOANS

SEC. 501. DISTRIBUTION OF LATE COLLECTIONS.

    Section 466(b) (20 U.S.C. 1087ff(b)) is amended by striking 
``March 31, 2012'' and inserting ``October 1, 2012''.

                        TITLE VI--NEED ANALYSIS

SEC. 601. SUPPORT FOR WORKING STUDENTS.

    (a) Dependent Students.--Subparagraph (D) of section 
475(g)(2) (20 U.S.C. 1087oo(g)(2)(D)) is amended to read as 
follows:
                    ``(D) an income protection allowance of the 
                following amount (or a successor amount 
                prescribed by the Secretary under section 478):
                            ``(i) for academic year 2009-2010, 
                        $3,750;
                            ``(ii) for academic year 2010-2011, 
                        $4,500;
                            ``(iii) for academic year 2011-
                        2012, $5,250; and
                            ``(iv) for academic year 2012-2013, 
                        $6,000;''.
    (b) Independent Students Without Dependents Other Than a 
Spouse.--Clause (iv) of section 476(b)(1)(A) (20 U.S.C. 
1087pp(b)(1)(A)) is amended to read as follows:
                            ``(iv) an income protection 
                        allowance of the following amount (or a 
                        successor amount prescribed by the 
                        Secretary under section 478):
                                    ``(I) for single or 
                                separated students, or married 
                                students where both are 
                                enrolled pursuant to subsection 
                                (a)(2)--
                                            ``(aa) for academic 
                                        year 2009-2010, $7,000;
                                            ``(bb) for academic 
                                        year 2010-2011, $7,780;
                                            ``(cc) for academic 
                                        year 2011-2012, $8,550; 
                                        and
                                            ``(dd) for academic 
                                        year 2012-2013, $9,330; 
                                        and
                                    ``(II) for married students 
                                where 1 is enrolled pursuant to 
                                subsection (a)(2)--
                                            ``(aa) for academic 
                                        year 2009-2010, 
                                        $11,220;
                                            ``(bb) for academic 
                                        year 2010-2011, 
                                        $12,460;
                                            ``(cc) for academic 
                                        year 2011-2012, 
                                        $13,710; and
                                            ``(dd) for academic 
                                        year 2012-2013, 
                                        $14,960;''.
    (c) Independent Students With Dependents Other Than a 
Spouse.--Paragraph (4) of section 477(b) (20 U.S.C. 1087qq(b)) 
is amended to read as follows:
            ``(4) Income protection allowance.--The income 
        protection allowance is determined by the tables 
        described in subparagraphs (A) through (D) (or a 
        successor table prescribed by the Secretary under 
        section 478).
                    ``(A) Academic year 2009-2010.--For 
                academic year 2009-2010, the income protection 
                allowance is determined by the following table:

                                          ``Income Protection Allowance
----------------------------------------------------------------------------------------------------------------
               Family Size                                           Number in College
----------------------------------------------------------------------------------------------------------------
                                                                                                       For each
           (including student)                  1          2          3           4           5       additional
                                                                                                      subtract:
----------------------------------------------------------------------------------------------------------------
                    2                         $17,720    $14,690
                    3                          22,060     19,050    $16,020
                    4                          27,250     24,220     21,210     $18,170
                    5                          32,150     29,120     26,100      23,070     $20,060
                    6                          37,600     34,570     31,570      28,520      25,520       $3,020
For each
additional
  add:                                          4,240      4,240      4,240       4,240       4,240
----------------------------------------------------------------------------------------------------------------

                    ``(B) Academic year 2010-2011.--For 
                academic year 2010-2011, the income protection 
                allowance is determined by the following table:

                                          ``Income Protection Allowance
----------------------------------------------------------------------------------------------------------------
               Family Size                                           Number in College
----------------------------------------------------------------------------------------------------------------
                                                                                                       For each
           (including student)                  1          2          3           4           5       additional
                                                                                                      subtract:
----------------------------------------------------------------------------------------------------------------
                    2                         $19,690    $16,330
                    3                          24,510     21,160    $17,800
                    4                          30,280     26,910     23,560     $20,190
                    5                          35,730     32,350     29,000      25,640     $22,290
                    6                          41,780     38,410     35,080      31,690      28,350       $3,350
For each
additional
  add:                                          4,710      4,710      4,710       4,710       4,710
----------------------------------------------------------------------------------------------------------------

                    ``(C) Academic year 2011-2012.--For 
                academic year 2011-2012, the income protection 
                allowance is determined by the following table:

                                          ``Income Protection Allowance
----------------------------------------------------------------------------------------------------------------
               Family Size                                           Number in College
----------------------------------------------------------------------------------------------------------------
                                                                                                       For each
           (including student)                  1          2          3           4           5       additional
                                                                                                      subtract:
----------------------------------------------------------------------------------------------------------------
                    2                         $21,660    $17,960
                    3                          26,960     23,280    $19,580
                    4                          33,300     29,600     25,920     $22,210
                    5                          39,300     35,590     31,900      28,200     $24,520
                    6                          45,950     42,250     38,580      34,860      31,190       $3,690
For each
additional
  add:                                          5,180      5,180      5,180       5,180       5,180
----------------------------------------------------------------------------------------------------------------

                    ``(D) Academic year 2012-2013.--For 
                academic year 2012-2013, the income protection 
                allowance is determined by the following table:

                                          ``Income Protection Allowance
----------------------------------------------------------------------------------------------------------------
               Family Size                                           Number in College
----------------------------------------------------------------------------------------------------------------
                                                                                                       For each
           (including student)                  1          2          3           4           5       additional
                                                                                                      subtract:
----------------------------------------------------------------------------------------------------------------
                    2                         $23,630    $19,590
                    3                          29,420     25,400    $21,360
                    4                          36,330     32,300     28,280     $24,230
                    5                          42,870     38,820     34,800      30,770     $26,750
                    6                          50,130     46,100     42,090      38,030      34,020       $4,020
For each
additional
  add:                                          5,660      5,660      5,660       5,660       5,660          ''.
----------------------------------------------------------------------------------------------------------------

    (d) Updated Tables and Amounts.--Section 478(b) (20 U.S.C. 
1087rr(b)) is amended--
            (1) by striking paragraph (1) and inserting the 
        following:
            ``(1) Revised tables.--
                    ``(A) In general.--For each academic year 
                after academic year 2008-2009, the Secretary 
                shall publish in the Federal Register a revised 
                table of income protection allowances for the 
                purpose of sections 475(c)(4) and 477(b)(4), 
                subject to subparagraphs (B) and (C).
                    ``(B) Table for independent students.--
                            ``(i) Academic years 2009-2010 
                        through 2012-2013.--For each of the 
                        academic years 2009-2010 through 2012-
                        2013, the Secretary shall not develop a 
                        revised table of income protection 
                        allowances under section 477(b)(4) and 
                        the table specified for such academic 
                        year under subparagraphs (A) through 
                        (D) of such section shall apply.
                            ``(ii) Other academic years.--For 
                        each academic year after academic year 
                        2012-2013, the Secretary shall develop 
                        the revised table of income protection 
                        allowances by increasing each of the 
                        dollar amounts contained in the table 
                        of income protection allowances under 
                        section 477(b)(4)(D) by a percentage 
                        equal to the estimated percentage 
                        increase in the Consumer Price Index 
                        (as determined by the Secretary) 
                        between December 2011 and the December 
                        next preceding the beginning of such 
                        academic year, and rounding the result 
                        to the nearest $10.
                    ``(C) Table for parents.--For each academic 
                year after academic year 2008-2009, the 
                Secretary shall develop the revised table of 
                income protection allowances under section 
                475(c)(4) by increasing each of the dollar 
                amounts contained in the table by a percentage 
                equal to the estimated percentage increase in 
                the Consumer Price Index (as determined by the 
                Secretary) between December 1992 and the 
                December next preceding the beginning of such 
                academic year, and rounding the result to the 
                nearest $10.''; and
            (2) in paragraph (2), by striking ``shall be 
        developed'' and all that follows through the period at 
        the end and inserting ``shall be developed for each 
        academic year after academic year 2012-2013, by 
        increasing each of the dollar amounts contained in such 
        section for academic year 2012-2013 by a percentage 
        equal to the estimated percentage increase in the 
        Consumer Price Index (as determined by the Secretary) 
        between December 2011 and the December next preceding 
        the beginning of such academic year, and rounding the 
        result to the nearest $10.''.
    (e) Effective Date.--The amendments made by this section 
shall be effective on July 1, 2009.

SEC. 602. SIMPLIFIED NEEDS TEST AND AUTOMATIC ZERO IMPROVEMENTS.

    (a) Simplified Needs Test.--Section 479 (20 U.S.C. 1087ss) 
is amended--
            (1) in subsection (b)--
                    (A) in paragraph (1)(A)(i)--
                            (i) in subclause (II), by striking 
                        ``or'' after the semicolon;
                            (ii) by redesignating subclause 
                        (III) as subclause (IV);
                            (iii) by inserting after subclause 
                        (II) the following:
                                    ``(III) 1 of whom is a 
                                dislocated worker; or''; and
                            (iv) in subclause (IV) (as 
                        redesignated by clause (ii)), by 
                        striking ``12-month'' and inserting 
                        ``24-month''; and
                    (B) in paragraph (1)(B)(i)--
                            (i) in subclause (II), by striking 
                        ``or'' after the semicolon;
                            (ii) by redesignating subclause 
                        (III) as subclause (IV);
                            (iii) by inserting after subclause 
                        (II) the following:
                                    ``(III) 1 of whom is a 
                                dislocated worker; or''; and
                            (iv) in subclause (IV) (as 
                        redesignated by clause (ii)), by 
                        striking ``12-month'' and inserting 
                        ``24-month'';
            (2) in subsection (c)--
                    (A) in paragraph (1)--
                            (i) in subparagraph (A)--
                                    (I) in clause (ii), by 
                                striking ``or'' after the 
                                semicolon;
                                    (II) by redesignating 
                                clause (iii) as clause (iv);
                                    (III) by inserting after 
                                clause (ii) the following:
                            ``(iii) 1 of whom is a dislocated 
                        worker; or''; and
                                    (IV) in clause (iv) (as 
                                redesignated by subclause 
                                (II)), by striking ``12-month'' 
                                and inserting ``24-month''; and
                            (ii) in subparagraph (B), by 
                        striking ``$20,000'' and inserting 
                        ``$30,000''; and
                    (B) in paragraph (2)--
                            (i) in subparagraph (A)--
                                    (I) in clause (ii), by 
                                striking ``or'' after the 
                                semicolon;
                                    (II) by redesignating 
                                clause (iii) as clause (iv);
                                    (III) by inserting after 
                                clause (ii) the following:
                            ``(iii) 1 of whom is a dislocated 
                        worker; or''; and
                                    (IV) in clause (iv) (as 
                                redesignated by subclause 
                                (II)), by striking ``12-month'' 
                                and inserting ``24-month''; and
                            (ii) in subparagraph (B), by 
                        striking ``$20,000'' and inserting 
                        ``$30,000''; and
                    (C) in the flush matter following paragraph 
                (2)(B), by adding at the end the following: 
                ``The Secretary shall annually adjust the 
                income level necessary to qualify an applicant 
                for the zero expected family contribution. The 
                income level shall be adjusted according to 
                increases in the Consumer Price Index, as 
                defined in section 478(f).''; and
            (3) in subsection (d)--
                    (A) by redesignating paragraphs (1) through 
                (6) as subparagraphs (A) through (F), 
                respectively and moving the margins of such 
                subparagraphs 2 ems to the right;
                    (B) by striking ``(d) Definition'' and all 
                that follows through ``the term'' and inserting 
                the following:
    ``(d) Definitions.--In this section:
            ``(1) Dislocated worker.--The term `dislocated 
        worker' has the meaning given the term in section 101 
        of the Workforce Investment Act of 1998 (29 U.S.C. 
        2801).
            ``(2) Means-tested federal benefit program.--The 
        term''.
    (b) Effective Date.--The amendments made by this section 
shall be effective on July 1, 2009.

SEC. 603. DISCRETION OF STUDENT FINANCIAL AID ADMINISTRATORS.

    (a) Amendments.--The third sentence of section 479A(a) (20 
U.S.C. 1087tt(a)) is amended--
            (1) by inserting ``or an independent student'' 
        after ``family member'';
            (2) by inserting ``a family member who is a 
        dislocated worker (as defined in section 101 of the 
        Workforce Investment Act of 1998),'' before ``the 
        number of parents''; and
            (3) by inserting ``a change in housing status that 
        results in an individual being homeless (as defined in 
        section 103 of the McKinney-Vento Homeless Assistance 
        Act),'' after ``under section 487,''.
    (b) Effective Date.--The amendments made by this section 
shall take effect on July 1, 2009.

SEC. 604. DEFINITIONS.

    (a) In General.--Section 480 (20 U.S.C. 1087vv) is 
amended--
            (1) in subsection (a)(2)--
                    (A) by striking ``and no portion'' and 
                inserting ``no portion''; and
                    (B) by inserting ``and no distribution from 
                any qualified education benefit described in 
                subsection (f)(3) that is not subject to 
                Federal income tax,'' after ``1986,'';
            (2) by striking subsection (b) and inserting the 
        following:
    ``(b) Untaxed Income and Benefits.--
            ``(1) The term `untaxed income and benefits' 
        means--
                    ``(A) child support received;
                    ``(B) workman's compensation;
                    ``(C) veteran's benefits such as death 
                pension, dependency, and indemnity 
                compensation, but excluding veterans' education 
                benefits as defined in subsection (c);
                    ``(D) interest on tax-free bonds;
                    ``(E) housing, food, and other allowances 
                (excluding rent subsidies for low-income 
                housing) for military, clergy, and others 
                (including cash payments and cash value of 
                benefits);
                    ``(F) cash support or any money paid on the 
                student`s behalf, except, for dependent 
                students, funds provided by the student's 
                parents;
                    ``(G) untaxed portion of pensions;
                    ``(H) payments to individual retirement 
                accounts and Keogh accounts excluded from 
                income for Federal income tax purposes; and
                    ``(I) any other untaxed income and 
                benefits, such as Black Lung Benefits, Refugee 
                Assistance, or railroad retirement benefits, or 
                benefits received through participation in 
                employment and training activities under title 
                I of the Workforce Investment Act of 1998 (29 
                U.S.C. 2801 et seq.).
            ``(2) The term `untaxed income and benefits' shall 
        not include the amount of additional child tax credit 
        claimed for Federal income tax purposes.'';
            (3) in subsection (d)--
                    (A) by redesignating paragraphs (1), (2), 
                (3) through (6), and (7) as subparagraphs (A), 
                (B), (D) through (G), and (I), respectively, 
                and indenting appropriately;
                    (B) by striking ``The term'' and inserting 
                the following:
            ``(1) Definition.--The term'';
                    (C) by striking subparagraph (B) (as 
                redesignated by subparagraph (A)) and inserting 
                the following:
                    ``(B) is an orphan, in foster care, or a 
                ward of the court, at any time when the 
                individual is 13 years of age or older;
                    ``(C) is an emancipated minor or is in 
                legal guardianship as determined by a court of 
                competent jurisdiction in the individual's 
                State of legal residence;'';
                    (D) in subparagraph (G) (as redesignated by 
                subparagraph (A)), by striking ``or'' after the 
                semicolon;
                    (E) by inserting after subparagraph (G) (as 
                redesignated by subparagraph (A)) the 
                following:
                    ``(H) has been verified during the school 
                year in which the application is submitted as 
                either an unaccompanied youth who is a homeless 
                child or youth (as such terms are defined in 
                section 725 of the McKinney-Vento Homeless 
                Assistance Act), or as unaccompanied, at risk 
                of homelessness, and self-supporting, by--
                            ``(i) a local educational agency 
                        homeless liaison, designated pursuant 
                        to section 722(g)(1)(J)(ii) of the 
                        McKinney-Vento Homeless Assistance Act;
                            ``(ii) the director of a program 
                        funded under the Runaway and Homeless 
                        Youth Act or a designee of the 
                        director;
                            ``(iii) the director of a program 
                        funded under subtitle B of title IV of 
                        the McKinney-Vento Homeless Assistance 
                        Act (relating to emergency shelter 
                        grants) or a designee of the director; 
                        or
                            ``(iv) a financial aid 
                        administrator; or''; and
                    (F) by adding at the end the following:
            ``(2) Simplifying the dependency override 
        process.--A financial aid administrator may make a 
        determination of independence under paragraph (1)(I) 
        based upon a documented determination of independence 
        that was previously made by another financial aid 
        administrator under such paragraph in the same award 
        year.'';
            (4) in subsection (e)--
                    (A) in paragraph (3), by striking ``and'' 
                after the semicolon;
                    (B) in paragraph (4), by striking the 
                period at the end and inserting ``; and''; and
                    (C) by adding at the end the following:
            ``(5) special combat pay.'';
            (5) in subsection (f), by striking paragraph (3) 
        and inserting the following:
            ``(3) A qualified education benefit shall be 
        considered an asset of--
                    ``(A) the student if the student is an 
                independent student; or
                    ``(B) the parent if the student is a 
                dependent student, regardless of whether the 
                owner of the account is the student or the 
                parent.'';
            (6) in subsection (j)--
                    (A) in paragraph (2), by inserting ``, or a 
                distribution that is not includable in gross 
                income under section 529 of such Code, under 
                another prepaid tuition plan offered by a 
                State, or under a Coverdell education savings 
                account under section 530 of such Code,'' after 
                ``1986''; and
                    (B) by adding at the end the following:
            ``(4) Notwithstanding paragraph (1), special combat 
        pay shall not be treated as estimated financial 
        assistance for purposes of section 471(3).''; and
            (7) by adding at the end the following:
    ``(n) Special Combat Pay.--The term `special combat pay' 
means pay received by a member of the Armed Forces because of 
exposure to a hazardous situation.''.
    (b) Effective Date.--The amendments made by this section 
shall be effective on July 1, 2009.

           TITLE VII--COMPETITIVE LOAN AUCTION PILOT PROGRAM

SEC. 701. COMPETITIVE LOAN AUCTION PILOT PROGRAM.

    Title IV (20 U.S.C. 1070 et seq.) is further amended by 
adding at the end the following:

            ``PART I--COMPETITIVE LOAN AUCTION PILOT PROGRAM

``SEC. 499. COMPETITIVE LOAN AUCTION PILOT PROGRAM.

    ``(a) Definitions.--In this section:
            ``(1) Eligible federal plus loan.--The term 
        `eligible Federal PLUS Loan' means a loan described in 
        section 428B made to a parent of a dependent student 
        who is a new borrower on or after July 1, 2009.
            ``(2) Eligible lender.--The term `eligible lender' 
        has the meaning given the term in section 435.
    ``(b) Pilot Program.--The Secretary shall carry out a pilot 
program under which the Secretary establishes a mechanism for 
an auction of eligible Federal PLUS Loans in accordance with 
this subsection. The pilot program shall meet the following 
requirements:
            ``(1) Planning and implementation.--During the 
        period beginning on the date of enactment of this 
        section and ending on June 30, 2009, the Secretary 
        shall plan and implement the pilot program under this 
        subsection. During the planning and implementation, the 
        Secretary shall consult with other Federal agencies 
        with knowledge of, and experience with, auction 
        programs, including the Federal Communication 
        Commission and the Department of the Treasury.
            ``(2) Origination and disbursement; applicability 
        of section 428b.--Beginning on July 1, 2009, the 
        Secretary shall arrange for the origination and 
        disbursement of all eligible Federal PLUS Loans in 
        accordance with the provisions of this subsection and 
        the provisions of section 428B that are not 
        inconsistent with this subsection.
            ``(3) Loan origination mechanism.--The Secretary 
        shall establish a loan origination auction mechanism 
        that meets the following requirements:
                    ``(A) Auction for each state.--The 
                Secretary administers an auction under this 
                paragraph for each State, under which eligible 
                lenders compete to originate eligible Federal 
                PLUS Loans under this paragraph at all 
                institutions of higher education within such 
                State.
                    ``(B) Prequalification process.--The 
                Secretary establishes a prequalification 
                process for eligible lenders desiring to 
                participate in an auction under this paragraph 
                that contains, at a minimum--
                            ``(i) a set of borrower benefits 
                        and servicing requirements each 
                        eligible lender shall meet in order to 
                        participate in such an auction; and
                            ``(ii) an assessment of each such 
                        eligible lender's capacity, including 
                        capital capacity, to participate 
                        effectively.
                    ``(C) Timing and origination.--Each State 
                auction takes place every 2 years, and the 
                eligible lenders with the winning bids for the 
                State are the only eligible lenders permitted 
                to originate eligible Federal PLUS Loans made 
                under this paragraph for the cohort of students 
                at the institutions of higher education within 
                the State until the students graduate from or 
                leave the institutions of higher education.
                    ``(D) Bids.--Each eligible lender's bid 
                consists of the amount of the special allowance 
                payment (after the application of section 
                438(b)(2)(I)(v)) the eligible lender proposes 
                to accept from the Secretary with respect to 
                the eligible Federal PLUS Loans made under this 
                paragraph in lieu of the amount determined 
                under section 438(b)(2)(I).
                    ``(E) Maximum bid.--The maximum bid 
                allowable under this paragraph shall not exceed 
                the amount of the special allowance payable on 
                eligible Federal PLUS Loans made under this 
                paragraph computed under section 438(b)(2)(I) 
                (other than clauses (ii), (iii), (iv), and (vi) 
                of such section), except that for purposes of 
                the computation under this subparagraph, 
                section 438(b)(2)(I)(i)(III) shall be applied 
                by substituting `1.79 percent' for `2.34 
                percent'.
                    ``(F) Winning bids.--The winning bids for 
                each State auction shall be the 2 bids 
                containing the lowest and the second lowest 
                proposed special allowance payments, subject to 
                subparagraph (E).
                    ``(G) Agreement with secretary.--Each 
                eligible lender having a winning bid under 
                subparagraph (F) enters into an agreement with 
                the Secretary under which the eligible lender--
                            ``(i) agrees to originate eligible 
                        Federal PLUS Loans under this paragraph 
                        to each borrower who--
                                    ``(I) seeks an eligible 
                                Federal PLUS Loan under this 
                                paragraph to enable a dependent 
                                student to attend an 
                                institution of higher education 
                                within the State;
                                    ``(II) is eligible for an 
                                eligible Federal PLUS Loan; and
                                    ``(III) elects to borrow 
                                from the eligible lender; and
                            ``(ii) agrees to accept a special 
                        allowance payment (after the 
                        application of section 438(b)(2)(I)(v)) 
                        from the Secretary with respect to the 
                        eligible Federal PLUS Loans originated 
                        under clause (i) in the amount proposed 
                        in the second lowest winning bid 
                        described in subparagraph (F) for the 
                        applicable State auction.
                    ``(H) Sealed bids; confidentiality.--All 
                bids are sealed and the Secretary keeps the 
                bids confidential, including following the 
                announcement of the winning bids.
                    ``(I) Eligible lender of last resort.--
                            ``(i) In general.--In the event 
                        that there is no winning bid under 
                        subparagraph (F), the students at the 
                        institutions of higher education within 
                        the State that was the subject of the 
                        auction shall be served by an eligible 
                        lender of last resort, as determined by 
                        the Secretary.
                            ``(ii) Determination of eligible 
                        lender of last resort.--Prior to the 
                        start of any auction under this 
                        paragraph, eligible lenders that desire 
                        to serve as an eligible lender of last 
                        resort shall submit an application to 
                        the Secretary at such time and in such 
                        manner as the Secretary may determine. 
                        Such application shall include an 
                        assurance that the eligible lender will 
                        meet the prequalification requirements 
                        described in subparagraph (B).
                            ``(iii) Geographic location.--The 
                        Secretary shall identify an eligible 
                        lender of last resort for each State.
                            ``(iv) Notification timing.--The 
                        Secretary shall not identify any 
                        eligible lender of last resort until 
                        after the announcement of all the 
                        winning bids for a State auction for 
                        any year.
                            ``(v) Maximum special allowance.--
                        The Secretary is authorized to set a 
                        special allowance payment that shall be 
                        payable to a lender of last resort for 
                        a State under this subparagraph, which 
                        special allowance payment shall be kept 
                        confidential, including following the 
                        announcement of winning bids. The 
                        Secretary shall set such special 
                        allowance payment so that it incurs the 
                        lowest possible cost to the Federal 
                        Government, taking into consideration 
                        the lowest bid that was submitted in an 
                        auction for such State and the lowest 
                        bid submitted in a similar State, as 
                        determined by the Secretary.
                    ``(J) Guarantee against losses.--The 
                Secretary guarantees the eligible Federal PLUS 
                Loans made under this paragraph against losses 
                resulting from the default of a parent borrower 
                in an amount equal to 99 percent of the unpaid 
                principal and interest due on the loan.
                    ``(K) Loan fees.--The Secretary shall not 
                collect a loan fee under section 438(d) with 
                respect to an eligible Federal Plus Loan 
                originated under this paragraph.
                    ``(L) Consolidation.--
                            ``(i) In general.--An eligible 
                        lender who is permitted to originate 
                        eligible Federal PLUS Loans for a 
                        borrower under this paragraph shall 
                        have the option to consolidate such 
                        loans into 1 loan.
                            ``(ii) Notification.--In the event 
                        a borrower with eligible Federal PLUS 
                        Loans made under this paragraph wishes 
                        to consolidate the loans, the borrower 
                        shall notify the eligible lender who 
                        originated the loans under this 
                        paragraph.
                            ``(iii) Limitation on eligible 
                        lender option to consolidate.--The 
                        option described in clause (i) shall 
                        not apply if--
                                    ``(I) the borrower includes 
                                in the notification in clause 
                                (ii) verification of 
                                consolidation terms and 
                                conditions offered by an 
                                eligible lender other than the 
                                eligible lender described in 
                                clause (i); and
                                    ``(II) not later than 10 
                                days after receiving such 
                                notification from the borrower, 
                                the eligible lender described 
                                in clause (i) does not agree to 
                                match such terms and 
                                conditions, or provide more 
                                favorable terms and conditions 
                                to such borrower than the 
                                offered terms and conditions 
                                described in subclause (I).
                            ``(iv) Consolidation of additional 
                        loans.--If a borrower has a Federal 
                        Direct PLUS Loan or a loan made on 
                        behalf of a dependent student under 
                        section 428B and seeks to consolidate 
                        such loan with an eligible Federal PLUS 
                        Loan made under this paragraph, then 
                        the eligible lender that originated the 
                        borrower's loan under this paragraph 
                        may include in the consolidation under 
                        this subparagraph a Federal Direct PLUS 
                        Loan or a loan made on behalf of a 
                        dependent student under section 428B, 
                        but only if--
                                    ``(I) in the case of a 
                                Federal Direct PLUS Loan, the 
                                eligible lender agrees, not 
                                later than 10 days after the 
                                borrower requests such 
                                consolidation from the lender, 
                                to match the consolidation 
                                terms and conditions that would 
                                otherwise be available to the 
                                borrower if the borrower 
                                consolidated such loans in the 
                                loan program under part D; or
                                    ``(II) in the case of a 
                                loan made on behalf of a 
                                dependent student under section 
                                428B, the eligible lender 
                                agrees, not later than 10 days 
                                after the borrower requests 
                                such consolidation from the 
                                lender, to match the 
                                consolidation terms and 
                                conditions offered by an 
                                eligible lender other than the 
                                eligible lender that originated 
                                the borrower's loans under this 
                                paragraph.
                            ``(v) Special allowance on 
                        consolidation loans that include loans 
                        made under this paragraph.--The 
                        applicable special allowance payment 
                        for loans consolidated under this 
                        paragraph shall be equal to the lesser 
                        of--
                                    ``(I) the weighted average 
                                of the special allowance 
                                payment on such loans, except 
                                that in calculating such 
                                weighted average the Secretary 
                                shall exclude any Federal 
                                Direct PLUS Loan included in 
                                the consolidation; or
                                    ``(II) the result of--
                                            ``(aa) 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; plus
                                            ``(bb) 1.59 
                                        percent.
                            ``(vi) Interest payment rebate 
                        fee.--Any loan under section 428C 
                        consolidated under this paragraph shall 
                        not be subject to the interest payment 
                        rebate fee under section 428C(f).''.

                     TITLE VIII--PARTNERSHIP GRANTS

SEC. 801. COLLEGE ACCESS CHALLENGE GRANT PROGRAM.

    Title VII (20 U.S.C. 1133 et seq.) is amended by adding at 
the end the following new part:

            ``PART E--COLLEGE ACCESS CHALLENGE GRANT PROGRAM

``SEC. 771. COLLEGE ACCESS CHALLENGE GRANT PROGRAM.

    ``(a) Authorization and Appropriation.--There are 
authorized to be appropriated, and there are appropriated, to 
carry out this section $66,000,000 for each of the fiscal years 
2008 and 2009. The authority to award grants under this section 
shall expire at the end of fiscal year 2009.
    ``(b) Program Authorized.--
            ``(1) Grants authorized.--From amounts appropriated 
        under subsection (a), the Secretary shall award grants, 
        from allotments under subsection (c), to States (and to 
        philanthropic organizations, as appropriate under 
        paragraph (3)) having applications approved under 
        subsection (d), to enable the State (or philanthropic 
        organization) to pay the Federal share of the costs of 
        carrying out the activities and services described in 
        subsection (f).
            ``(2) Federal share; non-federal share.--
                    ``(A) Federal share.--The amount of the 
                Federal share under this section for a fiscal 
                year shall be equal to \2/3\ of the costs of 
                the activities and services described in 
                subsection (f) that are carried out under the 
                grant.
                    ``(B) Non-federal share.--The amount of the 
                non-Federal share under this section shall be 
                equal to \1/3\ of the costs of the activities 
                and services described in subsection (f). The 
                non-Federal share may be in cash or in-kind, 
                and may be provided from State resources, 
                contributions from private organizations, or 
                both.
            ``(3) Reduction for failure to pay non-federal 
        share.--If a State fails to provide the full non-
        Federal share required under this subsection, the 
        Secretary shall reduce the amount of the grant payment 
        under this section proportionately, and may award the 
        proportionate reduction amount of the grant directly to 
        a philanthropic organization, as defined in subsection 
        (i), to carry out this section.
            ``(4) Temporary ineligibility for subsequent 
        payments.--
                    ``(A) In general.--The Secretary shall 
                determine a grantee to be temporarily 
                ineligible to receive a grant payment under 
                this section for a fiscal year if--
                            ``(i) the grantee fails to submit 
                        an annual report pursuant to subsection 
                        (h) for the preceding fiscal year; or
                            ``(ii) the Secretary determines, 
                        based on information in such annual 
                        report, that the grantee is not 
                        effectively meeting the conditions 
                        described under subsection (g) and the 
                        goals of the application under 
                        subsection (d).
                    ``(B) Reinstatement.--If the Secretary 
                determines that a grantee is ineligible under 
                subparagraph (A), the Secretary may enter into 
                an agreement with the grantee setting forth the 
                terms and conditions under which the grantee 
                may regain eligibility to receive payments 
                under this section.
    ``(c) Determination of Allotment.--
            ``(1) Amount of allotment.--Subject to paragraph 
        (2), in making grant payments to grantees under this 
        section, the allotment to each grantee for a fiscal 
        year shall be equal to the sum of--
                    ``(A) the amount that bears the same 
                relation to 50 percent of the amount 
                appropriated under subsection (a) for such 
                fiscal year as the number of residents in the 
                State aged 5 through 17 who are living below 
                the poverty line applicable to the resident's 
                family size (as determined under section 673(2) 
                of the Community Service Block Grant Act) bears 
                to the total number of such residents in all 
                States; and
                    ``(B) the amount that bears the same 
                relation to 50 percent of the amount 
                appropriated under subsection (a) for such 
                fiscal year as the number of residents in the 
                State aged 15 through 44 who are living below 
                the poverty line applicable to the individual's 
                family size (as determined under section 673(2) 
                of the Community Service Block Grant Act) bears 
                to the total number of such residents in all 
                States.
            ``(2) Minimum amount.--The allotment for each State 
        under this section for a fiscal year shall not be an 
        amount that is less than 0.5 percent of the total 
        amount appropriated under subsection (a) for such 
        fiscal year.
    ``(d) Submission and Contents of Application.--
            ``(1) In general.--For each fiscal year for which a 
        grantee desires a grant payment under subsection (b), 
        the State agency with jurisdiction over higher 
        education, or another agency designated by the Governor 
        or chief executive of the State to administer the 
        program under this section, or a philanthropic 
        organization, in accordance with subsection (b)(3), 
        shall submit an application to the Secretary at such 
        time, in such manner, and containing the information 
        described in paragraph (2).
            ``(2) Application.--An application submitted under 
        paragraph (1) shall include the following:
                    ``(A) A description of the grantee's 
                capacity to administer the grant under this 
                section and report annually to the Secretary on 
                the activities and services described in 
                subsection (f).
                    ``(B) A description of the grantee's plan 
                for using the grant funds to meet the 
                requirements of subsections (f) and (g), 
                including plans for how the grantee will make 
                special efforts to--
                            ``(i) provide such benefits to 
                        students in the State that are 
                        underrepresented in postsecondary 
                        education; or
                            ``(ii) in the case of a 
                        philanthropic organization that 
                        operates in more than one State, 
                        provide benefits to such students in 
                        each such State for which the 
                        philanthropic organization is receiving 
                        grant funds under this section.
                    ``(C) A description of how the grantee will 
                provide or coordinate the provision of the non-
                Federal share from State resources or private 
                contributions.
                    ``(D) A description of--
                            ``(i) the structure that the 
                        grantee has in place to administer the 
                        activities and services described in 
                        subsection (f); or
                            ``(ii) the plan to develop such 
                        administrative capacity.
    ``(e) Subgrants to Nonprofit Organizations.--A State 
receiving a payment under this section may elect to make a 
subgrant to one or more nonprofit organizations in the State, 
including an eligible not-for-profit holder (as defined in 
section 435(p) of the Higher Education Act of 1965, as amended 
by section 303 of this Act), or a partnership of such 
organizations, to carry out activities or services described in 
subsection (f), if the nonprofit organization or partnership--
            ``(1) was in existence on the day before the date 
        of the enactment of this Act; and
            ``(2) as of such day, was participating in 
        activities and services related to increasing access to 
        higher education, such as those activities and services 
        described in subsection (f).
    ``(f) Allowable Uses.--
            ``(1) In general.--Subject to paragraph (3), a 
        grantee may use a grant payment under this section only 
        for the following activities and services, pursuant to 
        the conditions under subsection (g):
                    ``(A) Information for students and families 
                regarding--
                            ``(i) the benefits of a 
                        postsecondary education;
                            ``(ii) postsecondary education 
                        opportunities;
                            ``(iii) planning for postsecondary 
                        education; and
                            ``(iv) career preparation.
                    ``(B) Information on financing options for 
                postsecondary education and activities that 
                promote financial literacy and debt management 
                among students and families.
                    ``(C) Outreach activities for students who 
                may be at risk of not enrolling in or 
                completing postsecondary education.
                    ``(D) Assistance in completion of the Free 
                Application for Federal Student Aid or other 
                common financial reporting form under section 
                483(a) of the Higher Education Act of 1965.
                    ``(E) Need-based grant aid for students.
                    ``(F) Professional development for guidance 
                counselors at middle schools and secondary 
                schools, and financial aid administrators and 
                college admissions counselors at institutions 
                of higher education, to improve such 
                individuals' capacity to assist students and 
                parents with--
                            ``(i) understanding--
                                    ``(I) entrance requirements 
                                for admission to institutions 
                                of higher education; and
                                    ``(II) State eligibility 
                                requirements for Academic 
                                Competitiveness Grants or 
                                National SMART Grants under 
                                section 401A, and other 
                                financial assistance that is 
                                dependent upon a student's 
                                coursework;
                            ``(ii) applying to institutions of 
                        higher education;
                            ``(iii) applying for Federal 
                        student financial assistance and other 
                        State, local, and private student 
                        financial assistance and scholarships;
                            ``(iv) activities that increase 
                        students' ability to successfully 
                        complete the coursework required for a 
                        postsecondary degree, including 
                        activities such as tutoring or 
                        mentoring; and
                            ``(v) activities to improve 
                        secondary school students' preparedness 
                        for postsecondary entrance 
                        examinations.
                    ``(G) Student loan cancellation or 
                repayment (as applicable), or interest rate 
                reductions, for borrowers who are employed in a 
                high-need geographical area or a high-need 
                profession in the State, as determined by the 
                State.
            ``(2) Prohibited uses.--Funds made available under 
        this section shall not be used to promote any lender's 
        loans.
            ``(3) Use of funds for administrative purposes.--A 
        grantee may use not more than 6 percent of the total 
        amount of the sum of the Federal share provided under 
        this section and the non-Federal share required under 
        this section for administrative purposes relating to 
        the grant under this section.
    ``(g) Special Conditions.--
            ``(1) Availability to students and families.--A 
        grantee receiving a grant payment under this section 
        shall--
                    ``(A) make the activities and services 
                described in subparagraphs (A) through (F) of 
                subsection (f)(1) that are funded under the 
                payment available to all qualifying students 
                and families in the State;
                    ``(B) allow students and families to 
                participate in the activities and services 
                without regard to--
                            ``(i) the postsecondary institution 
                        in which the student enrolls;
                            ``(ii) the type of student loan the 
                        student receives;
                            ``(iii) the servicer of such loan; 
                        or
                            ``(iv) the student's academic 
                        performance;
                    ``(C) not charge any student or parent a 
                fee or additional charge to participate in the 
                activities or services; and
                    ``(D) in the case of an activity providing 
                grant aid, not require a student to meet any 
                condition other than eligibility for Federal 
                financial assistance under title IV of the 
                Higher Education Act of 1965, except as 
                provided for in the loan cancellation or 
                repayment or interest rate reductions described 
                in subsection (f)(1)(G).
            ``(2) Priority.--A grantee receiving a grant 
        payment under this section shall, in carrying out any 
        activity or service described in subsection (f)(1) with 
        the grant funds, prioritize students and families who 
        are living below the poverty line applicable to the 
        individual's family size (as determined under section 
        673(2) of the Community Service Block Grant Act).
            ``(3) Disclosures.--
                    ``(A) Organizational disclosures.--In the 
                case of a State that has chosen to make a 
                payment to an eligible not-for-profit holder in 
                the State in accordance with subsection (e), 
                the holder shall clearly and prominently 
                indicate the name of the holder and the nature 
                of the holder's work in connection with any of 
                the activities carried out, or any information 
                or services provided, with such funds.
                    ``(B) Informational disclosures.--Any 
                information about financing options for higher 
                education provided through an activity or 
                service funded under this section shall--
                            ``(i) include information to 
                        students and the students' parents of 
                        the availability of Federal, State, 
                        local, institutional, and other grants 
                        and loans for postsecondary education; 
                        and
                            ``(ii) present information on 
                        financial assistance for postsecondary 
                        education that is not provided under 
                        title IV of the Higher Education Act of 
                        1965 in a manner that is clearly 
                        distinct from information on student 
                        financial assistance under such title.
            ``(4) Coordination.--A grantee receiving a grant 
        payment under this section shall attempt to coordinate 
        the activities carried out with the grant payment with 
        any existing activities that are similar to such 
        activities, and with any other entities that support 
        the existing activities in the State.
    ``(h) Report.--A grantee receiving a payment under this 
section shall prepare and submit an annual report to the 
Secretary on the activities and services carried out under this 
section, and on the implementation of such activities and 
services. The report shall include--
            ``(1) each activity or service that was provided to 
        students and families over the course of the year;
            ``(2) the cost of providing each activity or 
        service;
            ``(3) the number, and percentage, if feasible and 
        applicable, of students who received each activity or 
        service; and
            ``(4) the total contributions from private 
        organizations included in the grantee's non-Federal 
        share for the fiscal year.
    ``(i) Definitions.--In this section:
            ``(1) Philanthropic organization.--The term 
        `philanthropic organization' means a non-profit 
        organization--
                    ``(A) that does not receive funds under 
                title IV of the Higher Education Act of 1965 or 
                under the Elementary and Secondary Education 
                Act of 1965;
                    ``(B) that is not a local educational 
                agency or an institution of higher education;
                    ``(C) that has a demonstrated record of 
                dispersing grant aid to underserved populations 
                to ensure access to, and participation in, 
                higher education;
                    ``(D) that is affiliated with eligible 
                consortia (as defined in paragraph (2)) to 
                carry out this section; and
                    ``(E) the primary purpose of which is to 
                provide financial aid and support services to 
                students from underrepresented populations to 
                increase the number of such students who enter 
                and remain in college.
            ``(2) Eligible consortia.--The term `eligible 
        consortia' means a partnership of 2 or more entities 
        that have agreed to work together to carry out this 
        section that--
                    ``(A) includes--
                            ``(i) a philanthropic organization, 
                        which serves as the manager of the 
                        consortia;
                            ``(ii) a State that demonstrates a 
                        commitment to ensuring the creation of 
                        a Statewide system to address the 
                        issues of early intervention and 
                        financial support for eligible students 
                        to enter and remain in college; and
                            ``(iii) at the discretion of the 
                        philanthropic organization described in 
                        clause (i), additional partners, 
                        including other non-profit 
                        organizations, government entities 
                        (including local municipalities, school 
                        districts, cities, and counties), 
                        institutions of higher education, and 
                        other public or private programs that 
                        provide mentoring or outreach programs; 
                        and
                    ``(B) conducts activities to assist 
                students with entering and remaining in 
                college, which may include--
                            ``(i) providing need-based grants 
                        to students;
                            ``(ii) providing early notification 
                        to low-income students of their 
                        potential eligibility for Federal 
                        financial aid (which may include 
                        assisting students and families with 
                        filling out FAFSA forms), as well as 
                        other financial aid and other support 
                        available from the eligible consortia;
                            ``(iii) encouraging increased 
                        student participation in higher 
                        education through mentoring or outreach 
                        programs; and
                            ``(iv) conducting marketing and 
                        outreach efforts that are designed to--
                                    ``(I) encourage full 
                                participation of students in 
                                the activities of the consortia 
                                that carry out this section; 
                                and
                                    ``(II) provide the 
                                communities impacted by the 
                                activities of the consortia 
                                with a general knowledge about 
                                the efforts of the consortia.
            ``(3) Grantee.--The term `grantee' means--
                    ``(A) a State awarded a grant under this 
                section; or
                    ``(B) with respect to such a State that has 
                failed to meet the non-Federal share 
                requirement of subsection (b), a philanthropic 
                organization awarded the proportionate 
                reduction amount of such a grant under 
                subsection (b)(3).''.

SEC. 802. INVESTMENT IN HISTORICALLY BLACK COLLEGES AND UNIVERSITIES 
                    AND MINORITY-SERVING INSTITUTIONS.

    Title IV (20 U.S.C. 1070 et seq.) is further amended by 
adding after part I (as added by section 701 of this Act) the 
following new part:

 ``PART J--STRENGTHENING HISTORICALLY BLACK COLLEGES AND UNIVERSITIES 
                AND OTHER MINORITY-SERVING INSTITUTIONS

``SEC. 499A. INVESTMENT IN HISTORICALLY BLACK COLLEGES AND UNIVERSITIES 
                    AND OTHER MINORITY-SERVING INSTITUTIONS.

    ``(a) Eligible Institution.--An institution of higher 
education is eligible to receive funds from the amounts made 
available under this section if such institution is--
            ``(1) a part B institution (as defined in section 
        322 (20 U.S.C. 1061));
            ``(2) a Hispanic-serving institution (as defined in 
        section 502 (20 U.S.C. 1101a));
            ``(3) a Tribal College or University (as defined in 
        section 316 (20 U.S.C. 1059c));
            ``(4) an Alaska Native-serving institution or a 
        Native Hawaiian-serving institution (as defined in 
        section 317(b) (20 U.S.C. 1059d(b)));
            ``(5) a Predominantly Black Institution (as defined 
        in subsection (c));
            ``(6) an Asian American and Native American Pacific 
        Islander-serving institution (as defined in subsection 
        (c)); or
            ``(7) a Native American-serving nontribal 
        institution (as defined in subsection (c)).
    ``(b) New Investment of Funds.--
            ``(1) In general.--There shall be available to the 
        Secretary to carry out this section, from funds not 
        otherwise appropriated, $255,000,000 for each of the 
        fiscal years 2008 and 2009. The authority to award 
        grants under this section shall expire at the end of 
        fiscal year 2009.
            ``(2) Allocation and allotment.--
                    ``(A) In general.--Of the amounts made 
                available under paragraph (1) for each fiscal 
                year--
                            ``(i) $100,000,000 shall be 
                        available for allocation under 
                        subparagraph (B);
                            ``(ii) $100,000,000 shall be 
                        available for allocation under 
                        subparagraph (C); and
                            ``(iii) $55,000,000 shall be 
                        available for allocation under 
                        subparagraph (D).
                    ``(B) HSI stem and articulation programs.--
                The amount made available for allocation under 
                this subparagraph by subparagraph (A)(i) for 
                any fiscal year shall be available for 
                Hispanic-serving Institutions for activities 
                described in section 503, with a priority given 
                to applications that propose--
                            ``(i) to increase the number of 
                        Hispanic and other low income students 
                        attaining degrees in the fields of 
                        science, technology, engineering, or 
                        mathematics; and
                            ``(ii) to develop model transfer 
                        and articulation agreements between 2-
                        year Hispanic-serving institutions and 
                        4-year institutions in such fields.
                    ``(C) Allocation and allotment hbcus and 
                pbis.--From the amount made available for 
                allocation under this subparagraph by 
                subparagraph (A)(ii) for any fiscal year--
                            ``(i) 85 percent shall be available 
                        to eligible institutions described in 
                        subsection (a)(1) and shall be made 
                        available as grants under section 323 
                        and allotted among such institutions 
                        under section 324, treating such 
                        amount, plus the amount appropriated 
                        for such fiscal year in a regular or 
                        supplemental appropriation Act to carry 
                        out part B of title III, as the amount 
                        appropriated to carry out part B of 
                        title III for purposes of allotments 
                        under section 324, for use by such 
                        institutions with a priority for--
                                    ``(I) activities described 
                                in paragraphs (1), (2), (4), 
                                (5), and (10) of section 
                                323(a); and
                                    ``(II) other activities, 
                                consistent with the 
                                institution's comprehensive 
                                plan and designed to increase 
                                the institution's capacity to 
                                prepare students for careers in 
                                the physical or natural 
                                sciences, mathematics, computer 
                                science or information 
                                technology or sciences, 
                                engineering, language 
                                instruction in the less-
                                commonly taught languages or 
                                international affairs, or 
                                nursing or allied health 
                                professions; and
                            ``(ii) 15 percent shall be 
                        available to eligible institutions 
                        described in subsection (a)(5) and 
                        shall be available for a competitive 
                        grant program to award 25 grants of 
                        $600,000 annually for programs in any 
                        of the following areas:
                                    ``(I) science, technology, 
                                engineering, or mathematics 
                                (STEM);
                                    ``(II) health education;
                                    ``(III) 
                                internationalization or 
                                globalization;
                                    ``(IV) teacher preparation; 
                                or
                                    ``(V) improving educational 
                                outcomes of African American 
                                males.
                    ``(D) Allocation and allotment to other 
                minority-serving institutions.--From the amount 
                made available for allocation under this 
                subparagraph by subparagraph (A)(iii) for any 
                fiscal year--
                            ``(i) $30,000,000 for such fiscal 
                        year shall be available to eligible 
                        institutions described in subsection 
                        (a)(3) and shall be made available as 
                        grants under section 316, treating such 
                        $30,000,000 as part of the amount 
                        appropriated for such fiscal year in a 
                        regular or supplemental appropriation 
                        Act to carry out such section, and 
                        using such $30,000,000 for purposes 
                        described in subsection (c) of such 
                        section;
                            ``(ii) $15,000,000 for such fiscal 
                        year shall be available to eligible 
                        institutions described in subsection 
                        (a)(4) and shall be made available as 
                        grants under section 317, treating such 
                        $15,000,000 as part of the amount 
                        appropriated for such fiscal year in a 
                        regular or supplemental appropriation 
                        Act to carry out such section and using 
                        such $15,000,000 for purposes described 
                        in subsection (c) of such section;
                            ``(iii) $5,000,000 for such fiscal 
                        year shall be available to eligible 
                        institutions described in subsection 
                        (a)(6) for activities described in 
                        section 311(c); and
                            ``(iv) $5,000,000 for such fiscal 
                        year shall be available to eligible 
                        institutions described in subsection 
                        (a)(7)--
                                    ``(I) to plan, develop, 
                                undertake, and carry out 
                                activities to improve and 
                                expand such institutions' 
                                capacity to serve Native 
                                Americans, which may include--
                                            ``(aa) the 
                                        purchase, rental, or 
                                        lease of scientific or 
                                        laboratory equipment 
                                        for educational 
                                        purposes, including 
                                        instructional and 
                                        research purposes;
                                            ``(bb) renovation 
                                        and improvement in 
                                        classroom, library, 
                                        laboratory, and other 
                                        instructional 
                                        facilities;
                                            ``(cc) support of 
                                        faculty exchanges, 
                                        faculty development, 
                                        and faculty fellowships 
                                        to assist faculty in 
                                        attaining advanced 
                                        degrees in the 
                                        faculty's field of 
                                        instruction;
                                            ``(dd) curriculum 
                                        development and 
                                        academic instruction;
                                            ``(ee) the purchase 
                                        of library books, 
                                        periodicals, microfilm, 
                                        and other educational 
                                        materials;
                                            ``(ff) funds and 
                                        administrative 
                                        management, and 
                                        acquisition of 
                                        equipment for use in 
                                        strengthening funds 
                                        management;
                                            ``(gg) the joint 
                                        use of facilities such 
                                        as laboratories and 
                                        libraries; and
                                            ``(hh) academic 
                                        tutoring and counseling 
                                        programs and student 
                                        support services; and
                                    ``(II) to which the 
                                Secretary, to the extent 
                                possible and consistent with a 
                                competitive process under which 
                                such grants are awarded, 
                                allocates funds under this 
                                clause to ensure maximum and 
                                equitable distribution among 
                                all such eligible institutions.
    ``(c) Definitions.--
            ``(1) Asian american.--The term `Asian American' 
        has the meaning given the term `Asian' in the Office of 
        Management and Budget's Standards for Maintaining, 
        Collecting, and Presenting Federal Data on Race and 
        Ethnicity as published on October 30, 1997 (62 Fed. 
        Reg. 58789).
            ``(2) Asian american and native american pacific 
        islander-serving institution.--The term `Asian American 
        and Native American Pacific Islander-serving 
        institution' means an institution of higher education 
        that--
                    ``(A) is an eligible institution under 
                section 312(b); and
                    ``(B) at the time of application, has an 
                enrollment of undergraduate students that is at 
                least 10 percent Asian American and Native 
                American Pacific Islander students.
            ``(3) Enrollment of needy students.--The term 
        `enrollment of needy students' means the enrollment at 
        an institution of higher education with respect to 
        which not less than 50 percent of the undergraduate 
        students enrolled in an academic program leading to a 
        degree--
                    ``(A) in the second fiscal year preceding 
                the fiscal year for which the determination is 
                made, were Federal Pell Grant recipients for 
                such year;
                    ``(B) come from families that receive 
                benefits under a means-tested Federal benefit 
                program (as defined in paragraph (5));
                    ``(C) attended a public or nonprofit 
                private secondary school--
                            ``(i) that is in the school 
                        district of a local educational agency 
                        that was eligible for assistance under 
                        part A of title I of the Elementary and 
                        Secondary Education Act of 1965 for any 
                        year during which the student attended 
                        such secondary school; and
                            ``(ii) which for the purpose of 
                        this paragraph and for that year was 
                        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 a 
                        measure of poverty described in section 
                        1113(a)(5) of such Act exceeds 30 
                        percent of the total enrollment of such 
                        school; or
                    ``(D) are first-generation college students 
                (as that term is defined in section 402A(g)), 
                and a majority of such first-generation college 
                students are low-income individuals.
            ``(4) Low-income individual.--The term `low-income 
        individual' has the meaning given such term in section 
        402A(g).
            ``(5) Means-tested federal benefit program.--The 
        term `means-tested Federal benefit program' means a 
        program of the Federal Government, other than a program 
        under title IV, in which eligibility for the programs' 
        benefits or the amount of such benefits are determined 
        on the basis of income or resources of the individual 
        or family seeking the benefit.
            ``(6) Native american.--The term `Native American' 
        means an individual who is of a tribe, people, or 
        culture that is indigenous to the United States.
            ``(7) Native american pacific islander.--The term 
        `Native American Pacific Islander' means any descendant 
        of the aboriginal people of any island in the Pacific 
        Ocean that is a territory or possession of the United 
        States.
            ``(8) Native american-serving nontribal 
        institution.--The term `Native American-serving 
        nontribal institution' means an institution of higher 
        education that--
                    ``(A) at the time of application--
                            ``(i) has an enrollment of 
                        undergraduate students that is not less 
                        than 10 percent Native American 
                        students; and
                            ``(ii) is not a Tribal College or 
                        University (as defined in section 316); 
                        and
                    ``(B) submits to the Secretary such 
                enrollment data as may be necessary to 
                demonstrate that the institution is described 
                in subparagraph (A), along with such other 
                information and data as the Secretary may by 
                regulation require.
            ``(9) Predominantly black institution.--The term 
        `Predominantly Black institution' means an institution 
        of higher education that--
                    ``(A) has an enrollment of needy students 
                as defined by paragraph (3);
                    ``(B) has an average educational and 
                general expenditure which is low, per full-time 
                equivalent undergraduate student in comparison 
                with the average educational and general 
                expenditure per full-time equivalent 
                undergraduate student of institutions of higher 
                education that offer similar instruction, 
                except that the Secretary may apply the waiver 
                requirements described in section 392(b) to 
                this subparagraph in the same manner as the 
                Secretary applies the waiver requirements to 
                section 312(b)(1)(B);
                    ``(C) has an enrollment of undergraduate 
                students--
                            ``(i) that is at least 40 percent 
                        Black American students;
                            ``(ii) that is at least 1,000 
                        undergraduate students;
                            ``(iii) of which not less than 50 
                        percent of the undergraduate students 
                        enrolled at the institution are low-
                        income individuals or first-generation 
                        college students (as that term is 
                        defined in section 402A(g)); and
                            ``(iv) of which not less than 50 
                        percent of the undergraduate students 
                        are enrolled in an educational program 
                        leading to a bachelor's or associate's 
                        degree that the institution is licensed 
                        to award by the State in which the 
                        institution is located;
                    ``(D) is legally authorized to provide, and 
                provides within the State, an educational 
                program for which the institution of higher 
                education awards a bachelor's degree, or in the 
                case of a junior or community college, an 
                associate's degree;
                    ``(E) is accredited by a nationally 
                recognized accrediting agency or association 
                determined by the Secretary to be a reliable 
                authority as to the quality of training 
                offered, or is, according to such an agency or 
                association, making reasonable progress toward 
                accreditation; and
                    ``(F) is not receiving assistance under 
                part B of title III.''.
      And the Senate agree to the same.

                                    George Miller,
                                    Robert E. Andrews,
                                    Bobby Scott,
                                    Ruben Hinojosa,
                                    John F. Tierney,
                                    David Wu,
                                    Susan A. Davis,
                                    Danny K. Davis,
                                    Timothy Bishop,
                                    Mazie K. Hirono,
                                    Jason Altmire,
                                    John Yarmuth,
                                    Joe Courtney,
                                 Managers on the Part of the House.

                                    Ted Kennedy,
                                    Chris Dodd,
                                    Tom Harkin,
                                    Barbara A. Mikulski,
                                    Jeff Bingaman,
                                    Patty Murray,
                                    Jack Reed,
                                    Hillary Rodham Clinton,
                                    Barack Obama,
                                    Bernard Sanders,
                                    Sherrod Brown,
                                    Michael B. Enzi,
                                    Lamar Alexander,
                                    Orrin G. Hatch,
                                Managers on the Part of the Senate.
       JOINT EXPLANATORY STATEMENT OF THE COMMITTEE OF CONFERENCE

      The managers on the part of the House and the Senate at 
the conference on the disagreeing votes of the two Houses on 
the amendment of the Senate to the bill (H.R. 2669), to provide 
for reconciliation pursuant to section 601 of the concurrent 
resolution on the budget for fiscal year 2008, submit the 
following joint statement to the House and the Senate in 
explanation of the effect of the action agreed upon by the 
managers and recommended in the accompanying conference report:
      The Senate amendment struck all of the House bill after 
the enacting clause and inserted a substitute text.
      The House recedes from its disagreement to the amendment 
of the Senate with an amendment that is a substitute for the 
House bill and the Senate amendment. The differences between 
the House bill, the Senate amendment, and the substitute agreed 
to in conference are noted below, except for clerical 
corrections, conforming changes made necessary by agreements 
reached by the conferees, and minor drafting and clarifying 
changes.

                         SECTION 1. SHORT TITLE

      The House bill's short title is the ``College Cost 
Reduction Act.''
      The Senate amendment provides that the Act may be cited 
as the ``Higher Education Access Act of 2007'' and that, unless 
otherwise indicated, references in the bill are made to the 
Higher Education Act of 1965.
      The House recedes with an amendment to provide a new 
short title of the ``College Cost Reduction and Access Act.'' 
The Conferees adopt the Senate amendment as amended by the 
House.

  TITLE I--GRANTS TO STUDENTS IN ATTENDANCE AT INSTITUTIONS OF HIGHER 
                               EDUCATION

                    SECTION 101. TUITION SENSITIVITY

      The House bill (Sec. 101) eliminates the Pell grant 
``tuition sensitivity'' provision that prevents low-income 
students attending low-cost institutions, such as community 
colleges, to benefit fully from the Pell Grant. Authorizes and 
appropriates $5,000,000 for fiscal year 2008.
      The Senate amendment (Sec. 101) also eliminates the Pell 
grant ``tuition sensitivity'' provision and authorizes and 
appropriates $5,000,000 for fiscal year 2008.
      The House and the Senate recede with an amendment to 
authorize and appropriate $11,000,000 for fiscal year 2008 to 
ensure that all eligible students in award year 2007-2008 
receive funding. The Conferees concur and adopt the amendment.

              SECTION 102. MANDATORY PELL GRANT INCREASES

      The House bill (Sec. 101) authorizes and appropriates new 
mandatory funding to increase the maximum Pell grant award, 
above the appropriated level, by: $200 in 2008-09; $200 in 
2009-10; $300 in 2010-11; $500 in 2011-12; and $500 in 2012 and 
each subsequent award year.
      The Senate amendment (Sec. 102) creates ``Promise 
grants''--a new grant program for low-income, Pell-eligible 
students to be established in addition to the Pell grant 
program. Promise grants shall be awarded in the same way Pell 
grants are awarded, except that they shall be awarded only to 
students who are already eligible for Pell grants. Grants shall 
be awarded to those students with the greatest need, as 
determined under Section 471. Grants awarded under this 
subsection shall be used to supplement and not supplant other 
Federal, State and institutional grant funds. The Senate 
amendment authorizes and appropriates new mandatory funding to 
increase the maximum Pell grant award, above the appropriated 
level, by: $790 in 2008-09; $890 in 2009-10; $990 in 2010-11; 
$1,090 in 2011-12; and $1,090 in 2012.
      The House and Senate recede with an amendment that 
provides new mandatory funding for Pell grants and makes the 
following increases in the Pell maximum under current law:
            $490 in 2008-2009 and 2009-2010;
            $690 in 2010-2011 and 2011-2012; and
            $1,090 in 2012-2013.
      The Conferees concur and adopt the amendment as proposed 
by both the House and the Senate. Combined with an appropriated 
level of $4,310, as it is in current law, the maximum Pell 
Grant award will reach $4,800 in the 2008-2009 academic year, 
$4,800 in the 2009-2010 academic year, $5,000 in the 2010-2011 
academic year, $5,000 in the 2011-2012 academic year, and 
$5,400 in the 2012-2013 academic year.
      The Conferees intend that in awarding the funds under 
this section, the Secretary shall determine the universe of 
students who are eligible to receive a Pell grant, without 
regard to this section, and award grants under this section 
only to such students. The Conferees further intend that the 
allocated funds for all academic years be distributed in the 
same manner as funds are awarded under the Pell grant program, 
in accordance with the eligibility determination, needs 
analysis formula and regulations used for the distribution of 
Pell grant awards from discretionary funds. The Conferees 
intend that students who receive a maximum Pell grant under the 
discretionary maximum award level will be eligible to receive 
the maximum award allowed under this section, and students who 
receive Pell grants that are less than the maximum under the 
discretionary funding would be eligible to receive grants under 
this section proportionate to the size of the Pell grant the 
student received under the discretionary funding level, in 
accordance with the Pell grant formula.
      The Conferees intend that the funding provided in this 
section be used to supplement, and in no way supplant, current 
or future discretionary funding for the Pell grant program or 
increases in such funding.

                       SECTION 103. UPWARD BOUND

      The House bill (Sec. 412) restricts the Secretary's use 
of funds for the purposes of evaluating and selecting 
participants of the Upward Bound program. The bill also 
provides an additional $228 million to restore Upward Bound 
funding to unfunded programs from the FY07 competition.
      The Senate amendment contains no similar provision.
      The Senate recedes with an amendment to strike the 
provision that restricts the Secretary's use of funds for the 
purposes of evaluating and selecting participants of the Upward 
Bound Program. The Conferees adopt the provision in the House 
bill as amended by the Senate.

                       SECTION 104. TEACH GRANTS

      The House bill (Sec. 301) creates new TEACH Grants that 
provide up-front pre-paid tuition assistance of $4,000/year 
(with a maximum of $16,000) for high-achieving graduate and 
undergraduate students who commit to teaching a high-need 
subject in a high-need school for four years. Bonus grants are 
provided to students who are enrolled in a qualified teacher 
education program and teach in a science or mathematics field.
      The Senate amendment contains no similar provision.
      The Senate recedes with an amendment striking the bonus 
grants in the House proposal. The Conferees adopt the provision 
in the House bill as amended by the Senate.
      The Conferees intend that the Department of Education may 
operate this program through a pre-existing office, and does 
not require the creation of a new office.

         TITLE II--STUDENT LOAN BENEFITS, TERMS, AND CONDITIONS

                 SECTION 201. INTEREST RATE REDUCTIONS

      The House bill (Sec. 111) reduces interest rates on 
subsidized Stafford loans for undergraduates to 6.12 percent on 
July 1, 2008; 5.44 percent on July 1, 2009; 4.76 percent on 
July 1, 2010; 4.08 percent on July 1, 2011 and 3.4 percent on 
July 1, 2012.
      The Senate amendment contains no similar provision.
      The Senate recedes with an amendment, to reduce interest 
rates on subsidized Stafford loans for undergraduates to 6.0 
percent on July 1, 2008; 5.6 percent on July 1, 2009; 4.5 
percent on July 1, 2010; and 3.4 percent on July 1, 2011. The 
Conferees adopt the provision in the House bill as amended by 
the Senate.

 SECTION 202. STUDENT LOAN DEFERMENT FOR CERTAIN MEMBERS OF THE ARMED 
                                 FORCES

      The Senate amendment (Sec. 202) eliminates a three-year 
limitation on the period for which certain members of the armed 
forces may receive deferments on their student loan payments. 
It allows deferments until 180 days after such member is 
demobilized. It also provides that such benefits are available 
regardless of when the student loan was originated. As in 
current law, members of the armed forces who qualify for this 
deferment are limited to those who are serving on active duty 
or performing qualifying National Guard duty during a war or 
other military operation in a national emergency.
      The House bill contains no similar provision.
      The House recedes.

                  SECTION 203. INCOME-BASED REPAYMENT

      The House bill (Sec. 133) builds on the tenets of the 
Income Contingent Repayment program by guaranteeing that all 
borrowers' loan payments will be limited to 15 percent of their 
discretionary income, or 15 percent of the amount by which a 
borrower's adjusted gross income exceeds 150 percent of the 
poverty line, divided by 12. Under this section, unpaid 
interest and principal are capitalized and any outstanding loan 
balance is forgiven after 20 years of repayment.
      In the Senate amendment, unpaid interest on subsidized 
loans is paid or forgiven by the Secretary and outstanding loan 
balance is forgiven after 25 years of repayment. The amendment 
provides that borrowers repaying loans according to income-
contingent repayment or income-sensitive repayment plans prior 
to enactment of this Act shall have the option of continuing to 
repay under the terms and conditions of those programs as they 
existed prior to enactment of this Act or may elect to use the 
income-based repayment plan created by this section.
      The House and Senate recede with an amendment adopting 
the structure of the House proposal, and requiring the 
Secretary to pay any unpaid interest on subsidized loans for up 
to three years. The amendment also provides for loan 
forgiveness of unpaid principal balances after 25 years of 
repayment in the income-based repayment program. The Conferees 
adopt the provision as proposed by both the House and the 
Senate.

     SECTION 204. DEFERRAL OF LOAN REPAYMENT FOLLOWING ACTIVE DUTY

      The House bill (Sec. 137) allows active duty members of 
the armed services, including members of the National Guard or 
other reserve component of the armed forces who were enrolled 
in college or left college within six months of deployment to 
receive extended repayment on loan terms of up to 13 months 
upon return from active duty.
      The Senate amendment contains no similar provision.
      The Senate recedes.

                 SECTION 205. MAXIMUM REPAYMENT PERIOD

      The House bill (Sec. 136) amends provisions concerning 
the maximum repayment period in the income-contingent repayment 
program.
      The Senate amendment contains no similar provision.
      The Senate recedes.

            TITLE III--FEDERAL FAMILY EDUCATION LOAN PROGRAM

           SECTION 301. GUARANTY AGENCY COLLECTION RETENTION

      The House bill (Sec. 116) reduces the percentage which 
guaranty agencies shall be allowed to retain from payments made 
through collections on defaulted loans from 23 percent to 16 
percent.
      The Senate amendment (Sec. 302) contains the same 
provision.
      The Conferees adopt the language of the identical 
provisions in both the House and Senate.

  SECTION 302. ELIMINATION OF EXCEPTIONAL PERFORMER STATUS FOR LENDERS

      The House bill (Sec. 114) eliminates the provision that 
allows lenders designated as ``exceptional performers'' to 
receive 99 percent insurance on defaulted loans if they are in 
full compliance with due diligence requirements.
      The Senate amendment (Sec. 303) also eliminates the 
provision that allows lenders designated as ``exceptional 
performers.'' The Senate amendment makes the change effective 
October 1, 2007, except that lenders designated as exceptional 
performers as of that date shall be allowed to continue such 
designation for the remainder of the year for which the 
designation was made.
      The House recedes.
      In a July 26, 2007 report concerning the exceptional 
performer designation, the Government Accountability Office 
(GAO) found that the designation has not materially affected 
loan servicing, and that default claims have not declined as a 
result. In addition, GAO found that providing an extra 2 
percent reimbursement rate for default claims serviced by 
exceptional performers is not in the fiscal interest of the 
federal government, because lenders are being paid a premium to 
perform due diligence activities that are already required of 
all lenders. Accordingly, GAO recommended that the exceptional 
performer designation be eliminated. The Conferees concur with 
the GAO recommendation and adopt the Senate amendment.

           SEC. 303. REDUCTION OF LENDER INSURANCE PERCENTAGE

      The House bill (Sec. 115) reduces the insurance rate from 
97 percent to 95 percent of the unpaid principal of such loans.
      The Senate amendment (Sec. 301) maintains the level of 
insurance paid by the Federal government on defaulted loans 
guaranteed under title IV, currently set at 97 percent.
      The House recedes with an amendment to reduce the lender 
insurance rate in 2013 to 95 percent. The Conferees adopt the 
Senate amendment as amended by the House.

                        SECTION 304. DEFINITIONS

Economic hardship
      The House bill (Sec. 134) changes the definition of 
economic hardship to create a uniform definition that applies 
to all borrowers, based on income less than 150 percent of the 
poverty level for the borrower's family size.
      The Senate amendment (Sec. 304) changes part of the 
definition of economic hardship to income less than 150 percent 
of the poverty level for the borrower's family size.
      The Senate recedes.
Eligible not-for-profit holder
      The House bill (Sec. 118) defines a not-for-profit holder 
for the purposes of determining which lenders qualify for the 
elimination of the origination fee. As such not-for-profit 
holders are defined as any holder that is a unit of a state or 
local government or a nonprofit private entity; and is not 
owned in whole or in part by, or controlled, by a for-profit 
entity.
      The Senate amendment (Sec. 304) establishes a definition 
of eligible not-for-profit holder for the purposes of 
determining the special allowance payment for which a lender is 
eligible. Eligible not-for-profit holder means an eligible 
lender that is a State, or a political subdivision, authority, 
agency or other instrumentality thereof, or an entity with not-
for-profit status under the tax code, or a trustee acting as an 
eligible lender on behalf of one of these entities. The 
amendment establishes that no eligible not-for-profit holder 
shall be owned or controlled, in whole or in part, by a for-
profit entity, and that if an eligible not-for-profit holder 
sells loans on which the Secretary is paying the higher special 
allowance payment designated for eligible not-for-profit 
holders described in Section 305 of the Senate amendment, to a 
for-profit entity or an entity that is not an eligible not-for-
profit holder, such loans shall from the date of sale instead 
receive the special allowance payment designated for other such 
lenders, as described in Section 305. The Senate amendment 
requires that the Secretary promulgate regulations implementing 
this provision no later than one year after the date of 
enactment.
      The House recedes with an amendment (1) clarifying that 
an eligible not-for-profit holder will not be considered to be 
owned or controlled by a for-profit entity if an eligible 
lender trustee merely holds the loan in trust for the eligible 
not-for-profit holder and does not receive any benefit from the 
loan beyond reasonable and customary fees; and (2) specifying 
that a not-for-profit entity on whose behalf a trustee is 
acting as an eligible lender will not be deemed owned or 
controlled by a for-profit entity, as a result of granting a 
security interest in, or otherwise pledging as collateral, 
loans or the income from a loan to secure a debt obligation in 
the operation of the trustee relationship. The amendment also 
specifies that an eligible not-for-profit holder must have been 
in operation and serving as an eligible lender on the date of 
enactment of the College Cost Reduction and Access Act, and 
that a trustee, in order to be an eligible not-for-profit 
lender, must be a trustee acting on behalf of such an eligible 
lender. The amendment specifies that a state may elect to waive 
this requirement for a new eligible not-for-profit holder 
determined by the State to be necessary to fill a public 
purpose, except that a State may not waive any of the 
requirements related to trustees.
      The Conferees adopt the Senate amendment as amended by 
the House.

                    SECTION 305. SPECIAL ALLOWANCES

Reduction of lender special allowance payments
      The House bill (Sec. 113) reduces the special allowance 
payment rate for lenders, which is currently set for student 
loans at the Commercial Paper (CP) lending rate plus 1.74 
percent while borrowers are in school or in a grace period, and 
CP plus 2.34 percent while borrowers are in repayment, and is 
currently set for PLUS loans at CP plus 2.64 percent, and for 
consolidation loans at CP plus 2.64 percent (less the 1.05 
percent annual rebate fee). The House bill reduces these 
payment rates by 0.55 percentage points (or 55 basis points) 
for loans held by all lenders and equalizes the special 
allowance payment rate for Stafford and PLUS loans.
      The Senate amendment (Sec. 305) reduces these payments 
for loans held by for-profit lenders by 0.50 percentage points 
(or 50 basis points), and by 0.35 percentage points (35 basis 
points) for loans held by not-for-profit lenders and equalizes 
the SAP rate for Stafford and PLUS loans.
      The House recedes with an amendment that reduces the SAP 
payments by 40 basis points for non-profit lenders and by 55 
basis points for all other lenders. The amendment also 
equalizes the SAP rate for Stafford and PLUS loans. The 
Conferees adopt the Senate amendment as amended by the House.
Increased loan fees from lenders
      The House bill (Sec. 118) increases the fee the Secretary 
shall collect under Section 438(d) of title IV on each loan 
disbursed from 0.50 percent to 1 percent for certain for-profit 
lenders. The fee is eliminated for non-profit lenders and small 
lenders, defined as those that collectively hold the lowest 15 
percent of total loan volume.
      The Senate amendment (Sec. 305) increases the fee the 
Secretary shall collect from all lenders under Section 438(d) 
of title IV on each loan disbursed from 0.50 percent to 1 
percent.
      The House recedes.

                 SECTION 306. ACCOUNT MAINTENANCE FEES

      The House bill (Sec. 117) reduces account maintenance 
fees from 0.1 percent to 0.06 percent.
      The Senate amendment (Sec. 402) changes the method by 
which account maintenance fees are calculated from a 
calculation based on the total amount of loan principal to a 
per-loan basis.
      The Senate recedes.

                       TITLE IV--LOAN FORGIVENESS

       SECTION 401. LOAN FORGIVENESS FOR PUBLIC SERVICE EMPLOYEES

      The House bill (Sec. 132) amends the current Income-
Contingent Repayment program in the Direct Loan program to 
provide loan forgiveness for public sector employees. The 
change provides that the Secretary shall forgive the remaining 
loan balance on a loan under part D of title IV for a borrower 
who has been employed in a public sector job and has made 
payments on such loan for a period of ten years.
      The Senate amendment (Sec. 401) creates a new loan 
forgiveness plan for public service employees. The plan 
provides that the Secretary shall forgive the remaining loan 
balance for a borrower who has been employed in a public sector 
job and has made payments on such loan for a period of ten 
years (which need not be consecutive). Such borrowers shall be 
eligible to have \1/10\ of the remaining loan balance forgiven 
for each of the ten years in which the borrower earned $65,000 
or less.
      The House recedes with an amendment to modify the 
definition of public service employees and eliminate the 
$65,000 income cap.
      The Conferees adopt the Senate amendment as amended by 
the House.

                     TITLE V--FEDERAL PERKINS LOANS

             SECTION 501. DISTRIBUTION OF LATE COLLECTIONS

      The House bill (Sec. 141) provides $100 million per year 
for the Perkins Loan Federal Contribution program for fiscal 
years 2008-2012.
      The Senate amendment (Sec. 501) postpones the date on 
which institutions must return late collections on Perkins 
loans to the Secretary to September 30, 2012.
      The House recedes.

                        TITLE VI--NEED ANALYSIS

               SECTION 601. SUPPORT FOR WORKING STUDENTS

      The House bill (Sec. 102) includes provisions to increase 
students' eligibility for student aid, including the Pell 
grant, through phased-in increases in the Income Protection 
Allowance for all students. The protected income for unmarried 
independent students without dependents will be $6,690 by 2009. 
For dependent students the protected income will be $3,750 by 
2009. These amounts will increase by 10 percent each year until 
2012.
      The Senate amendment (Sec. 601) also increases the Income 
Protection Allowance in the following ways: (1) for dependent 
students, it increases the amount of the income protection 
allowance to $3,750 for the 2009-2010 academic year; $4,500 for 
the 2010-2011 academic year; $5,250 for the 2011-2012 academic 
year; and $6,000 for the 2012-2013 academic year; (2) for 
independent students without dependents other than a spouse, 
who are single, separated, or married with both spouses 
enrolled, it increases the amount of the income protection 
allowance to $7,000 for the 2009-2010 academic year; $7,780 for 
the 2010-2011 academic year; $8,550 for the 2011-2012 academic 
year; and $9,330 for the 2012-2013 academic year. For 
independent students without dependents other than a spouse, 
who are married and whose spouse is not enrolled, it increases 
the amount of the income protection allowance to $11,220 for 
the 2009-2010 academic year; $12,460 for the 2010-2011 academic 
year; $13,710 for the 2011-2012 academic year; and $14,690 for 
the 2012-2013 academic year. For independent students with 
dependents other than a spouse, it increases the amount of the 
income protection allowance as specified by the tables 
contained in this section, for a total increase of 50 percent 
over four years. Under this section, for all students, the 
income protection allowance reverts to current law after the 
2012-2013 academic year.
      The House recedes with an amendment to continue the 
changes beyond the 2012-2013 academic year. The Conferees adopt 
the Senate amendment as amended by the House.

   SECTION 602. SIMPLIFIED NEEDS TEST AND AUTOMATIC ZERO IMPROVEMENTS

Simplified needs test
      The House bill (Sec. 103) extends the time that an 
individual who has participated in a federal means-tested 
benefit program can qualify for a simplified needs test to 24 
months from 12 months, and allows dislocated workers to be 
eligible for the simplified application form.
      The Senate amendment contains no similar provision.
      The Senate recedes.
Automatic zero
      The House bill (Sec. 103) increases the family income 
level under which a student is automatically eligible for the 
maximum Pell grant, or the ``auto-zero,'' from the current 
level of $20,000 to $30,000 and indexes this level to the 
Consumer Price Index (CPI).
      The Senate amendment (Sec. 602) also increases the family 
income level under which a student is automatically eligible 
for the maximum Pell grant to $30,000.
      The Senate recedes.

    SECTION 603. DISCRETION OF STUDENT FINANCIAL AID ADMINISTRATORS

      The House bill (Sec. 104) allows financial aid 
administrators to use discretion in calculating the expected 
student or family contribution in cases where a family member 
is a dislocated worker (as defined in section 101 of the 
Workforce Investment Act of 1998).
      The Senate amendment (Sec. 603) clarifies and expands the 
conditions under which financial aid administrators may use 
discretion in calculating the expected student or family 
contribution to include an independent student's loss of 
employment or a change in a student's housing status that 
results in homelessness. The Senate amendment (Sec. 605) 
authorizes and appropriates $10,000,000 for fiscal year 2008 to 
pay for the estimated increased cost in the Pell program for 
award year 2007-2008 resulting from the amendments made by 
sections 603 and 604.
      Both the House and Senate recede with an amendment to 
change the effective date to July 1, 2009. The Conferees concur 
and adopt the amendment as proposed by the House and Senate.

                        SECTION 604. DEFINITIONS

      The House bill (Sec. 104) clarifies definitions for 
dislocated workers and means-tested federal benefits. The House 
bill amends the provisions concerning untaxed income and 
benefits in current law. Specifically, the bill excludes TANF 
(welfare benefits), Earned Income Tax Credits, and Social 
Security from the income calculation in the needs analysis. The 
House bill clarifies the asset calculation in this section of 
the bill to ensure that 529 plans are counted as the asset of 
the parent for independent students.
      The Senate amendment (Sec. 604) makes changes to the 
definition of independent student. It expands the definition of 
independent students to include: individuals in foster care 
anytime after age 13; emancipated minors or individuals in 
legal guardianships as determined by an appropriate court in 
such an individual's State of legal residence; and any 
individual who has been adequately verified as an unaccompanied 
youth who is a homeless child or youth, as defined in the 
McKinney-Vento Homeless Assistance Act. It clarifies that 
financial aid administrators may make determinations regarding 
a student's independent status based on a documented 
determination of independence by another financial aid 
administrator in the same year.
      Both the House and Senate recede with an amendment 
clarifying that foster students do not lose their independent 
student status during non-school terms with regard to housing 
and other benefits. The Conferees concur and adopt the 
amendment as proposed by the House and Senate.

           TITLE VII--COMPETITIVE LOAN AUCTION PILOT PROGRAM

            SEC. 701. COMPETITIVE LOAN AUCTION PILOT PROGRAM

      The House bill (Sec. 119) requires a study by the 
Secretaries of Education and Treasury with the Congressional 
Budget Office, the Office of Management and Budget, and the 
Government Accountability Office to identify and select among 
the best mechanisms for a loan auction.
      Based on the information from the study, a pilot program 
shall be implemented by the Secretary of Education using 10 
percent of loan volume under Part B in the first year of the 
pilot study and 20 percent the second year of the pilot study.
      The Senate amendment (Sec. 801) establishes a new 
competitive loan auction pilot program. The Secretary is 
directed to carry out a pilot program to establish a mechanism 
for the auction of all eligible PLUS loans. Such loans are 
loans made to parents of dependent students. The Secretary 
shall administer one auction for each state, in which eligible 
lenders shall compete to originate all eligible PLUS loans at 
institutions of higher education within the state.
      The House recedes.
      The Conferees believe this loan auction pilot should be 
closely evaluated by the Secretary of Education in consultation 
with the Secretary of Treasury, the Office of Management and 
Budget, the Congressional Budget Office, and the Comptroller 
General. Additionally, the Conferees believe the evaluation 
should consider the extent of the savings generated through the 
pilot program; the number of lenders participating in the pilot 
program and the extent to which the pilot program generated 
competition among lenders; and the effect of transition to and 
operation of the pilot program on the feasibility of using 
other market mechanisms to operate the loan programs.
      The Conferees intend to include an evaluation of the loan 
auction and other market mechanisms during reauthorization of 
the Higher Education Act which we are committed to moving 
forward in this session.

                     TITLE VIII--PARTNERSHIP GRANTS

              SECTION 801. COLLEGE ACCESS CHALLENGE GRANTS

      The House bill (Sec. 411) establishes ``College Access 
Challenge Grants,'' which leverage federal funds to increase 
the number of students from underserved populations who enter 
and complete college through matching grants to philanthropic 
organizations. The federal government will provide a 2 to 1 
match for private and other public funds for these purposes. 
The philanthropic organizations will work with states, 
institutions of higher education, and local education agencies 
and other organizations to raise funds and provide outreach and 
student support programs.
      The Senate amendment (Sec. 801) establishes a College 
Access Partnership Grant program, to make payments to States to 
assist them in carrying out specified activities to increase 
college access for low-income students in the state. The 
federal share of the matching grant is \2/3\ and the state 
share is \1/3\. Activities may be carried out under this grant 
by state agencies or not-for-profit organizations that the 
state designates, including not-for-profit lenders, and must be 
made available to all qualifying students in the state, with 
priority given to students and families living below the 
poverty line. The amendment provides that authority to carry 
out this section shall expire on September 30, 2009.
      The House recedes with an amendment changing the name of 
the program to ``College Access Challenge Grants'' and 
incorporating a House provision allowing philanthropic 
organizations to apply to the Secretary for a grant in the case 
where a state does not meet the matching requirements or 
chooses not to apply for a grant. The Conferees adopt the 
Senate amendment as amended by the House.
      The Conferees intend that states, entities, or 
organizations providing activities under the College Access 
Challenge Grants program created by this Act coordinate such 
activities with existing state partnership programs designed to 
increase college access, particularly the state's Leveraging 
Educational Assistance Partnership program (LEAP) under title 
IV, Part A, Subpart 4, if a state has such a program.

SECTION 802. INVESTMENT IN HISTORICALLY BLACK COLLEGES AND UNIVERSITIES 
                   AND MINORITY SERVING INSTITUTIONS

      The House bill (Sec. 401) provides a total $500 million 
over the next five years to the following designated 
institutions with the following amounts:
            $200 million to Hispanic-Serving Institutions to be 
        distributed to the institutions in the same competitive 
        manner as is done under title V of the Higher Education 
        Act, and for uses under title V with priority to those 
        applications that will increase the number of low-
        income students attaining degrees in the fields of 
        science, technology, engineering, or math and to 
        applications that develop model transfer articulation 
        agreements.
            $170 million to Historically Black Colleges and 
        Universities to be distributed for use through some of 
        the activities described in section 323(a) of the 
        Higher Education Act including the purchase of 
        laboratory equipment, the funding of instruction, the 
        purchase of materials, and the establishment or 
        enhancement of a teacher education program. 
        Additionally, funds may be used in a manner consistent 
        with the institution's comprehensive plan and designed 
        to increase the institution's capacity to prepare 
        students for careers in the physical and natural 
        sciences, math, computer science, information 
        technology, engineering, language instruction and other 
        specified areas.
            $30 million to Predominately Black Institutions to 
        award 50 grants of $600,000 for programs in the fields 
        of science, technology, engineering, health education, 
        teacher education, or programs that improve the 
        educational outcomes of African American males.
            $60 million to Tribal Colleges and Universities to 
        be distributed in the manner that the funds are used 
        under current law in section 316 of the Higher 
        Education Act including the purchase of laboratory 
        equipment, the funding of instruction, the purchase of 
        materials, or the establishment or enhancement of 
        teacher education and outreach programs.
            $30 million to Alaska/Hawaiian Native Institutions 
        to be distributed in the manner that the funds are used 
        under current law in section 317 of the Higher 
        Education Act including the purchase of laboratory 
        equipment, the funding of instruction, the purchase of 
        materials, and the creation of academic tutoring 
        programs.
            $10 million to Asian American and Pacific Islander 
        Institutions to be distributed to institutions as 
        defined in this section, and used in a manner that may 
        include the purchase of laboratory equipment, the 
        funding of instruction, the purchase of materials, and 
        the creation of tutoring programs.
      The House bill defines the following for the purposes of 
distributing funds:
      Predominately Black Institutions as institutions that 
have an enrollment of financially needy undergraduate students; 
an enrollment of undergraduate students at least 40% of whom 
are Black; and, that has at least 1,000 undergraduate students 
of whom not less than 50% enrolled at the institution are low-
income or first generation and registered in a BA or AA program 
leading to a degree.
      Asian and Pacific Islander-serving institution as 
institutions that have an enrollment of undergraduate students 
that is at least 10% Asian American and Pacific Islander and 
has a significant enrollment of financially needy students.
      The Senate amendment contains no similar provision.
      The Senate recedes with an amendment that $255 million 
shall be authorized in each of 2008 and 2009, for a total 
investment of $510 million. The amendment adds $10 million for 
Native American Serving, Nontribal Institutions to be 
distributed to institutions as defined in this section, and 
used in a manner that may include the purchase of laboratory 
equipment, the funding of instruction, the purchase of 
materials, and the creation of tutoring programs. The Conferees 
agree to the House bill as amended by the Senate.
      The amendment defines Native American Serving, Nontribal 
Institutions for the purposes of distributing funds at 
institutions that have an enrollment of undergraduate students 
that is at least 10% Native American and is not a Tribal 
College or University.
      These institutions, which serve groups who were 
historically denied access to postsecondary education because 
of discrimination, have an important role in higher education. 
They help to preserve cultural traditions and to ensure a 
diverse pool of qualified professionals in the nation's 
economy. At the same time, they offer affordable, high quality 
college education to thousands of students as well as provide 
much needed job training. These institutions also provide 
crucial support services and add hope to communities that have 
high rates of poverty and unemployment. Today, a high quality 
education greatly depends on the technology and resources 
available to students. The Conferees recognize that HBCUs, 
HSIs, and other Minority Serving Institutions (MSIs) do not 
have sufficient financial ability to provide these 
opportunities and satisfy the unique needs of these schools 
without Federal assistance.
      MSIs have an important role in providing equal 
educational opportunities to qualified minority students. 
According to the Institute for Higher Education Policy, 
approximately 2.3 million students, or about one-third of all 
African Americans, American Indians/Alaska Natives, and 
Hispanics in all higher education institutions in the United 
States and Puerto Rico, were enrolled at HBCUs, HSIs, TCUs, 
Alaska and Hawaiian Native institutions. These numbers have 
grown rapidly in recent years--in fact, enrollment at these 
institutions--accelerated by 66 percent from 1995 to 2003, 
compared to only 20 percent at all postsecondary institutions.
      The importance of these unique institutions is 
underscored by the fact that they provide postsecondary 
educational opportunities specifically tailored to students who 
traditionally have been denied access to adequately funded 
elementary and secondary schools, especially low-income, 
educationally disadvantaged students. The Conferees believe 
that this section offers an opportunity to help these 
institutions fulfill their missions to assist students to meet 
their educational goals.

                     COMPLIANCE WITH HOUSE RULE XXI

      Pursuant to clause 9 of rule XXI of the Rules of the 
House of Representatives, this conference report contains no 
congressional earmarks, limited tax benefits, or limited tariff 
benefits as defined in clause 9(d), 9(e), or 9(f) of rule XXI.

                                    George Miller,
                                    Robert E. Andrews,
                                    Bobby Scott,
                                    Ruben Hinojosa,
                                    John F. Tierney,
                                    David Wu,
                                    Susan A. Davis,
                                    Danny K. Davis,
                                    Timothy Bishop,
                                    Mazie K. Hirono,
                                    Jason Altmire,
                                    John Yarmuth,
                                    Joe Courtney,
                                 Managers on the Part of the House.

                                    Ted Kennedy,
                                    Chris Dodd,
                                    Tom Harkin,
                                    Barbara A. Mikulski,
                                    Jeff Bingaman,
                                    Patty Murray,
                                    Jack Reed,
                                    Hillary Rodham Clinton,
                                    Barack Obama,
                                    Bernard Sanders,
                                    Sherrod Brown,
                                    Michael B. Enzi,
                                    Lamar Alexander,
                                    Orrin G. Hatch,
                                Managers on the Part of the Senate.

                                  
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