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DOCUMENT RESUME ED 369 325 HE 027 363 TITLE A Compilation of Federal Education Laws. Volume III--Higher Education, As Amended through March 1994. Prepared for the Use of the Committee on Education and Labor of the U.S. House of Representatives and for the Use of the Committee on Labor and Human Resources of the United States Senate, One Hundred Third Congress, Second Session. [Committee Print.] INSTITUTION Congress of the U.S., Washington, D.C. House Committee on Education and Labor.; Congress of the U.S., Washington, D.C. Senate Committee on Labor and Human Resources. PUB DATE Mar 94 NOTE 735p.; Serial No. 103-3. PUB TYPE Legal/Legislative/Regulatory Materials (090) EDRS PRICE MF04/PC30 Plus Postage. DESCRIPTORS American Indians; *Educational Facilities; Educational Finance; *Educational Improvement; *Educational Legislation; Engineering; Federal Aid; *Federal Legislation; *Government School Relationship; *Higher Education; Laws; Mathematics Education; School Support; Science Education; Universities IDENTIFIERS Education Amendments 1972; Education Amendments 1980; Excellence in Math Sci and Engrg Educ Act 1990; Higher Education Act 1965; Higher Education Act Amendments 1986; Higher Education Act Amendments 1992; National Science Foundation Act 1950 ABSTRACT This document presents the texts of selected titles, sections, and amendments of federal laws dealing with specific aspects of postsecondary education. It is divided into the following major parts: (1) "General Higher Education Programs"; (2) "Native American Higher Education"; (3) "National Science Foundation"; (4) Mathematics, Science, and Engineering"; and (5) "Assistance to Specified Institutions." Selected titles and subsections include those from the Higher Education Act of 1965; the Higher Education Amendments of 1968, 1980, 1986, and 1992; the National Science Foundation Act of 1950; and the Excellence in Mathematics, Science, and Engineering Education Act of 1990. Among the subjects addressed are institutional and student financial assistance; educator recruitment, retention, and development; international education programs; academic facility improvement and construction; c,00perative education; land-grant status for colleges in the United States, Virgin Islands, and Guam; postsecondary education legislation directed at American Indians; and educational improvements in the areas of mathematics and the sciences. 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OCI-{1 posihnr or policy BEST COPY AVAILABLE [COMMITITE PRINT] A COMPILATION OF FEDERAL EDUCATION LAWS VOLUME III-HIGHER EDUCATION As Amended Through March 1994 PREPARED FOR THE USE OF THE COMM]TTEE ON EDUCATION AND LABOR OF THE U.S. HOUSE OF REPRESENTATIVES Serial No. 103J AND FOR THE USE OF THE COMMITTEE ON LABOR AND HUMAN RESOURCES OF THE UNITED STATES SENATE ONE HUNDRED THIRD CONGRESS SECOND SESSION MARCH 1994 U.S. GOVERNMENT PRINTING OFFICE 77-630 WASHINGTON : 1394 3 COMMITTEE ON EDUCATION AND LABOR WILLIAM D. FORD, Michigan, Chairman WILLIAM (BILL) CLAY, Missouri GEORGE MILLER, California AUSTIN J. MURPHY, Pennsylvania DALE E. KILDEE, Michigan PAT WILLIAMS, Montana MATTHEW G. MARTINEZ, California MAJOR R. OWENS, New York THOMAS C. SAWYER, Ohio DONALD M. PAYNE, New Jersey JOLENE UNSOELD, Washington PATSY T. MINK, Hawaii ROBERT E. ANDREWS, New Jersey JACK F. REED, Rhode Island TIM ROEMER, Indiana ELIOT L. ENGEL, New York XAVIER BECERRA, California ROBERT C. "BOBBY" SCOTT, Virginia GENE GREEN, Texas LYNN C. WOOLSEY, California, CARLOS A. ROMERO-BARCELO, Puerto Rico RON KLINK, Pennsylvania KARAN ENGLISH, Arizona TED STRICKLAND, Ohio RON DE LUGO, Virgin Islands ENI F.H. FALEOMAVAEGA, American Samoa SCOTI'Y BAESLER, Kentucky ROBERT A. UNDERWOOD, Guam WILLIAM F. GOODLING, Pennsylvania THOMAS E. PETRI, Wisconsin MARGE ROUKEMA, New Jersey STEVE GUNDERSON, Wisconsin RICHARD K. ARMEY, Texas HARRIS W. FAWELL, Illinois PAUL B. HENRY, Michigan CASS BALLENGER, North Carolina SUSAN MOLINARI, New York BILL BARRETT, Nebraska JOHN A. BOEHNER, Ohio RANDY "DUKE" CUNNINGHAM, California PETER HOECKSTRA, Michigan HOWARD "BUCK" McKEON, California DAN MILLER, Florida MICHAEL N. CASTLE, Delaware PATRICIA RISSLER, Majority Staff Director JAY EAGEN, Minority Staff Director COMMITTEE ON LABOR AND HUMAN RESOURCES EDWARD M. KENNEDY, Massachusetts, Chairman CLAIBORNE PELL, Rhode Island NANCY LANDON KASSEBAUM, Kansas HOWARD M. METZENBAUM, Ohio JAMES M. JEFFORDS, Vermont DAN COATS, Indiana JUDD GREGG, New Hampshire STROM THURMOND, South Carolina ORRIN G. HATCH, Utah DAVE DURENBERGER, Minnesota CHRISTOPHER J. DODD, Connecticut PAUL SIMON, Illinois TOM HARKIN, Iowa BARBARA A. MIKULSKI, Maryland JEFF BINGAMAN, New Mexico PAUL D. WELLSTONE, Minnesota HARRIS WOFFORD, Pennsylvania NICK LITMEFIELD, Staff Director and Chief Counsel SUSAN K. HATTAN, Minority Staff Director 4 a ALPHABETICAL LISTING OF STATUTES CONTAINED IN VOLUME III Page Act of March 2,1867 (Howard University) 715 Bankhead-Jones Act 626 Education Amendments of 1972, Land-Grant Status for the College of the Virgin Islands and the University of Guam 552 Education Amendments of 1980, Title XIII, Parts G and I 553 Education Amendments of 1980, Title XIII, Part H (Miscellaneous Provisions) 723 Excellence in Mathematics, Science and Engineering Education Act of 1990 687 First Morrill Act 620 Grants to Eisenhower College and to Samuel Rayburn Library 722 Harry S Truman Memorial Scholarship Act 628 Herbert Hoover Memorial 720 Higher Education Act of 1965 1 Higher Education Amendments of 1986 555 Higher Education Amendments of 1968 551 Higher Education Amendments of 1992Title IV, V, XIV 589 Higher Education Amendments of 1992Title XIII 654 Howard University Endowment Act 717 Human Services Reauthorization Act, Title V 728 National Science Foundation Act of 1950 673 Navajo Community College Act 635 Public Law 98-480, Title III (Higher Education Projects) 726 Public Law 98-558, Title V (Higher Education and Research Project) 704 Second Morrill Act 623 Tribally Controlled Community College Assistance Act of 1978 639 5 TABLE OF CONTENTS VOLUME HIHIGHER EDUCATION PART IGENERAL HIGHER EDUCATION PROGRAMS Pace Higher Education Act of 1965 1 Title IPartnerships for Educational Excellence 1 Part ASchool, College, and University Partnerships 1 Part BArticulation Agreements 4 Part CAcoess and Equity To Education For All Americans Through Telecommunications 8 Title IIAcademic Library and Information Services 10 Part ACollege Library Technology and Cooperation Grants 11 Part BLibrary Education, Research, and Development 13 Part CImproving Access to Research Library Resources 14 Part DStrengthening Library and Information Science Programs and Libraries in Historically Black Colleges and Universities and Other Minority-Serving Institutions 15 Title IIIInstitutional Aid 16 Part AStrengthening Institutions 17 Part BStrengthening Historically Black Colleges and Universities 22 Part CEndowment Challenge Grants for Institutions Eligible for Assistance Under Part A or Part B 29 Part DGeneral Provisions 33 Title IVStudent Assistance 39 Part AGrants to Students in Attendance at Institutions of Higher Education 39 Subpart 1Basic Educational Opportunity Grants 40 Subpart 2Federal Early Outreach and Student Services Programs 44 Chapter 1Federal Trio Programs 44 Chapter 2National, Early Intervention Scholarship and Partnership Program 65 Chapter 3Presidential Access Scholarships 61 Chapter 4Model Program Community Partnership and Counseling Grants 64 Chapter 5Public Information 65 Chapter 6--National Studnet Savings Demonstration Program 67 Chapter 7Preeligibility Form 68 Chapter 8Technical Assistance for Teachers and Counselors 69 Subpart 3Federal Supplemental Education Opportunity Grants 70 Subpart 4Grants to States for State Student Incentives 76 (V) VI Page Higher Education Act of 1965Continued Title IVStudent AssistanceContinued Part AGrants to Students in Attendance at Institutions of Higher EducationContinued Subpart 5Special Programs for Students Whose Families are Engaged in Migrant and Seasonal Farmwork 80 Subpart 6Robert C. Byrd Honors Scholarship Program 83 Subpart 7Assistance to Institutions of Higher Education 86 Subpart 8Special Child Care Services for Disadvantaged College Students 86 Part BFederal Family Education Loan Program 87 Part CFederal Work-Study Programs 221 Part DFederal Direct Loan Demonstration Program 232 Part EFederal Perkins Loans 246 Part FNeed Analysis 268 Part GGeneral Provisions Relating to Student Assistance Programs 297 Part HProgram Integrity Triad 345 Subpart 1State Postsecondary Review Program 345 Subpart 2Accrediting Agency Approval 353 Subpart 3Eligibility and Certification Procedures 358 Title VEducator Recruitment, Retention, and Development 365 Part AState and Local Programs for Teacher Excellence 367 Part BNational Teacher Academies 388 Part CTeacher Scholarships and Fellowships 392 Subpart 1Paul Douglas Teacher Scholarships 392 Subpart 2Christa McAuliffe Fellowship Program 399 Subpart 2Teacher Corps 403 Part DInnovation and Research 410 Subpart 1National Board for Professional Teaching Standards . 410 Subpart 2Alternative Routes to Teacher Certification and Licensure 415 Subpart 3Class Size Demonstration Grant 417 Subpart 4Middle School Teaching Demonstration Progrmas 420 Part EMinority Teacher Recruitment 422 Subpart 1New Teaching Recruitment 422 Subpart 2Programs to Encourage Minority Students to Become Teachers 426 Part FPrograms for Special Populations 429 Subpart 1National Mini Corps Program 429 Subpart 2Foreign Language Instruction 431 Subpart 3Small State Teaching Initiative 433 Subpart 4Faculty Development Grants 434 Subpart 5Early Childhood Education Training 434 Title VIInternational Education Programs 438 Part AInternational and Foreign Language Studies 438 Part BBusiness and International Education Programs 448 Part CInstitute for International Public Policy 454 Part DGeneral Provisions 457 Title VIIConstruction, Reconstruction, and Renovation of Academic Facilities 458 Part AImprovement of Academic and Library Facilities 459 Part BHistorically Black College and University Capital Financing 463 , VII Page Higher Education Act of 1965Continued Title WIConstruction, Reconstruction, and Renovation of Academic FacilitiesContinued Part CLoans for Construction, Reconstruction, and Renovation of Academic, Housing, and Other Educational Facilities 470 Part DCollege Construction Loan Insurance Association 476 Part EGeneral 482 Title I/IIICooperative Education 487 Title TXGraduate Programs 493 Part AGrants to Institutions and Consortia To Encourage Women and Minorty Participation in Graduate Education 493 Part BPatricia Roberts Harris Fellowships Program 495 Part CJacob K. Javits Fellowship Program 499 Part DGraduate Assistance in Areas of National Need 502 Part EFaculty Development Fellowship Program 507 Part FAssistance for Training in the Legal Profession 511 Part GLaw School Clinical Experience Programs 512 Title XPostsecondary Improvement Programs 614 Part AFund for the Improvement of Postsecondary Education 514 Subpart 1Program Authority 514 Subpart 2Specialk Projects in Areas of National Need 516 Part BMinority Science and Engineering Improvement Programs 516 Subpart 1Minority Science Improvement Program 516 Subpart 2Science and Engineering Access Programs 518 Subpart 3Administrative and General Provisions 520 Part CWomen and Minorities Science and Engineering Outreach Demonstration Program 522 Part DDwight D. Eisenhower Leadership Program 525 Title XICommunity Service Program 526 Part AUrban Community Services 526 Part BInnovative Projects 530 Subpart 1Innovative Projects for Projects Service 530 Subpart 2Student Literacy Corps and Student Mentoring Corps 531 Subpart 3Authorization of Appropriations 534 Title XIIGeneral Provisions 534 Higher Education Amendments of 1968, Section 507 551 Education Amendments of 1972, Land-Grant Status for the College of the Virgin Islands and the University of Guam 552 Education Amendments of 1980 553 Title XIIIMiscellaneous Provisions 553 Part GNew Land Grant Colleges 553 Part ITechnical Provisions 553 Higher Education Amendments of 1986 555 Title IVStudent Assistance 555 Title XIIIEducation Administration 558 Title XVAmerican Indian, Alaska Native, and Native Hawaiian Culture and Art Development 570 Higher Education Amendments of 1992 589 Effective Dates and Related Implementation Provisions 589 Title IVStudent Assistance 589 Title VEducator Recruitment, Retention, and Development 593 Title XIVStudies and Commissions 594 Title XVRelated Programs and Amendments to Other Laws 610 VIII Page First Morrill Act 620 Second Morrill Act 623 Bankhead-Jones Act 626 Harry S Truman Memorial Scholarship Act 628 PART HNATIVE AMERICAN HIGHER EDUCATION Navajo Community College Act 635 Tribally Controlled Community College Assistance Act of 1978 639 Title ITribally Controlled Community Colleges 640 Title IIITribally Controlled Community College Endowment Program 650 Title IVTribal Economic Development 652 Higher Education Amendments of 1992 654 Title XIIIIndian Higher Educations Programs 654 Part ATribally Controlled Community Colleges 654 Part BHigher Education Tribal Grant Authorization Act 654 Part CCritical Needs for Tribal Development Act 660 Part DInstitute of American Indian Native Culture and Arts Development 663 Part ETribal Development Student Assistance Revolving Loan Program 663 Part FAmerican Indian Postsecondary Economic Development Scholarship 667 Part CIAmerican Indian Teacher Training 670 PART IIINATIONAL SCIENCE FOUNDATION National Science Foundation Act of 1950 673 PART IVMATHEMATICS, SCIENCE, AND ENGINEERING Excellence in Mathematics, Science, and Engineering Education Act of 1990 687 Title IFindings and Objectives 688 Title IIMathematics, Science, and Technology Improvements 689 Title IIIHigher Education 694 Title IVWomen and Minorities in Mathematics, Science and Engineering 696 Title VEducation Coordination and Department of Energy Programs 697 Title VIScience Scholarships 699 Title WIGeneral Provisions and Authorization of Appropriations 711 PART VASSISTANCE TO SPECIFIED INSTITUTIONS Act of March 2, 1867 715 Howard University Endowment Act 717 Title IIHoward University Endowment 717 Herbert Hoover Memorial 720 Grants to Eisenhower College and to the Samuel Rayburn Library 722 9 IX Page Education Amendments of 1980 723 Title XIIIMiscellaneous Provisions 723 Part HMemorials 723 Subpart 1The Robert A. Taft Institute 723 Subpart 2General Daniel James Memorial Health Education Center 724 Subpart 3The William Levi Dawson Chair of Public Affairs .. 724 Public Law 98-480 726 Title IIIHigher Education Projects 726 Human Services Reauthorizations Act (P.L. 98-558) 728 Title VHigher Education and Research Project 728 PART IGENERAL HIGHER EDUCATION PROGRAMS Higher Education Act of 1965 (Pl. 89-329) Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That this Act may be cited as the "Higher Education Act of 1965". TITLE I-PARTNERSHIPS FOR EDUCATIONAL EXCELLENCE PART A-SCHOOL, COLLEGE, AND UNIVERSITY PARTNERSHIPS 1 SEC. 101. PURPOSE. It is the purpose of this part to encourage partnerships be- tween. institutions of higher education or State higher education agencies and secondary schools serving low-income and disadvan- taged students, to support programs that (1) improve the retention and graduation rates at such sec- ondary schools; (2) improve the academic skills of public and private non- profit secondary school students; (3) increase such students' opportunities to continue a pro- gram of education after secondary school; and (4) improve such students' prospects for employment after secondary school. (20 U.S.C. 1001) Enacted July 23, 1992, P.L. 102-325, sec. 101, 106 Stat. 459. SEC. 102. AGREEMENT. (a) AGREEMENT.To be eligible for a grant under this part, an institution of higher education, a State higher education agency, or a consortium consisting of any of the preceding entities thereof shall enter into a written partnership agreement with a local edu- cational agency. Such partnership may include businesses, labor or- ganizations, professional associations, community-based organiza- tions, public television stations or other telecommunications enti- ties, or other public or private agencies or organizations. Each en- tity participating in the partnership shall sign the agreement. (b) CONTENTS OF AGREEMENT.The agreement shall include- 1This program was originally enacted as part B of title V of this Act (P.L. 99-498, sec. 501(a), 100 Stat. 1498). 1 T. Sec. 103 HIGHER EDUCATION ACT OF 1965 2 (1) a listing of all participants in the partnership, includ- ing a designation of the official representatives of each entity participating in the partnership; (2) a description of the responsibilities of each participant in the partnership; and (3) a listing of the resources to be contributed by each par- ticipant in the partnership. (20 U.S.C. 1002) Enacted July 23, 1992, P.L. 102-325, sec. 101, 106 Stat. 459. SEC. 103. GRANTS. (a) DIVISION BETWEEN SCHOOL-YEAR AND SUMMER PRO- GRAMS.Frorn the funds appropriated to carry out this part pursu- ant to section 106, the Secretary shall reserve 65 percent of such funds tv carry out programs operating during the regular school year and 35 percent of such funds to carry out programs operating during the summer. (b) AMOUNT AND USE OF GRANTS. (1) AMOUNT.The Secretary shall make grants under this part in amounts which are not less than $250,000 and not more than $1,000,000. (2) PERMITTED USES OF FUNDS.Grants under this part may be used by the partnership for programs that (A) use college students to tutor secondary school stu- dents and improve their basic academic skills or to involve secondary sch.00l students in community service-learning projects; (B) are designed to improve the basic academic skills of secondary school students; (C) are designed to increase the understanding of spe- cific subjects of secondary school students; (D) are designed to improve the opportunity to con- tinue a program of education after graduation for second- ary school students; and (E) are designed to increase the prospects for employ- ment after graduation of secondary sch.00l students. (C) PREFERENCES.In making grants under this part, the Sec- retary shall give a preference to (1) programs which will serve predominantly low-income communities; (2) partnerships which will run programs during the regu- lar school year and summer; (3) programs which will serve educationally disadvantaged students; students with disabilities; potential dropouts; preg- nant adolescents and teenage parents; children of migratory agricultural workers or of migratory fishermen; or students whose native language is other than English; and (4) programs designed to encourage women and minorities who are underrepresented in the fields of science and mathe- matics to pursue these fields. (d) DURATION.Each grant awarded under this part may be awarded for a period not to exceed 5 years. (e) EQUITABLE GEOGRAPHIC DISTRIBUTION.The Secretary shall award grants under this part in a manner that achieves an equitable geographic distribution of such grants. MEW 3 HIGHER EDUCATION ACT OF 1965 Sec. 105 (20 U.S.C. 1003) Enacted July 23, 1992, P.L. 102-325, sec. 101, 106 Stat. 459; amended December 20, 1993, P.L. 103-208, sec. 2(a)(1), 107 Stat. 2457. SEC. 104. GRANT APPLICATION. (a) APPLICATION REQUIRED.A partnership desiring to receive a grant under this part shall submit an application to the Sec- retary, in such form and providing such information as the Sec- retary, by regulation, shall require. (b) CONTENTS OF APPLICATION.The application shall include (1) the partnership agreement described in section 102; (2) a listing of the public and private nonprofit secondary school or schools to be involved in the program; (3) a description of the activities and services for which as- sistance is sought; (4) a description of the programs to be developed and oper- ated by the partnership; and (5) assurances to the Secretary that (A) the partnership will establish a governing body in- cluding one representative of each participant in the part- nership; (B) Federal funds will provide no more than 70 per- cent of the cost of the project in the first year, 60 percent of such costs in the second year, and 50 percent of such costs in the third year and any subsequent year; (C) a local educational agency or institution of higher education receiving funds under this part shall not reduce its combined fiscal effort per student or its aggregate ex- penditure on education; (D) a local educational agency or institution of higher education participating in this partnership shall utilize any Federal funds it shall receive from a grant under this part to supplement, and, to the extent practicable, increase the resources that would, in the absence of such Federal funds, be made available from non-Federal sources for the education of students described in this part; and (E) in no case shall funds under such a grant be used to supplant non-Federal funds already available. (c) SPECIAL RULE.The non-Federal share of grants awarded under this part may be in cash or in kind fairly evaluated, includ- ing services, supplies or equipment. (d) WAIVER.The Secretary may waive the matching require- ment described in paragraph (5)(B) for any eligible partnership that demonstrates to the satisfaction of the Secretary a unique hardship that prevents compliance with such matching require- ment. (20 U.S.C. 1004) Enacted July 23, 1992, P.L. 102-325, sec. 101, 106 Stat. 460; amended December 20, 1993, P.L. 103-208, sec. 2(a)(2), 107 Stat. 2457. SEC. 105. PEER REVIEW. The Secretary shall designate a peer review panel to review applications submitted under this part and make recommendations for funding to the Secretary. In selecting the peer review panel, the Secretary shall consult with officials of the other Federal agencies and with non-Federal organizations to ensure that the panel mem- ! 3 Sec. 106 NIGHER EDUCATION ACT OF 1965 4 bership shall be geographically balanced and be composed of rep- resentatives from public and private institutions of elementary, sec- ondary, and higher education, labor, business, and State and local governments, who have expertise in community service or in edu- cation. (20 U.S.C. 1005) Enacted July 23, 1992, P.L. 102-325, sec. 101, 106 Stat. 461. SEC. 106. AUTHORIZATION OF APPROPRIATIONS. There are authorized to be appropriated $20,000,000 for fiscal year 1993 and such sums as may be necessary for each of the 4 succeeding fiscal years to carry out this part. (20 U.S.C. 1006) Enacted July 23, 1992, P.L. 102-325, sec. 101, 106 Stat. 461. PART B-ARTICULATION AGREEMENTS SEC. 121. FINDINGS AND PURPOSE. (a) FINDINGS.The Congress finds that (1) because more than one-half of all first-time first-year students attending postsecondary institutions attend commu- nity or junior colleges, and because almost one-half of minority students enrolled in higher education attend 2-year institu- tions, community and junior colleges represent a substantial and an important educational resource; (2) declining participation rates for low-income students and minorities at institutions of higher education is of growing concern to the higher education community and Congress; and (3) there is growing awareness of the need to assist low- income, minority and other nontraditional students in bridging the gap between 2-year to 4-year institutions, enabling such students to reach their individual potential, as well as contrib- ute to the larger society. (b) PURPOSE.The purpose of this part is to improve the edu- cational opportunities of this Nation's postsecondary students by creating comprehensive articulation agreements and planning be- tween partnerships of 2-year and 4-year institutions of higher edu- cation. (20 U.S.C. 1011) Enacted July 23, 1992, P.L. 102-325, sec. 101, 106 Stat. 461. SEC. 122. AUTHORIZATION OF GRANTS. (a) ASSISTANCE FOR ARTICULATION PARTNERSHIPS.From amounts appropriated for this part, the Secretary shall make grants to States to enable States to make awards, either on a com- petitive basis or on the basis of a formula determined by the State, to articulation partnerships between (1) a qualified 2-year institution; and (2) a qualified 4-year institution. (b) QUALIFIED INSTITUTIONS.For purposes of this part (1) a qualified 2-year institution is an institution of higher education (as determined under section 481(a)) that is an eligi- ble institution under section 435(a) and that (A) is a nonprofit institution that offers a 2-year asso- ciate degree or a 2-year certificate program; or (B) is a proprietary institution that offers a 2-year as- sociate degree program; and 14 5 HIGHER EDUCATION ACT OF 1965 Sec. 124 (2) a qualified 4-year institution is an institution of higher education (as determined under section 481(a)) that is an eligi- ble institution under section 435(a) and that offers a bacca- laureate degree program. (C) ALLOCATION AND STATE GRANTS. (3.) FORMULA ALLOCATION.In any fiscal year for which the amount made available under section 129 to carry out the pro- visions of this part equals or exceeds $50,000,000, the Sec- retary shall allot an amount that bears the same ratio to the amount appropriated under section 129 for such fiscal year as the total amount received under title IV by students attending institutions of higher education in that State for such fiscal year bears to the total amount received under title IV by all students for such fiscal year, based on the most recent year for which such data are available. (2) COMPETITIVE GRANTS.In any fiscal year for which the amount made available under section 129 to carry out the pro- visions of this part do not equal or exceed $50,000,000, the Sec- retary is authorized, in accordance with the provisions of this part, to make grants to States to carry out articulation agree- ments under sections 124 and 125. (20 U.S.C. 1011a) Enacted July 23, 1992, P.L. 102-325, sec. 101, 106 Stat. 462. SEC. 123. STATE APPLICATION. Each State that desires to receive a grant under this part shall submit an application to the Secretary in such form and containing or accompanied by such information as the Secretary may require. Such application shall (1) after consultation with the State agencies responsible for supervision of community colleges, technical institutes, or other 2-year postsecondary institutions, designate a sole State agency as the State agency responsible for the administration and supervision of activities carried out with assistance under this part; (2) describe how funds will be allocated in a manner con- sistent with section 124; (3) contain assurances that the State will comply with the requirements of this part; (4) provide for an annual submission of data concerning the use of funds and students served with assistance under this part; and (5) provide that the State will keep such records and pro- vide such information to the Secretary as may be required for purposes of financial audits and program evaluation. (20 U.S.C. 1011b) Enacted July 23, 1992, P.L. 102-325, sec. 101, 106 Stat. 462. SEC. 124. LOCAL APPLICATIONS. Any articulation partnership comprised of qualified institutions that desires to receive a) grant from a State under this part shall submit an application to the State in such form and containing or accompanied by such information as the State may require and shall (1) include in the articulation agreement (A) assurances that academic credit earned at the qualified institution described in section 122(b)(1) will be 7. Sec. 125 HIGHER EDUCATION ACT OF 1965 6 transferable to the qualified institution or institutions as described in section 122(b)(2); (B) development of articulation agreement programs and services appropriate to the needs of the partnership participants; (C) activities that facilitate the development of pro- grams and services appropriate to the needs of the stu- dents attending courses covered by the articulation agree- ment;(D) inservice training for faculty designed to imple- ment effective articulation agreements; (E) counseling services; and (F) information concerning programs contained in the articulation agreement; (2) include assurances that the articulation partnership has the qualified personnel required (A) to develop, administer, and implement the pro- gram required by this part; and (B) to provide special training necessary to prepare staff for the program; and (3) include a plan of operation for the program which in- cludes a description of (A) the program goals; (B) the uses of funds as required by paragraph (2); (C) the activities and services which will be provided under the program (including training and preparation of staff); and (D) the subject areas to be included in the articulation agreement. (20 U.S.C. 1011c) Enacted July 23, 1992, P.L. 102-325, sec. 101, 106 Stat. 463. SEC. 125. ARTICULATION AGREEMENT. (a) LENGTH OF GRANT.Each recipient of a grant from a State shall use the amounts provided under the grant to develop and op- erate articulation agreements for 6 years. (b) USE OF FUNDS.Funds provided to an articulation partner- ship under this part may be used (1) to perform any activity or program required by section 124; (2) as part of the program's planning activities, to acquire technical assistance from Federal, State, or local entities that have successfully designed, established, and operated articula- tion programs; (3) to provide workshops with students and teachers, coun- seling for students to continue their education to a bachelors degree, orientation visits at institutions participating in the partnerships; (4) to develop agreements with local educational agencies for vocational course equivalency approval procedures for pur- poses of satisfying entrance requirements to qualified institu- tions; and (5) to provide outreach to potential students. (20 U.S.C. 1011d) Enacted July 23, 1992, P.L. 102-325, sec. 101, 106 Stat. 463. 16 7 HIGHER EDUCATrN ACT OF 1965 Sec. 129 SEC. 126. STATE ADMINISTRATION. A State may reserve not more than 3 percent of the amounts available under this part for any fiscal year for State administra- tive costs including monitoring and technical assistance. (20 U.S.C. 1011e) Enacted July 23, 1992, P.L. 102-325, sec. 101, 106 Stat. 464, SEC. 127. PRIORITY. The State shall give priority to grant applications for programs which (1) encourage teacher education; (2) have, as one of the partners participating in an articu- lation agreement, an entity participating in an articulation agreement described in section 344(b)(1) of the Carl D. Perkins Vocational and Applied Technology Education Act; (3) contribute their own institutional resources; (4) are not subject to a default reduction agreement under section 428F; (5) encourage technology education; or (6) encourage articulation in subject areas of national im- portance as determined by the Secretary. (20 U.S.C. 10110 Enacted July 23, 1992, P.L. 102-325, sec. 101, 106 Stat. 464. SEC. 128. REPORTS. (a) STATE REPORTS.Each State shall submit to the Secretary an annual report on the operation of the program under this part in such State during the preceding year. Such report shall include such information as the Secretary may require by regulation. (b) EVALUATION AND DISSEMINATION. (1) EVALUATION.The Secretary shall, on the basis of the reports submitted under subsection (a), evaluate all or a sam- ple of the programs conducted under this part for the purposes of (A) determining the success or failure of such pro- grams in increasing access and entry of students from 2- year institutions to 4-year institutions; and (B) identifying the most successful programs under this part and the causes for such success. (2) DISSEMINATION.The Secretary shall, not later than January 31, 1996, submit a report to the Congress on the re- sults of the evaluation described in paragraph (1). The Sec- retary shall disseminate the findings made pursuant to sub- paragraph (B) through appropriate agencies and organizations. (3) RESERVATION.The Secretary may reserve up to 3 per- cent of the amount appropriated under section 129 to carry out this subsection. (20 U.S.C. 1011g) Enacted July 23, 1992, P.L. 102-325, sec. 101, 106 Stat. 464. SEC. 129. AUTHORIZATION OF APPROPRIATIONS. There are authorized to be appropriated to carry out this part, $25,000,000 for fiscal year 1993, and such sums as may be nec- essary for each of the 4 succeeding fiscal years. (20 U.S.C. 1011h) Enacted July 23, 1992, P.L. 102-325, sec. 101, 106 Stat. 465. 1 7 Sec. 131 HIGHER EDUCATION ACT OF 1965 8 PART C-ACCESS AND EQUITY TO EDUCATION FOR ALL AMERICANS THROUGH TELE- COMMUNICATIONS SEC. 131. PROGRAM ESTABLISHED; AUTHORIZATION OF APPROPRIA- TIONS; ELIGIBILITY. (a) GENERAL AUTHORITY.The Secretary is authorized to make grants to eligible partnerships to enable such partnerships to pay the Federal share of the cost of the activities described in the appli- cation submitted pursuant to section 132. (b) AUTHORIZATIONS OF APPROPRIATIONS. (1) IN GENERALThere are authorized to be appropriated to carry out this part $10,000,000 for fiscal year 1993 and such sums as may be necessary for each of the 4 succeeding fiscal years.(2) AVAILABILITY.Funcla appropriated pursuant to the au- thority of paragraph (1) shall remain available until expended. (c) ELIGIBLE PARTNERSHIP.For the purpose of this part the term "eligible partnership' means a partnership which (1) shall consist of (A) a public broadcasting entity or a consortium there- of; and (B) an institution of higher education or a consortium thereof; and (2) may also include a State, a unit of local government, or a public or private nonprofit organization. (d) FEDERAL SHARE.The Federal share shall be 50 percent. (20 U.S.C. 1015) Enacted July 23, 1992, P.L. 102-325, sec. 101, 106 Stat. 465. SEC. 132. APPLICATION. (a) IN GENERAL.Each eligible partnership desiring to receive a grant under this part shall submit an application to the Sec- retary at such time, in such manner and containing or accom- panied by such information as the Secretary may reasonably re- quire.(b) CONTENTS.Each application submitted pursuant to para- graph (1) shall (1) describe the education telecommunications activities or services to be assisted; (2) describe the administrative and management structure supporting such activities or services; (3) provide assurances that the financial interests of the United States in the telecommunications equipment, software and other facilities shall be protected for the useful life of such equipment, software or facilities; (4) describe the manner in which nontraditional post- secondary education students will benefit from the activities and services supported; (5) describe the manner in which special services, includ- ing captioned films, television, descriptive video and education media for individuals with disabilities, shall be supported; and (6) provide assurances that the eligible partnership will provide the non-Federal share of assistance under this part. (C) APPROVAL OF APPLICATIONS. 18 9 HIGHER EDUCATION ACT OF 1965 Sec. 134 (1) IN GENERAL.The Secretary shall, in approving appli- cations under this part, give priority to applications which de- scribe programs thatc (A) include support for services to make captioned films, descriPtive video and educational media available to individuals with disabilities who otherwise lack access to such educational materials; (B) will provide, directly or indirectly, activities or services to a significant number of postsecondary institu- tions; (C) improve access to accredited telecommunications coursework for individuals with disabilities otherwise de- nied such access; (D) will be available in a multistate area; (E) include evidence of significant support for the pro- gram from the business community; or (F) provide matching funds, in an amount which ex- ceeds the required non-Federal share. (2) EQUITABLE GEOGRAPHIC DISTRIBUTION OF ASSISTANCE. In approving applications under this part the Secretary shall ensure the equitable geographic distribution of grants awarded under this part. (20 U.S.C. 1015a) Enacted July 23, 1992, P.L. 102-325, sec. 101, 106 Stat. 465. SEC. 133. AUTHORIZED ACTIVITIES. Grants awarded under this part shall be used for one or more of the following activities: (1) The acquisition of site equipment to provide the tech- nical ability to receive diverse education services at schools, campuses, and work site locations. (2) Satellite, fiber optic and other distribution systems, and for local broadcast or other local distribution capability. (3) Pre-service or in-service education and training for kin- dergarten through 12th grade teachers through interactive tel- evision conferencing. (4) Preparation of telecommunications programs and soft- ware that support national, regional or statewide efforts to pro- vide teaching and learning materials not otherwise available for local use. (5) A loan service of captioned films, descriptive video and educational media in order to make such materials available, in accordance with regulations issued by the Secretary, in the United States for nonprofit purposes to individuals with dis- abilities, parents of individuals with disabilities, and other in- dividuals directly involved in activities for the advancement of individuals with disabilities, including addressing problems of illiteracy among individuals with disabilities. (20 U.S.C. 1015b) Enacted July 23, 1992, P.L. 102-325, sec. 101, 106 Stat. 466. SEC. 134. DEFINITION. For the purpose of this part, the term "public broadcasting en- tity" has the same meaning given to such term by section 397(11) of the Communications Act of 1934. (20 U.S.C. 1015c) Enacted July 23, 1992, P.L. 102-325, sec. 101, 106 Stat. 466. 9 Sec. 135 HIGHER EDUCATION ACT OF 1965 10 SEC. 135. REPORT. (a) IN GENERAL.Each recipient of a grant under this part shall submit a report to the Secretary not later than 30 days a.fter the conclusion of the grant period. (b) CONTENTS.Each report described in subsection (a) shall include(1) a description of activities and services assisted under this part; (2) a description of the population served by the program; and (3) an assessment of the ability of private sector entities participating in the eligible partnership to continue the sup- port of the activities and services in the absence of Federal funding. (c) DISSEMINATION.The Secretary shall select reports received under this subsection that are appropriate for dissemination to the education community and shall make such reports available through the National Diffusion Network. (20 U.S.C. 1015d) Enacted July 23, 1992, P.L. 102-325, sec. 101, 106 Stat. 466. TITLE II ACADEMIC LIBRARIES AND INFORMATION SERVICES SEC. 201. PURPOSE; AUTHORIZATION. (a) PURPOSE.The Secretary shall carry out a program to assist (1) college and university libraries in acquiring techno- logical equipment and in conducting research in information technology in accordance_with part A; (2) in the education and training of persons in library and information science and to encourage research and develop- ment relating to improvement of libraries (including the pro- motion of economical and effective information delivery, cooper- ative efforts, and developmental projects) in accordance with part B; (3) the Nation's major research libraries, in maintaining and strengthening their collections, and in making information resources available to other libraries whose users have need for research materials in accordance with part C; and (4) historically black colleges and universities and other minority-serving institutions with programs in library and in- formation sciences to train and educate African-Americans and other underrepresented racial, national origin, and ethnic mi- norities in such programs in accordance with part D. (b) AUTHORIZATION OF APPROPRIATIONS. (1) PART A.There are authorized to be appropriated to carry out part A $20,000,000 for fiscal year 1993 and such sums as may be necessary for each of the 4 succeeding fisca3 years.(2) PART B.There are authorized to be appropriated to carry out part B $10,000,000 for fiscal year 1993 and such sums as may be necessary for each of the 4 succeeding fiscal years. 20 11 HIGHER EDUCATION ACT OF 1965 Sec. 211 (3) PART C.-There are authorized to be appropriated to carry out part C $20,000,000 for fiscal year 1993 and such sums as may be necessary for each of the 4 succeeding fiscal years. (4) PART D.-There are authorized to be appropriated to carry out part D $15,000,000 for fiscal year 1993 and such sums as may be necessary for each of the 4 succeeding fiscal years. (20 U.S.C. 1021) Enacted Nov. 8, 1965, P.L. 89-329, sec. 201, 79 Stat. 1224; amended Oct. 16, 1968, P.L. 90-575, sec. 211, 82 Stat.,1036; amended June 23, 1972, P.L. 92-318, sec. 111(b)(1), 86 Stat. 238; amended October 12, 1976, P.L. 94- 482, sec. 106, 90 Stat. 2089; amended October 3, 1980, P.L. 96-374, sec. 201, 94 Stat. 1384; amended October 17, 1986, P.L. 99-498, sec. 201(b), (c), 100 Stat. 1287; amended Aug. 23, 1988, P.L. 100-418, sec. 6241, 102 Stat. 1520; amended July 23, 1992, P.L. 102-325, sec. 201, 106 Stat. 467. SEC. 202. NOTIFICATION OF STATE AGENCY. Each institution of higher education which receives a grant under this title shall annually inform the State agency designated pursuant to section 1203 of its activities under this title. (20 U.S.C. 1022) Enacted Nov. 8, 1965, P.L. 89-329, sec. 202, 79 Stat. 1224; amended Nov. 3, 1966, P.L. 89-752, sec. 9, 80 Stat. 1243; amended Oct. 16, 1968, P.L. 90-575, sec. 214, 82 Stat. 1037; amended June 23, 1972, P.L. 92-318, sec. 111(b)(2)(A), 86 Stat. 238; amended and redesignated June 23, 1972, P.L. 92-318, sec. 112, 86 Stat. 240; amended October 3, 1980, P.L. 96-374, sec. 201, 94 Stat. 1384; amended July 23, 1992, P.L. 102-325, sec. 201, 106 Stat. 468. SEC. 203. LIBRARY EXPERTS. The Secretary shall make every effort to ensure that programs under this title are administered by appropriate library experts. (20 U.S.C. 1023) Enacted July 23, 1992, P.L. 102-325, sec. 201, 106 Stat. 468. PART A-COLLEGE LIBRARY TECHNOLOGY AND COOPERATION GRANTS SEC. 211. COLLEGE LIBRARY TECHNOLOGY AND COOPERATION GRANTS. (a) GRANTS AUTHORIZED.-The Secretary is authorized to make grants for technological equipment, networking, and other special purposes to- (1) institutions of higher education which demonstrate a need for special assistance for the planning, development, ac- quisition, maintenance, or upgrading of technological equip- ment necessary to organize, access or utilize material in elec- tronic formats and to participate in networks for the accessing and sharing of library and information resources; (2) combinations of institutions of higher education which demonstrate a need for special assistance in establishing and strengthening joint-use library facilities, resources, or equip- ment for the accessing and sharing of library and information resources; (3) other public and private nonprofit organizations which provide library and information services to institutions of high- er education on a formal, cooperative basis for the purpose of 'This part was originally enacted as part D of this title (P.L. 99-498, sec. 207, 100 Stat. 1289). 21 Sec. 211 HIGHER EDUCATION ACT OF 1965 12 ks`ablishing, developing, or expanding programs or projects that improve the services provided by such organizations to in- stitutions of higher education; and (4) institutions of higher education conducting research or demonstration projects that improve information services to meet special national or regional needs by utilizing technology to enhance library or information services such as through the National Research and Education Network. (b) ANVARDS REQUIREMENTS.From funds appropriated for this part, the Secretary shall make competitive awards to institutions, combinations of institutions, or organizations in each of the cat- egories described in paragraphs (1) through (4) of subsection (a). (C) AMOUNT. (1) IN GENERAL.The Secretary shall award grants under this section in an amount which is not less than $25,000. (2) SPECIAL RULE.The Secretary shall award grants pur- suant to paragraph (1) of subsection (a) in an amount which is not more than $50,000 for each institution of higher edu- cation. (d) PRIORITY.In awarding grants pursuant to paragraph (1) of subsection (a), the Secretary shall give priority to institutions of higher education seeking assistance for projects which assist devel- oping institutions of higher education in linking one or more insti- tutions of higher education to resource sharing networks. (e) DURATION.The Secretary shall award grants under this section for a period not to exceed 3 years. (f) APPLICATION. (1) IN GENERAL.Each institution of higher education or combination thereof desiring a grant under this section shall submit an application to the Secretary at such time, in such manner and accompanied by such information as the Secretary may reasonably require. (2) CONTENT.Each application submitted pursuant to paragraph (1) shall (A) describe the activities ond services for which as- sistance is sought; and (B) contain assurances that the applicant will expend during the period for which the grant is sought (from funds other than funds received under this title), for the same purpose as such grant, an amount from such other sources equal to not less than one-third of such grant. (3) CRITERIA.The Secretary shall prescribe by regulation criteria for the approval of applications submitted under this section. (20 U.S.C. 1029) Enacted October 3, 1980, P.L. 96-374, sec. 201, 94 Stat. 1384; amended October 17, 1986, P.L. 99-498, sec. 207, 100 Stat. 1276; amended July 23, 1992, P.L. 102-325, sec. 201, 106 Stat. 468. ?2 13 HIGHER EDUCATION ACT OF 1965 Sec. 223 PART B-LIBRARY EDUCATION, RESEARCH, AND DEVELOPMENT SEC. 221. GRANTS AUTHORIZED. (a) GRANTS.-From the amounts appropriated for this part for any fiscal year, the Secretary shall make grants in accordance with sections 222 and 223. (b) RESERVATION.-Of the amount appropriated for this part for any fiscal year, the Secretary shall make available two-thirds of such amount for the purpose of section 222 and one-third of such amount for the purpose of section 223. (20 U.S.C. 1031) Enacted June 23, 1972, P.L. 92-318, sec. 111(b)(3)(A), 86 Stat. 239; amended October 3, 1980, P.L. 96-374, sec. 201, 94 Stat. 1385; amended Octo- ber 17, 1986, P.L. 99-498, sec. 204(b)(1), 100 Stat. 1289; amended July 23, 1992, P.L. 102-325, sec. 201, 106 Stat. 469. SEC. 222. LIBRARY EDUCATION AND HUMAN RESOURCE DEVELOP- MENT. (a) PURPOSE AND GRANT CRITERIA.-The Secretary is author- ized to make grants to, and enter into contracts with, institutions of higher education and library organizations or agencies to assist such institutions, library organizations, or agencies in educating and training persons in library and information science, particu- larly in areas of critical needs, such as recruitment and retention of minorities. Such grants or contracts may be used by such institu- tions, library organizations, or agencies to- (1) assist in covering the cost of courses of study or staff development (including short term or regular session insti- tutes), (2) establish and maintain fellowships or traineeships with stipends (including allowances for travel, subsistence, and other expenses) for fellows who demonstrate need and who are working toward a graduate degree (and their dependents), not in excess of such maximum amounts as may be determined by the Secretary, and (3) establish, develop, or expand programs of library and information science, including new techniques of information transfer and communication technology. (b) ADDITIONAL REQUIREMENTS.-Not less than 50 percent of the grants made under this section shall be for the purpose of es- tablishing and maintaining fellowships or traineeships under sub- section (a)(2). (20 U.S.C. 1032) Enacted Nov. 8, 1965, P.L. 89-329, sec. 223, 79 Stat. 1227; amended Oct, 16, 1968, P.L. 90-575, sec. 216, 82 Stat. 1037; amended June 23, 1972, P.L. 92-318, sec. 111(b)(3) (B) and (K); redesignated by P.L. 92-318, sec. 111(b)(3)(D), 86 Stat. 240; amended October 3, 1980, P.L. 96-374, sec. 201, 94 Stat. 1385; amended July 23, 1992, P.L. 102-325, sec. 201, 106 Stat. 469. SEC. 223. RESEARCH AND DEMONSTRATION. The Secretary is authorized to make grants to, and enter into contracts with, institutions of higher education and other public and private agencies, institutions, and organizations for research and development projects related to the improvement of libraries, education in library and information science, the enhancement of library services through effective and efficient use of new tech- ? 3 Sac. 224 HIGHER EDUCATION ACT OF 1965 14 nologies, and for the dissemination of information derived from such projects. (20 U.S.C. 1033) Enacted Nov. 8, 1965, P.L. 89-329, sec. 224, 79 Stat. 1228; sub- sec.. (c) repealed Apr. 13, 1970, P.L. 91-230, sec. 401(h) and superseded by pt. C of title IV of P.L. 90-247, as amended. (20 U.S.C. 1233c.); redesignated June 23 1972, P.L. 92-318, sec. 111(b)(3)(D), 86 Stat. 240; amended October 3, 1980, P.L. 96-374, sec. 201, 94 Stat. 1385; amended October 17, 1986, P.L. 99-498, sec. 205, 100 Stat. 1289; amended July 23, 1992, P.L. 102-325, sec. 201, 106 Stat. 470. SEC. 224. CONSULTATION REQUIREMENTS. The Secretary shall consult with the appropriate library and information science professional bodies in the determination of crit- ical needs under section 222 and in the determination of priorities under section 223. (20 U.S.C. 1034) Enacted July 23, 1992, P.L. 102-325, sec. 201, 106 Stat. 470. PART C-IMPROVING ACCESS TO RESEARCH LIBRARY RESOURCES SEC. 231. RESEARCH LIBRARY RESOURCES. (a) GRANTS.- (1) GENERAL AUTHORITY.-From the amount appropriated for this part, the Secretary shall make grants to institutions with major research libraries. (2) MAJOR RESEARCH LIBRARY.-For the purposes of this part, the term "major research library" means a public or pri- vate nonprofit institution (including the library resources of an institution of higher education), an, independent research li- brary, or a State or other public library, having a library collec- tion which is available to qualified users and which- (A) makes a significant contribution to higher edu- cation and research; (B) is broadly based and is recognized as having na- tional or international significance for scholarly research; (C) is of a unique nature, and contains material not widely available; and (D) is in substantial demand by researchers and schol- ars not connected with that institution. (b) ELIGIBILITY.-In deterMining eligibility for assistance under this part, the Secretary shall permit institutions that do not other- wise qualify to provide additional information or documents to demonstrate the national or international significance for scholarly research of the particular collection described in the grant proposal. (20 U.S.C. 1041) Enacted Nov. 8, 1965, P.L. 89-329, sec. 231, 79 Stat. 1228; amended Oct. 16, 1968, P.L. 90-575, sec. 217, 218, 82 Stat. 1037-1038; amended June 23, 1972, P.L. 92-318, sec. 114, 86 Stat. 240; amended Oct. 12, 1976, P.L. 94- 482, sec. 107, 90 Stat. 2090; amended October 3, 1980, P.L. 96-374, sec. 201, 94 Stat. 1386; amended October 17, 1986, P.L. 99-498, sec. 204(b)(2), 206, 100 Stat. 1289; amended July 23, 1992, P.L. 102-325, sec. 201, 106 Stat. 470. SEC. 232. GEOGRAPHICAL DISTRIBUTION OF GRANTS. In making grants under this part, the Secretary shall endeavor to achieve broad and equitable geographical distribution through- out the Nation. (20 U.S.C. 1042) Enacted June 23, 1972, P.L. 92-318, sec. 115(a), 86 Stat. 241; amended Oct. 12, 1976, P.L. 94-482, sec. 107, 90 Stat. 2090; amended October 3, 9 4 15 HIGHER EDUCATION ACT OF 1965 Sec. 241 1980, P.L. 96-374, sec. 201, 94 Stat. 1386; amended July 23, 1992, P.L. 102-325, sec. 201, 106 Stat. 471. PART D-STRENGTIIENING LIBRARY AND IN- FORMATION SCIENCE PROGRAMS AND LI- BRARIES IN HISTORICALLY BLACK COL- LEGES AND UNIVERSITIES AND OTHER MI- NORITY-SERVING INSTITUTIONS SEC. 241, STRENGTHENING LIBRARY AND INFORMATION SCIENCE PROGRAMS AND LIBRARIES IN HISTORICALLY BLACK COLLEGES AN/3 UNIVERSITIES AND OTHER MINORITY. SERVING INSTITUTIONS. (a) ELIGIBLE INSTITUTIONS.For the purposes of this section, the term "eligible institution" means (1) an historically black college or university; or (2) an institution of higher education which (A) serves a large number or high percentage of minor- ity students; and (B) enrolls and graduates minority students in library and information science programs. (b) GENERAL AUTHORITY. (1) AUTHORITY OF SECRETARY.The Secretary is author- ized to make grants to, and enter into contracts with (A) eligible institutions to assist such institutions in strengthening their library and information science pro- grams and library resources; and (B) eligible institutions, and library organizations or agencies which have nationally approved programs in li- brary and information science, to assist such institutions and organizations in the education and training of African Americans and other underrepresented racial, national ori- gin, and ethnic minorities, particularly in areas of critical needs of library and information science. (2) USE OF FUNDS.Such grants or contracts may be used by such institutions, library organizations, or agencies to (A) establish, develop, or strengthen libraries and li- brary and information science programs, including new techniques of information transfer and communication technology; (B) assist in covering the cost of courses of study or staff development (including short-term or regular session institutec); and (C) establish and maintain fellowships or traineeships with stipends (including allowances for travel, subsistence, and other expenses) for fellows who demonstrate need and who are working toward a graduate degree (and their de- pendents), not in excess of such maximum amounts as may be determined by the Secretary. (c) TRAINEESHIPS.Not less than 50 percent of the grants made under this section shall be for the purpose of establishing and maintaining fellowships or traineeships under subsection (a)(2). Sec. 301 HIGHER EDUCATION ACT OF 1965 16 (d) FUNDING PROMBITION.-Notwithstanding any other provi- sion of law, no funds are authorized to be appropriated to carry out this part for any fiscal year unless the amount appropriated to carry out each of parts A, B, and C for such fiscal year equals or exceeds the amount appropriated for such parts, respectively, for fiscal year 1992. (20 U.S.C. 1047) Enacted July 23, 1992, P.L. 102-325, sec. 201, 106 Stat. 471; amended December 20, 1993, P.L. 103-208, sec. 2(a)(3), 107 Stat. 2457. TITLE III-INSTITUTIONAL AID SEC. 301. FINDINGS AND PURPOSES. (a) FINDINGS.-The Congress finds that- (1) there are a significant number of institutions of higher education serving high percentages of minority students and students from low-income backgrounds, that face problems that threaten their ability to survive; (2) the problems relate to the management and fiscal oper- ations of certain institutions of higher education, as well as to an inability to engage in long-range planning and development activities, including endowment building; (3) the title HI program prior to 1985 did not always meet the specific development needs of historically Black colleges and universities and other institutions with large concentra- tions of minority, low-income students; (4) the solution of the problems of these institutions would enable them to become viable, fiscally stable and independent, thriving institutions of higher education; (5) providing assistance to eligible institutions will en- hance the role of such institutions in providing access and quality education to Iow-income and minority students; (6) these institutions play an important role in the Amer- ican system of higher education, and there is a strong national interest in assisting them in solving their problems and in sta- bilizing their management and fiscal operations, and in becom- ing fmancially independent; and (7) there is a particular national interest in aiding those institutions of higher education that have historically served students who have been denied access to postsecondary edu- cation because of race or national origin and whose participa- tion in the American system of higher education is in the Na- tion's interest so that equality of access and quality of post- secondary education opportunities may be enhanced for all stu- dents. (b) PURPOSE.-It is the purpose of this title to assist such insti- tutions in equalizing educational opportunity through a program of Federal assistance. (20 U.S.C. 1051) Enacted June 23, 1972, P.L. 92-318, sec. 121(a), 86 Stat. 241; amended Oct. 12, 1976, P.L. 94-482, sec. 111, 90 Stat. 2091; amended October 3, 1980, P.L. 96-374, sec. 301, 94 Stat. 1390; amended October 17, 1986, P.L. 99-498, sec. 301(a), 100 Stat. 1290; amended July 23, 1992, P.L. 102-325, sec. 301, 106 Stat. 472; amended December 20, 1993, P.L. 103-208, secs. 2(a)(4), (m), 107 Stat. 2457, 2486. 9 17 HIGHER EDUCATION ACT OF 1965 Sec. 312 PART ASTRENGTHENING INSTITUTIONS SEC. 311. PROGRAM PURPOSE. (a) GENERAL AUTHORIZATION.The Secretary shall carry out a program, in accordance with this part, to improve the academic quality, institutional management, and fiscal stability of eligible in- stitutions, in order to increase their self-sufficiency and strengthen their capacity to make a substantial contribution to the higher edu- cation resources of the Nation. (b) GRANTS AWARDED; SPECIAL CONSIDERATI0N.(1) From the sums available for this part under section 360(a)(1), the Secretary may award grants to any eligible institution with an application approved under section 351 in order to assist such an institution to plan, develop, or implement activities that promise to strengthen the institution. (2) Special consideration shall be given to any eligible institution (A) which has endowment funds (other than any endow- ment fund built under section 332 of this Act as in effect on September 30, 1986, and under part B) the market value of which, per full-time equivalent student, is less than the aver- age current market value of the endowment funds, per full- time equivalent student (other than any endowment fund built under section 332 of this Act as in effect on September 30, 1986, and under part B) at similar institutions; or (B) which has expenditures per full-time equivalent stu- dent for library materials which is less than the average of the expenditures for library materials per full-time equivalent stu- dent by other similarly situated institutions. (3) Special consideration shall be given to applications which propose, pursuant to the institution's plan, to engage in (A) faculty development; (B) funds and administrative management; (C) development and improvement of academic programs; (D) acquisition of equipment for use in strengthening funds management and academic programs; (E) joint use of facilities such as libraries and laboratories; and (F) student services. (20 U.S.C. 1057) Enacted October 3, 1980, P.L. 96-374, sec. 301, 94 Stat. 1391; amended October 17, 1986, P.L. 99-498, sec. 301(a), 100 Stat. 1291; amended June 3, 1987, P.L. 100-50, sec. 2(a)(1), 101 Stat. 335; amended December 20, 1993, P.L. 103-208, sec. 2(m), 107 Stat. 2486. SEC. 312. DEFINITIONS; ELIGIBILITY. (a) EDUCATIONAL AND GENERAL EXPENDITURES.For the pur- pose of this part, the term "educational and general expenditures" means the total amount expended by an institution of higher edu- cation for instruction, research, public service, academic support (including library expenditures), student services, institutional sup- port, scholarships and fellowships, operation and maintenance ex- penditures for the physical plant, and any mandatory transfers which the institution is required to pay by law. (b) ELIGIBLE INSTITUTION.For the purpose of this part, the term "eligible institution" means See. 312 HIGHER EDUCATION ACT OF 1965 18 (1) an institution of higher education (A) which has an enrollment of needy students as re- quired by subsection (c) of this section; (B) except as provided in section 352(b), the average educational and general expenditures of which are low, per full-time equivalent undergraduate student, in comparison with the average educational and general expenditures per full-time equivalent undergraduate student of institutions that offer similar instruction; (C)(i) which is legally authorized to provide, and pro- vides within the State, an educational program for which it awards a bachelor's degree, or (ii) which is a junior or community college; (D) which is accredited by a nationally recognized ac- crediting agency or association determined by the Sec- retary to be reliable authority as to the quality of training offered or which is, according to such an agency or associa- tion, making reasonable progress toward accreditation; and (E) which meets such other requirements as the Sec- retary may prescribe; and (2) any branch of any institution of higher education de- scribed under paragraph (1) which by itself satisfies the re- quirements contained in subparagraphs (A) and (B) of such paragraph. For purposes of the determination of whether an institution is an eligible institution under this paragraph, the factor described under paragraph (1)(A) shall be given twice the weight of the factor described under paragraph (1)(B). (C) ENROLLMENT OF NEEDY STUDENTS.For the purpose of this part, the term "enrollment of needy students" means an enrollment at an institution of higher education or a junior or community col- lege which includes (1) at least 50 percent of the degree students so enrolled who are receiving need-based assistance under title IV of this Act in the second fiscal year preceding the fiscal year for which the determination is being made (other than loans for which an interest subsidy is paid pursuant to section 428), or (2) a substantial percentage of students receiving Pell Grants in the second fiscal year preceding the fiscal year for which determination is being made, in comparison with the percentage of students receiving Pell Grants at all such institu- tions in the second fiscal year preceding the fiscal year for which the determination is made, unless the requirement of this subdivision is waived under section 352(a). (d) FULL-TIME EQUIVALENT STUDENTS.For the purpose of this part, the term "full-time equivalent students" means the sum of the number of students enrolled full time at an institution, plus the full-time equivalent of the number of 3tudents enrolled part time (determined on the basis of the quotient of the sum of the credit hours of all part-time students divided by 12) at such institution. (e) JUNIOR OR COMMUNITY COLLEGE.For the purpose of this part, the term "junior or community college" means an institution of higher education-- 28 19 HIGHER EDUCATION ACT OF 1965 Sec. 313 (1) that admits as regular students persons who are be- yond the age of coMpulsory school attendance in the State in which the institution is located and who have the ability to benefit from the training offered by the institution; (2) that does not provide an educational program for which it awards a bachelor's degree (or an equivalent degree); and (3) that- (A) provides an educational program of not less than 2 years that is acceptable for full credit toward such a de- gree, or (B) offers a 2-year program in engineering, mathe- matics, or the physical or biological sciences, designed to prepare a student to work as a technician or at the semiprofessional level in engineering, scientific, or other technological fields requiring the understanding and appli- cation of basic engineering, scientific, or mathematical principles of knowledge. (f) HISTORICALLY BLACK COLLEGE OR UNIVERSUY.-For the purposes of this section, ne historically black college or university which is eligible for and receives funds under part B of this title is eligible for or may receive funds under this part. (20 U.S.C. 1058) Enacted October 3, 1980, P.L. 96-374, sec. 301, 94 Stat. 1391; amended October 17, 1986, P.L. 99-498, sec. 301(a), 100 Stat. 1292; amended June 3, 1987, P.L. 100-50, sec. 2(a)(2)-(6), 101 Stat. 335; amended July 18, 1988, P.L. 100-369, sec. 10, 102 Stat. 837-838; amended July 23, 1992, P.L. 102-325, sec. 302(a)-(b), 106 Stat. 472; amended December 20, 1993, P.L. 103-208, sec. 2(a)(5), (in), 107 Stat. 2457, 2486. SEC. 313. DURATION OF GRANT. (a) AWARD PERIOD.-The Secretary may award a grant to an eligible institution under this part for 5 years. (b) LIMITATIONS.-In awarding grants under this part the Sec- retary shall give priority to applicants who are not already receiv- ing a grant under this part, except that for the purpose of this sub- section a grant under section 354(a)(1) shall not be considered a grant under this part. (c) PLANNING GRANTS.-Notwithstanding subsection (a), the Secrets. 1 may award a grant to an eligible institution under this part for a period of one year for the purpose of preparation of plans and applications for a grant under this part. (20 U.S.C. 1059) Enacted October 3, 1980, P.L. 96-374, sec. 301, 94 Stat. 1392; amended October 17, 1986, P.L. 99-498, sec. 301(a), 100 Stat. 1294; amended July 23, 1992, P.L. 102-325, sec. 302(c), 106 Stat. 472; amended December 20, 1993, P.L. 103-208, sec. 2(a)(6), (m), 107 Stat. 2457, 2486. SEC. 314. APPLICATION REVIEW PROCESS. (a) REVIEW PANEL.-(1) All applications submitted under part A by institutions of higher education shall be read by a panel of readers composed of individuals selected by the Secretary which shall include outside readers who are not employees of the Federal Government. The Secretary shall ensure that no individual as- signed under this section to review any application has any conflict of interest with regard to that application which might impair the impartiality with which that individual conducts the review under this section. Sec. 314 HIGHER EDUCATION ACT OF 1965 20 (2) The Secretary shall take care to include as readers rep- resentatives of historically and predominantly Black colleges, His- panic institutions, Native American colleges and universities, and institutions with substantial numbers of students who are His- panic, Native American, Asian American, and Native American Pa- cific Islander (including Native Hawaiians). (3) All readers selected by the Secretary shall receive thorough instruction from the Secretary regarding the evaluation process for applications submitted under part A, including (A) explanations and examples of the types of activities re- ferred to in section 311(b) that must receive special consider- ation for grants awarded under part A; (B) an enumeration of the factors to be used to determine the quality of applications submitted under part A; and (C) an enumeration of the factors to be used to determine whether a grant should be awarded for a project under part A, the amount of any such grant, and the duration of any such grant. (b) RECOMMENDATIONS OF PANEL.In awarding grants under part A, the Secretary shall take into consideration the rec- ommendations of the panel established under subsection (a). (c) NOTIFICATION.Not later than June 30 of each year, the Secretary shall notify each institution of higher education making an application under part A of (1) the scores given the applicant by the panel pursuant to this section; (2) the recommendations of the panel with respect to such application; and (3) the reasons for the decision of the Secretary in award- ing or refusing to award a grant under part A and any modi- fications, if any, Li the recommendations of the panel made by the Secretary. (20 U.S.C. 1059a) Enacted June 3, 1987, P.L. 100-50, sec. 2(b), 101 Stat. 336; amended December 20, 1993, P.L. 103-208, sec. 2(m), 107 Stat. 2486. SEC. 315. GOALS FOR FINANCIAL MANAGEMENT AND ACADEMIC PRO- GR.AM. (a) GOALS.Any application for a grant under this part shall describe measurable goals for the institution's financial manage- ment and academic programs, and include a plan of how the appli- cant intends to achieve those goals. (b) CONTINUATION REQUIR.EMENTS.Any continuation applica- tion shall demonstrate the progress made toward achievement of the goals described pursuant to subsection (a). (20 U.S.C. 1059b) Enacted July 23, 1992, P.L. 102-325, sec. 302(d)(1), 106 Stat. 473. SEC. 316. RISPANIC-SERVING INSTITUTIONS. (a) PROGRAM AUTHORIZED.The Secretary shall provide grants and related assistance to Hispanic-serving institutions to enable such institutions to improve and expand their capacity to serve Hispanic and other low-income students. (b) DEFINITIONS.For the purpose of this section (I) the term "Hispanic-serving institution" means an insti- tution of higher education which- 30 21 HIGHER EDUCATION ACT OF 1965 Sec. 316 (A) is an eligible institution under section 312(b); (B) at the time of application, has an enrollment of un- dergraduate full-time equivalent students that is at least 25 percent Hispanic students; (C) provides assurances that (i) not less than 50 percent of its Hispanic stu- dents are low-income individuals who are first genera- tion college students; and (ii) another 25 percent of its Hispanic students are either low-income individuals or first generation col- lege students; (2) the term "first generation college student" means (A) an individual both of whose parents did not com- plete a baccalaureate degree; or (B) in the case of any individual who regularly resided with and received support from only one parent, an indi- vidual whose only such parent did not complete a bacca- laureate degree; and (3) the term "low-income individual" means an individual from a family whose taxable income for the preceding year did not exceed 150 percent of an amount equal to the poverty level determined by using criteria of poverty established by the Bu- reau of the Census. (c) AUTHORIZED ACTIVITIES. (1) TYPES OF ACTIVITIES AUTHORIZED.Grants awarded under this section shall be used by Hispanic-serving institu- tions of higher education to assist such institutions to plan, de- velop, undertake, and carry out programs. (2) EXAMPLES OF AUTHORIZED ACTIVITIES.Such programs may include (A) purchase, rental, or lease of scientific or laboratory equipment for educational purposes, including instruc- tional and research purposes; (B) renovation and improvement in classroom, library, laboratory, and other instructional facilities; (C) support of faculty exchanges, and faculty develop- ment and faculty fellowships to assist in attaining ad- vanced degrees in their field of instruction; (D) curriculum development and academic instruction; (E) purchase of library books, periodicals, microfilm, and other educational materials; (F) funds and administrative management, and acqui- sition of equipment for use in strengthening funds man- agement; (G) joint use of facilities such as laboratories and li- braries; and (H) academic tutoring and counseling programs and student support services. (d) APPLICATION PROCESS. (1) INSTITUTIONAL ELIGIBILITY.Each Hispanic-serving in- stitution desiring to receive assistance under this Act shall submit to the Secretary such enrollment data as may be nec- essary to demonstrate that it is a Hispanic-serving institution as defined in paragraph (1) of subsection (b), along with such 0 1 Sec. 321 HIGHER EDUCATION ACT OF 1965 22 other information and data as the Secretary may by regulation require. (2) APPLICATIONS.Any institution which is determined by the Secretary to be a Hispanic-serving institution (on the basis of the information and data submitted under paragraph (1)) may submit an application for assistance under this section to the Secretary. Such application shall include (A) a 5-year plan for improving the assistance pro- vided by the Hispanic-serving institution to Hispanic and other low-income students; and (B) such other information and assurance as the Sec- retary may require. (3) PRIORITY.The Secretary shall give priority to applica- tions that contain satisfactory evidence that such institution has entered into or will enter Lnto a collaborative arrangement with at least one local educational agency to provide such agency with assistance (from funds other than funds provided under this part) in reducing Hispanic dropout rates, improving Hispanic rates of academic achievement, and increasing the rates at which Hispanic high school graduates enroll in higher education. (e) SPECIAL RULE.Por the purposes of this section, no His- panic-serving college or university which is eligible for and receives funds under this section may concurrently receive other funds under this part or part B. (20 U.S.C. 1059c) Enacted July 23, 1992, P.L. 102-325, sec. 302(d)(1), 106 Stat. 473, amended December 20, 1993, P.L. 103-208, sec. 2(a)(7), 107 Stat. 2457. PART BSTRENGTHENING HISTORICALLY BLACK COLLEGES AND UNIVERSITIES SEC. 321. FINDINGS AND PURPOSES. The Congress finds that (1) the historically Black colleges and universities have contributed significantly to the effort to attain equal oppor- tunity through postsecondary education for Black, low-income, and educationally disadvantaged Americans; (2) States and the Federal Government have discriminated in the allocation of land and financial resources to support Black public institutions under the Morrill Act of 1862 and its progeny, and against public and private Black colleges and uni- versities in the award of Federal grants and contracts, and the distribution of Federal resources under this Act and other Fed- eral programs which benefit institutions of higher education; (3) the current state of Black colleges and universities is partly attributable to the discriminatory action of the States and the Federal Government and this discriminatory action re- quires the remedy of enhancement of Black postsecondary in- stitutions to ensure their continuation and participation in ful- filling the Federal mission of equality of educational oppor- tunity; and (4) financial assistance to establish or strengthen the phys- ical plants, financial management, academic resources, and en- dowments of the historically Black colleges and universities are 32 23 HIGHER EDUCATION ACT OF 1965 Sec. 323 appropriate methods to enhance these institutions and facili- tate a decrease in reliance on governmental financial support and to encourage reliance on endowments and private sources. (20 U.S.C. 1060) Enacted, October 3, 1980, P.L. 96-374, sec. 301, 94 Stat. 1393; amended October 17, 1986, P.L. 99-498, sec. 301(a), 100 Stat. 1294; amended De- cember 20, 1993, P.L. 103-208, sec. 2(m), 107 Stat. 2486. SEC. 322. DEFINITIONS. For the purpose of this part: (1) The term "graduate" means an individual who has at- tended an institution for at least three semesters and fulfilled academic requirements for undergraduate studies in not more than 5 consecutive school years. (2) The term "part B institution" means any historically Black college or university that was established prior to 1964, whose principal mission was, and is, the education of Black Americans, and that 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 rea- sonable progress toward accreditation, except that any branch campus of a southern institution of higher education that prior to September 30, 1986, received a grant as an institution with special needs under section 321 of this title and was formally recognized by the National Center for Education Statistics as a Historically Black College or University but was determined not to be a part B institution on or aftey October 17, 1986, shall, from the date of enactment of this exception, be consid- ered a part B institution. (3) The term "Pell Grant recipient" means a recipient of fi- nancial aid under subpart 1 of part A of title IV of this Act. (4) The term "professional and academic areas in which Blacks are underrepresented" shall be determined by the Sec- retary and the Commissioner of the Bureau of Labor Statistics, on the basis of the most recent available satisfactory data, as professional and academic areas in which the percentage of Black Americans who have been educated, trained, and em- ployed is less than the percentage of Blacks in the general pop- ulation. (5) The term "school year" means the period of 12 months beginning July 1 of any calendar year and ending June 30 of the following calendar year. (20 U.S.C. 1061) Enacted October 3, 1980, P.L. 96-374, sec. 301, 94 Stat. 1393; amended October 17, 1986, P.L. 99-498, sec. 301(a), 100 Stat. 1294; amended July 18, 1988, P.L. 100-369, sec. 10(c), 102 Stat. 838; amended December 20, 1993, P.L. 103-208, sec. 2(m), 107 Stat. 2486. SEC. 323. GRANTS TO INSTECUTIONS. (a) GENERAL AUTHORIZATION; USES OF FUNDS.-From amounts available under section 360(a)(2) in any fiscal year the Secretary shall make grants (under section 324) to institutions which have applications approved by the Secretary (under section 325) for any of the following uses: (1) Purchase, rental, or lease of scientific or laboratory equipment for educational purposes, including instructional and research purposes. 77-530 0-94 --2 Sec. 323 HIGHER EDUCA110N ACT OF 1965 24 (2) Construction, maintenance, renovation, and improve- ment in classroom, library, laboratory, and other instructional facilities, including purchase or rental of telecommunications technology equipment or services. (3) Support of faculty exchanges, and faculty development and faculty fellowships to assist in attaining advanced degrees in their field of instruction. (4) Academic instruction in disciplines in which Black Americans are underrepresented. (5) Purchase of library books, periodicals, microfilm, and other educational materials, including telecommunicationg pro- gram materials. (6) Tutoring, counseling, and student service programs de- signed to improve academic success. (7) Funds and administrative management, and acquisi- tion of equipment for use in strengthening funds management. (8) Joint use of facilities, such as laboratories and libraries. (9) Establishing or improving a development office to strengthen or improve contributions from alumni and the pri- vate sector. (10) Establishing or enhancing a program of teacher edu- cation designed to qualify students to teach in a public eiemen- tary or secondary school in the State that shall include, as part of such program, preparation for teacher certification. (11) Establishing community outreach programs which will encourage elementary and secondary students to develop the academic skills and the interest to pursue postsecondary edu- cation. (12) Other activities proposed in the application submitted pursuant to section 325 that (A) contribute to carrying out the purposes of this part; and (B) are approved by the Secretary as part of the re- view and acceptance of such application. (b) LIMITATIONS.(1) No grant may be made under this Act for any educational program, activity, or service related to sectarian instruction or religious worship, or provided by a school or depart- ment of divinity. For the purpose of this subsection, the term "school or department of divinity" means an institution whose pro- gram is specifically for the education of students to prepare them to become ministers of religion or to enter upon some other reli- gious vocation, or to prepare them to teach theological subjects. (2) Not more than 50 percent of the allotment of any institu- tion may be available for the purpose of constructing or maintain- ing a classroom, library, laboratory, or other instructional facility. (3) The Secretary shall not award a grant under this part for telecommunications technology equipment, facilities or services, if such equipment, facilities or services are available pursuant to sec- tion 396(k) of the Communications Act of 1934. (20 U.S.C. 1062) Enacted October 3, 1980, P.L. 96-374, sec. 301, 94 Stat. 1395; amended October 17, 1986, P.L. 99-498, sec. 301(a), 100 Stat. 1295; amended June 3, 1987, P.L. 100-50, sec. 2(a)(7), 101 Stat. 335; amended July 18, 1988, P.L. 100 369, sec. 10(b), 102 Stat. 838; amended July 23, 190, P.L. 102-325, sec. 303;a) (b), 106 Stat. 474; amended December 20, 1993, P.L. 103-208, sec. 2(a)(8), (m), 107 Stat. 2457, 2486. 0 4 25 HIGHER EDUCATION ACT OF 1965 Sec. 324 SEC. 324. ALLOTMENTS TO INSTITUTIONS. (a) ALLOTMENT; PELL GRANT BASIS.From the amounts appro- priated to carry out this part for any fiscal year, the Secretary shall allot to each part B institution a sum which bears the same ratio to one-half that amount as the number of Pell Grant recipients in attendance at such institution at the end of the school year preced- ing the beginning of that fiscal year bears to the total number of Pell Grant recipients at all part B institutions. (b) ALLOTMENT; GRADUATES BASIS.From the amounts appro- priated to carry out this part for any fiscal year, the Secretary shall allot to each part B institution a sum which bears the same ratio to one-fourth that amount as the number of graduates for such school year at such institution bears to the total number of grad- uates for such school year at all part B institutions. (c) ALLOTMENT; GRADUATE AND PROFESSIONAL STUDENT BASIS.From the amounts appropriated to carry out this part for any fiscal year, the Secretary shall allot to each part B institution a sum which bears the same ratio to one-fourth of that amount as the percentage of graduates per institution, who are admitted to and in attendance at, within 5 years of graduation with a bacca- laureate degree, a graduate or professional school in a degree pro- gram in disciplines in which Blacks are underrepresented, bears to the percentage of such graduates per institution for all part B insti- tutions. (d) MINIMUM ALLOTMENT.(1) Notwithstanding subsections (a), (b), 'and (c), the amount allotted to each part B institution under this section shall not be less than $500,000. (2) If the amount appropriated pursuant to section 360(a)(2)(A) for any fiscal year is not sufficient to pay the minimum allotment required by paragraph (1) of this subsection to all part B institu- tions, the amount of such minimum allotments shall be ratably re- duced. If additional sums become available for such fiscal year, such reduced allocation shall be increased on the same basis as they were reduced (until the amount allotted equals the minimum allotment required by paragraph (I)). (e) REALLOTMENT.The amount of any part B institution's al- lotment under subsection (a), (b), (c), or (d) for any fiscal year which the Secretary determines will not be required for such insti- tution for the period such allotment is available shall be available for reallotment from time to time on such date during such period as the Secretary may determine to other part B institutions in pro- portion to the original allotment to such other institutions under this section for such fiscal year. (f) SPECIAL MERGER RULE.(1) The Secretary shall permit any eligible institution for a grant under part B in any fiscal year prior to the fiscal year 1986 to apply for a grant under this part if the eligible institution has merged with another institution of higher education which is not so eligible or has merged with an eligible institution. (2) The Secretary may establish such regulations as may be necessary to carry out the requirement of paragraph (1) of this sub- section. (g) SPECIAL RULE FOR CERTAIN DISTRICT OF COLUMBIA ELIGI- BLE INSTITUTIONS.In any fiscal year that the Secretary deter- Sec. 325 HIGHER EDUCATION ACT OF 1965 26 mines that Howard University or the University 'of the District of Columbia will receive an allotment under subsections (b) and (c) of this section which is not in excess of amounts received by Howard University under the Act of March 2, 1867 (14 Stat. 438; 20 U.S.C. 123), relating to annual authorization of appropriations for Howard University, or by the University of the District of Columbia under the District of Columbia Self-Government and Governmental Reor- ganization Act (87 Stat. 774) for such fiscal year, then Howard Uni- versity and the University of the District of Columbia, as the case may be, shall be ineligible to receive an allotment under this sec- tion. (20 U.S.C. 1063) Enacted October 3, 1980, P.L. 96-374, sec. 301, 94 Stat. 1395; amended October 17, 1986, P.L. 99-498, sec. 301(a), 100 Stat. 1296; amended Octo- ber 21, 1986, P.L. 99-509, sec. 7007, 100 Stat. 1950; amended July 23, 1992, P.L. 102-325, sec. 303(c)-(d), 106 Stat. 475; amended December 20, 1993, P.L. 103-208, sec. 2(m), 107 Stat. 2486. SEC. 325. APPLICATIONS. (a) CONTENTS.-No part B institution shall be entitled to its al- lotment of Federal funds for any grant under section 324 for any period unless that institution meets the requirements of subpara- graphs (C), (D), and (E) of section 312(b)(1) and submits an applica- tion to the Secretary at such time, in such manner, and containing or accompanied by such information, as the Secretary may reason- ably require. Each such application shall- (1) provide that the payments under this Act will be used for the purposes set forth in section 323; and (2) provide for making an annual report to the Secretary and provide for- (A) conducting, except as provided in subparagraph (B), a financial and compliance audit of an eligible institu- tion, with regard to any funds obtained by it under this title at least once every 2 years and covering the period since the most recent audit, conducted by a qualified, inde- pendent organization or person in accordance with stand- ards established by the Comptroller General for the audit of governmental organizations, programs, and functions, and as prescribed in regulations of the Secretary, the re- sults of which shall be submitted to the Secretary; or (B) with regard to an eligible institution which is au- dited under chapter 75 of title 31, United States Code, deeming such audit to satisfy the requirements of subpara- graph (A) for the period covered by such audit. (b) APPROVAL.-The Secretary shall approve any application which meets the requirements of subsection (a) and shall not dis- approve any application submitted under this part, or any modi- fication thereof, without first affording such institution reasonable notice and opportunity for a hearing. (C) GOALS FOR FINANCIAL MANAGEMENT AND ACADEMIC PRO- GRAMS.-Any application for a grant under this part shall describe measurable goals for the institution's financial management and academic programs and include a plan of how the applicant intends to achieve those goals. (20 U.S.C. 1063a) Enacted October 17, 1986, P.L. 99-498, sec. 301(a), 100 Stat. 1296; amended June 3, 1987, P.L. 100-50, sec. 2(a)(8), 101 Stat. 335; amended July 3 13 27 HIGHER EDUCATION ACT OF 1965 Sec. 326 23, 1992, P.L. 102-325, sec. 303(e), 106 Stat. 475; amended December 20, 1993, P.L. 103-208, sec. 2(m), 107 Stat. 2486. SEC. 326. PROFESSIONAL OR GRADUATE INSTITUTIONS. (a) GENERAL AUTH0RIZATI0N.(1) Subject to the availability of funds appropriated to carry out this section,. the Secretary shall award program grants to each of the postgraduate institutions list- ed in subsection (e) that is determined by the Secretary to be mak- ing a substantial contribution to the legal, medical, dental, veteri- nary, or other graduate education opportunities for Black Ameri- cans. (2) No grant in excess of $500,000 may be made under this sec- tion unless the postgraduate institution provides assurances that 50 percent of the cost of the purposes for which the grant is made will be paid from non-Federal sources except that the Morehouse School of Medicine shall receive at least $3,000,000. (b) DURATION.Grants shall be made for a period not to exceed 5 years. No more than two 5-year grants (for a period of not more than 10 years) may be made to any one undergraduate or post- graduate institution. (C) USES OF FUNDS.A grant under this section may be used for (1) any of the purposes enumerated under section 323; (2) to establish or improve a development office to strengthen and increase contributions from alumni and the pri- vate sector; and (3) to assist !la the establishment or maintenance of an in- stitutional endov, ment to facilitate fmancial independence pur- suant to section 332 of this title. (d) APPLICATION.Any institution eligible for a grant under this section shall submit an application which (1) demonstrates how the grant funds will be used to im- prove graduate educational opportunities for Black and low-in- come students, and lead to greater financial independence; and (2) provides, in the case of applications for grants in excess of $500,000, the assurances required by subsection (a)(2) and specifies the manner in which the eligible institution is going to pay the non-Federal share of the cost of the application. (e) ELIGIBILITY. (1) IN GENERAL.Independent professional or graduate in- stitutions and programs eligible for grants under subsection (a) include (A) Morehouse School of Medicine; (B) Meharry Medical School; (C) Charles R. Drew Postgraduate Medical School; (D) Clark-Atlanta University; (E) Tuskegee University School of Veterinary Medi- cine; (F) Xavier University School of Pharmacy; (G) Southern University School of Law; (H) Texas Southern University School of Law and School of Pharmacy; (I) Florida A&M University School of Pharmaceutical Sciences; (J) North Carolina Central University School of Law; () See. 327 HIGHER EDUCATION ACT OF 1965 28 (K) Morgan State University qualified graduate pro- gram; (L) Hampton University qualified graduate program; (M) Alabama A&M qualified graduate program; (N) North Carolina A&T State University qualified graduate program; (0) University of Maryland Eastern Shore qualified graduate program; and (P) Jackson State qualified graduate program. (2) QUALIFIED GRADUATE PROGRAM.For the purposes of this section, the term "qualified graduate program" means a graduate or professional program that (A) provides a program of instruction in the physical or natural sciences, engineering, mathematics, or other sci- entific discipline in which African Americans are underrepresented; and (B) has students enrolled in such program at the time of application for a grant under this section. (3) SPECIAL RULE.Graduate institutions that were award- ed grants under this section prior to October 1, 1992 shall con- tinue to receive such grant payments, regardless of the eligi- bility of the graduate institutions described in subparagraphs (F) through (P), until such grant period has expired or Septem- ber 30, 1993, whichever is later. (4) ONE GRANT PER INSTITUT1ON.The Secretary shall not award more than 1 grant under this section in any fiscal year to any institution of higher education or university system. (f) FUNDING RULE.Of the amount appropriated to carry out this section for any fiscal year (1) the first $12,000,000 (or any lesser amount appro- priated) shall be available only for the purposes of making grants to institutions or programs described in subparagraphs (A) through (E) of subsection (e)(1); (2) any amount appropriated in excess of $12,000,000 shall be available (A) for the purposes of making grants, in equal amounts not to exceed $500,000, to institutions or pro- grams described in subparagraphs (F) through (P) of sub- section (e)(1); and (B) secondly for the purposes of making grants to in- stitutions or programs described in subparagraphs (A) through (P) of subsection (e)(1). (20 U.S.C. 1063b) Enacted October 17, 1986, P.L. 99-498, sec. 301(a), 100 Stat. 1297; amended June 3, 1987, P.L. 100-50, sec. 2(a)(9)-(10), 101 Stat. 335; amended July 23, 1992, P.L. 102-325. sec. 303(f)-(g), 106 Stat. 475; amended December 20, 1993, P.L. 103-208, sec 2(a-q), (m), 107 Stat. 2457, 2486. SEC. 327. REPORTING A1,0 AUDIT REQUIREMENTS. (a) RECORDKEEPING.Each recipient of a grant under this part shall keep such records as the Secretary shall prescribe, including records which fully disclose (1) the amount and disposition by such recipient of the proceeds of such assistance; (2) the cost of the project or undertaking in connection with which such assistance is given or used; 38 29 HIGHER EDUCATION ACT OF 1965 Sec. 331 (3) the amount of that portion of the cost of the project or undertaking supplied by other sources; and (4) such other records as will facilitate an effective audit. (b) REPAYMENT OF UNEXPENDED FUNDS.Any funds paid to an institution and not expended or used for the purposes for which the funds, were paid within 10 years following the date of the initial grant awarded to an institution under part B of this title shall be repaid to the Treasury of the United States. (20 U.S.C. 1063c) Enacted October 17, 1986, P.L. 99-498, sec. 301(a), 100 Stat. 1298; amended June 3, 1987, P.L. 100-50, sec. 2(a)(11), 101 Stat. 335; amended De- cember 20, 1993, P.L. 103-208, sec. 2(m), 107 Stat. 2486. PART CENDOWMENT CHALLENGE GRANTS FOR INSTITUTIONS ELIGIBLE FOR ASSISTANCE UNDER PART A OR PART B SEC. 331. ENDOWMENT CHALLENGE GRANTS. (a) PURPOSE; DEFINITI0NS.(1) The purpose of this section is to establish a program to provide matching grants to eligible insti- tutions in order to establish or increase endowment funds at such institutions, to provide additional incentives to promote fund rais- ing activities by such institutions, and to foster increased independ- ence and self-sufficiency at such institutions. (2) For the purpose of this section: (A) The term "endowment fund" means a fund established by State law, by an institution of higher education, or by a foundation which is exempt from taxation and is maintained for the purpose of generating income for the support of the in- stitution, but which shall not include real estate. (B) The term "endowment fund corpus" means an amount equal to the grant or grants awarded under this section plus an amount equal to such grant or grants provided by the insti- tution. (C) The term "endowment fund income" means an amount equal to the total value of the endowment fund established under this section minus the endowment fund corpus. (D)(i) The term "eligible institution" means an institution that is an (I) eligible institution under part A or would be consid- ered to be such an institution if section 312(b)(1)(C) re- ferred to a postgraduate degree rather than a bachelor's degree; (II) institution eligible for assistance under part B or would be considered to be such an institution if section 324 referred to a postgraduate degree rather than a bacca- laureate degree; or (III) institution of higher education that makes a sub- stantial contribution to postgraduate medical educational opportunities for minorities and the economically dis- advantaged. (ii) The Secretary may waive the requirements of subclauses (I) and (II) of clause (i) with respect to a post- graduate degree in the case of any institution otherwise eligi- ble under clause (i) for an endowment challenge grant upon de- termining that the institution makes a substantial contribution See. 331 HIGHER EDUCATION ACT OF 1965 30 to medical education opportunities for minorities and the eco- nomically disadvantaged. (b) GRANTS AUTHORIZED.-(1) From sums available for this sec- tion under section 360, the Secretary is authorized to award en- dowment challenge grants to eligible institutions to establish or in- crease an endowment fund at such institution. Such grants shall be made only to eligible institutions described in paragraph (4) whose applications have been approved pursuant to subsection (g). (2)(A) Except as provided in subparagraph (B), no institution shall receive a grant under this section, unless such institution has deposited in its endowment fund established under this section an amount equal to the amount of such grant. The source of funds for this institutional match shall not include Federal funds or funds from an existing endowment fund. (B) The Secretary may make a grant under this part to an eli- gible institution under the following circumstances: (i) In any fiscal year in which the amount appropriated to carry out this part is less than $15,000,000, the institution (I) may apply for a grant in an amount not exceeding $500,000; and (II) shall have deposited in its endowment fund estab- lished under this section an amount which is equal to one- half of the amount of such grant. (ii) In any fiscal year in which the amount appropriated to carry out this part is equal to or greater than $15,000,000 but less than $25,000,000, the institution (I) may apply for a grant in an amount not exceeding $1,000,000; and (II) shall have deposited in its endowment fund estab- lished under this section an amount which is equal to one- half of the amount of such grant. (iii) In any fiscal year in which the amount appropriated to carry out this part is equal to or greater than $25,000,000, the institution may apply for a grant in an amount not to ex- ceed $1,500,000 if such institution has deposited in its endow- ment fund established under this section an amount which is equal to one-half of the amount of such grant. (C)(i) Except as provided in clause (ii), if the appropriation for this part in a fiscal year is $20,000,000 or less, an eligible institu- tion of higher education that is awarded a grant under subsection (b)(2)(B) of this section shall not be eligible to reapply for a grant under subsection (b)(2)(B) of this section during the 10 years imme- diately following the period that such institution received such a grant. (ii) If the appropriation for this part in any fiscal year is great- er than $20,000,000, an eligible institution of higher education that is awarded a grant under subsection (b)(2)(B) of this section shall not be eligible to reapply for a grant under subsection (b)(2)(B) of this section during the 5 years immediately following the period that such insti'aition received such a grant. This provision shall apply for the fiscal year in which the appropriation is greater than $20,000,000 and subsequent fiscal years, regardless of the appro- priation in those fiscal years. 4 Z) 31 HIGHER EDUCATION ACT OF 1965 Sec. 331 (3) The period of a grant under this section shall be not more than 10 years. During the grant period, an institution may not withdraw or expend any of the endowment fund corpus. After the termination of the grant period, an institution may use the endow- ment fund corpus plus any endowment 'fund income for any edu- cational purpose. (4)(A) An institution of' higher education is eligible to receive a grant under this section if it is an eligible institution as described in subsection (a)(2)(D) of this section. (B) No institution shall be ineligible for an endowment chal- lenge grant under this section for a fiscal year by reason of the pre- vious receipt of such a grant but no institution shall be eligible to receive such a grant for more than 2 fiscal years out of any period of 5 consecutive fiscal years. (5) An endowment challenge grant awarded under this section to an eligible institution shall be in an amount which is not less than $50,000 in any fiscal year. (6)(A) An eligible institution may designate a foundation, which was established for the purpose of raising money for the in- stitution, as the recipient of the grant awarded under this section. (B) The Secretary shall not award a grant to a foundation on behalf of an institution unless (i) the institution assures the Secretary that the founda- tion is legally authorized to receive the endowment fund corpus and is legally authorized to administer the fund in accordance with this section and any implementing regulation; (ii) the foundation agrees to administer the fund in accord- ance with the requirements of this section and any implement- ing regulation; and (iii) the institution agrees to be liable for any violation by the foundation of the provisions of this section and any imple- menting regulation, including any monetary liability that may arise as a result of such violation. (C) GRANT AGREEMENT; ENDOWMENT FUND PROVISIONS.-(1) An institution awarded a grant under this section shall enter into an agreement with the Secretary containing satisfactory assurances that it will (A) immediately comply with the matching require- ments of subsection (b)(2), (B) establish an endowment fund inde- pendent of any other such fund of the institution, (C) invest the en- dowment fund corpus, and (D) meet the other requirements of this section. (2)(A) An institution shall invest the endowment fund corpus and endowment fund income in low-risk securities in which a regu- lated insurance company may invest under the law of the State in which the institution is located such as a federally insured bank savings account or comparable interest-bearing account, certificate of deposit, money market fund, mutual fund, or obligations of the United States. (B) The institution, in investing the endowment fund estab- lished under this section, shall exercise the judgment and care, under the circumstances then prevailing, which a person of pru- dence, discretion, and intelligence would exercise in the manage- ment of such person's own affairs. 41 Sec. 331 HIGHER EDUCATION ACT OF 1965 32 (3)(A) An institution may withdraw and expend the endow- ment fund income to defray any expenses necessary to the oper- ation of such college, including expenses of operations and mainte- nance, administration, academic and support personnel, construc- tion and renovation, community and student services programs, and technical assistance. (B)(i) Except as provided in clause (ii), an institution may not spend more than 50 percent of the total aggregate endowment fund income earned prior to the time of expenditure. (ii) The Secretary may permit an institution to spend more than 50 percent of the endowment fund income notwithstanding clause (i) if the institution demonstrates such an expenditure is necessary because of (I) a fmancial emergency, such as a pending insolvency or temporary liquidity problem; (II) a life-threatening situation occasioned by a natural disaster or arson; or (III) any other unusual occurrence or exigent circumstance. (d) REPAYMENT PROWSIONS.(1) If at any time an institution withdraws part of the endowment fund corpus, the institution shall repay to the Secretary an amount equal to 50 percent of the with- drawn amount, which represents the Federal share, plus income earned thereon. The Secretary may use such repaid funds to make additional challenge grants, or to increase existing endowment grants, to other eligible institutions. (2) If an institution expends more of the endowment fund in- come than is permitted under subsection (c), the institution shall repay the Secretary an amount equal to 50 percent of the amount improperly expended (representing the Federal share thereof). The Secretary may use such repaid fund to make additional challenge grants, or to increase existing challenge grants, to other eligible in- stitutions. (e) AUDIT INFORMATION.An institution receiving a grant under this section shall provide to the Secretary (or a designee thereof) such information (or access thereto) as may be necessary to audit or examine expenditures made from the endowment fund corpus or income in order to determine compliance with this sec- tion.(f) SELECTION CRITERIA.In selecting eligible institutions for grants under this section for any fiscal year, the Secretary shall (1) give priority to an applicant that is receiving assistance under part A. or part B or has received a grant under part A or part B of this title within the 5 fiscal years preceding the fiscal year in which the applicant is applying for a grant under this section; (2) give priority to an applicant with a greater need for such a grant, based on the current market value of the appli- cant's existing endowment in relation to the number of full- time equivalent students enrolled at such institution; and (3) consider (A) the effort made by the applicant to build or main- tain its existing endowment fund; and (B) the degree to which an applicant proposes to match the grant with nongovernmental funds. (g) APPLICATION.Any institution which is eligible for assist- ance under this section may submit to the Secretary a grant appli- 4 2 33 HIGHER EDUCATION ACT OF 1965 Sec. 351 cation at such time, in such form, and containing such information as the Secretary may prescribe, including a description of the long- and short-term plans for raising and using the funds under this part. Subject to the availability of appropriations to carry out this section and consistent with the requirement of subsection (f), the Secretary may approve an application for a grant if an institution, in its application, provides adequate assurances that it will comply with the requirements of this section. (h) TERMINATION AND RECOVERY PROVISIONS.(1) After notice and an opportunity for a hearing, the Secretary may terminate and recover a grant awarded under this section if the grantee institution (A) expends portions of the endowment fund corpus or ex- pends more than the permissible amount of the endowment funds income as prescribed in subsection (c)(3); (B) fails to invest the endowment fund in accordance with the investment standards set forth in subsection (c)(2); or (C) fails to properly account to the Secretary concerning the investment and expenditures of the endowment funds. (2) If the Secretary terminates a grant under paragraph (1), the grantee shall return to the Secretary an amount equal to the sum of each original grant under this section plus income earned thereon. The Secretary may use such repaid funds to make addi- tional endowment grants, or to increase existing challenge grants, to other eligible institutions under this part. (20 U.S.C. 1065) Enacted October 3, 1980, P.L. 96-374, sec. 301, 94 Stat. 1396; amended October 17. 1986, P.L. 99-498, sec. 301(a), 100 Stat. 1299; amended June 3, 1987, P.L. 100-50, sec. 2(a)(12), 101 Stat. 336; amended July 23, 1992, P.L. 102 325, sec. 304(a)(3), (b), 106 Stat. 476; amended December 20, 1993, P.L. 103-208, secs 2(a)(8), (10), (11), and (m), 107 Stat. 2457, 2458, 2486. PART DGENERAL PROVISIONS SEC. 361. APPLICATIONS FOR ASSISTANCE. (a) APPLICATION REQUIRED; APPROVAL.Any institution which is eligible for assistance under this title shall submit to the Sec- retary an application for assistance at such time, in such form, and containing such information, as may be necessary to enable the Secretary to evaluate its need for assistance. Subject to the avail- ability of appropriations to carry out this title, the Secretary may approve an application for a grant under this title if the application meets the requirements of subsection (b) and shows that the appli- cant is eligible for assistance in accordance with the part of this title under which the assistance is sought. (b) CONTENTS.An institution, in its application for a grant, shall (1) set forth, or describe how the institution (other than an institution applying under part C) will develop, a comprehen- sive development plan to strengthen the institution's academic quality and institutional management, and otherwise provide for institutional self-sufficiency and growth (including measur- able objectives for the institution and the Secretary to use in monitoring the effectiveness of activities under this title); (2) set forth policies and procedures to ensure that Federal funds made available under this title for any fiscal year will 3 Sec. 351 HIGHER EDUCATION ACT OF 1965 34 be used to supplement and, to the extent practical, increase the funds that would otherwise be made available for the purposes of section 311(b) or 323, and in no case supplant those funds; (3) set forth policies and procedures for evaluating the ef- fectiveness in accomplishing the purpose of the activities for which a grant is sought under this title; (4) provide for such fiscal control and fund accounting pro- cedures as may be necessary to ensure proper disbursement of and accounting for funds made available to the applicant under this title; (5) provide (A) for making such reports, in such form and containing such information, as the Secretary may require to carry out the functions under this title, including not less than one report annually setting forth the institution's progress to- ward achieving the objectives for which the funds were award- ed, and (B) for keeping such records and affording such access thereto, as the Secretary may find necessary to assure the cor- rectness and verification of such reports; (6) provide that the institution will comply with the limita- tions set forth in section 357; (7) describe in a comprehensive manner any proposed project for which funds are sought under the application and include (A) a description of the various components of the pro- posed project, including the estimated time required to complete each such component; (B) in the case of any development project which con- sists of several components (as described by the applicant pursuant to subparagraph (A)), a statement identifying those components which, if separately funded, would be sound investments of Federal funds and those components which would be sound investments of Federal funds only if funded under this title in conjunction with other parts of the development project (as specified by the applicant); (C) an evaluation by the applicant of the priority given any proposed project for which funds are sought in relation to any other projects for which funds are sought by the ap- plicant under this title, and a similar evalcAtion regarding priorities among the components of any single proposed project (as described by the applicant pursuant to subpara- graph (A)); (D) a detailed budget showing the manner in which funds for any proposed project would be spent by the appli- cant; and (E) a detailed description of any activity which in- volves the expenditure of more than $25,000, as identified in the budget referred to in subparagraph (E); and (8) include such other information as the Secretary may prescribe. (C) PRIORITY CRITERIA PUBLICATION REQUIRED.The Secretary shall publish in the Federal Register, pursuant to chapter 5 of title 5, United States Code, all policies and procedures required to exer- cise the authority set forth in subsection (a). No other criteria, poli- cies, or procedures shall apply. 4 4 35 HIGHER EDUCATION ACT OF 1965 Sec. 352 (d) ELIGIBILITY DATA.The Secretary shall use the most recent and relevant data concerning the number and percentage of stu- dents receiving need-based assistance under title IV of this Act in making eligibility determinations under section 312 and shall ad- vance the base-year forward following each annual grant cycle. (20 U.S.C. 1066) Enacted October 3, 1980, P.L. 96-374, sec. 301, 94 Stat. 1396; renumbered and amended October 17, 1986, P.L. 99-498, sec. 301(a), 100 Stat. 1302; amended June 3, 1987, P.L. 100-50, sec. 2(a)(13), 101 Stat. 336; amended July 23, 1992, P.L. 102-325, sec. 305(a), 106 Stat. 478; amended December 20, 1993, P.L. 103-208, sec. 2(m), 107 Stat. 2486. SEC. 352. WAIVER AUTHORITY AND REPORTING REQUIREMENT. (a) WAIVER REQUIREMENTS; NEED-BASED ASSISTANCE STU- DENTS.The Secretary may waive the requirements set forth in section 312(b)(1)(A) in the case of an institution (1) which is extensively subsidized by the State in which it is located and charges low or no tuition; (2) which serves a substantial number of low-income stu- dents as a percentage of its total student population; (3) which is contributing substantially to increasing higher education opportunities for educationally disadvantaged, underrepresented, or minority students, who are low-income individuals; (4) which is substantially increasing higher educational op- portunities for individuals in rural or other isolated areas which are unserved by postsecondary institutions; (5) located on or near an Indian reservation or a substan- tial population of Indians, if the Secretary determines that the waiver will substantially increase higher education opportuni- ties appropriate to the needs of American Indians; or (6) wherever located, if the Secretary determines that the waiver will substantially increase higher education opportuni- ties appropriate to the needs of Black Americans, Hispanic Americans, Native Americans, Asian Americans, or Pacific Is- landers, including Native Hawaiians. (b) WAIVER DETERMINATIONS; EXPENDITURES.(1) The Sec- retary ma,,, waive the requirements set forth in section 312(b)(1)(B) if the Secretary determines, based on persuasive evidence submit- ted by the institution, that the institution's failure to meet that cri- terion is due to factors which, when used in the determination of compliance with such criterion, distort such determination, and that the institution's designation as an eligible institution under part A is otherwise consistent with the purposes of such parts. (2) The Secretary shall submit to the Congress every other year a report concerning the institutions which, although not satis- fying the criterion contained in section 312(b)(1)(B), have been de- termined to be eligible institutions under part A institutions which enroll significant numbers of Black American, Hispanic, Native American, Asian American, or Native Hawaiian students under part A, as the case may be. Such report shall (A) identify the factors referred to in paragraph (1) which were considered by the Secretary as factors that distorted the determination of compliance with subparagraphs (A) and (B) of section 312(b)(1); and 5 Sec. 353 HIGHER EDUCATION ACT OF 1965 36 (B) contain a list of each institution determined to be an eligible institution under part A including a statement of the reasons for each such determination. (3) The Secretary may waive the requirement set forth in sec- tion 312(b)(1)(E) in the case of an institution located on oi near an Indian reservation or a substantial population of Indians, if the Secretary determines that the waiver will substantially increase higher education opportunities appropriate to the needs of Amer- ican Indians. (20 U.S.C. 1067) Enacted October 3, 1980, P.L. 96-374, sec. 301, 94 Stat. 1398; renumbered and amended October 17, 1986, P.L. 99-498, sec. 301(a), 100 Stat. 1304; amended June 3, 1987, P.L. 100-50, sec. 2(a)(14)-(15), 101 Stat. 336; amended July 23, 1992, P.L. 102-325, sec. 305(b), 106 Stat. 478; amended December 20, 1993, P L. 103-208, sec. 2(m), 107 Stat. 2486. SEC. 353. APPLICATION REVIEW PROCESS. (a) REVIEW PANEL.(1) All applications submitted under this title by institutions of higher education shall be read by a panel of readers composed of individuals selected by the Secretary. The Sec- retary shall assure that no individual assigned under this section to review any application has any conflict of interest with regard to the application which might impair the impartiality with which the individual conducts the review under this section. (2) The Secretary shall take care to assure that representatives of historically and predominantly Black colleges, Hispanic institu- tions, Native American colleges and universities, and institutions with substantial numbers of Hispanics, Native Americans, Asian Americans, and Native American Pacific Islanders (including Na- tive Hawaiians) are included as readers. (3) All readers selected by the Secretary shall receive thorough instruction from the Secretary regarding the evaluation process for applications submitted under this title and consistent with the pro- visions of this title, including (A) explanations and examples of the types of activities re- ferred to in section 311(b) that should receive special consider- ation for grants awarded under part A and of the types of ac- tivities referred to in section 323 that should receive special consideration for grants awarded under part B; (B) an enumeration of the factors to be used to determine the quality of applications submitted under this title; and (C) an enumeration of the factors to be used to determine whether a grant should be awarded for a project under this title, the amount of any such grant, and the duration of any such grant. (b) RECOMMENDATIONS OF PANEL.In awarding grants under this title, the Secretary shall take into consideration the rec- ommendations of the panel made under subsection (a). (c) NOTIFICATION.Not later than June 30 of each year, the Secretary shall notify each institution of higher education making an application under this title of (1) the scores given the applicant by the panel pursuant to this section; (2) the recomm endations of the panel with respect to such application; and 4 6 37 HIGHER EDUCATION ACT OF 1965 See. 356 (3) the reasons for the decision of the Secretary in award- ing or refusing to award a grant under this title, and any modifications, if any, in the recommendations of the panel made by the Secretary. (20 U.S.C. 1068) Enacted October 3, 1980, P.L. 96-374, sec. 301, 94 Stat. 1398; renumbered and amended October 17, 1986, P.L. 99-498, sec. 301(a), 100 Stat. 1305; amended December 20, 1993, P.L. 103-208, sec. 2(m), 107 Stat. 2486. SEC. 354. COOPERATIVE ARRANGEMENTS. (a) GENERAL AumoRrrY.The Secretary may make grants to encourage cooperative arrangements (1) with funds available to carry out part A, between insti- tutions eligible for assistance under part A and between such institutions and institutions not receiving assistance under this title; or (2) with funds available to carry out part B, between insti- tutions eligible for assistance under part B. and institutions not receiving assistance under this title; for the activities described in section 311(b) or section 323, as the case may be, so that the resources of the cooperating institutions might be combined and shared to achieve the purposes of such parts and avoid costly duplicative efforts and to enhance the devel- opment of part A and part B eligible institutions. (b) PRIORrry.The Secretary shall give priority to grants for the purposes described under subsection (a) whenever the Sec- retary determines that the cooperative arrangement is geographi- cally and economically sound or will benefit the applicant institu- tion. (c) DURATION.Grants to institutions having a cooperative ar- rangement may be made under this section for a period as deter- mined under section 313 or section 323. (20 U.S.C. 1069) Enacted October 3, 1980, P.L. 96-374, sec. 301, 94 Stat. 1399; renumbered and amended October 17, 1986, P.L. 99-498, sec. 301(a),, 100 Stat. 1305; amended December 20, 1993, P.L. 103-208, sec. 2(m), 107 Stat 2486. [Section 355 was repealed by P.L. 102-325, sec. 305(c), 106 Stat. 478.] SEC. 356. ASSISTANCE TO INSTITUTIONS UNDER OTHER PROGRAMS. (a) ASSISTANCE ELIGIBILITY.Each institution which the Sec- retary determines to be an institution eligible under part A or an institution eligible under part B may be eligible for waivers in ac- cordance with subsection (1)). (b) WAIVER APPLICABILITY.(1) Subject to, and in accordance with, regulations promulgated for the purpose of this section, in the case of any application by an institution referred to in subsection (a) for assistance under any programs specified in paragraph (2), the Secretary is authorized, if such application is otherwise approv- able, to waive any requirement for a non-Federal share of the cost of the program or project, or, to the extent not inconsistent with other law, to give, or require to be given, priority consideration of the application in relation to applications from other institutions. (2) The provisions of this section shall apply to any program authorized by title H, IV, VII, or VIII of this Act. (c) LIMITATION.The Secretary shall not waive, under sub- section (b), the non-Federal share requirement for any program for 4 7 Sec. 357 HIGHER EDUCATION ACT OF 1965 38 applications which, if approved, would require the expenditure of more than 10 percent of the appropriations for the program for any fiscal year. (20 U.S.C. 1069b) Enacted October 3, 1980, P.L. 96-374, sec. 301, 94 Stat. 1400; renumbered and amended October 17, 1986, P.L. 99-498, sec. 301(a), 100 Stat. 1306; amended July 23, 1992, P.L. 102-325, sec. 305(d), 106 Stat. 478; amended De- cember 20, 1993, P.L. 103-208, sec. 2(m), 107 Stat. 2486. SEC. 357. LIMITATIONS. The funds appropriated under section 360 may not be used- (1) for a school or department of divinity or any religious worship or sectarian activity; (2) for an activity that is inconsistent with a State plan for desegregation of higher education applicable to such institu- tion;(3) for an activity that is inconsistent with a State plan of higher education applicable to such institution; or (4) for purposes other than the purposes set forth in the approved application under which the funds were made avail- able to the institution. (20 U.S.C. 1069c) Enacted October 3, 1980, P.L. 96-374, sec. 301, 94 Stat. 1400; amended Sept. 26, 1983, P.L. 98-95, sec. 3, 97 Stat. 711; amended June 12, 1984, P.L. 98-312, sec. 1, 98 Stat. 233; renumbered and amended October 17, 1986, P.L. 99-498, sec. 301(a), 100 Stat. 1307; amended December 20, 1993, P.L. 103-208, sec.. 2(m), 107 Stat. 2486. SEC. 358. PENALTIES. Whoever, being an officer, director, agent, or employee of, or connected in any capacity with, any recipient of Federal financial assistance or grant pursuant to this title embezzles, willfully misapplies, steals, or obtains by fraud any of the funds which are the subject of such grant or assistance, shall be fined not more than $10,000 or imprisoned for not more than 2 years, or both. (20 U.S.C. 1069d) Enacted October 17, 1986, P.L. 99-498, sec. 301(a), 100 Stet. 1307; amended December 20, 1993, P.L. 103-208, sec. 2(m), 107 Stat. 2486. [Section 359 was repealed by P.L. 102-325, sec. 305(c), 106 Stat. 478.] SEC. 360. AUTHORIZATIONS OF APPROPRIATIONS. (a) AUTHORIZATIONS.- (1) PART A.-(A) There are authorized to be appropriated to carry out part A, $135,000,000 (other than section 316) for fiscal year 1993, and such sums as may be necessary for each of the 4 succeeding fiscal years. (B)(i) There are authorized to be appropriated to carry out section 316, $45,000,000 for fiscal year 1993 and such sums as may be necessary for each of the 4 succeeding fiscal years. (ii) No funds are authorized to be appropriated pursuant to clause (i) for any fiscal year unless the amount appropriated pursuant to paragraph (1)(A) for such fiscal year equals or ex- ceeds $80,000,000. (2) PART B.-(A) There are authorized to be appropriated to carry out part B (other than section 326), $135,000,000 for fiscal year 1993, and such sums as may be necessary for each of the 4 succeeding fiscal years. 4 8 39 HIGHER EDUCATION ACT OF 1965 Sec. 400 (B) There are authorized to be appropriated to carry out section 326, $20,000,000 for fiscal year 1993, and such sums as may be necessary for each of the 4 succeeding fiscal years. (3) PART C.There are authorized to be appropriated to carry out part C, $50,000,000 for fiscal year 1993, and such sums as may be necessary for each of the 4 succeeding fiscal years. (b) USE OF MULTIPLE YEAR AWARDS.In the event of a mul- tiple year award to any institution under this title, the Secretary shall make funds available for such award from funds appropriated for this title for the fiscal year in which such funds are to be used by the recipient. (C) RESERVATIONS.If the amourit appropriated under sub- section (a)(1) for part A for any fiscal year beginning after Septem- ber 30, 1986, equals or exceeds the amount appropriated for such part for fiscal year 1986, the Secretary shall, for such fiscal year (1) allocate 25 percent of the excess (above the amount ap- propriated for part A for fiscal year 1986) among eligible insti- tutions at which at least 60 percent of the students are African Americans, Hispanic Americans, Native Americans, Asian Americans, Native Hawaiians, or Pacific Islanders, or any com- bination thereof; and (2) allocate 75 percent of such excess among other eligible institutions. (d) RATABLE REDUCTION IN FISCAL YEAR IN WHICH AMOUNTS APPROPRIATED ARE INSUFFICIENT.In any fiscal year in which the sums appropriated for part A are insufficient to make the reserva- tions required by subsection (c) of this section, the Secretary shall ratably reduce the amount of the reservation. (e) ADDITIONAL RESERVATION.In any fiscal year beginning after September 30, 1992, the Secretary shall award at least 25 percent of the amount appropriated pursuant to the authority of , paragraph (3) of subsection (a) in each fiscal year to historically black colleges and universities that meet the requirements of part C, unless there are an insufficient number of quality applications or an insufficient number of applications due to the provisions in subsection (b)(2)(C) or subsection (b)(4)(B) of section 331. (20 U S C 10690 Enacted October 17, 1986, P.L. 99-498, sec. 301(a), 100 Stat. 1307, amended July 23, 1992, P.L. 102-325, sec. 305(e)-(g), 106 Stat. 479. TITLE IVSTUDENT ASSISTANCE PART AGRANTS TO STUDENTS IN ATTENDANCE AT INSTITUTIONS OF HIGHER EDUCATION SEC. 400. STATEMENT OF PURPOSE; PROGRAM AUTHORIZATION. (a) PURPOSE.It is the purpose of this part, to assist in mak- ing available the benefits of postsecondary education to eligible stu- dents (defined in accordance with section 484) in institutions of higher education by-- (1) providing basic educational opportunity grants to all el- igible students; (2) providing supplemental educational opportunity grants to those students who demonstrate financial need; 4 (1. Sec. 401 HIGHER EDUCATION ACT OF 1965 40 (3) providing for payments to the States to assist them in making financial aid available to such students; (4) providing for special programs and projects designed (A) to identify and encourage qualified youths with financial or cultural need with a potential for postsecondary education, (B) to prepare students from low-income families for postsecondary education, and (C) to provide remedial (including remedial lan- guage study) and other services to students; and (5) providinz assistance to institutions of higher education. (b) SECRETARY REQUIRED To CARRY OUT PURPOSES.The Sec- retary shall, in accordance with subparts 1 through 8, carry out programs to achieve the purposes of this part. (20 U.S.C. 1070) Enacted June 23, 1972, P.L. 92-318, sec. 131(b)(1), 86 Stat. 247- 248; amended June 23, 1972, Pl. 92-318, sec. 1001(c), 86 Stat. 381; amended Octo- ber 3, 1980, P.L. 96-374, sec. 401, 1391, 94 Stat. 1401, 1503; amended October 17, 1986, P.L. 99-498, sec. 401(a), 100 Stat. 1308; amended December 20, 1993, P.L. 103-208, sec. 2(m), 107 Stat. 2486. SUBPART 1BASIC EDUCATIONAL OPPORTUNITY GRANTS SEC. 401. BASIC EDUCATIONAL OPPORTUNITY GRANTS: AMOUNT AND DETERMJNATIONS; APPLICATIONS. (a) PROGRAM AUTHORITY AND METHOD OF DISTRIBUTION.(1) The Secretary shall, during the period beginning July 1, 1972, and ending September 30, 1998, pay to each eligible institution such sums as may be necessary to pay to each eligible student (defined in accordance with section 484) for each academic year during which that student is in attendance at an institution of higher edu- cation, as an undergraduate, a basic grant in the amount for which that student is eligible, as determined pursuant to subsection (b). Not less than 85 percent of such sums shall be advanced to eligible institutions prior to the start of each payment period and shall be based ugon an amount requested by the institution as needed to pay eligible students, except that this sentence shall not be con- strued to limit the authority of the Secretary to place an institution on a reimbursement system of payment. (2) Nothing in this section shall be interpreted to prohibit the Secretary from paying directly to students, in advance of the begin- ning of the academic term, an amount for which they are eligible, in cases where the eligible institution elects not to participate in the disbursement system required by paragraph (1). (3) Basic grants made under this subpart shall be known as "Federal Pell Grants". (b) PURPOSE AND AMOUNT OF GRANTS.(1) The purpose of this subpart is to provide a basic grant that in combination with rea- sonable family and student contribution and supplemented by the programs authorized under subparts 3 and 4 of this part, will meet at least 75 percent of a student's cost of attendance (as defined in section 472), unless the institution determines that a greater amount of assistance would better serve the purposes of section 401.(2)(A) The amount of the basic grant for a student eligible under this part shall be (i) $3,700 for academic year 1993-1994, (ii) $3,900 for academic year 1994-1995, 5 0 41 HIGHER EDUCATION ACT OF 1965 Sec. 401 (iii) $4,100 for academic year 1995-1996, (iv) $4,300 for academic year 1996-1997, and (v) $4,500 for academic year 1997-1998, less an amount equal to the amount determined to be the expected family contribution with respect to that student for that year. (B) In any case where a student attends an institution of high- er education on less than a full-time basis (including a student who attends an institution of higher education on less than a half-time basis) during any academic year, the amount of the basic grant to which that student is entitled shall be reduced in proportion to the degree to which that student is not so attending on a full-time basis, in accordance with a schedule of reductions established by the Secretary for the purposes of this division, computed in accord- ance with this subpart. Such schedule of reductions shall be estab- lished by regulation and published in the Federal Register in ac- cordance with section 482 of this Act. (3)(A) For any academic year for which an appropriation Act provides a maximum basic grant in an amount in excess of $2,400, the amount of a student's basic grant shall equal $2,400 plus (i) one-half of the amount by which such maximum basic grant exceeds $2,400; plus (ii) the lesser of (I) the remaining one-half of such excess; or (II) the sum of the student's tuition and the student's allowance determined under subparagraph (B), if applica- ble. (B) For purposes of subparagraph (A)(ii)(II), a student's allow- ance is $750 if the student has dependent care expenses (as defined in section 472(8)) or disability related expenses (as defined in sec- tion 472(9)). (4) No basic grant under this subpart shall exceed the dif- ference between the expected family contribution for a student and the cost of attendance (as defined in section 472) at the institution at which that student is in attendance. If, with respect to any stu- dent, it is determined that the amount of a basic grant plus the amount of the expected family contribution for that student exceeds the cost of attendance for that year, the amount of the basic grant shall be reduced until the combination of expected family contribu- tion and the amount of the basic grant does not exceed the cost of attendance at such institution. (5) No basic grant shall be awarded to a student under this subpart if the amount of that grant for that student as determined under this subsection tor any academic year is less than $400, ex- cept that a stuctent who is eligible for a basic grant that is equal to or greater than $200 but less than $400 shall be awarded a basic grant of $400. (6) The Secretary may allow, on a case-by-case basis, a student to receive 2 Pell grants during a single award year, if-- (A) the student is enrolled full-time in an associate or bac- calaureate degree program of study that is 2 years or longer at an eligible institution that is computed in credit hours; and (B) the student completes course work toward completion of an associate or baccalaureate degree that exceeds the re- 5 See. 401 HIGHER EDUCATION ACT OF 1965 42 quirements for a full academic year as defined by the institu- tion. (7) Notwithstanding any other provision of this subpart, the Secretary shall allow the amount of the basic grant to be exceeded for students participating in a program of study abroad approved for credit by the institution at which the student is enrolled when the reasonable costs of such program are greater than the cost of attendance at the student's home institution, except that the amount of such basic grant in any fiscal year shall not exceed the grant level specified in the appropriate Appropriation Act for this subpart for such year. If the preceding sentence applies, the finan- cial aid administrator at the home institution may use the cost of the study abroad program, rather than the home institution's cost, to determine the cost of attendance of the student. (8)(A) No basic grant shall be awarded to an incarcerated stu- dent under this subpart that exceeds the sum of the amount of tui- tion and fees normally assessed by the institution of higher edu- cation for the course of study such student is pursuing plus an al- lowance (determined in accordance with regulations issued by the Secretaiy) for books and supplies associated with such course of study, except that no basic grant shall be awarded to any incarcer- ated student serving under sentence of death or any life sentence without eligibility for parole or release. (B) Basic grants under this subpart shall only be awarded to incarcerated individuals in a State if such grants are used to sup- plement and not supplant the level of postsecondary education as- sistance provided by such State to incarcerated individuals in fiscal year 1988. (c) PERIOD OF ELIGIBILITY FOR GRANTS.-(1) The period during which a student may receive basic grants shall be the period re- quired for the completion of the first undergraduate baccalaureate course of study being pursued by that student at the institution at which the student is in attendance except that any period during which the student is enrolled in a noncredit or remedial course of study as defined in paragraph (2) shall not be counted for the pur- pose of this paragraph. (2) Nothing in this section shall exclude from eligibility courses of study which are noncredit or remedial in nature (including courses in English language instruction) which are determined by the institution to be necessary to help the student be prepared for the pursuit of a first undergraduate baccalaureate degree or certifi- cate or, in the case of courses in English language instruction, to be necessary to enable the student to utilize already existing knowledge, training, or skills. Nothing in this section shall exclude from eligibility programs of study abroad that are approved for credit by the home institution at which the student is enrolled. (3) No student is entitled to receive Pell Grant payments con- currently from more than one institution or from the Secretary and an institution. (d) APPLICATIONS FOR GRANTS.-(1) The Secretary shall from time to time set dates by which students shall file applications for basic grants under this subpart. (2) Each student desiring a basic grant for any year shall file an application therefor containing such information and assurances 5 2 43 HIGHER EDUCATION ACT OF 1965 Sec. 401 as the Secretary may deem necessary to enable the Secretary to carry out the functions and responsibilities of this subpart. (e) DISTRIBUTION OF GRANTS TO STUDENTS.Payments under this section shall be made in accordance with regulations promul- gated by the Secretary for such purpose, in such manner as will best accomplish the purpose of this section. Any disbursement al- lowed to be made by crediting the student's account shall be lim- ited to tuition and fees and, in the case of institutionally owned housing, room and board. The student may elect to have the insti- tution provide other such goods and services by crediting the stu- dent's account. (f) CALCULATION OF ELIGIBILITY.(1) Each contractor process- ing applications for awards under this subpart (including a central processor, if any, designated by the Secretary) shall, in a timely manner, furnish to the student fmancial aid administrator (at each institution of higher education which a student awarded a basic grant under this subpart is attending), as a part of its regular out- put document, the expected family contribution for each such stu- dent. Each such student financial aid administrator shall (A) examine and assess the data used to calculate the ex- pected family contribution of the student furnished pursuant to this subsection; (B) recalculate the expected family contribution of the stu- dent if there has been a change in circumstances of the student or in the data submitted; (C) make the award to the student in the correct amount; and (D) after making such award report the corrected data to such contractor and to a central processor (if any) designated by the Secretary for a confirmation of the correct computation of amount of the expected family contribution for each such student. (2) Whenever a student receives an award under this subpart that, due to recalculation errors by the institution of higher edu- cation, is in excess of the amount which the student is entitled to receive under this subpart, such institution of higher education shall pay to the Secretary the amount of such excess unless such excess can be resolved in a subsequent disbursement to the institu- tion. (3) Each contractor processing applications for awards under this subpart shall for each academic year after academic year 1986-1987 prepare and submit a report to the Secretary on the cor- rectness of the computations of amount of the expected family con- tribution, and on th.e accuracy of the questions on the application form under this subpart for the previous academic year for which the contractor is responsible. The Secretary shall transmit the re- port, together with the comments and recommendations of the Sec- retary, to the Committee on Appropriations and the Committee on Labor and Human Resources of the Senate and the Committee on Appropriations and the Committee on Education and Labor of the House of Representatives. (g) INSUFFICIENT APPROPRIATIONS.If, for any fiscal year, the funds appropriated for payments under this subpart are insuffi- cient to satisfy fully all entitlements, as calculated under sub- Sec. 401 HIGHER EDUCATION ACT OF 1966 44 section (b) (but at the maximum grant level specified in such ap- propriation), the Secretary shall promptly transmit a notice of such insufficiency to each House of the Congress, and identify in such notice the additional amount that would be required to be appro- priated to satisfy fully all entitlements (as so calculated at such maximum grant level). (h) USE OF EXCESS FUNDS.-(1) If, at the end of a fiscal year, the funds available for making payments under this subpart exceed the amount necessary to make the payments required under this subpart to eligible students by 15 percent or less, then all of the excess funds shall remain available for making payments under this subpart during the next succeeding fiscal year. (2) If, at the end of a fiscal year, the funds available for mak- ing payments under this subpart exceed the amount necessary to make the payments required under this subpart to eligible stu- dents by more than 15 percent, then all of such funds shall remain available for making such payments but payments may be made under this paragraph only with respect to entitlements for that fis- cal year. (i) TREATMENT OF INSTITUTIONS AND STUDENTS UNDER OTHER LAWS.-Any institution of higher education which enters into an agreement with the Secretary to disburse to students attending that institution the amounts those students are eligible to receive under this subpart shall not be deemed, by virtue of such agree- ment, a contractor maintaining a system of records to accomplish a function of the Secretary. Recipients of Pell Grants shall not be considered to be individual grantees for purposes of subtitle D of title V of Public Law 100-690. (20 U.S.C. 1070a) Enacted June 23, 1972, P.L. 92-318, sec. 131(b)(1), 86 Stat. 247-251; amended June 30, 1976, P.L. 94-328, sec. 2(0, 90 Stat. 727; amended Oc- tober 12, 1976, P.L. 94-482, sec. 121, 90 Stat. 2091, 2092, 2093, 2094; amended June 15, 1977, P.L. 95-43, sec. 1(a)(5)(A), (a)(5)(B), 91 Stat. 213; amended Novem- ber 1, 1978, P.L. 95-566, sec. 2, 92 Stat. 2402, 2403; amended October 3, 1980, P.L. 96-374, sec. 402, 1391, 94 Stat. 1401-1404, 1503; amended October 13, 1982, P.L. 97-301, sec. 8(a), 96 Stat. 1402; amended October 17, 1986, P.L. 99-498, sec. 401(a), 100 Stat. 1309; amended June 3, 1987, P.L. 100-50, sec. 3(a), 101 Stat. 337; amend- ed July 23, 1992, P.L. 102-325, sec. 401, 106 Stat. 479; amended December 20, 1993, P.L. 103-208, sec. 2(b)(1)-(5), (k)(1), and (m), 107 Stat. 2457, 2485, 2486. [Sections 411A through 43.1F were repealed by P.L. 102-325, sec. 401(i), 106 Stat. 482.1 Subpart 2-Federal Early Outreach and Student Services Programs CHAPTER I-FEDERAL TRIO PROGRAMS SEC. 402A. PROGRAM AUTHORITY; AUTHORIZATION OF APPROPRIA- TIONS. (a) GRANTS AND CONTRACTS AUTHORIZED.-The Secretary shall, in accordance with the provisions of this chapter, carry out a pro- gram of making grants and contracts designed to identify qualified individuals from disadvantaged backgrounds, to prepare them for This was previously designated no subpart 4 of part 1 of title IV and was redesignated as chapter 1 by P.L. 102-325, sec. 402(a), 106 Stat. 482. Ma. 45 HIGHER EDUCATION ACT Or' "s5 Sec. 402A a program of postsecondary education, to px -.le support services for such students who are pursuing programs of postsecondary edu- cation, to motivate and prepare students for doctoral programs, and to train individuals serving or preparing for service in programs and proj_ects so designed. (b) RECIPIENTS, DURATION, AND SIZE. (1) RECIPIENTS.For the purposes described in subsection (a), the Secretary is authorized, without regard to section 3709 of the Revised Statutes (41 U.S.C. 5), to make grants to, and contracts with, institutions of higher education, public and pri- vate agencies and organizations, combinations of such institu- tions, agencies and organizations, and in exceptional cir- cumstances, secondary schools, for planning, developing, or carrying out one or more of the services assisted under this chapter. (2) DURATION.Grants or contracts made under this chap- ter shall be awarded for a period of 4 years, except that (A) the Secretary shall award such grants or contracts for 5 years to applicants whose peer review scores were in the highest 10 percent of scores of all applicants receiving grants or contracts in each program competition for the same award year; and (B) grants made under section 402G shall be awarded for a period of 2 years. (3) MINIMUM GRANT LEVEL.In any year in which the ap- propriations authorized under this chapter exceed the prior year appropriation as adjusted for inflation, the Secretary shall use 80 percent of the amount appropriated above the current services level to bring each award up to the minimum grant level or the amount requested by the institution or agency, whichever is less. The minimum grant level (A) for programs authorized under section 402D or 402G, shall not be less than $170,000 for fiscal year 1993; (B) for programs authorized under section 402B or 402F shall not be less than $180,000 for fiscal year 1994; and (C) for programs authorized under section 402C or 402E shall not be less than $190,000 for fiscal year 1995. (C) PROCEDURES FOR AWARDING GRANTS AND CONTRACTS. (1) PRIOR EXPERIENCE.In making grants and contracts under this chapter, the Secretary shall consider the prior expe- rience of service delivery under the particular program for which funds are sought by each applicant. For fiscal years after 1985, the level of consideration given to prior experience shall not vary from the level of consideration given this factor for fiscal year 1985, except that in the case of the programs au- thorized in sections 402E and 402G, the level of consideration given to prior experience shall be the same as the level of con- sideration given this factor in the other programs authorized in this chapter. (2) ORDER OF AWARDS; PROGRAM FRAUD.(A) Except with respect to grants made under section 402G, and as provided in subparagraph (B), the Secretary shall award grants and con- tracts under this chapter in the order of the scores received by the application for such grant or contract in the peer review Sec. 402A HIGHER EDUCATION ACT OF 1965 46 process required under section 1210 and adjusted for prior ex- perience in accordance with paragraph (1). (B) The Secretary is not required to provide assistance to a program otherwise eligible for assistance under this chapter, if the Secretary has determined that such program has in- volved the fraudulent use of funds under this chapter. (3) PEER REVIEW PROCESS.(A) The Secretary shall assure that, to the extent practicable, members of groups underrepresented in higher education, including African Amer- icans, Hispanics, Native Americans, Alaska Natives, Asian Americans, Native American Pacific Islanders (including Na- tive Hawaiians), are represented as readers of applications submitted under this chapter. The Secretary shall also assure that persons from urban and rural backgrounds are rep- resented as readers. (B) The Secretary shall ensure that each application sub- mitted under this chapter is read by at least 3 readers who are not employees of the Federal Government (other than as read- ers of applications). (4) APPLICATION STATUS.The Secretary shall inform each entity operating programs under this chapter regarding the status of their application for continued funding at least 8 months prior to the expiration of the grant or contract. The Secretary, in the case of an entity that is continuing to operate a successful program under this chapter, shall ensure that the start-up date for a new grant or contract for such program im- mediately follows the termination of preceding grant or con- tract so that no interruption of funding occurs for such success- ful reapplicants. The Secretary shall inform each entity re- questing assistance under this subpart for a new program re- garding the status of their application at least 8 months prior to the proposed startup date of such program. (5) NUMBER OF APPLICATIONS FOR GRANTS AND CON- TRACTS.The Secretary shall not limit the number of applica- tions submitted by an entity under any program authorized under this chapter if the additional applications describe pro- grams serving different populations or campuses. (6) COORDINATION WITH OTHER PROGRAMS FOR DISADVAN- TAGED STUDENTS.The Secretary shall encourage coordination of programs assisted under this chapter with other programs for disadvantaged students operated by the sponsoring institu- tion or agency, regardless of the funding source of such pro- grams. The Secretary shall not limit an entity's eligibility to receive funds under this chapter because such entity sponsors a program similar to the program to be assisted under this chapter, regardless of the funding source of such program. The Secretary shall not require a separate Director to administer a program funded under this chapter if the imposition of such requirement will hinder coordination among programs funded under this chapter or between programs funded under this subpart and similar programs funded through other sources. (d) OUTREACH. (1) IN GENERAL.The Secretary shall conduct outreach ac- tivities to ensure that entities eligible for assistance under this 47 HIGHER EDUCATION ACT OF 1965 Sec. 402A chapter submit applications proposing programs that serve ge- ographic areas and eligible populations which have been un- derserved by the programs assisted under this chapter. (2) NOTICE.In carrying out the provisions of paragraph (1), the Secretary shall notify the entities described in sub- section (b) of the availability of assistance under this sub- section not less than 120 days prior to the deadline for submis- sion of applications under this chapter and shall consult na- tional, State, and regional organizations about candidates for notification. (3) TECHNICAL ASSISTANCE.The Secretary shall provide technical training to applicants for projects and programs au- thorized under this chapter. The Secretary shall give priority to serving programs and projects that serve geographic areas and eligible populations which have been und.erserved by the programs assisted under this chapter. Technical training ac- tivities shall include the provision of information on authoriz- ing legislation, goals and objectives of the program, required activities, eligibility requirements, the application process and application deadlines, and assistance in the development of program proposals and the completion of program applications. Such training shall be furnished at conferences, seminars, and workshops to be conducted at not less than 10 sites throughout the United States to ensure that all areas of the United States with large concentrations of eligible participants are served. (4) SPECIAL RULE.The Secretary may contract with eligi- ble entities to conduct the outreach activities described in this subsection. (e) DOCUMENTATION OF STATUS AS A LO1N-INCOME INDIVID- UAL.(1) Except in the case of an independent student, as defmed in section 480(d), documentation of an individual's status pursuant to subsection (g)(2) shall be made by providing the Secretary with (A) a signed statement from the individual's parent or legal guardian; (B) verification from another governmental source; (C) a signed financial aid application; or (D) a signed United States or Puerto Rico income tax re- turn. (2) In the case of an independent student, as defined in section 480(d), documentation of an individual's status pursuant to sub- section (g)(2) shall be made by providing the Secretary with (A) a signed statement from the individual; (B) verification from another governmental source; (C) a signed financial aid application; or (D) a signed United States or Puerto Rico income tax re- turn. co AUTHORIZATION OF APPROPRIATIONS.For the purpose of making grants and contracts under this chapter, there are author- ized to be appropriated $650,000,000 for fiscal year 1993, and such sums as may be necessary for each of the 4 succeeding fiscal years. Of the amount appropriated under this chapter, the Secretary may use no more than 1/2 of 1 percent of such amount to obtain addi- tional qualified readers and additional staff to review applications, Sec. 402B HIGHER EDUCATION ACT OF 1965 48 to increase the level of oversight monitoring, to support impact studies, program assessments and reviews, and to provide technical assistance to potential applicants and current grantees. In expend- ing these funds, the Secretary shall give priority to the additional administrative requirements provided in the Higher Education Amendments of 1992, to outreach activities, and to obtaining addi- tional readers. The Secretary shall report to Congress by October 1, 1994, on the use of these funds. (g) DEFINITIONS.-For the purpose of this chapter: (1) FIRST GENERATION COLLEGE STUDENT.-The term "first generation college student" means- (A) an individual both of whose parents did not com- plete a baccalaureate degree; or (B) in the case of any individual who regularly resided with and received support from only one parent, an indi- vidual whose only such parent did not complete a bacca- laureate degree. (2) LOW-INCOME INDIVIDUAL-The term "low-income indi- vidual" means an individual from a family whose taxable in- come for the preceding year did not exceed 150 percent of an amount equal to the poverty level determined by using criteria of poverty established by the Bureau of the Census. (3) VETERAN ELIGIBILITY.-No veteran shall be deemed in- eligible to participate in any program under this chapter by reason of such individual's age who- (A) served on active duty for a period of more than 180 days, any part of which occurred after January 31, 1955, and was discharged or released therefrom under conditions other than dishonorable; or (B) served on active duty after January 31, 1955, and was discharged or released therefrom because of a service connected disability. (20 U S.C. 1070a-11) Enacted June 23, 1972, P.L. 92-318, sec. 131(b)(1), 86 Stat. 258, amended October 12, 1976, P.L. 94-482, sec. 124(a), 90 Stat. 2094; amended October 3, 1980, P.L. 96-374, sec. 405, 94 Stat. 1407; amended October 1986, P L 99-498, sec. 401(0, 100 Stat. 1336; amended July 23, 1992, P.L. 102-325, sec. 402(a)(4), 106 Stat. 482; amended December 20, 1993, P.L. 103-208, sec. 2(b)(6)-(9), 107 Stat 2458. SEC. 402B. TALENT SEARCH. (a) PROGRAM AUTHORITY.-The Secretary shall carry out a pro- gram to be known as talent search which shall be designed- (1) to identify qualified youths with potential for education at the postsecondary level and to encourage such youths to complete secondary school and to undertake a program of post- secondary education; (2) to publicize the availability of student financial assist- ance available to persons who pursue a program of postsecond- ary education; anoi (3) to encourage persons who have not completed programs of education at the secondary or postsecondary level, but who have the ability to complete such programs, to reenter such programs. (b) PERMISSIBLE SERVICES.-Any talent search project assisted under this chapter may provide services such as- 58 49 HIGHER EDUCATION ACT OF 1965 Sec. 402B (1) academic advice and assistance in secondary school and college course selection; (2) assistance in completing college admission and fman- cial aid applications; (3) assistance in preparing for college entrance examina- tions; (4) guidance on secondary school reentry or entry to gen- eral educational development (GED) programs or other alter- native education programs for secondary school dropouts; (5) personal and career counseling; (6) tutorial services; (7) exposure to college campuses as well as cultural events, academic programs and other sites or activities not usually available to disadvantaged youth; (8) workshops and counseling for parents of students served; (9) mentoring programs involving elementary or secondary school teachers, faculty members at institutions of higher edu- cation, students, or any combination of such persons; and (10) programs and activities as described in paragraphs (1) through (9) which are specially designed for students of limited English proficiency. (C) REQUIREMENTS FOR APPROVAL OF APPLICATIONS.-In ap- proving applications for talent search projects under this chapter for any fiscal year the Secretary shall- (1) require an assurance that not less than two-thirds of the individuals participating in the project proposed to be car- ried out under any application be low-income individuals who are first generation college students; (2) require that such participants be persons who either have completed 5 years of elementary education or are at least 11 years of age but not more than 27 years of age, unless the imposition of any such limitation with respect to any person would defeat the purposes of this section or the purposes of section 402F; (3) require an assurance that individuals participating in the project proposed in the application do not have access to services from another project funded under this section or under section 402F; and (4) require an assurance that the project will be located in a setting accessible to the persons proposed to be served by the project. (20 U.S.C. 1070a-12) Enacted June 23, 1972, P.L. 92-318, sec. 131(b)(1), 86 Stat. 258, 259; amended August 21, 1974, P.L. 93-380, sec. 833, 88 Stat. 602, 604; amended October 12, 1976, P.L. 94-482, sec. 124, 90 Stat. 2094, 2095, 2096; amend- ed November 1, 1978, P.L. 95-566, sec. 4, 92 Stat. 2403; amended October 3, 1980, P.L. 96-374, sec. 405, 94 Stat. 1408; amended October 17, 1986, P.L. 99-498, sec. 401(a), 100 Stat. 1337; amended July 23, 1992, P.L. 102-325, sec. 402(a)(4), 106 Stat. 486. SEC. 402C. UPWARD BOUND. (a) PROGRAM AUTHORITY.-The Secretary shall carry out a pro- gram to be known as upward bound which shall be designed to generate skills and motivation necessary for success in education beyond secondary school. 5J Sec. 402C HIGHER EDUCATION ACT OF 1965 50 (b) PERMISSIBLE SERVICES.Any upward bound project as- sisted under this chapter may provide services such as (1) instruction in reading, writing, study skills, mathe- matics, and other subjects necessary for success beyond second- ary school; (2) personal counseling; (3) academic advice and assistance in secondary school course selection; (4) tutorial services; (5) exposure to cultural events, academic programs, and other activities not usually available to disadvantaged youth; (6) activities designed to acquaint youths participating in the project with the range olcareer options available to them; (7) instruction designed to prepare youths participating in the project for careers in which persons from disadvantaged backgrounds are particularly underrepresented; (8) on-campus residential programs; (9) mentormg programs invoMng elementary or secondary school teachers, faculty members at mstitutions of higher edu- cation, students, or any combination of such persons; and (10) programs and activities as described in paragraphs (1) through (9) which are specially designed for students of limited English proficiency. (c) REQUIRED SERVICES.Any upward bound project assisted under this chapter which has received funding for two or more years shall include, as part of the core curriculum in the next and succeeding years, instruction in mathematics through precalculus, laboratory science, foreign language, composition, and literature. (d) REQUIREMENTS FOR APPROVAL OF APPLICATIONS.In ap- proving applications for upward bound projects under this chapter for any fiscal year, the Secretary shall (1) require an assurance that not less than two-thirds of the youths participating in the project proposed to be carried out under any application be low-income individuals who are first generation college students; (2) require an assurance that the remaining youths partici- pating in the project proposed to be carried out under any ap- plication be either low-income individuals or first generation college students; (3) require that there be a determination by the institu- tion, with respect to each participant in such project that the participant has a need for academic support in order to pursue successfully a program of education beyond secondary school; and (4) require that such participants be persons who have completed 8 years of elementary education and are at least 13 years of age but not more than 19 years of age, unless the im- position of any such limitation would defeat the purposes of this section. (e) MAXIMUM STIPENDS.Youths participating in a project pro- posed to be carried out under any application may be paid stipends not in excess of $60 per month during June, July, and. August, and not in excess of $40 per month during the remaining period of the year. 60 51 HIGHER EDUCATION ACT OF 1965 Sec. 402D (20 U.S.C. 1070a-13) Enacted October 3, 1980, P.L. 96-374, sec. 405, 94 Stat. 1409; amended October 17, 1986, P.L. 99-498, sec. 401(a), 100 Stat. 1338; amended July 23, 1992, P.L. 102-325, sec. 402(a)(4), 106 Stat. 487; amended December 20, 1993, P.L. 103-208, sec. 2(b)(10), 107 Stat. 2459. SEC. 402D. STUDENT SUPPORT SERVICES. (a) PROGRAM AUTHORITY.The Secretary shall carry out a pro- gram to be known as student support services which shall be designed (1) to increase college retention and graduation rates for eligible students; (2) to increase the transfer rates of eligible students from 2-year to 4-year institutions; and (3) to foster an institutional climate supportive of the suc- cess of low-income and first generation college students and in- dividuals with disabilities. (b) PERMISSIBLE SERVICES.A student support services project assisted under this chapter may provide services such as (1) instruction in reading, writing, study skills, mathe- matics, and other subjects necessary for success beyond second- ary school; (2) personal counseling; (3) academic advice and assistance in course selection; (4) tutorial services and counseling and peer counseling; (5) exposure to cultural events and academic programs not usually available to disadvantaged students; (6) activities designed to acquaint students participating in the project with the range of career options available to them; (7) activities designed to assist students participating in the project in securing admission and financial assistance for enrollment in graduate and professional programs; (8) activities designed to assist students currently enrolled in 2-year institutions in securing admission and financial as- sistance for enrollment in a four-year program of postsecondary education; (9) mentoring programs involving faculty or upper class students, or a combination thereof; and (10) programs and activities as described in paragraphs (1) through (9) which are specially designed for students of limited English proficiency. (c) REQUIREMENTS FOR APPROVAL OF APPLICATIONS.In ap- proving applications for student support services projects under this chapter for any fiscal year, the Secretary shall (1) require an assurance that not less than two-thirds of the persons participating in the project proposed to be carried out under any application (A) be individuals with disabilities; or (B) be low-income individuals who are first generation college students; (2) require an assurance that the remaining students par- ticipating in the project proposed to be carried out under any application be low-income individuals, first generation college students, or individuals with disabilities; 6 1 Sec. 402E HIGHER EDUCATION ACT OF 1965 52 (3) require an assurance that not less than one-third of the individuals with disabilities participating in the project be low- income individuals; (4) require that there be a determination by the institu- tion, with respect to each participant in such project, that the participant has a need for academic support in order to pursue successfully a program of education beyond secondary school; (5) require that such participants be enrolled or accepted for enrollment at the institution which is the recipient of the grant or contract; and (6) require an assurance from the institution which is the recipient of the grant or contract that each student enrolled in the project will be offered sufficient financial assistance to meet that student's full fmancial need. (20 U.S.C. 1070a-14) Enacted October 3, 1980, P.L. 95-374, sec. 405, 94 Stat. 1410; amended October 17, 1986, P.L. 99-498, sec. 401(a), 100 Stat. 1339; amended July 23, 1992, P.L. 102-325, sec. 402(a)(4), 106 Stat. 488; amended December 20, 1993, P.L. 103-208, sec. 2(b)(11), 107 Stat. 2459. SEC. 402E. POSTBACCALAUREATE ACHIEVEMENT PROGRAM AUTHOR- ITY'. (a) PROGRAM AUTHORITY.The Secretary shall carry out a pro- gram to be known as the "Ronald E. McNair Postbaccalaureate Achievement Program" that shall be designed to provide disadvan- taged college students with effective preparation for doctoral study. (b) SERV10ES.---A postbaccalaureate achievement project as- sisted under this section may provide services such as (1) opportunities for research or other scholarly activities at the institution or at graduate centers designed to provide students with effective preparation for doctoral study; (2) summer internships; (3) seminars and other educational activities designed to prepare students for doctoral study; (4) tutoring; (5) academic counseling; (6) activities designed to assist students participating in the project in securing admission to and financial assistance for enrollment in graduate programs; (7) mentoring programs involving faculty members at in- stitutions of higher education, students, or any combination of such persons; and (8) exposure to cultural events and academic programs not usually available to disadvantaged students. (c) REQUIREMENTS.--In approving applications for postbaccalaureate achievement projects assisted under this section for any fiscal year, the Secretary shall require (1) an assurance that not less than two-thirds of the indi- viduals participating in the project proposed to be carried out under any application be low-income individuals who are first generation college students; (2) an assurance that the remaining persons participating in the project proposed to be carried out be from a group that is underrepresented in graduate education; (3) an assurance that participants be enrolled in a degree program at an eligible institution having an agreement with 62 53 HIGHER EDUCATION ACT OF 1965 Sec. 402F the Secretary in accordance with the provisions of section 487; and (4) an assurance that participants in summer research in- ternships have completed their sophomore year in postsecond- ary education. (d) AWARD CONSIDERATIONS.In addition to such other selec- tion criteria as may be prescribed by regulations, the Secretary shall consider in making awards to institutions under this section (1) the quality of research and other scholarly activities in which students will be involved; (2) the level of faculty involvement in the project and the description of the research in which students will be involved; and (3) the institution's plan for identifying and recruiting par- ticipants including students enrolled in projects authorized under this section. (e) MAXIMUM STIPENDS.Students participating in research under a postbaccalaureate achievement project may receive an award that (1) shall include a stipend not to exceed $2,400 per annum; and (2) may include, in addition, the costs of summer tuition, summer room and board, and transportation to summer pro- grams. FUNDING.From amounts appropriated pursuant to the au- thority of section 402A(f), the Secretary shall, to the extent prac- ticable, allocate funds for projects authorized by this section in an amount which is not less than $11,000,000 for each of the fiscal years 1993 through 1997. (20 U.S.C. 1070a-15) Enacted October 17, 1986, P.L. 99-498, sec. 401(a), 100 Stat. 1339; amended June 3, 1987, P.L. 100-50, sec. 6, 101 Stat. 340; amended Aug. 23, 1988, P.L. 100-418, sec. 6271, 102 Stat. 1523; amended July 23, 1992, P.L. 102- 325, sec. 402(a)(4), 106 Stat. 489. SEC. 402F. EDUCATIONAL OPPORTUNITY CENTERS. (a) PROGRAM AUTHORITY; SERVICES PROVIDED.The Secretary shall carry out a program to be known as educational opportunity centers which shall be designed (1) to provide information with respect to financial and academic assistance available for individuals desiring to pur- sue a program of postsecondary education; and (2) to provide assistance to such persons in applying for admission to institutions at which a program of postsecondary education is offered, including preparing necessary applications for use by admissions and financial aid officers. (b) PERMISSIBLE SERVICES.An educational opportunity center assisted under this section may provide services such as (1) public information campaigns designed to inform the community regarding opportunities for postsecondary edu- cation and training; (2) academic advice and assistance in course selection; (3) assistance in completing college admission and fman- cial aid applications; 63 Sec. 402G HIGHER EDUCATION ACT OF 1965 54 (4) assistance in preparing for college entrance examina- tions;(5) guidance on secondary school reentry or entry to a gen- eral educational development (GED) program or other alter- native education programs for secondary school dropouts; (6) personal counseling; (7) tutorial services; (8) career workshops and counseling; (9) mentoring programs involving elementary or secondary school teachers, faculty members at mstitutions of higher edu- cation, students, or any combination of such persons; and (10) programs and activities as described in paragraphs (1) through (9) which are specially deAgned for students of limited English proficiency. (C) REQUIREMENTS FOR APPROVAL JF APPLICATIONS.In ap- proving applications for educational opportunity centers under this section for any fiscal year the Secretary shall (1) require an assurance that not less than two-thirds of the persons participating in the project proposed to be carried out under any application be low-income individuals who are first generation college students; (2) require that such participants be persons who are at least nineteen years of age, unless the imposition of such limi- tation with respect to any person would defeat the purposes of this section or the purposes of section 402B; and (3) require an assurance that individuals participating in the project proposed in the application do not have access to servzces from another project funded under this section or under section 402B. (20 U.S.C. 1070a-16) Enacted October 3, 1980, P.L. 96-374, sec. 405, 94 Stat. 1410; amended October 17, 1986, P.L. 99-498, sec. 401(a), 100 Stat. 1340; amended July 23, 1992, P.L. 102-325, sec. 402(a)(4), 106 Stat. 490. SEC. 402G. STAFF DEVELOPMENT ACTIVITIES. (a) SECRETARY'S AUTHORITY.For the purpose of improving the operation of the programs and projects authorized by this chapter, the Secretary is authorized to make grants to institutions of higher education and other public and private nonprofit institutions and organizations to provide training for staff and leadership personnel employed in, or preparing for employment in, such programs and projects. (b) CONTENTS OF TRAINING PROGRAMS.Such training shall in- clude conferences, internships, seminars, workshops, and the publi- cation of manuals designed to improve the operation of such pro- grams and projects and shall be carried out in the various regions of the Nation in order to ensure that the training opportunities are appropriate to meet the needs in the local areas being served by such programs and projects. Such training shall be offered annu- ally for new directors of projects funded under this chapter as well as annually on the following topics and other topics chosen by the Secretary:(1) Legislative and regulatory requirements for the oper- ation of programs funded under this chapter. (2) Assisting students in receiving adequate financial aid from programs assisted under this title and other programs. 6 4 55 HIGHER EDUCATION ACT OF 1965 Sec. 404A (3) The design and operation of model programs for projects funded under this chapter. (C) CONSULTATION.Grants for the purposes of this section tthall be made only after consultation with regional and State pro- fessional associations of persons having special knowledge with re- spect to the needs and problems of such programs and projects. (20 U.S.C. 1070a-17) Enacted October 3, 1980, P.L. 96-374, sec. 405, 94 Stat. 1411; amended October 17, 1986, P.L. 99-498, sec. 401(a), 100 Stat. 1341; amended July 23, 1992, P.L. 102-325, sec. 402(a)(4), 106 Stat. 491. SEC. 402IL EVALUATION FOR PROJECT IMPROVEMENT. (a) IN GENERAL.For the purpose of improving the operation of the programs and projects assisted under this chapter, the Sec- retary is authorized to make grants to and enter into contracts with institutions of higher education and other public and private institutions and organizations to evaluate the effectiveness of the various programs assisted under this subpart in meeting the pur- poses described in this chapter. (b) CONTENT.The evaluations described in subsection (a) shall identify institutional, community and program practices par- ticularly effective in increasing the access of low-income individuals and first-generation college students to postsecondary education, the preparation of such individuals and students for postsecondary education, and such individuals' and students' success in post- secondary education. (c) REsuurs.In order to improve program effectiveness, the results of the ongoing evaluations described in subsection (a) shall be disseminated by the Secretary to similar programs assisted under this chapter as well as other individuals concerned with the postsecondary access and retention of low-income individuals and first-generation college students. (20 U.S.C. 1070a-18) Enactzd July 23, 1992, P.L. 102-325, sec. 402(a)(4), 106 Stat. 491. CHAPTER 2-NATIONAL EARLY INTERVENTION SCHOLARSHIP AND PARTNERSHIP PROGRAM SEC. 404A. EARLY INTERVENTION PROGRAM AUTHORIZED. The Secretary is authorized, in accordance with the require- ments of this chapter, to establish a program that (1) encourages States to provide or maintain a guarantee to eligible low-income students who obtain a high school di- ploma (or its equivalent), of the financial assistance necessary to permit them to attend an institution of higher education; and (2) provides incentives to States, in cooperation with local educational agencies, institutions of higher education, commu- nity organizations and business, to provide (A) additional counseling, mentoring, academic sup- port, outreach, and supportive services to elementary, mid- dle, and secondary school students who are at risk of drop- ping out of school; and 77-5a 0-94 -- 3 65 Sec. 404B HIGHER EDUCATION ACT OF 1965 56 (B) information to students and their parents about the advantages of obtaining a postsecondary education and their college financing options. (20 U.S.C. 1070a-21) Enacted July 23, 1992, P.L. 102-325, sec. 402(a)(4), 106 Stat. 492; amended December 20, 1993, P.L. 103-208, sec. 2(b)(12), 107 Stat. 2459. SEC. 404B. STATE ELIGIBILITY AND STATE PLAN. (a) PLAN REQUIRED FOR ELIGIBILITY.(1) In order for a State to qualify for a grant under this chapter, the State shall submit to the Secretary a plan for carrying out the program under this chap- ter. Such plan shall provide for the conduct, under the State pro- gram, of both a scholarship component in accordance with section 404D and an early intervention component in accordance with sec- tion 404C. (2) Each State plan submitted pursuant to paragraph (1) shall be in such form, contain or be accompanied by such information or assurances, and be submitted at such time as the Secretary may require by regulation and shall (A) describe the activities for which assistance under this section is sought; and (B) provide such additional assurances as the Secretary de- termines necessary to ensure compliance with the require- ments of this section. (b) MATCHING REQUIREMENT.The Secretary shall not approve a plan submitted under subsection (a) unless such plan (1) provides that the State will provide, from State, local, or private funds, not less than one-half the cost of the program; (2) specifies the methods by which such share of the costs will be paid; and (3) includes provisions designed to assure that funds pro- vided under this chapter shall supplement and not supplant funds expended for existing State and local programs. (C) METHODS FOR COMPLYING WITH MATCHING REQUIRE- MENT.A State may count toward the contribution required by subsection (b)(1) (1) the amount of the grants paid to students from State, local, or private funds under this chapter; (2) the amount of tuition, fees, room or board waived or re- duced for recipients of grants under this chapter; and (3) the amount expended on documented, targeted, long- term mentoring and counseling provided by volunteers or paid staff of nonschool organizations, including businesses, religious organizations, community groups, postsecondary educational institutions, nonprofit and philanthropic organizations, and other organizations. (d) PAYMENT REQUIREMENTS.Upon submission by a State of such documents as the Secretary may, by regulation, require for demonstrating the total amount expended by the State in accord- ance with this chapter for a fiscal year, the Secretary shall, from such State's allotment under section 404E for such fiscal year, pay to such State an amount equal to not more than one-half of the total amount so expended. (20 U.S.C. 1070a-22) Enacted July 23, 1992, P.L. 102-325, sec. 402(a)(4), 106 Stat. 492; amended December 20, 1993, P.L. 103-208, sec. 2(b)(13) and (14), 107 Stat. 2459. 61; 57 HIGHER EDUCATION ACT OF 1965 Sec. 404C SEC. 404C. EARLY INTERVENTION. (a) IN GENERALIn order to receive payments under section 404B(d), a State shall demonstrate to the satisfaction of the Sec- retary that the State will provide comprehensive mentoring, coun- seling, outreach, and supportive services to students participating in programs under this chapter who are enrolled in preschool through grade 12. Such counseling shall include financial aid coun- seling that provides information on the opportunities for financial assistance under this title. The State shall demonstrate, pursuant to regulations of the Secretary, the methods by which the State will target services on priority students. (b) USES OF FUNDS. (1) IN GENERALThe Secretary shall, by regulation, estab- lish criteria for determining whether comprehensive mentoring, counseling, outreach, and supportive services pro- grams may be used to meet the revirements of subsection (a). (2) ALLOWABLE PROVIDERS.The activities required by subsection (a) may be provided by service providers such as community-based organizations, schools, institutions of higher education, public and private agencies, nonprofit and philan- thropic organizations, businesses, institutions and agencies sponsoring programs authorized under subpart 4 of this part, and other organizations the Secretary deems appropriate. (3) PERMISSIBLE ACTIVITIES.Examples of acceptable ac- tivities to meet the requirements of subsection (a) include the following; (A) Providing eligible students in preschool through grade 12 with a continuing system of mentoring and advis- ing that (1) is coordinated with the Federal and State com- munity service initiatives; and (ii) may include such support services as after school and summer tutoring, assistance in obtaining summer jobs, career mentoring and academic counsel- ing. (B) Requiring each student to enter into an agreement under which the student agrees to achieve certain aca- demic milestones, such as completing a prescribed set of courses and maintaining satisfactory academic progress as described in section 484(c), in exchange for receiving tui- tion assistance for a period of time to be established by each State. (C) Activities designed to ensure high school comple- tion and college enrollment of at-risk children, including identification of at-risk children, after school and summer tutoring, assistance in obtaining summer jobs, academic counseling, volunteer and parent involvement and former or current scholarship recipients as mentor or peer coun- selors, skills assessment, personal counseling, family coun- seling and home visits, and staff development, and pro- grams and activities as described in this subparagraph which are specially designed for students of limited Eng- lish proficiency. (D) Prefreshman summer programs that- 6 7 Sec. 4040 HIGHER EDUCATION ACT OF 1965 58 (i) are at institutions of higher education that also have programs of academic year supportive services for disadvantaged students through projects author- ized under section 402D or through comparable projects funded by the St Are or other sources; (ii) assure the participation of students who qual- ify as disadvantaged under the provisions of section 402D or who are eligible for comparable programs funded by the State; (iii)(I) provide summer instruction in remedial, de- velopmental or supportive courses; (II) provide such suinmer services as counseling, tutoring, or orienta- tion; and (III) provide grant aid to students to cover prefreshman summer costs for books, supplies, living costs and personal expenses; and (iv) assure that participating students will receive financial aid during each academic year they are en- rolled at the participating institution after the prefreshman summer. (E) Requiring eligible students to meet other stand- ards or requirements as the State determines necessary to meet the purposes of this section. (c) PRIORITY STUDENTS.In administering the early interven- U011 component, the State shall treat as priority students any stu- dent m preschool through grade 12 who is eligible (1) to be counted under section 1005(c) of the Elementary and Secondary Education Act of 1965; (2) for free or reduced price meals pursuant to the Na- tional School Lunch Act; or (3) for assistance pursuant to part A of title IV of the So- cial Security Act (Aid to Families with Dependent Children). (20 U S.C. 1070a-23) Enacted July 23, 1992, P.L. 102-325, sec. 402(04), 106 Stat 493; amended December 20, 1993, P.L. 103-208, sec. 2(6)(15)-(17), 107 Stat. 2459 SEC. 404D. SCHOLARSHIP COMPONENT. (a) IN GENERAL.In order to receive payments under section 404B(d), a State shall establish or maintain a financial assistance program that awards grants to students in accordance with the re- quirements of this section. The Secretary shall encourage the State to ensure that the tuition assistance provided pursuant to this sec- tion is available to an eligible student for use at any eligible insti- tution. (b) GRANT AMOUNTS.The maximum amount of the grant that an eligible student in any participating State shall be eligible to re- ceive under this section shall be established by the State. The mini- mum amount of the grant for each fiscal year shall not be less than the lesser of (1) 75 percent of the average cost of attendance for an in- State student, in a 4-year program of instruction, at public in- stitutions of higher education in such State, as determined in accordance with regulations prescribed by the Secretary; or (2) the maximum grant funded under section 401 for such fiscal year. 59 HIGHER EDUCATION ACT OF 1965 Sec. 404E (c) RELATION TO OTHER ASSISTANCE.--Thition assistance pro- vided under this chapter shall not be considered for the purpose of awarding Federal grant assistance under this title, except that in no casc shall the total amount of student financial assistance awarded to a student under this title exceed such student's total cost of attendance. (d) ELIGIBLE STUDENTS.A student eligible for assistance under this chapter is a student who (1) is less than 22 years old at time of first grant award; (2) receives a high school diploma or a certificate of high school equivalence on or after January 1, 1993; (3) is enrolled or accepted for enrollment in a program of undergraduate instruction at an institution of higher education that is located within the State!s boundaries; except that, as a State option, a State may offer grant j:irogram portability for recipients who attend institutions of higher education outside such State; and (4) who participated in the State early intervention compo- nent required under section 404C. (e) PRIORITY; WAIVER.(1) The Secretary shall ensure that each State place a priority on awarding scholarships to students who will receive a Pell Grant for the academic year for which the award is being made under this chapter. (2) A State may consider students who have successfully par- ticipated in programs funded under chapter 1 of this subpart to have met the requirements of subsection (dX4). (20 U.S.C. 1070a-24). Enacted July 23, 1992, P.L. 102-325, sec. 402(a)(4), 106 Stat. 495; amended December 20, 1993, P.L. 103-208, sec. 2(b)(18) and (19), 107 Stat. 2459. SEC. 404E. DISTRIBUTION OF FUNDS. (a) COMPETITIVE AwARDs.If the amount appropriated to carry out this chapter for a fiscal year is less than $50,000,000, then the Secretary shall award grants under this chapter on a competitive basis to States to carry out a program described in section 404A. (b) ALLOTMENT BASED ON TITLE I ESEA ALLOCATIONS.If the amount appropriated to carry out this chapter for a fiscal year is $50,000,000 or more, then the Secretary shall allot to each State an amount which bears the same ratio to such sums as (1) the amount allocated under section 1005 of the Elemen- tary and Secondary Education Act of 1965 to the local edu- cation agencies in th.e State, bears to (2) the total amount allocated under such section to all such agencies in all States. (c) LIMIT ON USE.No State may use less than 25 percent or more than 50 percent of its allotment for the early intervention component of the State program, except that the Secretary may waive the 50 percent limitation if the State demonstrates that the State has another means of providing the student's financial assist- ance that is described in the State plan. (d) REALLOTMENT.The amount of any State's allotment under subsection (b) for any fiscal year which the Secretary determines will not be required for such fiscal year for the program of that State shall be available for reallotment from time to time, on such 60 Sec. 404F HIGHER EDUCATION ACT OF 1965 60 dates during such year as the Secretary may fix, to other States in proportion to the original allotments to such States .for such year, but with such proportionate amount for any of such States being reduced to the extent it exceeds the sum the Secretary esti- mates such State needs and will be Able to use for such year for carrying out such programs. The total of such reductions shall be similarly reallotted among the States whose proportionate amounts were not so reduced. A State shall match, in accordance with sec- tion 404B(b) any reallocated funds it receives under this sub- section. (e) ALLOTMENT SUBJECT TO CONTINUING COMPLIANCE.The Secretary shall make payments for programs only to States which continue to meet the requirements of the State plan pursuant to section 404B. (20 U.S.C. 1070a-25) Enacted July 23, 1992, P.L. 102-325, sec. 402(a)(4), 106 Stat. 495; amended December 20, 1993, P.L. 103-208, sec. 2(b)(20), 107 Stat. 2459. SEC. 404F. EVALUATION AND REPORT. (a) EVALUATION.Each State receiving an allotment under this chapter shall biennially evaluate the early intervention program assisted under this chapter in accordance with the standards de- scribed in subsection (b) and shali submit to the Secretary a copy of such evaluation. The evaluation component shall permit service providers to track eligible student progress during the period such students are participating in the program assisted under this sec- tion and must be consistent with the standards developed by the Secretary pursuant to subsection (b). (b) EVALUATION STAIs/DARDS.The Secretary shall prescribe standards for the evaluation described in subsection (a). Such standards shall (1) provide for input from States and service providers; and (2) ensure that data protocols and procedures are consist- ent and uniform. (c) REPORT.The Secretary shall biennially report to the Con- gress on the activities assisted under this chapter and the evalua- tions conducted pursuant to subsection (a). (20 U.S.C. 100a-26) Enacted July 23, 1992, P.L. 102-325, sec. 402(a)(4), 106 Stt.t. 496; amended December 20, 1993, P.L. 103-208, sec. 2(b)(21) and (22), 107 Stat. 2459. SEC. 404G. APPROPRIATIONS. There is authorized to be appropriated to make grants under this chapter $200,000,000 for fiscal year 1993 and such sums as may be necessary for each of the four succeeding fiscal years. For any fiscal year for which funds are authorized to be appropriated to carry out subpart 4 of part A of this title, no amount may be expended to carry out the provisionp of this chapter unless the amount appropriated for such fiscal year to carry out such subpart 4 exceed $60,000,000. (20 U.S.C. 1070a-27) Enacted July 23, 1992, P.L. 102-325, sec. 402(a)(4), 106 Stat. 496; amended December 20, 1993, P.L. 103-208, sec. 2(b)(23), 107 Stat. 2459. 70 61 HIGHER EDUCATION ACT OF 1965 Sec. 406C CHAPTER 3-PRESIDENTIAL ACCESS SCHOLARSHIPS SEC. 406A. SCHOLARSHIPS AUTHORIZED. The Secretary is authorized in accordance with this chapter to award Presidential Access Scholarships to students who (1) are eligible to receive a Pell Grant for the year in which the scholarship is awarded; (2) have participated in a preparatory program for post- secondary education; and (3) demonstrate academic achievement. (20 U.S.C. 1070a-31) Enacted July 23, 1992, P.L. 102-325, sec. 402(a)(4), 106 Stat. 497. SEC. 406B. SCHOLARSHIP PROGRAM REQUIREMENTS. (a) AMOUNT OF AWARD. (1) IN GENERAL.Except as provided in paragraph (2), the amount of a scholarship awarded under this chapter for any academic year shall be equal to 25 percent of the Pell Grant that the recipient is awarded for that year or $400, whichever is greater. (2) ADJUSTMENT FOR INSUFFICIENT APPROPRIATIONS.If, after the Secretary determines the total number of eligible ap- plicants for an acadoinic year in accordance with section 406C, funds available in a fiscal year are insufficient to fully fund all awards for that academic year under this chapter, the amount paid to each student shall be reduced proportionately. (b) PERIOD OF ANVARD.Scholarships under this chapter shall be awarded for a period of not more than four academic years, or in the case of a student who is enrolled in an undergraduate course of study that requires attendance for the full-time equivalent of five academic years, five academic years. (c) USE AT ANY INSTITUTION PERMITTED.An eligible student awarded a scholarship under this chapter may use such scholar- ship stipend to attend any institution of higher education. (d) ASSISTANCE NOT TO EXCEED COST OF ATTENDANCE.A scholarship awarded under this chapter to any student, in com- bination with the Pell Grant and other student financial assistance available to such student, may not exceed the student's cost of at- tendance (as defined in section 472). (e) PRESIDENTIAL ACCESS SCHOLARS.Students awarded schol- arships under this chapter shall be known as "Presidential Access Scholars". (20 U.S.C. 1070a-32) Enacted July 23, 1992, Pl. 102-325, sec. 402(a)(4), 106 Stat. 497. SEC. 406C. ELIGIBILITY OF SCHOLARS. (a) REQUIREMENTS FOR STUDENTS IN FIRST YEAR OF POST- SECONDARY EDUCATION.In order for a student who will be attend- ing the student's first year of postsecondary education to be eligible to receive a scholarship under this chapter for that academic year, the student shall (1) be enrolled or accepted for enrollment in a degree or certificate program of at least 2 years in length; 71 Sec. 406C HIGHER EDUCATION ACT OF 1965 62 (2) have demonstrated academic achievement and prepara- tion for postsecondary education by taking college preparatory level coursework in the following areas while in secondary school or the equivalent: (A) 4 years of English; (B) 3 years of science; (C) 3 years of mathematics; (D) either (i) 3 years of history; or (ii) 2 years of history and 1 year of social studies; and (E) either (i) 2 years of a foreign language; or (ii) 1 year of computer science and 1 year of a for- eign language. (3) earn a grade point average of 2.5 or higher, on a scale of 4.0, in the final 2 years of high school; and (4) either (A) have participated, for a minimum period of 36 months, in an early intervention program that meets the requirements of section 406D; or (B) rank, or have ranked, in the top 10 percent, by grade point average, of the student's secondary school graduating class. (b) REQUIREMENTS FOR ALL STUDENTS. (1) Each eligible student desiring a scholarship under this chapter shall submit an application to the Secretary at such time, in such manner, and containing such information as the Secretary may reasonably require. (2) In order for. a student who will be attending a year of postsecondary education, other than the student's first year, to continue to be eligible to receive a scholarship under this chap- ter for that academic year the eligible student shall maintain eligibility to receive a Pell Grant, including fulfilling the re- quirements for satisfactory academic progress as described in section 484(c). (20 U.S.C. 1070a-33) Enacted July 23, 1992, P.L. 102-325, sec. 402(a)(4), 106 Stat. 497. SEC. 406D. ELIGIBLE EARLY INTERVENTION PROGRAMS. (a) PARTICIPATION IN TRIO PROGRAMS AND NATIONAL EARLY INTERVENTION SCHOLARSHIP AND PARTNERSHIP PROGRAMS.Par- ticipation in a program authorized under section 402B, 402C, or 402F, or chapter 2 of subpart 2 of this part for a 36-month period shall meet the requirement of section 406C(a)(4)(A). (b) OTHER ELIGIBLE EARLY INTERVENTION PROGRAM.Partici- pation in another early intervention program, regardless of spon- sorship, for a 36-month period, shall meet the requirements of sec- tion 406C(a)(4)(A) if the program (1) meets the requirements established by the Secretary; and (2) is certified by the Governor as an honors scholars pro- gram. 72 ep. 63 HIGHER EDUCATION ACT OF 1965 Sec. 406F (20 U.S.C. 1070a-34) Enacted July 23, 1992, P.L. 102-325, sec. 402(a)(4), 106 Stat. 498. SEC. 406E. STUDENT ELIGIBILITY. (a) STUDENT ELIGIBILITY.For the purpose of this chapter, the term "eligible student" means an individual who (1) is a graduate of a public or private secondary school or has the equivalent certificate of graduation as recognized by the State in which the eligible student resides; (2) not later than 3 years after such individual graduates or obtains an equivalent certificate, has been admitted for en- rollment or is enrolled at an institution of higher education; and (3) is eligible to receive a Pell Grant for the year in which the scholarship is awarded. (b) LIMITATION.For the purpose of thi§ chapter, the term "eli- gible student" does not include an individual who has been award- ed a baccalaureate degree. (c) WAIVERS. (1) EARLY INTERVENTION PROGRAM PARTICIPATION.The Secretary may waive the requirement described in section 406C(a)(4) for any student who was unable to participate in an early intervention program assisted under this part because such program was not available in the area in which such stu- dent resides or the student was unable to participate in an early intervention program where the student resides. (2) LIMITED-ENGLISH PROFICIENT STUDENTS.The Sec- retary may waive the requirement described in section 406C(a)(2)(E) for any limited-English proficient student who is fluent in a language other than English and is participating in a program to teach such student the English language or for any English speaking student fluent in a second language. (20 U.S.C. 1070a-35) Enacted July 23, 1992, P.L. 102-325, sec. 402(a)(4), 106 Stat. 498. SEC. 406F. EARLY INTERVENTION SCHOLARSHIP AGREEMENT. (a) IN GENERAL.In order for a student to receive a scholar- ship under this chapter, the State educational agency serving the State in which such child resides shall have entered into an agree- ment with the Secretary. (b) CONTENTS.Each agreement described in subsection (a) shall include provisions designed to ensure that (1) all secondary school students in the State have equal and easy access to the coursework described in section 406C(a)(2); (2) the State educational agency has procedures in place to verify to the Secretary that students receiving scholarships under this chapter have taken such coursework and that such coursework has been of a college preparatory level, including a requirement that all secondary schools in the State issue a certificate to each eligible student certifying that such student has completed the necessary coursework to qualify for a schol- arship under this chapter; (3) the State educational agency has procedures in place to notify institutions of higher education of the availability of Sec. 406G HIGHER EDUCATION ACT OF 1965 64 scholarships under this chapter, so that such institutions may award additional scholarships in concert with the scholarships received under this chapter; and (4) the -State educational agency has procedures in place to inform junior high school students and their families about the value of postsecondary education, the availability of student aid to meet college expenses, and the availability of scholar- ships under this chapter for students who take demanding courses, with particular emphasis on activities designed to en- sure that students from low- and moderate-income families have access to such information. (c) SPECIAL RULE.The Secretary may allow a State to receive assistance under this chapter for students whose secondary schools do not offer the necessary coursework if such students take the re- quired courses at another local secondary school or community col- lege (20 U.S.C. 1070a-36) Enacted July 23, 1992, P.L. 102-325, sec. 402(a)(4), 106 Stat 499. SEC. 406G. AUTHORIZATION OF APPROPRIATIONS. There are authorized to be appropriated $200,000,000 for fiscal year 1993 and such sums as may be necessary for each of the 4 succeeding fiscal years to carry out the provisions of this chapter. No amount may be expended to carry out the provisions of this chapter in any fiscal year unless the amount appropriated for such fiscal year to carry out subpart 1 of part A of this title exceeds the amount appropriated to carry out such subpart in the preceding fis- cal year. (20 U.S.C. 1070a-37) Enacted July 23, 1992, P.L. 102-325, sec. 402(a)(4), 106 Stat 499. CHAPTER 4-MODEL PROGRAM COMMUNITY PARTNERSHIP AND COUNSELING GRANTS SEC. 408A. MODEL PROGRAM GRANTS. (a) PROGRAM AUTHORrrY.From the amounts appropriated under section 408C, the Secretary shall award grants to develop model programs (1) to counsel students, at an early age, about college op- portunities, precollege requirements, the college admissions procedure, financial aid opportunities, and student support services that are specially designed or .customized for use in specific geographic, social, and cultural environments; or (2) which stimulate community partnerships with schools by providing tutoring, inc ntoring, work experiences, and other services which support making postsecondary education a real- istic goal for all students. (b) PRIORITIES IN SELECTION.The Secretary shall give priority to those model programs which are directed at areas which have a high proportion of minority, limited English proficiency, economi- cally disadvantaged, disabled, nontraditional, or at-risk students and those model programs which serve these students from rural or urban environments. (C) PROPOSAL REQUIREMENTS. 7 4 65 HIGHER EDUCATION ACT OF 1965 Sec. 408C (1) TAILORING.To receive a grant under subsection (a)(1), the proposal submitted to the Secretary shall demonstrate that the counseling on college opportunities, precollege require- ments, the college admissions procedure, and financial aid op- portunities (including early intervention counseling), is tailored to a specific geographic, social or cultural environment. (2) COMMMITY PARTNERSHIPS.To receive a grant under subsection (a)(2), the proposal submitted to the Secretary shall demonstrate the active involvement of a local educational agency and at least one of the following: (A) Local businesses. (B) Labor organizations. (C) Community groups. (3) GOALS AND OUTCOMES.To receive a grant under this section, each proposal shall contain a statement of specific, measurable goals and methods for obtaining statistics on the number of participants who continue on to postsecondary edu- cation. (20 U.S.C. 1070a-41) Enacted July 23, 1992, P.L. 102-325, sec. 402(a)(4), 106 Stat. 500. SEC. 408B. DIFFUSION ACTIVITIES. (a) COLLECTION OF INFoRmATION.The Secretary shall collect information concerning (1) programs supported under section 408A and programs of demonstrated effectiveness which counsel students about college opportunities, precollege requirements, the college ad- missions procedure, and financial aid opportunities; (2) early intervention programs of demonstrated effective- ness which set students on the path toward staying in school and pursuing a postsecondary education; (3) model programs which counsel students in specific en- vironments, such as urban, rural, and suburban; and (4) model programs which develop school/community part- nerships to provide mentoring, tutoring, work experiences and other services which support making postsecondary education a realistic goal for all students. (b) DISSEMINATION.The Secretary shall ensure that the infor- mation collected under subsection (a) is disseminated. (20 U.S.C. 1070a-42) Enacted July 23, 1992, P.L. 102-325, sec. 402(a)(4), 106 Stat. 500. SEC. 408C. AUTHORIZATION OF APPROPRIATIONS. There are authorized to be appropriated $35,000,000 for fiscal year 1993 and such sums as may be necessary for each of the 4 succeeding fiscal years to carry out this chapter. (20 U.S.C. 1070a-43) Enacted July 23, 1992, P.L. 102-325, sec. 402(a)(4). 106 Stat. 501. CHAPTER 5-PUBLIC INFORMATION SEC. 409A. DATABASE AND INFORMATION LINE. From the funds available under section 409C, the Secretary shall award a contract to establish and maintain Sec. 409A NIGHER EDUCATION ACT OF 1965 66 (1) a computerized database of all public and private stu- dent financial assistance programs, to be accessible to schools and libraries through either modems or toll-free telephone lines; and (2) a toll-free information line, including access by tele- communications devices for the deaf ("TDD's"), to provide indi- vidualized financial assistance information to parents, stu- dents, and other individuals, including individuals with dis- abilities, and to refer students with disabilities and their fami- lies to the postsecondary clearinghouse that is authorized under section 633(c) of the Individuals with Disabilities Edu- cation Act. (20 U.S.C. 1070a-51) Enacted July 23, 1992, P.L. 102-325, sec. 402(a)(4), 106 Stat. 501; amended December 20, 1993, P.L. 103-208, sec. 2(b)(24), 107 Stat. 2459. SEC. 409B. EARLY AWARENESS INFORMATION PROGRAM. (a) PROGRAM AUTHORM.The Secretary is authorized to enter into contracts with appropriate public agencies, nonprofit private organizations, and institutions of higher education to conduct an information program designed (1) to broaden the early awareness of postsecondary edu- cational opportunities by secondary school students and their parents; and (2) to encourage economically disadvantaged, minority, or at-risk individuals to seek higher education, and to seek higher education and financial assistance counseling at public schools and libraries. (b) CONTENTS OF MESSAGES.Announcements and messages supported under this section (1) may be specially designed for students of limited Eng- lish proficiency, (2) shall publicize (A) the availability of Federal student assistance under this Act; (B) the importance of postsecondary education in long- term career planning; and (C) the need and necessity to complete a secondary education program successfully in order to meet the re- quirements for college. (c) INFORMING CONGRESS.The Secretary shall keep the appro- priate committees of the Congress informed with respect to the ef- forts made pursuant to this section and shall recommend any addi- tional legislative authority that will serve the purposes of this sec- tion. (20 U.S.C. 1070a-52) Enacted July 23, 1992, Pi. 102-325, sec. 402(a)(4), 106 Stat. 501. SEC. 409C. DATABASE AND INFORMATION LINE. There are authorized to be appropriated $20,000,000 for fiscal year 1993 and such sums as may be necessary for each of the 4 succeeding fiscal years to carry out this chapter. (20 U.S.C. 1070a-53) Enacted July 23, 1992, P.L. 102-325, sec. 402(a)(4), 106 Stat. 502. 7 a 67 HIGHER EDUCA110N ACT OF 1965 Sec. 410A CHAPTER 6-NATIONAL STUDENT SAVINGS DEMONSTRATION PROGRAM SEC. 410A. NATIONAL STUDENT SAVINGS DEMONSTRATION PROGRAM. (a) STATEMENT OF PURPOSE.It is the purpose of this section to (1) create a demonstration program to test the feasibility of establishing a national student savings program to encour- age families to save for their children's college education and thereby reduce the loan indebtedness of college students; and (2) help determine the most effective means of achieving the activities described in paragraph (1). (b) DEMONSTRATION PROGRAM AUTHORIZED. (1) IN GENERAL.The Secretary is authorized to award a demonstration grant to not more than 5 States to enable each such State to conduct a student savings program in accordance with this section. (2) AMOUNT OF GRANT.The amount of each grant award- ed pursuant to paragraph (1) shall be computed on the basis of (A) a Federal match in an amount equal to the initial State deposit into each account established pursuant to subsection (cX2XB), except that such Federal match shall not exceed $50 per child; multiplied by (B) the number of children participating in the pro- gram assisted under this part. (3) PRIORITY.In awarding grants under this section the Secretary shall give priority to States proposing programs that establish accounts for a child prior to the age of compulsory school attendance in the State in which such child resides. (4) SPECIAL CONSIDERATION.Ip awarding grants under this section the Secretary shall give special consideration to States (A) that permit employers to use pretax income in making contributions to a child's account; and (B) that provide assurances that interest earned in ac- counts shall be exempt from State taxes. (c) APPLICATION. (1) IN GENERAL.Each State desiring a grant under this section shall submit an application to the Secretary at such time, in such manner, and accompanied by such information as the Secretary may reasonably require. (2) CONTENTS.Each application submitted pursuant to paragraph (1) shall (A) describe the student savings program to be estab- lished and the number of children to be served; (B) contain assurances that an account shall be estab- lished for each child participating in the program assisted under this section and set forth the initial amount to be deposited into each such account by the State; (C) contain assurances that deposits into such account shall be invested in a responsible manner that provides a reasonable rate of return; 77 Sec. 410B HIGHER EDUCATION ACT OF 1965 68 (D) contain assurances that funds in the account shall only be used to pay the cost of attendance (as such term is defined in section 472) at any eligible institution (as such term is defined in section 481); (E) describe the amount of the Federal contribution re- quested for starting each child's account, which shall not exceed $50 per child participating in the program; (F) describe the age at which children in the State may establish such accounts; (G) indicate whether the program will be open to all children, regardless of family income, or only to disadvan- taged children; (H) describe how additional deposits into each account from the State or other resources will be earned by a child for performance of community service, academic perform- ance, or other activities or achievements; (I) contain assurances that contributions in an account shall be refundable to the contributor without interest if the child is unable to attend college; (J) contain assurances that the State shall encourage individuals and organizations to make contributions to a child's account; (K) contain assurances that the State shall provide in- centives to employers to make contributions to a child's ac- count and participate in the program assisted under this section; and (L) contain assurances that if a child leaves the State in which such child has an account, then such child shall retain the right to make contributions to the account, ex- cept that the State shall not be required to make any addi- tional deposits other than interest. (d) AUTHORIZATION OF APPROPRIATIONS.There are authorized to be appropriated $10,000,000 for fiscal year 1993 and such sums as may be necessary for each of the 4 succeeding fiscal years to carry out this section. (20 U.S.C. 1070a-61) Enacted July 23, 1992, P.L. 102-325, sec. 402(a)(4), 106 Stat. 502. CHAPTER 7-PREELIGIBILITY FORM' SEC. 410B. INFORMATION ON ELIGIBILITY FOR ASSISTANCE. To help ensure access to postsecondary education by providing early notice to students of their potential eligibility for financial aid, the Secretary, as part of the contracts developed pursuant to section 483, may (1) develop and process a common preeligibility Federal fi- nancial aid form, (2) distribute and process such form on a year-round basis free of charge to students and parents, and (3) issue, on the basis of information reported by the stu- dent on such form, a preeligibility expected family contribution 1 This section was previously designated as section 483(d) and was redesignated as chapter 7 by P.L. 102-325. 69 HIGHER EDUCATION ACT OF 1965 Sec. 410C figure and estimate of the amount of Federal (and, if feasible, non-Federal) funds for which the student might qualify in later completing and submitting the application form called for under section 483. The Secretary shall widely disseminate the preeligibility form through post offices and other appropriate Federal installations, schools, institutions of higher education, libraries, and community- based agencies, including projects assisted under subparts 2 and 5 of this part. (20 U.S.C. 1070a-71) Enacted July 23, 1992, P.L. 102-325, sec. 402(a)(4), 106 Stat. 503. CHAPTER 8-TECHNICAL ASSISTANCE FOR TEACHERS AND COUNSELORS SEC. 410C. TECHNICAL ASSISTANCE GRANTS. (a) PROGRAM AUTHORITY.From the amounts appropriated under subsection (0, the Secretary shall award grants to local edu- cational agencies to use for the purpose of' obtaining specialized training for guidance counselors, teachers, and principals to coun- sel students about college opportunities, precollege requirements, the college admissions procedure, and financial aid opportunities. (b) SELECTION OF GRANT RECIPIENTS. (1) PRIORITY.In making grants under this section, the Secretary shall give priority to those local educational agencies serving school districts (A) from which the proportion of stu- dents who continue on to higher education is significantly below the national average, and (B) in which the proportion of students who are educationally disadvantaged is significantly above the national average. (2) SELECTION PROCEDURES.The Secretary shall develop a formal procedure for the submission of proposals and publish in the Federal Register an announcement with respect to that procedure and the availability of funds. (c) LOCAL PLAN.To receive a grant under this section, a local educational agency shall submit to the Secretary a plan that (1) specifies the methods to be used for outreach, imple- mentation, and follow-up with those students most in need and at-risk for dropping out or failing to pursue postsecondary edu- cation; (2) demonstrates the methods by which the agency will target funds to those schools within the district that have the lowest rate of students who continue on to higher education; (3) utilizes early intervention programs for counseling mi- nority, economically disadvantaged, disabled, and at-risk stu- dents about postsecondary education; (4) includes a strategy for keeping the guidance counselors, teachers (including elementary, secondary, vocational, and spe- cial education teachers), and principals who have been trained up-to-date on fmancial aid information; (5) contains a statement of specific goals and methods for obtaining statistics on the number of participants who continue on to postsecondary education; and 7 3 Sec. 413A HIGHER EDUCATION ACT OF 1965 70 (6) contains a description of the costs of the training and other activities to be undertaken. (d) DURATION OF GRANTS.-Grants under this section shall be available for 2 years. (e) EVALUATION.- (1) CONDUCT OF EVALUATIONS.-The Secretary shall re- serve not more than 2 percent of arty amount appropriated under subsection (0 for the purpose of carrying out an inde- pendent evaluation of the effectiveness of the training pro- grams assisted under this section in- (A) increasing the number of personnel in a school who regularly counsel students regarding college opportu- nities, precollege requirements, the college admission pro- cedure, and financial aid opportunities; and (B) increasing the number of students who continue on to postsecondary education from a school which has had personnel trained using monies from this section. (2) REPORT.-The Secretary shall submit to the appro- priate committees of the Congress a report which contains the findings of the evaluation required by paragraph (1). (f) TECHNICAL ASSISTANCE GRANTS.-There are authorized to be appropriated $40,000,000 for fiscal year 1993 and such sums as may be necessary for each of the 4 succeeding fiscal years to carry out this section. (20 U.S.C. 1070a-81) Enacted July 23, 1992, P.L. 102-325, sec. 402(a)(4), 106 Stat. 504. SUBPART 3-FEDERAL SUPPLEMENTAL EDUCATIONAL OPPORTUNITY GRANTS SEC. 413A. PURPOSE; APPROPRIATIONS AUTHORIZED. (a) PURPOSE OF SUBPART.-It is the purpose of this subpart to provide, through institutions of higher education, supplemental grants to assist in making available the benefits of postsecondary education to qualified students who demonstrate financial need in accordance with the provisions of part F of this title. (b) AUTHORIZATION OF APPROPRIATIONS.-(1) For the purpose of enabling the Secretary to make payments to institutions of higher education which have made agreements with the Secretary in ac- cordance with section 413C(a), for use by such institutions for pay- ments to undergraduate students of supplemental grants awarded to them under this subpart, there are authorized to be appro- priated $675,000,000 for fiscal year 1993 and such sums as may be necessary for the 4 succeeding fiscal years. (2) Sums appropriated pursuant to this subsection for any fis- cal year shall be available for payments to institutions until the end of the second fiscal year succeeding the fiscal year for which such sums were appropriated. (20 U.S.C. 1070b) Enacted June 23, 1972, P.L. 92-318, sec. 131(b)(1), 86 Stat. 251, 252; amended October 12, 1976, P.L. 94-482, sec. 122(a), 90 Stat. 2094; amended October 3, 1980, P.L. 96-374, sec. 403, 1391, 94 Stat. 1404, 1405, 1503; amended October 17, 1986, P.L. 99-498, sec. 401(a), 100 Stat. 1328; amended July 23, 1992, P L. 102-325, sec. 403(b), 106 Stat. 505; amended December 20, 1993, P.L. 103-208, sec. 2(m), 107 Stat. 2486. a 0 71 HIGHER EDUCATION ACT OF 1965 Sec. 413C SEC. 413B. AMOUNT AND DURATION OFGRANTS. (a) AMOUNT OF GRANT.--(1) Except as provided in paragraph (3), from the funds received by it for such purpose under this sub- part, an institution which awards a supplemental grant to a stu- dent for an academic year under this subpart shall, for each year, pay to that student an amount not to exceed the lesser of (A) the amount determined by the institution, in accordance with the pro- visions of part F of this title, to be needed by that student to enable the student to pursue a course of study at the institution or in a program of study abroad that is approved for credit by the institu- tion at which the student is enrolled, or (B) $4,000. (2) If the amount determined under paragraph (I) with respect to a student for any academic year is less than $100, no payment shall be made to that student for that year. For a student enrolled for less than a full academic year, the minimum payment required shall be reduced proportionately. (3) For students participating in study abroad programs, the institution shall consider all reasonable costs associated with such study abroad when determining student eligibility. The amount of grant to be awarded in such cases may exceed the maximum amount of $4,000 by as much as $400 if reasonable study abroad costs exceed the cost of attendance at the home institution. (b) PERIOD FOR RECEIPT OF GRANTS; CONTINUING ELIGI- BILITY.(1) The period during which a student may receive supple- mental grants shall be the period required for the completion of the first undergraduate baccalaureate course of study being pursued by that student. (2) A supplemental grant awarded under this subpart shall en- title the student (to whom it is awarded) to payments pursuant to such grant only if the student meets the requirements of section 484, except as provided in section 413C(c). (c) DISTRIBUTION OF GRANT DURING ACADEMIC YEAR.Nothing in this section shall be construed to prohibit an institution from making payments of varying amounts from a supplemental grant to a student during an academic year to cover costs for a period which are not applicable to other periods of such academic year. (20 U.S.C. 1070b-1) Enacted June 23, 1972, P.L. 92-318, sec. 131(b)(1), 86 Stat. 252, 253; amended October 3, 1980, P.L. 96-374, sec. 403, 94 Stat. 1405; amended October 17, 1986, P.L. 99-498, sec. 301(a), 100 Stat. 1328; amended July 23, 1992, P.L. 102-325, sec. 403(c), 106 Stat. 505; amended December 20, 1993, P.L. 103-208, sec. 2(m), 107 Stat. 2486. SEC. 4I3C. AGREEMENTS WITH INSTITUTIONS; SELECTION OF RECIPI- ENTS. (a) INSTITUTIONAL ELIGIBILM.Assistance may be made available under this subpart only to an institution which (1) has, in accordance with section 487, an agreement with the Secretary applicable to this subpart; (2) agrees that the Federal share of awards under this sub- part will not exceed 75 percent of such awards, except that the Federal share may be exceeded if the Secretary determines, pursuant to regulations establishing objective criteria for such determinations, that a larger Federal share is required to fur- ther the purpose of this subpart; and S Sec. 413C HIGHER EDUCATION ACT OF 1966 72 except that the Federal share may be exceeded if the Secretary determines, pursuant to regulations establishing objective cri- teria for such determinations, that a larger Federal share is re- quired to further the purpose of this subpart; and (3) agrees that the non-Federal share of awards made under this subpart shall be made from the institution's own re- sources, including (A) institutional grants and scholarships; (B) tuition or fee waivers; (C) State scholarships; and (D) foundation oi other charitable organization funds. (b) ELIGIBILITY FOR SELECTION.Aviards may be made under this subpart only to a student who (1) is an eligible student under section 484; and (2) makes application at a time and in a manner consistent with the requirements of the Secretary and that institution. (C) SELECTION OF INDIVIDUALS AND DETERMINATION OF AMOUNT OF AWARDS.(1) From among individuals who are eligible for supplemental grants for each fiscal year, the institution shall, in accordance with the agreement under section 487, and within the amount allocated to the institution for that purpose for that year under section 413D, select individuals who are to be awarded such grants and determine, in accordance with section 413B, the amounts to be paid to them. (2XA) In carrying out paragraph (1) of this subsection, each in- stitution of higher education shall, in the agreement made under section 487, assure that the selection procedures (i) will be designed to award supplemental grants under this subpart, first, to students with exceptional need, and (ii) will give a priority for supplemental grants under this subpart to students who receive Pell Grants and meet the re- quirements of section 484. (B) For the purpose of subparagraph (A), the term "students with exceptional need" means students with the lowest expected family contributions at the institution. (d) USE OF FUNDS FOR LESS-THAN-FULL-TIME STUDENTS.If the institution's allocation under this subpart is directly or indi- rectly based in part on the financial need demonstrated by students who are independent students or attending the institution less than full time, a reasonable proportion of the institution's alloca- tion shall be made available to such students, except that if the total financial need of all such students attending the institution exceeds 5 percent of the need of all students attending such insti- tution, then at least 5 percent of such allotment shall be made available to such students. (e) USE AND TRANSFER OF FUNDS FOR ADMINISTRATIVE EX- PENSES.An agreement entered into pursuant to this section shall provide that funds granted to an institution of higher education may be used only to make payments to student§ participating in 'Effective July 1, 1994, section 2(b)(25XA) of the Higher Education Tehhnical Amendments of 1993 amends this subsection by striking ", a reasonable proportion of the institution's alloca- tion shall be made available to such students, except that" and inserting "and". Effective July 1, 1994, section 2(bX25)(13) of such Act also amends this subsection by striking "5 percent of the need" and inserting "5 percent of the total financial need". 8 2 72 HIGHER EDUCATION ACT OF 1965 Sec. 4130 a grant program authorized under this subpart, except that an in- stitution may use a portion of the sums allocated to it under this subpart to meet administrative expenses in accordance with section 489 of this title. (20 1070b-2) Enacted June 23, 1972, P.L. 92-318, sec. 131(b)(1), 86 Stat. 253, 254; amended October 12, 1976, P.L. 94-482, sec. 122(b), 90 Stat. 2094; amend- ed October 3, 1980, P.L. 96-374, sec. 403(d), 94 Stat. 1405; amended October 17, 1986, P.L. 99-498, sec. 401(a), 100 Stat. 1329; amended July 23, 1992, P.L. 102 325, sec. 403(d)(0, 106 Stat. 506; amended December 20, 1993, P.L. 103-208, sec. 2(b)(25), (m), 107 Stat. 2459, 2486. SEC. 413D. ALLOCATION OF FUNDS. (a) ALLOCATION BASED ON PREVIOUS ALLOCATION.(1) From the amount appropriated pursuant to section 413A(b) for each fis- cal year, the Secretary shall first allocate to each eligible institu- tion an amount equal to 100 percent of the amount such institution received and used under this subpart for fiscal year 1985. (2)(A) From the amount so appropriated, the Secretary shall next allocate to each eligible institution that began participation in the program under this subpart after fiscal year 1985 but is not a first or second time participant, an amount equal to the greater of (1) $5,000; or (ii) 90 percent of the amount received and used under this subpart for the first year it participated in the program. (B) From the amount so appropriated, the Secretary shall next allocate to each eligible institution that began participation in the program under this subpart after fiscal year 1985 and is a first or second time participant, an amount equal to the greatest of (i) $5,000; (ii) an amount equal to (I) 90 percent of the amount re- ceived and used under this subpart in the second preceding fis- cal year by eligible institutions offering comparable programs of instruction, divided by (II) the number of students enrolled at such comparable institutions in such fiscal year, multiplied by (III) the number of students enrolled at the applicant insti- tution in such fiscal year; or (iii) 90 percent of the institution's allocation under this part for the preceding fiscal year. (C) Notwithstanding subparagraphs (A) and (B) of this para- graph, the Secretary shall allocate to each eligible institution which (i) was a first-time participant in the program in fiscal year 1986 or any subsequent fiscal year, and (ii) received a larger amount under this subsection in the second year of participation, an amount equal to 90 percent of the amount it received under this subsection in its second year of participation. (3)(A) If the amount appropriated for any fiscal year is less than the amount required to be allocated to all institutions under paragraph (1) of this subsection, then the amount of the allocation to each such institution shall be ratably reduced. (B) If the amount appropriated for any fiscal year is more than the amount required to be allocated to all institutions under para- Sec. 413D HIGHER EDUCATION ACT OF 1965 74 graph (1) but less than the amount required to be allocated to all institutions under paragraph (2), then (i) the Secretary shall allot the amount required to be allo- cated to all institutions under paragraph (1), and (ii) the amount of the allocation to each institution under paragraph (2) shall be ratably reduced. (C) If additional amounts are appropriated for any such fiscal year, such reduced amounts shall be increased on the same basis as they were reduced (until the amount allocated equals the amount required to be allocated under paragraphs (1) and (2) of this subsection). (4)(A) Notwithstanding any other provision of this section, the Secretary may allocate an amount equal to not more than 10 per- cent of the amount by which the amount appropriated in any fiscal year to carry out this part exceeds $700,000,000 among eligible hi- stitutions described in subparagraph (B). (B) In order to receive an allocation pursuant to subparagraph (A) an institution shall be an eligible institution from which 50 per- cent or more of the Pell Grant recipients attending such eligible in- stitution graduate from or transfer to a 4-year institution of higher education. (b) ALLOCATION OF EXCESS BASED ON PRO RATA SHARE.From one-quarter of the remainder of the amount appropriated pursuant to section 413A(b) for any fiscal year (after making the allocations required by subsection (a)), the Secretary shall allocate to each eli- gible institution an amount which bears the same ratio to such one-quarter as the amount the eligible institution receives for such fiscal year under subsection (a) bears to the amount all such insti- tutions receive under such subsection (a). (c) ALLOCATION OF EXCESS BASED ON FAIR SHARE.(1) From three-quarters of the remainder of the amount appropriated pursu- ant to section 413A(b) for each year (after making the allocations required by subsection (a)), the Secretary shall allocate to each eli- gible institution which has an excess eligible amount an amount which bears the same ratio to such remainder as such excess eligi- ble amount bears to the sum of the excess eligible amounts of all such eligible institutions (having such excess eligible amounts). (2) For any eligible institution, the excess eligible amount is the amount, if any, by which-- (A)(i) the amount of that institution's need (as determined under subsection (d)), divided by (ii) the sum of the need of all institutions (as so determined), multiplied by (iii) the amount appropriated pursuant to section 413A(b) of the fiscal year; ex- ceeds(B) the amount required to be allocated to that institution under subsection (a). (d) DETERMINATION OF INSTITUTION'S NEED.(1) The amount of an institution's need is equal to (A) the sum of the need of the institution's eligible under- graduate students; minus (B) the sum of grant aid received by students under sub- parts 1 and 3 of this part. (2) To determine the need of an institution's eligible under- graduate students, the Secretary shall 75 HIGHER EDUCATION ACT OF 1965 Sec. 413D (A) establish various income categories for dependent and independent undergraduate students; (3) establish an expected family contribution for each in- come category of dependent and independent undergraduate students, determined on the basis of the average expected fam- ily contribution (computed in accordance with part F of this title) of a representative sample within each income category for the second preceding fiscal year; (C) compute 75 percent of the average cost of attendance for all undergraduate students; (D) multiply the number of eligible dependent students in each income category by 75 percent of the average cost of at- tendance for all undergraduate students determined under subparagraph (C), minus the expected family contribution de- termined under subparagraph (B) for that income category, ex- cept that the amount computed by such subtraction shall not be less than zero; (E) add the amounts determined under subparagraph (D) for each income category of dependent students; (F) multiply the number of eligible independent students in each income category by 75 percent of the average cost of attendance for all undergraduate students determined under subparagraph (C), minus the expected family contribution de- termined under subparagraph (B) for that income category, ex- cept that the amount computed by such subtraction shall not be less than zero; (G) add the amounts determined under subparagraph (F) for each income category of independent students; and (H) add the amounts determined under subparagraphs CE) and (G). (3)(A) For purposes of paragraph (2), the term "average cost of attendance" means the average of the attendance costs for under- graduate students which shall include (i) tuition and fees deter- mined in accordance with subparagraph (B), (ii) standard living ex- penses determined in accordance with subparagraph (C), and (iii) books and supplies determined in accordance with subparagraph (D). (B) The average undergraduate tuition and fees described in subparagraph (A)(i) shall be computed on the basis of information reported by the institution to the Secretary, which shall include (i) total revenue received by the institution from undergraduate tui- tion and fees for the second year preceding the year for which it is applying for an allocation, and (ii) the institution's enrollment for such second preceding year. (C) The standard living expense described in subparagraph (A)(ii) is equal to 150 percent of the difference between the income protection allowance for a family of five with one in college and the income protection allowance for a family of six with one in college for a single independent student. (D) The allowance for books and supplies described in subpara- graph (A)(iii) is equal to $450. (e) REALLOCATION OF EXCESS ALLOCATIONS.-(1) If an institu- tion returns to the Secretary any portion of the sums allocated to such institution under this section for any fiscal year the Secretary r, Sec. 415B HIGHER EDUCATION ACT OF 1965 76 shall, in accordance with regulations, reallocate such excess to other institutions. (2) If under paragraph (1) of this subsection an institution re- turns more than 10 percent of its allocation, the institution's alloca- tion for the next fiscal year shall be reduced by the amount re- turned. The Secretary may waive this paragraph for a specific in- stitution if the Secretary finds that enforcing this paragraph would be contrary to the interest of the _program. (f) FILING DEADLINES.-The Secretary shall, from time to time, set dates before which institutions must file applications for alloca- tions under this part. (20 U.S.C. 1070b-3) Enacted June 23, 1972, P.L. 92-318, sec. 131(b)(1), 86 Stat. 254, 255; amended October 3, 1980, P.L. 96-374, sec. 403, 1351, 94 Stat. 1405, 1503; amended October 17, 1986, P.L. 99-498, sec. 401(a), 100 Stat. 1330; amended June 3, 1987, P.L. 100-50, sec. 4, 101 Stat. 340; amended July 23, 1992, P.L. 102-325, sec. 403(g), 106 Stat. 506; amended December 20, 1993, P.L. 103-208, sec. 2(b)(26), (m), 107 Stat. 2459, 2486. SUBPART 4-GRANTS TO STATES FOR STATE STUDENT INCENTIVES SEC. 415A. PURPOSE; APPROPRIATIONS AUTHORITED. (a) PURPOSE OF SUBPART.-It is the purpose of this subpart to make incentive grants available to States to assist States in provid- ing grants to- (1) eligible students attending institutions of higher edu- cation or participating in programs of study abroad that are approved for credit by institutions of higher education at which such students are enrolled; and (2) eligible students for campus-based community service work-study. (b) AUTHORIZATION OF APPROPRIATIONS; AVAILABILITY.- (1) IN GENERAL.-There are authorized to be appropriated $105,000,000 for fiscal year 1993, and such sums as may be necessary for each of the 4 succeeding fiscal years. (2) AVAILABILITY.-Sums appropriated pursuant to the au- thority of paragraph (1) for any fiscal year shall remain avail- able for payments to States under this subpart until the end of the fiscal year succeeding the fiscal year for which such sums were appropriated. (20 U.S.C. 1070c) Enacted June 23, 1972, PI, 92-318, sec. 131(b)(1), 86 Stat. 255, 256; amended October 12, 1976, P.L. 94-482, sec. 123(a) and 123(c)(1), 90 Stat. 2094; amended June 15, 1977, 95-43, sec. 1(b)(3), 91 Stat. 218; amended October 3, 1980, P.L. 96-374, sec. 404(a), 94 Stat. 1406; amended October 17, 1986, P.L. 99- 498, sec. 401(a), 100 Stat. 1332; amended July 23, 1992, P.L. 102-325, sec. 404(a), 106 Stat. 506; amended December 20, 1993, P.L. 103-208, sec. 2(m), 107 Stat. 2486. SEC. 4I5B. ALLOTMENT AMONG STATES. (a) ALLOTMENT BASED ON NUMBER OF ELIGIBLE STUDENTS IN ATTENDANCE.-(1) From the sums appropriated pursuant to section 415A(b)(1) for any fiscal year, the Secretary shall allot to each State an amount which bears the same ratio to such sums as the number of students who are deemed eligible in such State for par- ticipation in the grant program authorized by this subpart bears to the total number cri such students in all the States, except that no State shall receive less than the State received for fiscal year 1979. (2) For the purpose of this subsection, the number of students who are deemed eligible in a State for participation in the grant HIGHER EDUCATION ACT OF 1965 Sec. 415C program authorized by this subpart, and the number of such stu- dents in all the States, shall be determined for the most recent year for which satisfactory data are available. (b) REALLOTMENT.The amount of any State's allotment under subsection (a) for any fiscal year which the Secretary determines will not be required for such fiscal year for the State student grant incentive program of that State shall be available for reallotment from time to time, on such dates during such year as the Secretary may fix, to other States in proportion to the original allotments to such States under such part for such year, but with such propor- tionate amount for any of such States being reduced to the extent it exceeds the sum the Secretary estimates such State needs and will be able to use for such year for carrying out the State plan. The total of such reductions shall be similarly reallotted among the States whose proportionate amounts were not so reduced. Any amount reallotted to a State under this part during a year from funds appropriated pursuant to section 415A(b)(1) shall be deemed part of its allotment under subsection (a) for such year. CC) ALLOTMENTS SUBJECT TO CONTINUING COMPLIANCE.The Secretary shall make payments for continuing incentive grants only to States which continue to meet the requirements of section 415C(b). (20 U.S.C. 1070c-1) Enacted June 23, 1972, P.L. 92-318, sec. 131(b)(1), 86 Stat. 256; amended October 12, 1976, P.L. 94-482, sec. 123(c)(2), 90 Stat. 2094; amended October 3, 1980, P.L. 96-374, sec. 404(b), 1397, 94 Stat. 1407, 1503; amended Octo- ber 17, 1986, P.L. 99-498, sec. 401(a), 100 Stat. 1333; amended December 20, 1993, P.L. 103-208, sec. 2(m), 107 Stat. 2486. SEC. 4I5C. APPLICATIONS FOR STATE STUDENT INCENTIVE GRANT PROGRAMS. (a) SUBMISSION AND CONTENTS OF APPLICATIONS.A State which desires to obtain a payment under this subpart for any fiscal year shall submit annually an application therefor through the State agency administering its program under this subpart as of July 1, 1985, unless the Governor of that State so designates, in writing, a different agency to administer the program. The applica- tion shall contain such information as may be required by, or pur- suant to, regulation for the purpose of enabling the Secretary to make the &terminations required under this subpart. (b) PAYMENT OF FEDERAL SHARE OF GRANTS MADE BY QUALI- FIED PROGRAM.From a State's allotment under this subpart for any fiscal year the Secretary is authorized to make payments to such State for paying up to 50 percent of the amount of student grants pursuant to a State program which (1) is administered by a single State agency; (2) provides that such grants will be in amounts not in ex- cess of $5,000 per academic year (A) for attendance on a full- time basis at an institution of higher education, and (B) for campus-based community service work learning study jobs; (3) provides that (A) not more than 20 percent of the allotment to the State for each fiscal year may be used for the purpose de- scribed in paragraph (2)(B); 8 7 Sec. 415C HIGHER EDUCATION ACT OF 1965 78 (B) grants for the campus-based community work learning study jobs may be made only to students who are otherwise eligible for assistance under this subpart; and (C) grants for such jobs be made in accordance with the provisions of section 443(b)(1); (4) provides for the selection of recipients of such grants or of such State work-study jobs on the basis of substantial finan- cial need determined annually on the basis of criteria estab- lished by the State and approved by the Secretary, except that for the purpose of collecting data to make such determmation of financial need, no student or parent shall be charged a fee that is payable to an entity other than such State; (5) provides that, effective with respect to any academic year beginning on or after October 1, 1978, all nonprofit insti- tutions of higher education in the State are eligible to partici- pate in the State program, except in any State in which par- ticipation of nonprofit institutions of higher education is in vio- lation of the constitution of the State or in any State in which participation of nonprofit institutions of higher education is in violation of a statute of the State which was enacted prior to October 1, 1978; (6) provides for the payment of the non-Federal portion of such grants or of such work-study jobs from funds supplied by such State which represent an additional expenditure for such year by such State for grants or work-study jobs for students attending institutions of higher education over the amount ex- pended by such State for such grants or work-study jobs, if any, during the second fiscal year preceding the fiscal year in which such State initially received funds under this subpart; (7) provides that if the State's allocation under this sub- part is based in part on the financial need demonstrated by students who are independent students or attending the insti- tution less than full time, a reasonable proportion of the State's allocation shall be made available to such students; (8) provides for State expenditures under such program of an amount not less than the average annual aggregate expend- itures for the preceding three fiscal years or the average an- nual expenditure per full-time equivalent student for such years;(9) provides (A) for such fiscal control and fund accounting procedures as may be necessary to assure proper disbursement of and accounting for Federal funds paid to the State agency under this subpart, and (B) for the making of such reports, in such form and containing such information, as may be reason- ably necessary to enable the Secretary to perform his functions under this subpart; and (10) for any academic year beginning after June 30, 1987, provides the non-Federal share of the amount of student grants or work-study jobs under this subpart through a direct appropriation of State funds for the program under this sub- part. (c) RESERVATION AND DISBURSEMENT OF ALLOTMENTS AND REALLOTMENTS.Upon his approval of any application for a pay- ment under this subpart, the Secretary shall reserve from the ap- 79 HIGHER EDUCATION ACT OF 1965 Sec. 415D plicable allotment (including any applicable reallotment) available therefor, the amount of such payment, which (subject to the limits of such allotment or reallotment) shall be equal to the Federal share of the cost of the students' incentive grants or work-study jobs covered by such application. The Secretary shall pay such re- served amount, in advance or by way of reimbursement, and in such installments .as the Secretary may determine. The Secretary may amend the reservation of any amount under this section, ei- ther upon approval of an amendment of the application or upon re- vision of the estimated cost of the student grants or work-study jobs with respect to which such reservation was made. If the Sec- retary approves an upward revision of such estimated cost, the Sec- retary may reserve the Federal share of the added cost only from the applicable allotment (or reallotment) available at the time of such approval. (20 U.S.C. 1070c-2) Enacted June 23, 1972, P.L. 92-318, sec. 131(b)(1), 86 Stat. 256, 257; amended October 12, 1976, P.L. 94-482, sec. 123(b), 90 Stat. 2094; amend- ed June 15, 1977, P.L. 95-43, sec. 1(a)(6), 91 Stat. 213; amended November 1, 1978, P.L. 95-566, sec. 3, 92 Stat. 2403; amended October 3, 1980, P.L. 96-374, sec. 404(c), 1391, 94 Stat. 1407, 1503; amended October 17, 1986, P.L. 99-498, sec. 401(a), 100 Stat. 1333; amended July 23, 1992, P.L. 102-325, sec. 404(b)-(d), 106 Stat. 507; amended December 20, 1993, P.L. 103-208, sec. 2(6)(27), (m), 107 Stat. 2459, 2486. SEC. 415D. ADMLNISTRATION OF STATE PROGRAMS; JUDICIAL RE- VIEW. (a) DISAPPROVAL OF APPLICATIONS; SUSPENSION OF ELIGI- BILITY.-(1) The Secretary shall not finally disapprove any applica- tion for a State program submitted under section 415C, or any modification thereof, without first affording the State agency sub- mitting the program reasonable notice and opportunity for a hear- ing. (2) Whenever the Secretary, after reasonable notice and oppor- tunity for hearing to the State agency administering a State pro- gram approved under this subpart, finds- (A) that the State program has been so changed that it no longer complies with the provisions of this subpart, or (B) that in the administration of the program there is a failure to comply substantially with any such provisions, the Secretary shall notify such State agency that the State will not be regarded as eligible to participate in the program under this subpart until he is satisfied that there is no longer any such failure to comply. (b) REVIEW OF DECISIONS.-(1) If any State is dissatisfied with the Secretary's final action with respect to the approval of its State program submitted under this subpart or with his final action under subsection (a), such State may appeal to the United States court of appeals for the circuit in which such State is located. The summons and notice of appeal may be served at any place in the United States. The Commissioner shall forthwith certify and file in the court the transcript of the proceedings and the record on which he based his action. (2) The findings of fact by the Secretary, if supported by sub- stantial evidence, shall be conclusive; but the court, for good cause shown, may remand the case to the Secretary to take further evi- dence, and the Secretary may thereupon make new or modified F.- 9 Sec. 415E HIGHER EDUCATION ACT OF 1965 80 findings of fact and may modify his previous action, and shall cer- tify to the court the transcript and record of further proceedings. Such new or modified findings of fact shall likewise be conclusive if supported by substantial evidence. (3) The court shall have jurisdiction to affirm the action of the Secretary or to set it aside, in whole or in part. The judgment of the court shall be subject to review by the Supreme Court of the United States upon certiorari or certification as provided in title 28, United States Code, section 1254. (20 U.S.C. 1070c-3) Enacted June 23, 1972, P.L. 92-318, sec. 131(b)(1), 86 Stat. 257, 258; amended October 3, 1980, P.L. 96-374, sec. 1391, 94 Stat. 1503; amended October 17, 1986, P.L. 99-498, sec. 401(a), 100 Stat. 1335; amended December 20, 1993, P.L. 103-208, sec. 2(m), 107 Stat. 2486. SEC. 415E. DEFINITION. For the purpose of this subpart, the term "community service" means services, including direct service, planning, and applied re- search which are identified by an institution of higher education, through formal or informal consultation with local nonprofit, gov- ernmental, and community-based organizations, and which (1) are designed to improve the quality of life for commu- nity residents, particularly low-income individuals, or to solve particular problems related to the needs of such residents, in- cluding but not limited to, such fields as health care, child care, education, literacy training, welfare, social services, pub- lic safety, crime prevention and control, transportation, recre- ation, housing and neighborhood improvement, rural develop- ment, and community improvement; and (2) provide participating students with work-learning op- portunities related to their educational or vocational programs or goals. (20 U.S.C. 1070c-4) Enacted October 17, 1986, P.L. 99-498, sec. 401(a), 100 Stat. 1336; amended June 3, 1987, P.L. 100-50, sec. 5, 101 Stat. 340; amended December 20, 1993, P.L. 103-208, sec. 2(m), 107 Stat. 2486. SUBPART 5SPECIAL PROGRAMS FOR STUDENTS WHOSE FAMILIES ARE ENGAGED IN MIGRANT AND SEASONAL FARMWORK SEC. 418L MAINTENANCE AND EXPANSION OF EXISTING PROGRAMS. (a) PROGRAM AUTHORITY.The Secretary shall maintain and expand existing secondary and postsecondary high school equiva- lency program and college assistance migrant program projects lo- cated at institutions of higher education or at private nonprofit or- ganizations working in cooperation with institutions of higher edu- cation. (b) SERVICES PROVIDED BY HIGH SCHOOL EQUIVALENCY PRO- GRAM.The services authorized by this subpart for the high school equivalency program include (1) recruitment services to reach persons (A)(i) who are 16 years of age and over; or (ii) who are beyond the age of compulsory school at- tendance in the State in which such persons reside and are not enrolled in school; (B)(i) who themselves, or whose parents, have spent n minimum of 75 days during the past 24 months in migrant and seasonal farmwork; or o 81 HiGHER EDUCATION ACT OF 1965 Sec. 418A (ii) who are eligible to participate, or have participated within the preceding 2 years, in programs under subpart 1 of part D of chapter 1 of title I of the Elementary and Secondary Education Act of 1965 or section 402 of the Job Training Partnership Act; and (C) who lack a -high school diploma or its equivalent; (2) educational services which provide instruction designed to help students obtain a general education diploma which meets the guidelines established by the State in which the project is located for high school equivalency; (3) supportive services which include the following: (A) personal, vocational, and academic. counseling; (B) placement services designed to place students in a university, college, or junior college program, or in military service or career positions; and (C) health services; (4) information concerning, and assistance in obtaining, available student financial aid; (5) weekly stipends for high school equivalency program participants; (6) housing for those enrolled in residential programs; (7) exposure to cultural events, academic programs, and other educational and cultural activities usually not available to migrant youth; and (8) other essential supportive services, as needed to ensure the success of eligible students. (c) SERVICES PROVIDED BY COLLEGE ASSISTANCE MIGRANT PRO- GRAM.-(1) Services authorized by this subpart for the college as- sistance migrant program include (A) outreach and recruitment services to reach persons who themselves or whose parents have spent a minimum of 75 days during the past 24 months in migrant and seasonal farm- work or who have participated or are eligible to participate, in programs under subpart 1 of part D of chapter 1 of title I of the Elementary and Secondary Education Act of 1965 or sec- tion 402 of the Job Training Partnership Act, and who meet the minimum qualifications for attendance at a college or uni- versity; (B) supportive and instructional services which include: (i) personal, academic, and career counseling as an on- going part of the program; (ii) tutoring and academic skill building instruction and assistance; (iii) assistance with special admissions; (iv) health services; and (v) other services as necessary to assist students in completing program requirements; (C) assistance in obtaining student financial aid which in- cludes, but is not limited to: (i) stipends; (ii) scholarships; (iii) student travel; (iv) career oriented work study; (v) books and supplies; Sec. 418A HIGHER EDUCATION ACT OF 1965 82 (vi) tuition and fees; (vii) room and board; and (viii) other assistance necessary to assist students in completing their first year of college; (D) housing support for students living in institutional fa- cilities and commuting students; (E) exposure to cultural events, academic programs, and other activities not usually available to migrantyouth; and (F) other support services as necessary to ensure the suc- cess of eligible students. (2) A recipient of a grant to operate a college assistance mi- grant program under this subpart shall provide followup services for migrant students after such students have completed their first year of college, and shall not use more than 10 percent of such grant for such followup services. Such followup services may include(A) monitoring and reporting the academic progress of stu- dents who participated in the project during such student's first year of college and during such student's subsequent years in college; and (B) referring such students to on- or off-campus providers of counseling services, academic assistance, or financial aid. (d) MANAGEMENT PLAN REQUIRED.Each project application shall include a management plan which contains assurances that staff shall have a demonstrated knowledge and be sensitive to the unique characteristics and needs of the migrant and seasonal farm- worker population, and provisions for: (1) staff in-service training; (2) training and technical assistance; (3) staff travel; (4) student travel; (5) interagency coordination; and (6) an evaluation plan. (e) FIVE-YEAR GRANT PERIOD; CONSIDERATION OF PRIOR EXPE- RIENcE,Except under extraordinary circumstances, the Secretary shall award grants for a 5-year period. For the purpose of making grants under this subpart, the Secretary shall consider the prior experience of service delivery under the particular project for which funds are sought by each applicant. Such prior experience shall be awarded the same level of consideration given this factor for appli- cants for programs authorized by subpart 4 of this part in accord- ance with section 417A(b)(2). (0 MINIMUM ALLOCATIONS.The Secretary shall not allocate an amount less than (1) $150,000 for each project under the high school equiva- lency program, and (2) $150,000 for each project under the college assistance migrant program. (g) AUTHORIZATION OF APPROPRIATIONS.(1) There are author- ized to be appropriated for the high school equivalency program $15,000,000 for fiscal year 1993 and such sums as may be nec- essary for each of the 4 succeeding fiscal years. 9 2 83 HIGHER EDUCATION ACT OF 1965 Sec. 419C (2) There are authorized to be appropriated for the college as- sistance re igrant program $5,000,000 for fiscal year 1993 and such sums as may be necessary for each of the 4 succeeding fiscal years. (20 U.S.C. 1070d-2) Enacted October 3, 1980, P.L. 96-374, sec. 406, 94 Stat. 1411; amended October 17, 1986, P.L. 99-498, sec. 401(a), 100 Stat. 1341; amended June 3, 1987, P.L. 100-50, sec. 7, 101 Stat. 340; amended July 23, 1992, P.L. 102-325, sec. 405, 106 Stat. 507; amended December 20, 1993, P.L. 103-208, sec. 2(m), 107 Stat. 2486. SUBPART 6-ROBERT C. BYRD HONORS SCHOLARSHIP PROGRAM SEC. 419A. STATEMENT OF PURPOSE. It is the purpose of this subpart to establish a Robert C. Byrd Honors Scholarship Program to promote student excellence and achievement and to recognize exceptionally able students who show promise of continued excellence. (20 U.S.C. 1070d-31) Enacted October 30, 1984, P.L. 98-558, sec. 801(a), 98 Stat. 2900; amended Nov. 8, 1985, P.L. 99-145, sec. 1627(a), 99 Stat. 779; amended Octo- ber 17, 1986, P.L. 99-498, sec. 401(a), 100 Stat. 1343; amended December 20, 1993, P.L. 103-208, sec. 2(m), 107 Stat. 2486. [Section 419B was repealed by P.L. 102-325, sec. 406(a), 106 Stat. 508.1 SEC. 419C. SCHOLARSHIPS AUTHORIZED. (a) PROGRAM AUTHORITY.-The Secretary is authorized, in ac- cordance with the provisions of this subpart, to make grants to States to enable the States to award scholarships to individuals who have demonstrated outstanding academic achievement and who show promise of continued academic achievement. (b) PERIOD OF ANVARD.-Scholarships under this section shall be awarded for a period of not less than 1 or more than 4 years during the first 4 years of study at any institution of higher edu- cation eligible to participate in any programs assisted under this title. The State educational agency administering the program in a State shall have discretion to determine the period of the award (within the limits specified in the preceding sentence), except that- (1) if the amount appropriated for this subpart for any fis- cal year exceeds the amount appropriated for this subpart for fiscal year 1993, the Secretary shall identify to each State edu- cational agency the number of scholarships available to that State under section 419D(b) that are attributable to such ex- cess; 1 (2) the State educational agency shall award not less than that number of scholarships for a period of 4 years. (c) USE AT ANY INSTITUTION PERMITTED.-A student awarded a scholarship under this subpart may attend any institution of high- er education. (d) BYRD SCHOLARS.-Individuals awarded scholarships under this subpart shall be known as "Byrd Scholars". (20 U.S.C. 1070d-33) Enacted October 30, 1984, P.L. 98-558, sec, 801(a), 98 Stat. 2900; amended Nov. 8, 1985, P.L. 99-145, sec. 1627(b), 99 Stat. 779; amended Octo- ber 17, 1986, P.L. 99-498, sec. 401(a), 100 Stat. 1344; amended July 23, 1992, P.L. ' So in law. Probably ahould end with "; and" Sec. 419D HIGHER EDUCATION ACT OF 1965 84 102-325, sec. 406(b), 106 Stat. 508; amended December 20, 1993, P.L. 103-208, sec. 2(b)(28), (m), 107 Stat. 2459-2460, 2486. SEC. 419D. ALLOCATION AMONG STATES. (a) ALLOCATION PORMULA.-From the sums appropriated pur- suant to the authority of section 419K for any fiscal year, the Sec- retary shall allocate to each State that has an agreement under section 419E an amount equal to $1,500 multiplied by the number of scholarships determined by the Secretary to be available to such State in accordance with subsection (b). (b) NUMBER OF SCHOLARSHIPS AVAILABLE.-The number of scholarships to be made available in a State for any fiscal year shall bear the same ratio to the number of scholarships made avail- able to all States as the State's population ages 5 through 17 bears to the population ages 5 through 17 in all the States, except that not less than 10 scholarships shall be made available to any State. (c) USE OF CENSUS DATA.-For the purpose of this section, the population ages 5 through 17 in a State and in all the States shall be determined by the most recently available data, satisfactory to the Secretary, from the Bureau of the Census. (d) CONSOLIDATION BY INSULAR AREAS PROHIBITED.-Notwith- standing section 501 of Public Law 95-1134 (48 U.S.C. 1469a), funds allocated under this part to an Insular Area described in that section shall be deemed to be direct payments to classes of individ- uals, and the Insular Area may not consolidate such funds with other funds rec:Aved by the Insular Area from any department or agency of the United States Government. (20 U.S.C. 1070d-34) Enacted October 30, 1984, P.L. 98-558, sec. 801(a), 98 Stat. 2901; amended October 17, 1986, P.L. 99-498, sec. 401(a), 100 Stat. 1344; amended July 23, 1992, P.L. 102-325, sec. 406(c), 106 Stat. 509; amended December 20, 1993, P.L. 103-208, sec. 2(b)(29), (m), 107 Stat. 2460, 2486. SEC. 419E. AGREEMENTS. The Secretary shall enter into an agreement with each State desiring to participate in the scholarship program authorized by this subpart. Each such agreement shall include provisions de- signed to assure that- (1) the State educational agency will administer the schol- arship program authorized by this subpart in the State; (2) the State educational agency will comply with the eligi- bility and selection provisions of this subpart; (3) the State educational agency will conduct outreach ac- tivities to publicize the availability of scholarships under this subpart to all eligible students in the State, with particular emphasis on activities designed to assure that students from low-income and moderate-income families have access to the information on the opportunity for full participation in the scholarship program authorized by this subpart; and (4) the State educational agency will pay to each individ- ual in the State who is awarded a scholarship under this sub- part $1,500. (20 U.S.C. 1070d-35) Enacted October 30, 1984, Pl. 98-558, sec. 801(a), 98 Stat. 2901; amended Nov. 8, 1985, P.L. 99-145, sec. 1627(c), 99 Stat. 779; amended Octo- ber 17, 1986, P.L. 99-498, sec. 401(a), 100 Stat. 1344; amended July 23, 1992, P.L. 102-325, sec. 406(g)(2), 106 Stat. 509; amended December 20, 1993, P.L. 103-208, sec. 2(m), 107 Stat. 2486. 94 4. . 85 HIGHER EDUCKRON ACT OF 1965 Sec. 419H SEC. 419F. ELIGIBILITY OF SCHOLARS. (a) HIGH SCHOOL GRADUATION OR EQUIVALENT AND-ADMISSION TO INSTITUTION REQUIRED.-Each student awarded a scholarship under this subpart shall be a graduate of a public or private sec- ondary school or have the equivalent of a certificate of graduation as recognized by the State in which the student resides and must have been admitted for enrollment at an institution of higher edu- cation. (b) SELECTION BASED ON PROMISE OF ACADEMIC ACHIEVE- MENT.-Each student awarded a scholarship under this subpart must demonstrate outstanding academic achievement and show promise of continued academic achievement. (20 U.S.C. 1070(1-36) Enacted October 30, 1984, P.L. 98-558, sec. 801(a), 98 Stat. 2901; amended October 17, 1986, P.L. 99-498, sec. 401(a), 100 Stat. 1344; amended December 20, 1993, P.L. 103-208, sec. 2(m), 107 Stat. 2486. SEC. 419G. SELECTION OF SCHOLARS. (a) ESTABLISHMENT OF CRITERIA.-The State educational agen- cy is authorized to establish the criteria for the selection of scholars under this subpart. (b) ADOPTION OF PROCEDURES.-The State educational agency shall adopt selection procedures designed to ensure an equitable geographic distribution of awards within the State (and in the case of the F'ederated States of Micronesia, the Republic of the Marshall Islands, the Virgin Islands, American Samoa, the Commonwealth of the Northern 'Mariana Islands, Guam, or Palau (until such time as the Compact of Free Association is ratified), not to exceed 10 in- dividuals will be selected from such entities). (c) CONSULTATION REQUIREMENT.-In carrying out its respon- sibilities under subsections (a) and (b), the State educational agen- cy shall consult with school administrators, school boards, teachers, counselors, and parents. kr1) TIMING OF SELECTION.-The selection process shall be com- pleted, and the awards made, prior to the end of each secondary school academic year. (20 U.S.C. 1070d-37) Enacted October 30, 1984, P.L. 98-558, sec. 801(a), 98 Stat. 2901; amended October 17, 1986, P.L. 99-498, sec. 401(a), 100 Stat. 1345; amended July 23, 1992, P.L. 102-325, sec. 406(d), 106 Stat. 509; amended December 20, 1993, P.L. 103-208, sec. 2(b)(30), (in), 107 Stat. 2460, 2486. SEC. 4190. STIPENDS AND SCHOLARSHIP CONDITIONS. (a) AMOUNT OF AWARD.-Each student awarded a scholarship under this subpart shall receive a stipend of $1,500 for the aca- demic year of study for which the scholarship is awarded, except that in no case shall the total amount of financial aid awarded to such student exceed such student's total cost-of-attendance. (b) USE OF AWARD.-The State educational agency shall estab- lish procedures to assure that a scholar awarded a scholarship under this subpart pursues a course of study at an institution of higher education. (20 U.S.C. 1070d-38) Enacted October 30, 1984, P.L. 98-558, sec. 801(a), 98 Stat. 2902; amended October 17, 1986, P.L. 99-498, sec. 401(a), 100 Stat. 1345; amended July 23, 1992, P.L. 102-325, sec. 406(e), 106 Stat. 509; amended December 20, 1993, P.L. 103-208, sec. 2(m), 107 Stat. 2486. Q45 Sec. 419J HIGHER EDUCATION ACT OF 1965 86 SEC. 4I9J.1 CONSTRUCTION OF NEEDS PROVISIONS. Except as provided in section 471, nothing in this subpart, or any other Act, shall be construed to permit the receipt of a scholar- ship under this subpart to be counted for any needs test in connec- tion with the awarding of any grant or the making of any loan under this Act or any other provision of Federal law relating to educational assistance. (20 U.S.C. 1070d-40) Enacted October 30, 1984, P.L. 98-558, sec. 801(a), 98 Stat. 2902; amended October 17, 1986, P.L. 99-498, sec. 401(a), 100 Stat. 1345; amended July 23, 1992, 13,L. 102-325, sec. 406(f), 106 Stat. 509; amended December 20, 1993, P.L. 103-208, sec. 2(m), 107 Stat. 2486. SEC. 419K AUTHORIZATION OF APPROPRIATIONS. There are authorized to be appropriated for this subpart $10,000,000 for fiscal year 1993 and such sums as may be nec- essary for each of the 4 succeeding fiscal years. (20 U.S.C. 1070d-41) Enacted October 30, 1984, P.L. 98-558, sec. 801(a), 98 Stat. 2902; amended October 17, 1986, P.L. 99-498, sec. 401(a), 100 Stat. 1346; amended July 23, 1992, P.L. 102-325, sec. 406(h), 106 Stat. 509; amended December 20, 1993, P.L. 103-208, sec. 2(m), 107 Stat. 2486. SUBPART 7 2-ASSISTANCE TO INSTITUTIONS OF HIGHER EDUCATION SUBPART 8-SPECIAL CHILD CARE SERVICES FOR DISADVANTAGED COLLEGE STUDENTS SEC. 420E. SPECIAL CHILD CARE SERVICES FOR DISADVANTAGED COLLEGE STUDENTS. (a) PROGRAM AUTHORITY.-Funds appropriated pursuant to subsection (c) shall be used by the Secretary to make grants to in- stitutions of higher education to provide special child care services to disadvantaged students. (b) APPLICATIONS.-Any institution wishing to receive a grant under this section shall submit an application to the Secretary. Such application shall include- (1) a description of the program to be established; (2) assurances by the applicant to the Secretary that- (A) not less than two-thirds of the participants in the program are low-income individuals; (B) the participants require the services to pursue suc- cessfully a program of education beyond high school; (C) the participants are enrolled at the institution which is the recipient of the grant; (D) all participants will receive sufficient assistance (under this subpart, other provisions of this title, or other- wise) to meet that student's full financial need for child care services related to such enrollment; and (E) the institution will meet such need of participants by providing child care through vouchers, contracted serv- ices, or direct provision of services; and (3) such information (and meet such conditions) as may be required by the Secretary. Section 4191 was repealed by P.L. 102-325, sec. 406(01), 106 Stat. 509. 2Section 420 was repealed by P.L. 102-325, sec. 407, 106 Stat. 610; and section 420A was repealed by P.L. 102-326, sec. 408, 106 Stat 510. G 87 HIGHER EDUCATION ACT OF 1965 Sec. 421 (C) AUTHORIZATION OF APPROPRIATIONS.There are authorized to be appropriated to carry out the purpose of this section, $20,000,000 for fiscal year 1993, and such sums as may be nec- essary for the 4 succeeding fiscal years. (d) DEFINITION.For purposes of this subpart, the term "low- income individual" means an individual from a family whose tax- able income for the preceding year did not exceed 150 percent of an amount equal to the poverty level determined by using the cri- teria of poverty established by the Bureau of the Census. (20 U.S.C. 1070f) Enactod October 17, 1986, P.L. 99-498, sec. 401(a), 100 Stat. 1352; amended June 3, 1987, P.L. 100-50, sec. 9, 101 Stat. 341; amended July 23, 1992, P.L. 102-325, sec. 409, 106 Stat. 510; amended December 20, 1993, P.L. 103- 208, sec. 2(m), 107 Stat. 2486. PART BFEDERAL FAMILY EDUCATION LOAN PROGRAM SEC. 421. STATEMENT OF PURPOSE; NONDISCRIMINATION; AND AP- PROPRIATIONS AUTHORIZED. (a) PURPOSE; DISCRIMINATION PROHIBITED. (1) PURPOSE.The purpose of this part is to enable the Secretary (A) to encourage States and nonprofit private institu- tions and organizations to establish adequate loan insur- ance programs for students in eligible institutions (as de- fined in section 435), (B) to provide a Federal program of student loan in- surance for students or lenders who do not have reason- able access to a State or private nonprofit program of stu- dent loan insurance covered by an agreement under sec- tion 428(b), (C) to pay a portion of the interest on loans to quali- fied students which are insured under this part, and (D) to guarantee a portion of each loan insured under a program of a State or of a nonprofit private insti- tution or organization which meets the requirements of section 428(a)(1)(B). (2) DISCRIMINATION BY CREDITORS PROHIBITED.No agen- cy, organization, institution, bank, credit union, corporation, or other lender who regularly extends, renews, or continues credit or provides insurance under this part shall exclude from re- ceipt or deny the benefits of, or discriminate against any bor- rower or applicant in obtaining, such credit or insurance on the basis of race, national origin, religion, sex, marital status, age, or handicapped status. (b) AUTHORIZATION OF APPROPRIATIONS.For the purpose of carrying out this part (1) there are authorized to be appropriated to the student loan insurance fund (established by section 431) (A) the sum of $1,000,000, and (B) such further sums, if any, as may be- come necessary for the adequacy of the student loan insurance fund, (2) there are authorized to be appropriated, for payments under section 428 with respect to interest on student loans and for payments under section 437, such sums fox the fiscal year 77-520 7 BEST COPY AVAILABLE Sec. 422 HIGHER EDUCATION ACT OF 1965 88 ending June 30, 1966, and succeeding fiscal years, as may be required therefor, (3) there is authorized to be appropriated the sum of $17,500,000 for making advances pursuant to section 422 for the reserve funds of State and nonprofit private student loan insurance programs, (4) there are authorized to be appropriated (A) the sum of $12,500,000 for making advances after June 30, 1968, pursu- ant to sections 422 (a) and (b), and (B) such sums as may be necessary for making advances pursuant to section 422(c), for the reserve funds of State and nonprofit private student loan insurance programs, and (5) there are authorized to be appropriated such sums as may be necessary for the purpose of paying an administrative cost allowance in accordance with section 428(0 to guaranty agencies. Sums appropriated under paragraphs (1), (2), (4), and (5) of this subsection shall remain available until expended. No additional sums are authorized to be appropriated under paragraph (3) or (4) of this subsection by reason of the reenactment of such paragraphs by the Higher Education Amendments of 1986. (c) DES1GNATION.-The program established under this part shall be referred to as the "Robert T. Stafford Federal Student Loan Program". Loans made pursuant to sections 427 and 428 shall be known as "Federal Stafford Loans". (d) LIMITATION ON AUTHORIZATION To GUARANTEE NEW LOANS UNDER THIS PART.-Notwithstanding any other provision of this part, no new loan guarantees shall be issued after June 30, 1994, if the Secretary does not issue final regulations implementing the -hanges made to this part under the Higher Education Amend- ments of 1992 prior to that date. The authority to issue new loan guarantees shall resume upon the Secretary's issuance of such reg- ulations. This subsection shall not provide the basis for avoiding any requirements for notice and public hearing on such regula- tions. (20 U S.C. 1071) Enacted Nov. 8, 1965, P.L. 89-329, sec. 421, 79 Stat. 1236; amended Aug. 3, 1968, .P.L. 90-460, secs. 2, 3, 82 Stat. 635-6; amended Oct. 16, 1968, P L. 90-575, secs. 113, 114, 119, 82 Stat. 1020, 1021, 1027; amended Oct. 12, 1976, P L. 94-482, sec. 127(a), 90 Stat. 2099, 2100; amended June 15, 1977, P.L. 95-43, sec. 1 (a)(8), (a)(9), (a)(10), 91 Stat. 213; amended October 3, 1980, P.L. 96- 374, sec 1391, 94 Stat. 1503; amended August 15, 1983, P.L. 98-79, sec. 6, 97 Stat. 482, amended October 17, 1986, P.L. 99-498, sec. 402(a), 100 Stat. 1353; amended April 28, 1988, P.L. 100-297, sec. 2601, 102 Stat. 330; amended July 18, 1988, P.L. 100-369, sec. 8, 12 Stat. 837; amended July 23, 1992, P.L. 102-325, sec. 411(a)(2), (c), 106 Stat. 510, 511; amended December 20, 1993, P.L. 103-208, sec. 2(m), 107 Stat 2486. SEC. 422. ADVANCES FOR RESERVE FUNDS OF STATE AND NONPROFIT PRIVATE LOAN INSURANCE PROGRAMS. (a) PURPOSE OF AND AUTHORITY FOR ADVANCES TO RESERVE FUNDS.- (1) PURPOSE; ELIGIBLE RECIPIENTS.-From SUMS appro- priated pursuant to paragraphs (3) and (4)(A) of section 421(b), the Secretary is authorized to make advances to any State with which the Secretary has made an agreement pursuant to section 428(b) for the purpose of helping to establish or ,98 tio 89 HIGHER EDUCATION ACT OF 1965 Sec. 422 strengthen the reserve fund of the student loan insurance pro- gram covered by that agreement. If for any fiscal year a State does not have a student loan insurance program covered by an agreement made pursuant to section 428(b), and the Secretary determines after consultation with the chief executive officer of that State that there is no reasonable likelihood that the State will have such a student loan insurance program for such year, the Secretary may make advances for such year for the same purpose to one or more nonprofit private institutions or organi- zations with which the Secretary has made an agreement pur- suant to section 428(b) in order to enable students in the State to participate in a program of student loan insurance covered by such an agreement. The Secretary may make advances under this subsection both to a State program (with which he has such an agreement) and to one or more nonprofit private institutions or organizations (with which he has such an agree- ment) in that State if he determines that such advances are necessary in order that students in each eligible institution have access through such institution to a student loan insur- ance program which meets the requirements of section 428(bX 1). (2) MATCHING REQUIREMENT.No advance shall be made after June 30, 1968, unless matched by an equal amount from non-Federal sources. Such equal amount may include the unencumbered non-Federal portion of a reserve fund. As used in the preceding sentence, the term "unencumbered non-Fed- eral portion" means the amount (determined as of the time im- mediately preceding the making of the advance) of the reserve fund less the greater of (A) the sum of (i) advances made under this section prior to July 1, 1968; (ii) an amount equal to twice the amount of ad- vances made under this section after June 30, 1968, and before the advance for purposes of which the de- termination is made; and (iii) the proceeds of earnings on advances made under this section; or (B) any amount which is required to be maintained in such fund pursuant to State law or regulation, or by agree- ment with lenders, as a reserve against the insurance of outstanding loans. Except as provided in section 428(c)(10)(E) or (F), such unencumbered non-Federal portion shall not be subject to re- call, repayment, or recovery by the Secretary. (3) TERMS AND CONDITIONS; REPAYMENT.Advances pursu- ant to this subsection shall be upon such terms and conditions (including conditions relating to the time or times of payment) consistent with the requirements of section 428(b) as the Sec- retary determines will best carry out the purpose of this sec- tion. Advances made by the Secretary under this subsection shall be repaid within such period as the Secretary may deem to be appropriate in each case in the light of the maturity and solvency of the reserve fund for which the advance was made. a Sec. 422 HIGHER EDUCATION ACT OF 1965 (b) LIMITATIONS ON TOTAL ADVANCES. (1) IN GENERAL.The total of the advances from the sums appropriated pursuant to paragraph (4)(A) of section 421(b) to nonprofit private institutions and organizations for the benefit of students in any State and to such State may not exceed an amount which bears the same ratio to such sums as the popu- lation of such State aged 18 to 22, inclusive, bears to the popu- lation of all the States aged 18 to 22 inclusive, but such ad- vances may otherwise be in such amounts as the Secretary de- termines will best achieve the purposes for which they are made. The amount available for advances to any State shall not be less than $25,000 and any additional funds needed to meet this requirement shall be derived by proportionately re- ducing (but not below $25,000) the amount available for ad- vances to each of the remaining States. (2) CALCULATION OF POPULATION.For the purpose of this subsection, the population aged 18 to 22, inclusive, of each State and of all the States shall be determined by the Sec- retary on the basis of the most recent satisfactory data avail- able to him. (c) ADVANCES FOR INSURANCE OBLIGATIONS. (1) USE FOR PAYMENT OF INSURANCE OBLIGATIONS.From sums appropriated pursuant to section 421(b)(4Xl3), the Sec- retary shall advance to each State which has an agreement with the Secretary under section 428(c) with respect to a stu- dent loan insurance program, an amount determined in accord- ance with paragraph (2) of this subsection to be used for the purpose of making payments under the State's insurance obli- gations under such program. (2) AMOUNT OF ADVANCES.(A) Except as provided in sub- paragraph (B), the amount to be advanced to each such State shall be equal to 10 percent of the principal amount of loans made by lenders and insured by such agency on those loans on which the first payment of principal became due during the fis- cal year immediately preceding the fiscal year in which the ad- vance is made. (B) The amount of any advance determined according to subparagraph (A) of this paragraph shall be reduced by (i) the amount of any advance or advances made to such State pursuant to this subsection at an earlier date; and (ii) the amount of the unspent balance of the advances made to a State pursuant to subsection (a). Notwithstanding subpat agraph (A) and the preceding sentence of this subparagraph, but subject to subparagraph (D) of this paragraph, the amount of any advance to a State described in paragraph (5)(A) for the first year of its eligibility under such paragraph, and the amount of any advance to any State de- scribed in paragraph (5)(B) for each year of its eligibility under such paragraph, shall not be less than $50,000. (C) For the purpose of subparagraph (B), the unspent bal- ance of the advances made to a State pursuant to subsection (a) shall be that portion of the balance of the State's reserve fund (remaining at the time of the State's first request for an 91 HIGHER EDUCATION ACT OF 1965 Sec. 422 advance pursuant to this subsection) which bears the same ratio to such balance as the Federal advances made and not re- turned by such State, pursuant to subsection (a), bears to the total of all past contributions to such reserve funds from all sources (other than interest on investment af any portion of the reserve fund) contributed since the date such State executed an agreement pursuant to section 428(b). (73) If the sums appropriated for any fiscal year for paying the .amounts determined under subparagraphs (A) and (B) are not sufficient to pay such amounts in full, then such amounts shall be reduced (i) by ratably reducing that portion of the amount allo- cated to each State which exceed.s $50,000; and (ii) if further reduction is required, by equally reduc- ing the $50,000 minimum allocation of each State. If additional sums become available for paying such amounts for any fiscal year during which the preceding sentence has been applied, such reduced amounts shall be increased on the same basis as they were reduced. (3) USE OF EARNINGS FOR INSURANCE OBLIGATIONS.The earnings, if any, on any investments of advances received pur- suant to this subsection must be used for making payments under the State's insurance obligations. (4) REPAYMENT OF ADVANCES.Advances made by the Sec- retary under this subsection shall, subject to subsection (d), be repaid within such period as the Secretary may deem to be ap- propriate and shall 1De deposited in the fund established by sec- tion 431. (5) LIMITATION ON NUMBER OF ADVANCES.Except as pro- vided in paragraph (7), advances pursuant to this subsection shall be made to a State (A) in the case of a State which is actively carrying on a program under an agreement pursuant to section 428(b) which was entered into before October 12, 1976, upon such date as such State may request, but not before October 1, 1977, and on the same day of each of the 2 succeeding cal- endar years after the date so requested; and (B) in the case of a State which enters into an agree- ment pursuant to section 428(b) on or after October 12, 1976, or which is not actively carrying on a program under an agreement pursuant to such section on such date, upon such date as such State may request, but not before Octo- ber 1, 1977, and on the same day of each of the 4 succeed- ing calendar years after the date so requested of the ad- vance. (6) PAYMENT OF ADVANCES WHERE NO STATE PROGRAM. (A) If for any fiscal year a State does not have a student loan insurance program covered by an agreement made pursuant to section 428(b), and the Secretary determines after consultation with the chief executive officer of that State that there is no reasonable likelihood that the State will have such a student loan insurance program for such year, the Secretary may make advances pursuant to this subsection for such year for the same purpose to one or more nonprofit private institutions or Sec. 422 HIGHER EDUCATION ACT OF 1965 92 organizations with which he has made an agreement pursuant to subsection (c), as well as subsection (b), of section 428 and subparagraph (B) of this paragraph in order to enable students in that State to participate in a program of student loan insur- ance covered by such agreements. (B) The Secretary may enter into an agreement with a pri- vate nonprofit institution or organization for the purpose of this paragraph under which such institution or organization (i) agrees to establish within such State at .least one office with sufficient staff to handle written and telephone inquiries from students, eligible lenders, and other persons in the State, to encourage maximum commercial lender participation within the State, and to conduct periodic vis- its to at least the major eligible lenders within the State; (ii) agrees that its insurance will not be denied any student because of his or her choice of eligible institutions; and (iii) certifies that it is neither an eligible institution, nor has any substantial affiliation with an eligible institu- tion. (7) EMERGENCY ADVANCES.The Secretary is authorized to make advances, on terms and conditions satisfactory to the Secretary, to a guaranty agency (A) in accordance with section 428(j), in order to en- sure that the guaranty agency shall make loans as the lender-of-last-resort during the transition from the Federal -Family Education Loan Program under this part to the Federal Direct Student Loan Program under part D of this title; or (B) if the Secretary is seeking to terminate the guar- anty agency's agreement, or assuming the guaranty agen- cy's functions, in accordance with section 428(c)(10)(F)(v), in order to assist the agency in meeting its immediate cash needs, ensure the uninterrupted payment of claims, or en- sure that the guaranty agency shall make loans as de- scribed in subparagraph (A). (d) RECOVERY OF ADVANCES DURING FISCAL YEARS 1988 AND 1989. (1) AMOUNT AND USE OF RECOVERED FUNDS.Notwith- standing any other provision of this section, advances made by the Secretary under this section shall be repaid in accordance with this subsection and shall be deposited in the fund estab- lished by section 431. The Secretary shall, in accordance with the requirements of paragraph (2), recover (and so deposit) an amount equal to $75,000,000 during fiscal year 1988 and an amount equal to $35,000,000 for fiscal year 1989. (2) DETERMINATION OF GUARANTY AGENCY OBLIGATIONS. In determining the amount of advances which shall be repaid by a guaranty agency under paragraph (1), the Secretary (A) shall consider the solvency and maturity of the re- serve and insurance funds of the guaranty agency assisted by such advances, as determined by the Comptroller Gen- eral taking into account the requirements of State law as 93 HIGHER EDUCATION ACT OF 1965 Sec. 422 in effect on the date of enactment of the Higher Education Amendments of 1986; (B) shall not seek repayment of such advances from any State described in subsection (c)(5)(B) during any year of its eligibility under such subsection; and (C) shall not seek repayment of such advances from any State if such repayment encumbers the reserve fund requirement of State law as in effect on such date of enact- ment. (e) CORRECTION FOR ERRORS UNDER REDUCTION OF EXCESS CASH RESERVES. (1) IN GENERAL.The Secretary shall pay any guaranty agency the amount of reimbursement of claims under section 428(c)(1), filed between September 1, 1988, and December 31, 1989, which were previously withheld or canceled in order to be applied to satisfy such agency's obligation to eliminate ex- cess cash reserves held by such agency, based on the maximum cash reserve (as described in subsection (e) of this section as in effect on September 1, 1988) permitted at the end of 1986, if such maximum cash reserve was miscalculated because of er- roneous financial information provided by such agency to the Secretary and if (A) such erroneous information is verified by an audited financial statement of the reserve fund, signed by a certified public accountant, and (B) such audited financial statement is provided to the Secretary prior to January 1, 1993.(2) AmouNT.The amount of reimbursement for claims shall be equal to the amount of reimbursement for claims with- held or canceled in order to be applied to such agency's obliga- tion to eliminate excess cash reserves which exceeds the amount of that which would have been withheld or canceled if the maximum excess cash reserves had been accurately cal- culated. (f) REFUND OF CASH RESERVE PAYMENTS.The Secretary shall, within 30 days after the date of enactment of the Higher Education Amendments of 1992, pay the full amount of payments withheld or canceled under paragraph (3) of this subsection to any guaranty agency which (1) was required to eliminate excess cash reserves, based on the maximum cash reserve (as described in subsection (e) of this section as in effect on September 1, 1988) permitted at the end of 1986; (2) appealed the Secretary's demand that such agency should eliminate such excess cash reserves and received a waiver of a portion of the amount of such excess cash reserves to be eliminated; (3) had payments under section 428(c)(1) or section 428(f) previously withheld or canceled in order to be applied to satisfy such agency's obligation to eliminate excess cash reserves held by such agency, based on the maximum cash reserve (as de- scribed in subsection (e) of this section as in effect on Septem- ber 1, 1988) permitted at the end of 1986; and (4) accoriling to a Department of Education review that was completed and forwarded to such guaranty agency prior to I '3 Sec. 422 HIGHER EDUCATION ACT OF 1965 94 January 1, 1992, is expected to become insolvent during or be- fore 1996 and the payments withheld or canceled under para- graph (3) of this subsection are a factor in such agency's im- pending insolvency. (g) PRESERVATION AND RECOVERY OF GUARANTY AGENCY RE- SERVES. (1) AUTHORITY 'TO RECOVER FUNDS.Notwithstanding any other provision of law, the reserve funds of the guaranty agen- cies, and any assets purchased with such reserve funds, re- gardless of who holds or controls the reserves or assets, shall be considered to be the property of the United States to be used in the operation of the program authorized by this part or the program authorized by part D of this title. However, the Secretary may not require the return of all reserve funds of a guaranty agency to the Secretary unless the Secretary deter- mines that such return is in the best interest of the operation of the program authorized by this part or the program author- ized by part D of this title, or to ensure the proper mainte- nance of such agency's funds or assets or the orderly termi- nation of the guaranty agency's operations and the liquidation of its assets. The reserves shall be maintained by each guar- anty agency to pay program expenses and contingent liabil- ities, as authorized by the Secretary, except that (A) the Secretary may direct a guaranty agency to re- turn to the Secretary a portion of its reserve fund which the Secretary determines is unnecessary to pay the pro- gram expenses and contingent liabilities of the guaranty agency; (B) the Secretary may direct the guaranty agency to require the return, to the guaranty agency or to the Sec- retary, of any reserve funds or assets held by, or under the control of, any other entity, which the Secretary deter- mines are necessary to pay the program expenses and con- tingent liabilities of the guaranty agency, or which are re- quired for the orderly termination of the guaranty agency's operations and the liquidation of its assets; (C) the Secretary may direct a guaranty agency, or such agency's officers or directors, to cease any activities involving expenditure, use or transfer of the guaranty agency's reserve funds or assets which the Secretary deter- mines is a misapplication, misuse, or improper expenditure of such funds or assets; and (D) any such determination under subparagraph (A) or (B) shall be based on standards prescribed by regulations that are developed through negotiated rulemaking and that include procedures for administrative due process. (2) TERMINATION PROVISIONS IN CONTRACTS.(A) To ensure that the funds and assets of the guaranty agency are pre- served, any contract with respect to the administration of a guaranty agency's reserve funds, or the administration of any assets purchased or acquired with the reserve funds of the guaranty agency, that is entered into or extended by the guar- anty agency, or any other party on behalf of or with the con- currence of the guaranty agency, after the date of enactment 11!4 4 95 HIGHER EDUCATION ACT OF 1965 Sec. 423 of this subsection shall provide that the contract is terminable by the Secretary upon 30 days notice to the contracting parties if the Secretary determines that such contract includes an im- permissible transfer of the reserve funds or assets, or is other- wise inconsistent with the terms or purposes of this section. (B) The Secretary may direct a guaranty agency to sus- pend or cease activities under any contract entered into by or on behalf of such agency after January 1, 1993, if the Secretary determines that the misuse or improper expenditure of such guaranty agency's funds or assets or such contract provides un- necessary or improper benefits to such agency's officers or di- rectors. (3) PENALTIES.-Violation of any direction issued by the Secretary under this subsection may be subject to the penalties described in section 490 of this Act. (4) AVAILABILITY OF FUNDS.-Any funds that are returned or otherwise recovered by the Secretary pursuant to this sub- section shall be available for expenditure for expenses pursu- ant to section 458 of this Act. (20 U.S.C. 1072) Enacted Nov. 8, 1965, P.L. 89-329, sec. 422, 79 Stat. 1236; amended Nov. 3, 1966, P.L. 89-752, sec. 11, 80 Stat. 1243; amended Oct. 16, 1968, P.L. 90-575, sec. 114, 82 Stat. 1021; amended Oct. 12, 1976, P.L. 94-482, sec. 127(a), 90 Stat. 2100, 2101, 2102, 2103; amended June 15, 1977, P.L. 95-43, sec. 1(a)(11)(A), (B), (C), (a)(12), (a)(13), 91 Stat. 213, 214; amended Nov. 1, 1978, P.L. 95-561, sec. 1322(a), 92 Stat 2363; amended Oct. 3, 1980, P.L. 96-374, sec. 1391, 94 Stat. 1503; amended April 7, 1986, P.L. 99-272, sec. 16011, 100 Stat. 339; amended October 17, 1986, P.L. 99-498, sec. 402(a), 100 Stat. 1354; amended Dec. 22, 1987, P.L. 100-203, sec. 3001, 101 Stat. 1330-36-1330-38; amended July 23, 1992, P.L. 102-325, sec. 412, and 416(p)(8), 106 Stat. 511, 527; amended August 10, 1993, P.L. 103-66, sec. 4041(a)(2)(A) and 4042, 107 Stat. 354, 357; amended Decem- ber 20, 1993, P.L. 103-208, sec. 2(e)(1), (m), 107 Stat. 2460, 2486. SEC. 423. EFFECTS OF ADEQUATE NON-FEDERAL PROGRAMS. .(a) FEDERAL INSURANCE BARRED TO LENDERS WITH ACCESS TO STATE OR PRIVATE INSURANCE.-Except as provided in subsection (b), the Secretary shall not issue certificates of insurance under section 429 to lenders in a State if the Secretary determines that every eligible institution has reasonable access in that State to a State or private nonprofit student loan insurance program which is covered by an agreement under section 428(b). (b) EXCEPTIONS.-The Secretary may issue certificates of insur- ance under section 429 to a lender in a State- (1) for insurance of a loan made to a student borrower who does not, by reason of the borrower's residence, have access to loan insurance under the loan insurance program of such State (or under any private nonprofit loan insurance program which has received an advance under section 422 for the benefit of students in such State); (2) for insurance of all the loans made to student borrow- ers by a lender who satisfies the Secretary that, by reason of the residence of such borrowers, such lender will not have ac- cess to any single State or nonprofit private loan insurance program which will insure substantially all of the loans such lender intends to make to such student borrowers; or (3) under such circumstances as may be approved by the guaranty agency in such State, for the insurance of a loan to Sec. 424 HIGHER EDUCATION ACT OF 1965 96 a borrower for whom such lender previously was issued such a ,.ertificate if the loan covered by such certificate is not yet re- paid. (20 U.S.C. 1073) Enacted Nov. 8, 1965, P.L. 89-329, sec. 423, 79 Stat. 1237; amended Oct. 16, 1968, P.L. 90-575, sec. 119, 82 Stat. 1026; amended Oct. 12, 1976, P.L. 94-432, sec. 127(a), 90 Stat. 2103; amended June 15, 1977, P.L. 95-43, sec. 1(a)(14), 91 Stat. 214; amended October 3, 1980, P.L. 96-374, sec. 1391, 94 Stat. 1503; amended October 17, 1986, P.L. 99-498, sec. 402(a), 100 Stat. 1358; amended December 20, 1993, P.L. 103-208, sec. 2(m), 107 Stat. 2486. SEC. 424. SCOPE AND DURATION OF FEDERAL LOAN INSURANCE PRO- GRAM. (a) LIMITATIONS ON AMOUNTS OF LOANS COVERED BY FEDERAL INSURANCE.-The tat.: principal amount of new loans made and in- stallments paid pursuant to lines of credit (as defined in section 435) to students covered by Federal loan insurance under this part shall not exceed $2,000,000,000 for the period from July 1, 1976, to September 30, 1976, and for each of the succeeding fiscal years ending prior to October 1, 1998. Thereafter, Federal loan insurance pursuant to this part may be granted only for loans made (or for loan installments paid pursuant to lines of credit) to enable stu- dents, who have obtained prior loans insured under this part, to continue or complete their educational program; but no insurance may be granted for any loan made or installment paid after Sep- tember 30, 2002. (b) APPORTIONMENT OF AMOUNTS.-The Secretary may, if he or she finds it necessary to do so in order to assure an equitable dis- tribution of the benefits of this part, assign, within the maximum amounts specified in subsection (a), Federal loan insurance quotas applicable to eligible lenders, or to States or areas, and may from time to time reassign unused portions of these quotas. (20 U.S.C. 1074) Enacted Nov. 8, 1965, P.L. 89-329, sec. 424, 79 Stat. 1237; amended Aug. 3, 1968, P.L. 90-460, sec. 1, 82 Stat. 634; amended Oct. 16, 1968, P.L. 90-575, sec. 112, 82 Stat. 1020; amended June 23, 1972, P.L. 92-318, sec. 132(a), 86 Stat. 261; amended June 30, 1976, P.L. 94-328, sec. 2(a), 90 Stat. 727; amended Oct. 12, 1976, P.L. 94-482, sec. 127(a), 90 Stat. 2103, 2104; amended Octo- ber 3, 1980, P.L. 96-374, secs. 411, 1391, 94 Stat. 1415, 1503; amended April 7, 1986, P.L. 99-272, sec. 16018(a), 100 Stat. 348; amended October 17, 1986, P.L. 99- 498, sec. 402(a), 100 Stat. 1358; amended July 23, 1992, P.L. 102-325, sec. 411(b)(1), 106 Stat. 510; amended December 20, 1993, P.L. 103-208, sec. 2(m), 107 Stat. 2486. SEC. 425. LIMITATIONS ON INDIVIDUAL FEDERALLY INSURED LOANS AND ON FEDERAL LOAN INSURANCE. (a) ANNUAL AND AGGREGATE LIMITS.- (1) ANNUAL LIMITS.-(A) The total of loans made to a stu- dent in any academic year or its equivalent (as determined by the Secretary) which may be covered by Federal loan insurance under this part may not exceed- (i) in the case of a student at an eligible institution who has not successfully completed the first year of a pro- gram of undergraduate education- (I) $2,625, if such student is enrolled in a program whose length is at least one academic year in length (as determined under section 481); (II) $1,750, if such student is enrolled in a pro- gram whose length is less than one academic year, but at least 2/3 of such an academic year; and 1 6 97 HIGHER EDUCATION ACT OF 1965 Sec. 425 (III) $875, if such student is enrolled in a program whose length is less than 2/3, but at least 1/3, of such an academic year; (ii)1 in the case of a student who has successfully com- pleted such first year but has not successfully completed the remainder of a program of undergraduate study (I) $3,500, if such student is enrolled in a program whose length is at least one academic year in length (as determined under section 481); (II) $2,325, if such student is enrolled in a pro- gram whose length is less than one academic year, but at least 2/3 of such an academic year; and (III) $1,175, if such student is enrolled in a pro- gram whose length is less than 2/3, but at least 1/3, of such an academic year; (iii)1 in the case of a student at an eligible institution who has successfully completed such first and second year but has not successfully completed the remainder of a pro- gram of undergraduate study (I) $5,500, if such student is enrolled in a program whose length is at least one academic year in length (as determined under section 481); (II) $3,675, if such student is enrolled in a pro- gram whose length is less than one academic year, but at least 2/3 of such an academic year; and (III) $1,825, if such student is enrolled in a pro- gram whose length is less than 2/3, but at least 1/3, of such an academic year; and (iv) in the case of a graduate or professional student (as defined in regulations of the Secretary) at an eligible institution, $8,500; 2 (B) The annual insurable limits contained in subparagraph (A) shall not apply in cases where the Secretary determines, pursuant to regulations, that a higher amount is warranted in order to carry out the purpose of this part with respect to stu- dents engaged in specialized training requiring exceptionally high costs of education. The annual insurable limit per student 1Effective July 1, 1994, section 2(cX2)(A) of the Higher Education Technical Amendments of 1993 replaces clauses (ii) and (iii) with the following: "(ii) in the case of a student at an eligible institution who has successfully completed such first year but has not successfully completed the remainder of a program of undergraduate education "(I) $3,600; or "(II) if such student is enrolled in a program of undergraduate education, the remain- der of which is less than one academic year, the maximum annual loan amount that such student may receive may not exceed the amount that bears the same ratio to the amount specified in subclause (I) as such remainder measured in semester, trimester, quarter, or clock hours bears to one academic year; "(iii) in the case of a student at an eligible institution who has successfully completed the first and second years of a program of undergraduate education but has not successfully completed the remainder of such program "(I) $5,500; or "(II) if such student is enrolled in a program of undergraduate education, the remain- der of which is less than one vademic year, the maximum annual loan amount that such student may receive may not exceed the amount that bears the same ratio to the amount specified in subclause (I) as such remainder measured in semester, trimester, quarter, or clock hours bears to one academic year; 2 Effedive July 1, 1994, section 2(c)(2)(B) of the Higher Education Technical Amendments of 1993 strikes the semicolon and inserts a period. Sec. 425 HIGHER EDUCATION ACT OF 1965 98 shall not be deemed to be exceeded by a line of credit under which actual payments by the lender to the borrower will not be made in any year in excess of the annual limit. (C) For the purpose of subparagraph (A), the number of years that a student has completed in a program of under- graduate education shall include any prior enrollment in an el- igible program of undergraduate education for which the stu- dent was awarded an associate or baccalaureate degree, if such degree is required by the institution for admission to the pro- gram in which the student is enrolled. (2) AGGREGATE LIMITS.-(A) The aggregate insured unpaid principal amount for all such insured loans made to any stu- dent shall not at any time exceed (i) $23,000, in the case of any student who has not success- fully completed a program of undergraduate education, exclud- ing loans made under section 428A or 428B; and (ii) $65,500, in the case of any graduate or professional student (as defined by regulations of the Secretary) and (I) in- cluding any loans which are insured by the Secretary under this section, or by a guaranty agency, made to such student be- fore the student became a graduate or professional student), but (II) excluding loans made under section 428A or 428B, except that the Secretary may increase the limit applicable to stu- dents who are pursuing programs which the Secretary determines are exceptionally expensive. (B) The Secretary may increase the aggregate insurable limit applicable to students who are pursuing programs which the Secretary determines are exceptionally expensive. (b) LEVEL OF INSURANCE COVERAGE BASED ON DEFAULT RATE.- (1) REDUCTION FOR DEFAULTS IN EXCESS OF 5 OR 9 PER- CENT.-(A) Except as provided in subparagraph (B), the insur- ance liability on any loan insured by the Secretary under this part shall be 100 percent of the unpaid balance of the principal amount of the loan plus interest, except that (i) if, for any fiscal year, the total amount of payments under section 430 by the Secretary to any eligible lender as described in section 435(d)(1)(D) exceeds 5 percent of the sum of the loans made by such lender which are in- sured by the Secretary and which were in repayment at the end of the preceding fiscal year, the insurance liability under this subsection for that portion of such excess which represents loans insured after the applicable date with re- spect to such loans, as determined under subparagraph (C), shall be equal to 90 percent of the amount of such por- tion; or (ii) if, for any fiscal year, the total amount of such pay- ments to such a lender exceeds 9 percent of such sum, the insurance liability under this subsection for that portion of such excess which represents loans insured after the appli- cable date with respect to such loans, as determined under subparagraph (C), shall be equal to 80 percent of the amount of such portion. 1 ) 8 HIGHER EDUCATION ACT OF 1965 Sec. 425 (B) Notwithstanding subparagraph (A), the provisions of clauses (i) and (ii) of such subparagraph shall not apply to an eligible lender as described in section 435(dX1)(D) for the fiscal year in which such lender begins to carry on a loan program insured by the Secretary, or for any of the 4 succeeding fiscal years. (C) The applicable date with respect to a loan made by an eligible lender as described in section 435(d)(1)(D) shall be- (i) the 90th day after the adjournment of the next reg- ular session of the appropriate State legislature which con- venes after the date of enactment of the Education Amend- ments of 1976, or (ii) if the primary source of lending capital for such lender is derived from the sale of bonds, and the constitu- tion of the appropriate State prohibits a pledge of such State's credit as security against such bonds, the day which is one year after such 90th day. (2) COMPUTATION OF AMOUNTS IN REPAYMENT.-For the purpose of this subsection, the sum of the loans made by a lender which are insured by the Secretary and which are in re- payment shall be the original principal amount of loans made by such lender which are insured by the Secretary reduced by- (A) the amount the Secretary has been required to pay to discharge his or her insurance obligations under this part; (B) the original principal amount of loans insured by the Secretary which have been fully repaid; (C) the original principal amount insured on those loans for which payment of first installment of principal has not become due pursuant to section 427(a)(2)(B) or such first installment need not be paid pursuant to section 427(a)(2)(C); and (D) the original principal amount of loans repaid by the Secretary under section 437. (3) PAYMENTS TO ASSIGNEES.-For the purpose of this sub- section, payments by the Secretary under section 430 to an as- signee of the lender with respect to a loan shall be deemed payments made to such lender. (4) PLEDGE OF FULL FAITH AND CREDIT.-The full faith and credit of the United States is pledged to the payment of' all amounts which may be required to be paid under the provi- sions of section 430 or 437 of this part. (20 U.S.C. 1075) Enacted Nov. 8, 1965, P.L. 89-329, sec. 425, 79 Stat. 1238; amended Oct. 16, 1968, P.L. 90-575, secs. 116, 120, 82 Stat. 1023 and 1027; amend- ed June 23, 1972, Pl. 92-318, sec. 132(a), 86 Stat. 261; further amended June 23, 1972, P.L. 92-318, sec. 132B(a), 86 Stat. 262; amended Oct. 12, 1976, sec. 127(a), 96 Stat. 2104, 2105; amended June 15, 1977, P.L. 95-43, sec. 1 (a)(15), (a)(16), (a)(17), 91 Stat. 214; amended November 1, 1978, P.L. 95-566, sec. 5(b)(2), 92 Stat. 2403; amended October 3, 1980, P.L. 96-374, secs. 412, 1391, 94 Stat. 1416, 1503; as amended August 13, 1981, P.L. 97-35, sec. 535 (a), (b), 95 Stat. 455; amended April 7, 1986, P.L. 99-272, sec. 16013(e)(1), 100 Stat. 340; amended October 17, 1986, P.L. 99-498, sec. 402(a), 100 Stat. 1359; amended June 3, 1987, P.L. 100-50, sec. 10(a), 101 Stat. 341; amended July 23, 1992, P.L. 102-325, sec. 413, 106 Stat. 512; amended December 20, 1993, P.L. 103-208, sec. 2(c)(2) and (3), (m), 107 Stat. 2460-61, 2486. 9 Sec. 426 HIGHER EDUCATION ACT OF 1965 100 SEC. 426. SOURCES OF FUNDS. Loans made by eligible lenders in accordance with this part shall be insurable by the Secretary whether made from funds fully owned by the lender or from funds held by the lender in a trust or similar capacity and available for such loans. (20 U.S.C. 1076) Enacted Nov. 8, 1965, P.L. 89-329, sec. 426, 79 Stat. 1238; amended Oct. 12, 1976, P.L. 94-482, sec. 127(a), 90 Stat. 2106; amended October 17, 1986, P.L. 99-498, sec. 402(a), 100 Stat. 1361; amended December 20, 1993, P.L. 103-208, sec. 2(m), 107 Stat. 2486. SEC. 427. ELIGIBILITY OF STUDENT BORROWERS AND TERMS OF FED- ERALLY INSURED STUDENT LOANS. (a) LIST OF REQUIREMENTS.Except as provided in section 428C, a loan by an eligible lender shall be insurable by the Sec- retary under the provisions of this part only if (1) made to a student who (A) is an eligible *student under section 484, (B) has agreed to notify promptly the holder of the loan concerning any change of address, and (C) is carrying at least one-half the normal full-time academic workload for the course of study the student is pursuing (as determined by the institution); and (2) evidenced by a note or other written agreement which (A) is made without security and without endorse- ment;(B) provides for repayment (except as provided in sub- section (c)) of the principal amount of the loan in install- ments over a period of not less than 5 years (unless sooner repaid or unless the student, during the 6 months preced- ing the start of the repayment period, specifically requests that repayment be made over a shorter period) nor more than 10 years beginning 6 months after the month in which the student ceases to carry at an eligible institution at least one-half the normal full-time academic workload as determined by the institution, except (i) as provided in subparagraph (C); (ii) that the note or other written instrument may contain such reasonable provisions relating to repay- ment in the event of default in the payment of interest or in the payment of the cost of insurance premiums, or other default by the borrower, as may be authorized by regulations of the Secretary in effect at the time the loan is made; and (iii) that the lender and the student, after the stu- dent ceases to carry at an eligible institution at least one-half the normal full-time academic workload as determined by the institution, may agree to a repay- ment schedule which begins earlier, or is of shorter duration, than required by this subparagraph, but in the event a borrower has requested and obtained a re- payment period of less than 5 years, the borrower may at any time prior to the total repayment of the loan, have the repayment period extended so that the total repayment period is not less than 5 years; I 1, 0 101 HIGHER EDUCATION ACT OF 1965 Sec. 427 (C) provides that periodic installments of principal need not be paid, but mterest shall accrue and be paid, during any period a) d.uring which the borrower (I) is pursuing at least a half-time course of study as determined by an eligible institution; or (II) is pursuing a course of study pursuant to a graduate fellowship program approved by the Secretary, or pursuant to a rehabilitation training program for individuals with disabilities approved by the Secretary, except that no borrower shall be eligible for a deferment under this clause, or a loan made under this part (other than a loan made under section 428B or 428C), while serving in a medical internship or resi- dency program; (ii) not in excess of 3 years during which the bor- rower is seeking and unable to find full-time employ- ment; or (iii) not in excess of 3 years for any reason which the lender determines, in accordance with regulations prescribed by the Secretary under section 435(o), has caused or will cause the borrower to have an economic hardship; and provides that any such period shall not be included in determining the 10-year period described in subparagraph (B); (D) provides for interest on the unpaid principal bal- ance of the loan at a yearly rate, not exceeding the applica- ble maximum rate prescribed in section 427A, which inter- est shall be payable in installments over the period of the loan except that, if provided in the note or other written agreement, any interest payable by the student may be de- ferred until not later than the date upon which repayment of the first installment of principal falls due, in which case interest accrued during that period may be added on that date to the principal; (E) provides that the lender will not collect or attempt to collect from the borrower any portion of the interest on the note which is payable by the Secretary under this part, and that the lender will enter into such agreements with the Secretary as may be necessary for the purpose of sec- tion 437; (F) entitles the student borrower to accelerate without penalty repayment of the whole or any part of the loan; (G)(i) contains a notice of the system, of disclosure of information concerning such loan to credit bureau organi- zations under section 430A, and (ii) provides that the lend- er on request of the borrower will provide information on the repayment status of the note to such organizations; (H) provides that, no more than 6 months prior to the date on which the borrower's first payment on a loan is due, the lender shall offer the borrower the option of re- paying the loan in accordance with a graduated or income- 1 1 1 Sec. 427 HIGHER EDUCATION ACT OF 1965 102 sensitive repayment schedule established by the lender and in accordance with the regulations of the Secretary; and (I) contains such other terms and conditions, consist- ent with the provisions of this part and with the regula- tions issued by the Secretary pursuant to this part, as may be agreed upon by the parties to such loan, including, if agreed upon, a provision requiring the borrower to pay the lender, in addition to principal and interest, amounts equal to the insurance premiums payable by the lender to the Secretary with respect to such loan; (3) the funds borrowed by a student are disbursed to the institution by check or other means that is payable to and re- quires the endorsement or other certification by such student, except-(A) that nothing in this title shall be interpreted- (i) to allow the Secretary to require checks to be made copayable to the institution and the borrower; or (ii) to prohibit the disbursement of loan proceeds by means other than by check; and (B) in the case of any student who is studying outside the United States in a program of study abroad that is ap- proved for credit by the home institution at which such student is enrolled, the funds shall, at the request of the borrower, be delivered directly to the student and the checks may be endorsed, and fund transfers authorized, pursuant to an authorized power-of-attorney; and (4) the funds borrowed by a student are disbursed in ac- cordance with section 428G. (b) SPECIAL RULES FOR MULTIPLE DISBURSEMENT.-FOT the purpose of subsection (a)(4)- (1) all loans issued for the same period of enrollment shall be considered as a single loan; and (2) the requirements of such subsection shall not apply in the case of a loan made under section 428B or 428C, or made to a student to cover the cost of attendance at an eligible insti- tution outside the United States. (c) SPECIAL REPAYMENT RULES.-Except as provided in sub- section (a)(2)(H), the total of the payments by a borrower during any year of any repayment period with respect to the aggregate amount of all loans to that borrower which are insured under this part shall not, unless the borrower and the lender otherwise agree, be less than $600 or the balance of all such loans (together with interest thereon), whichever amount is less (but in no instance less than the amount of interest due and payable). (20 U.S.C. 1077) Enacted Nov. 8, 1965, P.L. 89-320, sec. 427, 79 Stat. 1238; amended Nov. 8, 1966, P.L. 89-794, sec. 1101(b), 80 Stat. 1476; amended Aug. 3, 1968, P.L. 90-460, sec. 2, 82 Stat. 635; amended Oct. 16, 1968, P.L. 90-575, secs. 113, 116, 120, 82 Stat. 1021, 1023, 1027; amended June 23, 1972, P.L. 92-318, sec. 132B(b), 86 Stat. 262; further amended June 23, 1972, P.L. 92-318, sec. 132C(c), 86 Stat. 263; amended Oct. 12, 1976, P.L. 94-482, sec. 127(a), 90 Stat. 2107, 2108; amended June 15, 1977, P.L. 95-43, sec. 1(a)(9), 91 Stat. 213; sec. 1(a)(18), 91 Stat. 214; amended November 1, 1978, P.L. 95-566, sec. 5(a)(1), 92 Stat. 2403; amended October 3, 1980, Pl. 96-374, secs. 413(a), 413(c), 415(a)(2), 415(b)(1), 416(a)(2), 423(a)(1), 1391, 94 Stat. 1417, 1418, 1419, 1420, 1421, 1432, 1503; amended August 31, 1981, P.L. 97-35, sec. 537 (b)(1), (d)(2), (e)(1), 95 Stat. 456, 457; amended August 103 HIGHER EDUCATION ACT OF 1965 Sec. 427A 15, 1983, P.L. 98-79, sec. 10, 97 Stat. 484; amended April 7, 1986, P.L. 99-272, secs. 16012(a), 16013(b), 16017(b)(1), 100 Stat. 339, 340, 343; amended October 17, 1986, P.L. 99-498, sec. 402(a), 100 Stat. 1361; amended June 3, 1987, P.L. 100-50, sec. 10 (b), (c), 101 Stat. 341; amended July 18, 1988, P.L. 100-369, secs. 5(b), 7(c), and 11, 102 Stat. 836, 831, and 838; amended December 19, 1989, P.L. 101-239, secs. 2002(a)(1), 2004(b)(2), 103 Stat. 2111 and 2116; amended November 15, 1991, P.L. 102-164, secs. 601(a) and 602(a), 105 Stat. 1065 and 1066; amended July 23, 1992, P.L. 102-325, sec. 414, 106 Stat. 513; amended December 20, 1993, P.L. 103-208, sec. 2(c)(4), (m), 107 Stat. 2461, 2486. SEC. 427A. APPLICABLE INTEREST RATES. (a) RATES To BE CONSISTENT FOR BORROWER'S ENTIRE DEBT.- With respect to any loan to cover the cost of instruction for any pe- riod of instruction beginning on or after January 1, 1981, the rate of interest applicable to any borrower shall- (1) not exceed 7 percent per year on the unpaid principal balance of the loan in the case of any borrower who, on the date of entering into the note or other written evidence of that loan, has an outstanding balance of principal or interest on any loan made, insured, or guaranteed under this part, for which the interest rate does not exceed 7 percent; (2) except as provided in paragraph (3), be 9 percent per year on the unpaid principal balance of the loan in the case of any borrower who, on the date of entering into the note or other written evidence of that loan, has no outstanding balance of principal or interest on any loan described in paragraph (1) or any loan for which the interest rate is determined under paragraph (1); or (3) be 8 percent per year on the unpaid principal balance of the loan for a loan to cover the cost of education for any pe- riod of enrollment beginning on or after a date which is 3 months after a determination made under subsection (b) in the case of any borrower who, on the date of entering into the note or other written evidence of the loan, has no outstanding bal- ance of principal or interest on any loan for which the interest rate is determined under paragraph (1) or (2) of this sub- section. (b) REDUCTION FOR NEW BORROWERS AFTER DECLINE IN TREAS- URY BILL RA'TES.-If for any 12-month period beginning on or after January 1, 1981, the Secretary, after consultation with the Sec- retary of the Treasury, determines that the average of the bond equivalent rates of 91-day Treasury bills auctioned for such 12- month period is equal to or less than 9 percent, the interest rate for loans under this part shall be the rate prescribed in subsection (a)(3) for borrowers described in such subsection. (c) RATES FOR SUPPLEMENTAL LOANS FOR STUDENTS AND LOANS FOR PARENTS.- (1.) IN GENERAL.-Except as otherwise provided in this sub- section, the applicable rate of interest on loans made pursuant to section 428A or 428B on or after October 1, 1981, shall be 14 percent per year on the unpaid principal balance of the loan. (2) REDUCTION OF RATE AFTER DECLINE IN TREASURY BILL RATES.-If for any 12-month period beginning on or after Octo- ber 1, 1981, the Secretary, after consultation with the Sec- retary of the Treasury, determines that the average of the 7 Sec. 427A HIGHER EDUCATION ACT OF 1965 104 bond equivalent rates of 91-day Treasury bills auctioned for such 12-month period is equal to or less than 14 percent, the applicable rate of interest for loans made pursuant to section 428A or 428B on and after the first day of the first month be- ginning after the date of publication of such determination shall be 12 percent per year on the unpaid principal balance of the loan. (3) INCREASE OF RATE AFTER INCREASE IN TREASURY BILL RATES.-If for any 12-month period beginning on or after the date ofpublication of a determination under paragraph (2), the Secretary, after consultation with the Secretary of the Treas- ury, determines that the average of the bond equivalent rates of 91-day Treasury bills auctioned for such 12-month period ex- ceeds 14 percent, the applicable rate of interest for loans made pursuant to section 428A or 428B on and after the first day of the first month beginning after the date of publication of that determination under this paragraph shall be 14 percent per year on the unpaid principal balance of the loan. (4) AVAILABILITY OF VARIABLE RATES.-(A) For any loan made pursuant to section 428A or 428B and disbursed on or after July 1, 1987, or any loan made pursuant to such section prior to such date that is refinanced pursuant to section 428A(d) or 428B(d), the applicable rate of interest during any 12-month period beginning on July 1 and ending on June 30 shall be determined under subparagraph (B), except that such rate shall not exceed 12 percent. (B) For any 12-month period beginning on July 1 and end- ing on June 30, the rate determined under this subparagraph is determined on the preceding June 1 and is equal to (i) the bond equivalent rate of 52-week Treasury bills auctioned at the final auction held prior to such June 1; plus (ii) 3.25 percent. (C) The Secretary shall determine the applicable rate of in- terest under subparagraph (B) after consultation with the Sec- retary of the Treasury and shall publish such rate in the Fed- eral Register as soon as practicable after the date of deter- mination. (D) Notwithstanding subparagraph (A) (i) for any loan made pursuant to section 428A for which the first disbursement is made on or after October 1, 1992(I) subparagraph (B) shall be applied by substitut- ing "3.1" for "3.25"; and (II) the interest rate shall not exceed 11 percent; and (ii) for any loan made pursuant to section 428B for which the first disbursement is made on or after October 1, 1992(I) subparagraph (B) shall be applied by substitut- ing "3.1" for "3.25"; and (II) the interest rate shall not exceed 10 percent. 105 HIGHER EDUCATION ACT OF 1965 Sec. 427A (E) Notwithstanding subparagraphs (A) and (D) for any loan made pursuant to section 428B for which the first dis- bursement is made on or after July 1, 1994 (i) subparagraph (B) shall be applied by substituting "3.1" for "3.25"; and (ii) the interest rate shall not exceed 9 percent. (d) INTEREST RATES FOR NEW BORROWERS AFTER JULY 1, 1988.Notwithstanding subsections (a) and (b) of this section, with respect to any loan (other than a loan made pursuant to sections 428A, 428B, and 4280) to cover the cost of instruction for any pe- riod of enrollment beginning on or after July 1, 1988, to any bor- rower who, on the date of entering into the note or other written evidence of the loan, has no outstanding balance of principal or in- terest on any' loan made, insured, or guaranteed under this part, the applicable rate of interest shall be (1) 8 percent per year on the unpaid principal balance of the loan during the period beginning on the date of the dis- bursement of the loan and ending 4 years after the commence- ment of repayment; and (2) 10 percent per year on the unpaid principal balance of the loan during the remainder of the repayment period. (e) INTEREST RATES FOR NEW BORROWERS AFTER OCTOBER 1, 1992. (1) IN GENERALNotwithstanding subsections (a), (b), and (d) of this section, with respect to any loan (other than a loan made pursuant to sections 428A, 428B and 4280) for which the first disbursement is made on or after October 1, 1992, to any borrower who, on the date of entering into the note or other written evidence of the loan, has no outstanding balance of principal or interest on any loan made, insured, or guaranteed under section 427, 428, or 428H of this part, the applicable rate of interest shall, during any 12-month period beginning on July 1 and ending on June 30, be determined on the preceding June 1 and be equal to (A) the bond equivalent rate of 91-day Treasury bills auctioned at the final auction held prior to such June 1; plus (E) 3.10 percent, except that such rate shall not exceed 9 percent. (2) CONSULTATION.The Secretary shall determine the ap- plicable rate of interest under paragraph (1) after consultation with the Secretary of the Treasury and shall publish such rate in the Federal Register as soon as practicable after the date of determination. (0 INTEREST RATES FOR NEW LOANS AFTER JULY 1, 1994. (1) IN GENERAL.Notwithstanding subsections (a), (b), (d), and (e) of this section, with respect to any loan made, insured, or guaranteed under this part (other than a loan made pursu- ant to section 428B or 428C) for which the first disbursement is made on or after July 1, 1994, the applicable rate of interest shall, during any 12-month period beginning on July 1 and ending on June 30, be determined on the preceding June 1 and be equal to- 5 Sec. 427A HIGHER EDUCATION ACT OF 1965 106 (A) the bond equivalent rate of 91-day Treasury bills auctioned at the final auction he/d prior to such June 1; plus (B) 3.10 percent, except that such rate shall not exceed 8.25 percent. (2) CONSULTATION.The Secretary shall determine the ap- plicable rate of interest under paragraph (1) after consultation with the Secretary of the Treasury and shall publish such rate in the Federal Register as soon as practicable after the date of determination. (g) IN SCHOOL AND GRACE PERIOD RULES. (1) GENERAL RULE.Notwithstanding the provisions of subsection (f), but subject to subsection (h), with respect to any loan under section 428 or 428H of this part for which the first disbursement is made on or after July 1, 1995, the applicable rate of interest for interest which accrues (A) prior to the beginning of the repayment period of the loan; or (B) during the period in which principal need not be paid (whether or not such principal is in fact paid) by rea- son of a provision described in section 428(b)(1)(M) or 427(a)(2)(C), shall not exceed the rate determined under paragraph (2). (2) RATE DETERMINATION.For purposes of paragraph (1), the rate determined under this paragraph shall, during any 12-month period beginning on July 1 and ending on June 30, be determined on the preceding June 1 and be equal to (A) the bond equivalent rate of 91-day Treasury bills auctioned at the final auction prior to such June 1; plus (B) 2.5 percent, except that such rate shall not exceed 8.25 percent. (3) CONSULTATION.The Secretary shall determine the ap- plicable rate of interest under this subsection after consulta- tion with the Secretary of the Treasury and shall publish such rate in the Federal Register as soon as practicable after the date of determination. (h) INTEREST RATES FOR NEW LOANS AFTER JULY 1, 1998. (1) IN GENERAL.Notwithstanding subsections (a), (b), (d), (e), (0, and (g) of this section, with respect to any loan made, insured, or guaranteed under this part (other than a loan made pursuant to sections 428B and 4280) for which the first dis- bursement is made on or after July 1, 1998, the applicable rate of interest shall, during any 12-month period beginning on July 1 and ending on June 30, be determined on the preceding June 1 and be equal to (A) the bond equivalent rate of the securities with a comparable maturity as established by the Secretary; plus (B) 1.0 percent, except that such rate shall not exceed 8.25 percent. (2) INTEREST RATES FOR NEW PLUS LOANS AFTER JULY 1, 1998.Notwithstanding subsections (a), (b), (d), (e), (f), and (g), with respect to any loan made under section 428B for which the first disbursement is made on or after July 1, 1998, para- graph (1) shall be applied UG 107 HIGHER EDUCATION ACT OF 1965 Sec. 427A (A) by substituting "2.1 percent" for "1.0 percent" in subparagraph (B); and (B) by substituting "9.0 percent" for "8.25 percent" in the matter following such subparagraph. (3) CONSULTATION.The Secretary shall determine the ap- plicable rate of interest under this subsection after consulta- tion with the Secretary of the Treasury and shall publish such rate in the Federal Register as soon as practicable after the date of determination. (i) TREATMENT OF EXCESS INTEREST PAYMENTS ON NEW BOR- ROWER ACCOUNTS RESULTING FROM DECLINE IN TREASURY BILL RATES. (1) EXCESS INTEREST ON 10 PERCENT LOANS.If, with re'- spect to a loan for which the applicable interest rate is 10 per- cent under subsection (d) of this section at the close of any cal- endar quarter, the sum of the average of the bond equivalent rates of 91-day Treasury bills auctioned for that quarter and 3.25 percent is less than 10 percent, then an adjustment shall be made to a borrower's account (A) by calculating excess interest in the amount com- puted under paragraph (2) of this subsection; and (B)(i) during any period in which a student is eligible to have interest payments paid on his or her behalf by the Government pursuant to section 428(a), by crediting the excess interest to the Government; or (ii) during any other period, by crediting such excess interest to the reduction of principal to the extent provided in paragraph (5) of this subsection. (2) AMOUNT OF ADJUSTMENT FOR 10 PERCENT LOANS.The amount of any adjustment of interest on a loan to be made under this subsection for any quarter shall be equal to (A) 10 percent minus the sum of (i) the average of the bond equivalent rates of 91-day Treasury bills auctioned for such calendar quarter, and (ii) 3.25 percent; multiplied by (B) the average daily principal balance of the loan (not including unearned interest added to principal) during such calendar quarter; divided by (C) fo ur. (3) EXCESS INTEREST ON LOANS AFTER 1992 AMENDMENTS, TO BORROWERS WITH OUTSTANDING BALANCES.ff, with respect to a loan made on or after the date of enactment of the Higher Education Amendments of 1992 to a borrower, who on the date of entering into the note or other written evidence of the loan, has an outstanding balance of principal or interest on any other loan made, insured, or guaranteed under this part, the sum of the average of the bond equivalent rates of 91-day Treasury bills auctioned for that quarter and 3.1 percent is less than the applicable interest rate, then an adjustment shall be made (A) by calculating excess interest in the amount com- puted under paragraph (4) of this subsection; and (B)(i) during any period in which a student is eligible to have interest payments paid on his or her behalf by the U7 Sec. 427A HIGHER EDUCATION ACT OF 1965 108 Government pursuant to section 428(a), by crediting the excess interest to the Government; or (ii) during any other period, by crediting such excess interest to the reduction of principal to the extent provided in paragraph (5) of this subsection. (4) AMOUNT OF ADJUSTMENT.The amount of any adjust- ment of interest on a loan to be made under this subsection for any quarter shall be equal to (A) the applicable interest rate minus the sum of (i) the average of the bond equivalent rates of 91-day Treas- ury bills auctioned for such calendar quarter, and (ii) 3.1 percent; multiplied by (B) the average daily principal balance of the loan (not including unearned interest added to principal) during such calendar quarter; divided by (C) four. (5) ANNUAL ADJUSTMENT OF INTEREST AND BORROWER ELI- GIBILITY FOR CREDIT.Any adjustment amount computed pur- suant to paragraphs (2) and (4) of this subsection for any quar- ter shall be credited, by the holder of the loan on the last day of the calendar year in which such quarter falls, to the loan ac- count of the borrower so as to reduce the principal balance of such account. No such credit shall be made to the loan account of a borrower who on the last day of the calendar year is delin- quent for more than 30 days in making a required payment on the loan, but the excess interest shall be calculated and cred- ited to the Secretary. Any credit which is to be made to a bor- rower's account pursuant to this subsection shall be made ef- fective commencing no later than 30 days following the last day of the calendar year in which the quarter falls for which the credit is being made. Nothing in this subsection shall be construed to require refunding any repayment of a loan. At the option of the lender, the amount of such adjustment may be distributed to the borrower either by reduction in the amount of the periodic payment on the loan, by nducing the number of payments that shall be made with respect to the loan, or by reducing the amount of the final payment of the loan. Nothing in this paragraph shall be construed to require the lender to make additional disclosures pursuant to section 433(b). (6) PUBLICATION OF TREASURY BILL RATE.For the purpose of enabling holders of loans to make the determinations and adjustments provided for in this subsection, the Secretary shall for each calendar quarter commencing with the quarter begin- ning on July 1, 1987, publish a notice of the average of the bond equivalent rates of 91-day Treasury bills auctioned for such quarter. Such notice shall be published not later than 7 days after the end of the quarter to which the notice relates. (7) CONVERSION TO VARIABLE RATE.(A) Subject to sub- paragraphs (C) and (D), a lender or holder shall convert the in- terest rate on a loan that is made pursuant to this part and is subject to the provisions of this subsection to a variable rate. Such conversion shall occur not later than January 1, 1995, and, commencing on the date of conversion, the applicable in- terest rate for each 12-month period beginning on July 1 and 109 HIGHER EDUCATION ACT OF 1965 Sec. 427A ending on June 30 shall be determined by the Secretary on the June 1 preceding each such 12-month period and be equal to the sum of (i) the bond equivalent rate of the 91-day Treasury bills auctioned at the final auction prior to such June 1; and (ii) 3.25 percent in the case of loans described in paragraph (1), or 3.10 percent in the case of loans described in paragraph (3). (B) In connection with the conversion specified in subpara- graph (A) for any period prior to such conversion, and subject to paragraphs (C) and (p), a lender or holder shall convert the interest rate to a variable rate on a loan that is made pursuant to this part and is subject to the provisions of this subsection to a variable rate. The interest rates for such period shall be reset on a quarterly basis and the applicable interest rate for any quarter or portion thereof shall equal the sum of (i) the av- erage of the bond equivalent rates of 91-Treasury bills auc- tioned for the preceding 3-month period, and (ii) 3.25 percent in the case of loans described in paragraph (1) or 3.10 percent in the case of loans described in paragraph (3). The rebate of excess interest derived through this conversion shall be pro- vided to the borrower as specified in paragraph (5) for loans described in paragraph (1) or to the Government and borrower as specified in paragraph (3). (C) A lender or holder of a loan being converted pursuant to this paragraph shall complete such conversion on or before January 1, 1995. The lender or holder shall notify the borrower that the loan shall be converted to a variable interest rate and provide a description of the rate to the borrower not later than 30 days prior to the conversion. The notice shall advise the borrower that such rate shall be calculated in accordance with the procedures set forth in this paragraph and shall provide the borrower with a substantially equivalent benefit as the ad- justment otherwise provided for under this subsection. Such notice may be incorporated into the disclosure required under section 433(b) if such disclosure has not been previously made. (D) The interest rate on a loan converted to a variable rate pursuant to this paragraph shall not exceed the maximum in- terest rate applicable to the loan prior to such conversion. (E) Loans on which the interest rate is converted in ac- cordance with subparagraph (A) or (B) shall not be subject to any other provisions of this subsection. (j) LESSER RATES PERMITTED.Nothing in this section or sec- tion 428C shall be construed to prohibit a lender from charging a borrower interest at a rate less than the rate which is applicable under this part. (k) DEFINITIONS.For the purpose of subsections (a) and (d) of this section (1) the term "period of instruction" shall, at the discretion of the lender, be any academic year, semester, trimester, quar- ter, or other academic period; or shall be the period for which the loan is made as determined by the institution of higher education; and (2) the term "period of enrollment" shall be the period for which the loan is made as determined by the institution of higher education and shall coincide with academic terms such Sec. 428 HIGHER EDUCATION ACT OF 1965 110 as academic year, semester, trimester, quarter, or other aca- demic period as defined by such institution. (20 U.S.C. 1077a) Enacted October 3, 1980, P.L. 96-374, sec. 415(a)(1), 94 Stat. 1419; amended August 13, 1981, P.L. 97-35, sec. 534(a)(1), Stat. 454; amended Au- gust 15, 1983, P.L. 98-79, sec. 5, 97 Stat. 481; amended October 17, 1986, P.L. 99- 498, sec. 402(a), 100 Stat. 1364; amended June 3, 1987, P.L. 100-50, sec. 10(d)(1), 101 Stat. 342; amended July 23, 1992, P.L. 102-325, sec. 415, 106 Stat. 514; amend- ed August 10, 1993, P.L. 103-66, sec. 4101, 107 Stat. 364; amended December 20, 1993, P.L. 103-208, sec. 2(c)(5)-(10), (m), 107 Stat. 2461, 2486. SEC. 428. FEDERAL PAYMENTS TO REDUCE STUDENT INTEREST COSTS. (a) FEDERAL INTEREST SUBSIDIES.- (1) TYPES OF LOANS THAT QUALIFY.-Each student who has received a loan for study at an eligible institution- (A) which is insured by the Secretary under this part; Or (B) which is insured under a program of a State or of a nonprofit private institution or organization which was contracted for, and paid to the student, within the period specified in paragraph (5), and which- (i) in the case of a loan insured prior to July 1, 1967, was made by an eligible lender and is insured under a program which meets the requirements of subparagraph (E) of subsection (b)(1) and provides that repayment of such loan shall be in installments beginning not earlier than 60 days after the student ceases to pursue a course of study (as described in subparagraph (D) of subsection (b)(1)) at an eligible in- stitution, or (ii) in the case of a loan insured after June 30, 1967, was made by an eligible lender and is insured under a program covered by an agreement made pur- suant to subsection (b), shall be entitled to have paid on his or her behalf and for his or her account to the holder of the loan a portion of the inter- est on such loan under circumstances described in paragraph (2). (2) ADDITIONAL REQUIREMENTS TO RECEIVE SUBSIDY.-(A) Each student qualifying for a portion of an interest payment under paragraph (1) shall- (i) have provided to the lender a statement from the eligible institution, at which the student has been accepted for enrollment, or at which the student is in attendance, which- (I) sets forth such student's estimated cost of at- tendance (as determined under section 472); 1 (II) sets forth such student's estimated financial assistance; and (III) sets forth a schedule for disbursement of the proceeds of the loan in installments, consistent with the requirements of section 428G; and (ii) meet the requirements of subparagraph (B); and Section 602 of Public Law 102-164 (105 Stat. 1066) amended section 428(a)(2)(A)tiX1) by striking "and" at the end thereof. This amendment could not be executed. 120 111 HIGHER EDUCATION ACT OF 1965 Sec. 428 (B) For the purpose of clause (ii) of subparagraph (A), a student shall qualifr for a portion of an interest payment under paragraph (1) if the eligible institution has provided the lender with a statement evidencing a determination of need for a loan (as determined under part F of this title) and the amount of such need, subject to the provisions of subparagraph (D). (C) For the purpose of paragraph (1) and this paragraph (i) a student's estimated fmancial assistance means, for the period for which the loan is sought, the amount of assistance such student will receive under subpart 1 of part A (as determined in accordance with section 484(b)), subpart 3 of part A, and parts C and E of this title, and any veterans education benefits paid because of enroll- ment in a postsecondary education institution, including veterans' education benefits (as defined in section 480(c)), plus other scholarship, grant, or loan assistance; and (ii) the determination of need and of the amount of a loan by an eligible institution under subparagraph (B) with respect to a student shall be calculated in accordance with part F. (D) An eligible institution may not, in carrying out the pro- visions of subparagraphs (A) and (B) of this paragraph, provide a statement which certifies the eligibility of any student to re- ceive any loan under this part in excess of the maximum amount applicable to such loan. (E) For the purpose of subparagraphs (B) and (C) of this paragraph, any loan obtained by a student under section 428A or 428H or a parent under section 428B of this Act or under any State-sponsored or private loan program for an academic year for which the determination is made may be used to offset the expected family contribution of the student for that year. (F) Except as provided in subparagraph (D), *an eligible in- stitution may refuse to certify a statement which permits a student to receive a loan under this part or to certify a loan amount that is less than the student's determination of need (as determined under part F of this title), if the reason for such action is documented and provided in written form to each stu- dent so affected. Cri). AMOUNT OF INTEREST SUBSIDY.-(A)(i) Subject to sec- tion 438(c), the portion of the interest on a loan which a stu- dent is entitled to have paid, on behalf of and for the account of the student, to the holder of the loan pursuant to paragraph (1) of this subsection shall be equal to the total amount of the interest on the unpaid principal amount of the loan (I) which accrues prior to the beginning of the repay- ment period of the loan, or (H) which accrues during a period in which principal need not be paid (whether or not such principal is in fact paid) by reason of a provision described in subsection (b)(1)(M) of this section or in section 427(a)(2)(C). (ii) Such portion of the interest on a loan shall not exceed, for any period, the amount of the interest on that loan which is payable by the student after taking into consideration the 2 Sec. 428 HIGHER EDUCATION ACT OF 1965 112 amount of any interest on that loan which the student is enti- tled to have paid on his or her behalf for that period under any State or private loan insurance program. (iii) The holder of a loan with respect to which payments are required to be made under this section shall be deemed to have a contractual right, as against the United States, to re- ceive from the Secretary the portion of interest which has been so determined without administrative delay after the receipt by the Secretary of an accurate and complete request for pay- ment pursuant to paragraph (4). (iv) The Secretary shall pay this portion of the interest to the holder of the loan on behalf of and for the account of the borrower at such times as may be specified in regulations in force when the applicable agreement entered into pursuant to subsection (b) was made, or, if the loan was made by a State or is insured under a program which is not covered by such an agreement, at such times as may be specified in regulations in force at the time the loan was paid to the student. (v) A lender may not receive interest on a loan for any pe- riod that precedes the date that is (I) in the case of a loan disbursed by check, 10 days before the first disbursement of the loan; or (II) in the case of a loan disbursed by electronic funds transfer, 3 days before the first disbursement of the loan. (B) If (i) a State student loan insurance program is covered by an agreement under subsection (b), (ii) a statute of such State limits the interest rate on loans insured by such program to a rate which is less than the applicable interest rate under this part, and (iii) the Secretary determines that subsection (d) does not make such statutory limitation inapplicable and that such statutory limitation threatens to impede the carrying out of the purpose of this part, then the Secretary may pay an administrative cost allowance to the holder of each loan which is insured under such program and which is made during the period beginning on the 60th day after the date of enactment of the Higher Education Amendments of 1968 and ending 120 days after the adjourn- ment of such State's first regular legislative session which ad- journs after January 1, 1969. Such administrative cost allow- ance shall be paid over the term of the loan in an amount per year (determined by the Secretary) which shall not exceed 1 percent of the unpaid principal balance of the loan. (4) SUBMISSION OF STATEMENTS BY HOLDERS ON AMOUNT OF PAYMENT.Each holder of a loan with respect to which pay- ments of interest are required to be made by the Secretary shall submit to the Secretary, at such time or times and in such manner as the Secretary may prescribe, statements con- taining such information as may be required by or pursuant to regulation for the purpose of enabling the Secretary to deter- mine the amount of the payment which he must make with re- spect to that loan. 122 113 HIGHER EDUCAT1^N ACT OF 1965 Sec. 428 (5) DURATION OF AUTHORITY TO MAKE INTEREST SUBSIDIZED LOANS.The period referred to in subparagraph (B) of para- graph (1) of this subsection shall begin on the date of enact- ment of this Act and end at the close of September 30, 1998, except that, in the case of a loan made or insured under a stu- dent loan or loan insurance program to enable a student who has obtained a prior loan made or insured under such program to continue his or her education program, such period shall end at the close of September 30, 2002. (6) ASSESSMENT OF BORROWER'S FINANCIAL CONDITION NOT PROHIBITED OR REQUIRED.Nothing in this or any other Act shall be construed to prohibit or require, unless otherwise spe- cifically provided by law, a lender to evaluate the total fman- cial situation of a student making application for a loan under this part, or to counsel a student with respect to any such loan, or to make a decision based on such evaluation and counseling with respect to the dollar amount of any such loan. (7) LOANS THAT HAVE NOT BEEN CONSUMMATED.Lenders may not charge interest or receive interest subsidies or special allowance payments for loans for which the disbursement checks have not been cashed or for which electronic funds transfers have not been completed. (b) INSURANCE PROGRAM AGREEMENTS To QUALIFY LOANS FOR INTEREST SUBSIDIES. (1) REQUIREMENTS OF INSURANCE PROGRAM.Any State or any nonprofit private institution or organization may enter into an agreement with the Secretary for the purpose of enti- tling students who receive loans which are insured under a student loan insurance program of that State, institution, or organization to have made on their behalf the payments pro- vided for in subsection (a) if the Secretary determines that the student loan insurance program (A) authorizes the insurance in any academic year or its equivalent (as determined under regulations of the Sec- retary) for any student who is carrying at an eligible insti- tution or in a program of study abroad, approved for credit by the eligible home institution at which such student is enrolled at least one-half the normal full-time academic workload (as determined by the institution) in any amount up to a maximum of (i) in the case of a student at an eligible institu- tion who has not successfully completed the first year of a program of undergraduate education (I) $2,625, if such student is enrolled in a pro- gram whose length is at least one academic year in length (as determined under section 481); (II) $1,750, if such student is enrolled in a program whose length is less than one academic year, but at least 2/3 of such an academic year; and (III) $875, if such student is enrolled in a pro- gram whose length is less than 2/3, but at least 1/3, of such an academic year; ''3 Sec. 428 HIGHER EDUCATION ACT OF 1965 114 (ii)1 in the case of a student who has successfully completed such first year but has not successfully com- pleted the remainder of a program of undergraduate study (I) $3,500, if such student is enrolled in a pro- gram whose length is at least on academic year in length (as determined under section 481); (II) $2,325, if such student is enrolled in a program whose length is less than one academic year, but at least 2/3 of such academic year; and (III) $1,175, if such student is enrolled in a program whose length is less than 2/3, but at least 1/3, of such academic year; (iii)1 in the case of a student at an eligible institu- tion who has successfully completed such first and sec- ond year but has not successfully completed the re- mainder of a program of undergraduate study (I) $5,500, if such student is enrolled in a pro- gram whose length is at least one academic year in length (as determined under section 481); (II) $3,675, if such student is enrolled in a program whose length is less than one academic year, but at least 2/3 of such an academic year; and (III) $1,825, if such student is enrolled in a program whose length is less than 2/3, but at least 1/3, of such an academic year; and (iv) in the case of a student who has received an associate or baccalaureate degree and is enrolled in an eligible program for which the institution requires such degree for admission, the number of years that a student has completed in a program of undergraduate education shall, for the purposes of clauses (ii) and (iii), include any prior enrollment in the eligible pro- gram of undergraduate education for which the stu- dent was awarded such degree; and Effective July 1, 1994, section 2(c)(13)(A) of the Higher Education Technical Amendments of 1993 replaces clauses (ii) and (iii) with the following: "(ii) in the case of a student at an eligible institution who has successfully completed such first year but has not successfully completed the remainder of a program of undergraduate education "(I) $3,500; or "(II) if such student is enrolled in a program of undergraduate education, the remain- der of which is less than one academic year, the maximum annual loan amount that such student may receive may not exceed the amount that bears the same ratio to the amount specified in subclause (I) as such remainder measured in semester, trimester, quarter, or clock hours bears to one academic year; "(iii) in the case of a student at an eligible institution who h,is successfully completed the first and second years of a program of undergraduate education but has not successfully completed the remainder of such program "(I) $5,600; or "(II) if such student is enrolled in a program of undergraduate education, the remain- der of which is less than one academic year, the maximum annual loan amount that such student may receive may not exceed the amount that bears the same ratio to the amount specified in subclause (I) as such remainder measured in semester, trimester, quarter, or clock hours bears to one academic year;". 124 115 HIGHER EDUCATION ACT OF 1965 Sec. 428 (v) in the case of a graduate or professional stu- dent (as defined in regulations of the Secretary) at an eligible institution, $8,500; except in cases where the Secretary determines, pursuant to regulations, that a higher amount is warranted in order to carry out the purpose of this part with respect to stu- dents engaged in specialized training requiring exception- ally high costs of education, but the annual insurable limit per student shall not be deemed to be exceeded by a line of credit under which actual payments by the lender to the borrower will not be made in any years in excess of the an- nual limit; (B) provides that the aggregate insured unpaid prin- cipal amount for all such insured loans made to any stu- dent shall be any amount up to a maximum of (i) $23,000, in the case of any student who has not successfully completed a program of undergraduate education, excluding loans made under section 428A or 428B; and (ii) $65,500, in the case of any graduate or profes- sional student (as defined by regulations of the Sec- retary), and (I) including any loans which are insured by the Secretary under this section, or by a guaranty agency, made to such student before the student be- came a graduate or professional student, but (II) ex- cluding loans made under section 428A or 428B, except that the Secretary may increase the limit applicable to students who are pursuing programs which the Sec- retary determines are exceptionally expensive; (C) authorizes the insurance of loans to any individual student for at least 6 academic years of study or their equivalent (as determined under regulations of the Sec- retary); (D) provides that (i) the student borrower shall be en- titled to accelerate without penalty the whole or any part of an insured loan, (ii) the repayment period of any in- sured loan may not exceed 10 years, and (iii) the note, or other written evidence of any loan, may contain such rea- sonable provisions relating to repayment in the event of default by the borrower as may be authorized by regula- tions of the Secretary in effect at the time such notE or written evidence was executed, and shall contain a notice that repayment may, following a default by the borrower, be subject to income contingent repayment in accordance with subsection (m); 1 (E) subject to subparagraphs (D) and (L), and except as provided by subparagraph (M), provides that (i) not more than 6 months prior to the date on which the borrower's first payment is due, the lender shall offer the borrower of a loan made, insured, or guaranteed under this section or section 428A, the op- The amendment made to this subparagraph (by section 4043(a) of P.L. 103-66) adding a ref- erence to subsection (m) is not effective until July 1,1994, 1 `) Sec. 428 HIGHER EDUCATION ACT OF 1965 116 tion of repaying the loan in accordance with a grad- uated or income-sensitive repayment schedule estab- lished by the lender and in accordance with regula- tions of the Secretary; and (ii) repayment of loans shall be in installments over a period of not less than 5 years (unless the stu- dent, during the 6 months immediately preceding the start of the repayment period, specifically requests that repayment be made over a shorter period) nor more than 10 years commencing at the beginning of the repayment period determined under paragraph (7) of this subsection; (F) authorizes interest on the unpaid balance of the loan at a yearly rate not in excess (exclusive of any pre- mium for insurance which may be passed on to the bor- rower) of the rate required by section 427A; (G) insures not less than 98 percent of the unpaid principal of loans insured under the program, except that such program shall insure 100 percent of the unpaid prin- cipal of loans made with funds advanced pursuant to sec- tion 428(j) or 439(q); 1 (H) provides for collection of a single insurance pre- mium equal to not more than 1.0 percent 2 of the principal amount of the loan, by deduction proportionately from each installment payment of the proceeds of the loan to the borrower, and insures that the proceeds of the pre- mium will not be used for incentive payments to lenders; (I) provides that the benefits of the loan insurance pro- gram will not be denied any student who is eligible for in- terest benefits under subsection (a) (1) and (2); (J) provides that a student may obtain insurance under the program for a loan for any year of study at an eligible institution; (K) in the case of a State program, provides that such State program is administered by a single State agency, or by one or more nonprofit private institutions or organiza- tions under supervision of a single State agency; (L) provides that the total of the payments by a b orrower (i) during any year of any repayment period with respect to the aggregate amount of all loans to that borrower which are insured under this part shall not, unless the borrower and the lender otherwise agree, be less than $600 or the balance of all such loans (to- gether with interest thereon), whichever amount is less (but in no instance less than the amount of inter- est due and payable); and 'Section 4102(b) of P.L. 103-66, changing the percentage of principal required to be insured, applies to loans for which the first disbursement of principal is made on or after October 1, 1993. 2Section 4102(c) of P.L. 103-66 amended this subparagraph by striking "3 percent" and in- serting "1.0 percent". Subsection (d) of such section states the amendments made by section 4102 are effective July 1, 1994. 1 9 117 HIGHER EDUCATION ACT OF 1965 Sec. 428 (ii) for a monthly or other similar payment period with respect to the aggregate of all loans held by the lender may, when the amount of a monthly or other similar payment is not a multiple of $5, be rounded to the next highest whole dollar amount that is a mul- tiple of $5; (M) provides that periodic installments of principal need not be paid, but interest shall accrue and be paid by the Secretary, during any period-- (i) during which the borrower (I) is pursuing at least a half-time course of study as determined by an eligible institution; or (II) is pursuing a course of study pursuant to a graduate fellowship program approved by the Secretary, or pursuant to a rehabilitation training program for disabled individuals approved by the Secretary, except that no borrower shall be eligible for a deferment under this clause, or loan made under this part (other than a loan made under 428B or 428C), while serving in a medical internship or residency pro- gram; (ii) not in excess of 3 years during which the bor- rower is seeking and unable to find full-time employ- ment; or (iii) not in excess of 3 years for any reason which the lender determines, in accordance with regulations prescribed by the Secretary under section 435(o), has caused or will cause the borrower to have an economic hardship; (N) provides that funds borrowed by a student (i) are disbursed to the institution by check or other means that is payable to, and requires the en- dorsement or other certification by, such student; or (ii) in the case of a student who is studying out- side the United States in a program of study abroad that is approved for credit by the home institution at which such student is enrolled or at an eligib3e foreign institution, are, at the request of the student, dis- bursed directly to the student by the means described in clause (i), unless such student requests that the check be endorsed, or the funds transfer authorized, pursuant to an authorized power-of-attorney; (0) provides that the proceeds of the loans will be dis- bursed in accordance with the requirements of section 428G; (P) requires the borrower to notify the institution con- cerning any change in local address during enrollment and requires the borrower and the institution at which the bor- rower is in attendance promptly to notify the holder of the loan, directly or through the guaranty agency, concerning (i) any change of permanent address, (ii) when the student ceases to be enrolled on at least a half-time basis, and (iii) .? 7 SOC. 428 HIGHER EDUCATION ACT OF 1965 118 any other change in status, when such change in status af- fects the student's eligibility for the loan; (Q) provides for the guarantee of loans made to stu- dents and parents under sections 428A and 428B; (R) with respect to lenders which are eligible institu- tions, provides for the insurance of loans by only such in- stitutions as are located within the geographic area served by such guaranty agency; (S) provides no restrictions with respect to the insur- ance of loans for students who are otherwise eligible for loans under such program if such a student is accepted for enrollment in or is attending an eligible institution within the State, or if such a student is a legal resident of the State and is accepted for enrollment in or is attending an eligible institution outside that State; (T) authorizes (i) the limitation of the total number of loans or volume of loans, made under this part to students attending a particular eligible institution during any aca- demic year; and (ii) the limitation, suspension, or termi- nation of the eligibility of an eligible institution if (I) such institution is ineligible for the emergency action, limitation, suspension, or termination of eligi- ble institutions under regulations issued by the Sec- retary or is ineligible pursuant to criteria, rules, or regulations issued under the student loan insurance program which are substantially the same as regula- tions with respect to emergency action, limitation, sus- pension, or termination of such eligibility issued by the Secretary; (II) there is a State constitutional prohibition af- fecting the eligibility of such an institution; (III) such institution fails to make timely refunds to students as required by regulations issued by the Secretary or has not satisfied within 30 days of issu- ance a final judgment obtained by a student seeking such a refund; (IV) such institution or an owner, director, or offi- cer of such institution is found guilty in any criminal, civil, or administrative proceeding, or such institution or an owner, director, or officer of such institution is found liable in any civil or administrative proceeding, regarding the obtaining, maintenance, or disburse- ment of State or Federal grant, loan, or work assist- ance funds; or (V) such institution or an owner, director, or offi- cer of such institution has unpaid financial liabilities involving the improper acquisition, expenditure, or re- fund of State or Federal financial assistance funds; except that, if a guaranty agency limits, suspends, or ter- minates the participation of an eligible institution, the Sec- retary shall 'apply that limitation, suspension, or termi- nation to all locations of such institution, unless the Sec- retary finds, within 30 days of notification of the action by 1? 8 119 HIGHER EDUCATION ACT OF 1965 Sec. 428 the guaranty agency, that the guaranty agency's action did not comply with the requirement; of this section; (U) provides (i) for the eligibility of all lenders de- scribed in section 435(d)(1) under reasonable criteria, un- less (I) that lender is eliminated as a lender under regula- tions for the emergency action, limitation, suspension, or termination of a lender under the Federal student loan in- surance program or is eliminated as a lender pursuant to criteria issued under the student loan insurance program which are substantially the same as regulations with re- spect to such eligibility as a lender issued under the Fed- eral student loan insurance program, or (II) there is a State constitutional prohibition affecting the eligibility of a lender, (ii) assurances that the guaranty agency will report to the Secretary concerning changes in such criteria, in- cluding any procedures in effect under such program to take emergency action, limit, suspend, or terminate lend- ers, and (iii) for (I) a compliance audit of each lender at least once a year and covering the period since the most recent audit, conducted by a qualified, independent organi- zation or person in accordance with standards established by the Comptroller General for the audit of governmental organizations, programs, and functions, and as prescribed in regulations of the Secretary, the results of which shall be submitted to the Secretary, or (II) with regard to a lender that is audited under chapter 75 of title 31, United States Code, such audit shall be deemed to satisfy the re- quirements of subclause (I) for the period covered by such audit, except that the Secretary may waive the require- ments of this clause (iii) if the lender submits to the Sec- retary the results of an audit conducted for other purposes that the Secretary determines provides the same informa- tion as the audits required by this clause; (V) provides authority for the guaranty agency to re- quire a participation agreement between the guaranty agency and each eligible institution within the State in which it is designated, as a condition for guaranteeing loans made on behalf of students attending the institution; (W) provides assurances that the agency will imple- ment all requirements of the Secretary for uniform claims and procedures pursuant to section 432(1); and (X) provides information to the Secretary in accord- ance with section 428(c)(10) and maintains reserve funds determined by the Secretary to be sufficient in relation to such agency's guarantee obligations. (2) CONTENTS OF INSURANCE PROGRAM AGREEMENT.Such an agreement shall (A) provide that the holder of any such loan will be re- quired to submit to the Secretary, at such time or times and in such manner as the Secretary may prescribe, state- ments containing such information as may be required by or pursuant to regulation for the purpose of enabling the Secretary to determine the amount of the payment which must be made*with respect to that loan; 17-5:30 0- 94--- 5 Sec. 428 HIGHER EDUCATION ACT OF 1965 120 (B) include such other provisions as may be necessary to protect the United States from the risk of unreasonable loss and promote the purpose of this part, including such provisions as may be necessary for the purpose of section 437, and as are agreed to by the Secretary and the guar- anty agency, as the case may be; (C) provide for making such reports, in such form and containing such information, including financial informa- tion, as the Secretary may reasonably require to carry out the Secretary's functions under this part and protect the fi- nancial interest of the United States, and for keeping such records and for affording such access thereto as the Sec- retary may find necessary to assure the correctness and, verification of such reports; (D) provide for----- (i) conducting, except as provided in clause (ii), fi- nancial and compliance audits of the guaranty agency on at least an annual basis and covering the period since the most recent audit, conducted by a qualified, independent organization or person in accordance with standards established by the Comptroller General for the audit of governmental organizations, programs, and functions, and as prescribed in regulations of the Secretary, the results of which shall be submitted to the Secretary; or (ii) with regard to a guaranty program of a State which is audited under chapter 75 of title 31, United States Code, deeming such audit to satisfy the require- ments of clause (i) for the period of time covered by such audit; (E)(i) provide that any guaranty agency may transfer loans which are insured under this part to any other guar- anty agency with the approval of the holder of the loan and such other guaranty agency; and (ii) provide that the lender (or the holder of the loan) shall, not later than 120 days after the borrower has left the eligible institution, notify the borrower of the date on which the repayment period begins; and (F) provide that, if the sale, other transfer, or assign- ment of a loan made under this part to another holder will result in a change in the identity ofthe party to whom the borrower must send subsequent payments or direct any communications concerning the loans, then (1) the transferor and the transferee will be re- quired, not later than 45 days from the date the trans- feree acquires a legally enforceable right to receive payment from the borrower on such loan, either jointly or separately to provide a notice to the borrower of (I) the sale or other transfer; (II) the identity of the transferee; (III) the name and address of the party to whom subsequent payments or communications must be sent; and 13(i - 121 HIGHER EDUCATION ACT OF 1965 Sec. 428 (IV) the telephone numbers of both the trans- feror and the transferee; and (ii) the transferee will be required to notify the guaranty agency, and, upon the request of an institu- tion of higher education, the guaranty agency shall no- tify the last such institution the student attended prior to the beginning of the repayment period of any loan made under this part, of (I) any sale or other transfer of the loan; and (II) the address and telephone number by which contact may be made with the new holder concerning repayment of the loan, except that this subparagraph (F) shall only apply if the borrower is in the grace period described in section 427(a)(2)(B) or 428(b)(7) or is in repayment status. (3) RESTRICTIONS ON INDUCEMENTS, MAILINGS, AND ADVER- TISING.A guaranty agency shall not (A) offer, directly or indirectly, premiums, payments, or other inducements to any educational institution or its employees in order to secure applicants for loans under this part; (B) offer, directly or indirectly, any premium, incentive payment, or other inducement to any lender, or any agent, employee, or independent contractor of any lender or guar- anty agency, in order to administer or market loans made under this part (other than a loan made under section 428H or a loan made as part of a guaranty agency's lend- er-of-last-resort program) for the purpose of securing the designation of that guaranty agency as the insurer of such loans; (C) conduct unsolicited mailings to students enrolled in secondary school of student loan application forms; or (D) conduct fraudulent or misleading advertising con- cerning loan availability. (4) SPECIAL RULE.For the purpose of paragraph (1)(m)(nan) of this subsection, the Secretary shall approve any course of study at a foreign university that is accepted for the completion of a recognized international fellowship program by the administrator of such a program. Requests for deferment of repayment of loans under this part by students engaged in graduate or postgraduate fellowship-supported study (such as pursuant to a Fulbright grant) outside the United States shall be approved until completion of the period of the fellowship. (5) GUARANTY AGENCY INFORMATION TRANSFERS.(A) Until such time as the Secretary has implemented section 485B and is able to provide to guaranty agencies the information re- quired by such section, any guaranty agency may request infor- mation regarding loans made after January 1, 1987, to stu- dents who are residents of the State for which the agency is the designated guarantor, from any other guaranty agency in- suring loans to such students. (B) Upon a request pursuant to subparagraph (A), a guar- anty agency shall provide- Sec. 428 HIGHER EDUCATION ACT OF 1965 122 (i) the name and the social security number of the bor- rower; and (ii) the amount borrowed and the cumulative amount borrowed. (C) Any costs associated with fulfilling the request of a guaranty agency for information on students shall be paid by the guaranty agency requesting the information. (6) STATE GUARANTY AGENCY INFORMATION REQUEST OF STATE LICENSING BOARDS.Each guaranty agency is authorized to enter into agreements with each appropriate State licensing board under which the State licensing board, upon request, will furnish the guaranty agency with the address of a student borrower in any case in which the location of the student bor- rower is unknown or unavailable to the guaranty agency.' (7) REPAYMENT PERIOD.(A) In the case of a loan made under section 427 or 428, the repayment period shall exclude any period of authorized deferment or forbearance and shall begin (i) the day after 6 months after the date the student ceases to carry at least one-half the normal full-time aca- demic workload (as determined by the institution); or (ii) on an earlier date if the borrower requests and is granted a repayment schedule that provides for repayment to commence at an earlier date. (B) In the case of a loan made under section 428H, the re- payment period shall exclude any period of authorized deferment or forbearance, and shall, begin as described in clause (i) or (ii) of subparagraph (A), but interest shall begin to accrue or be paid by the borrower on the day the loan is dis- bursed. (C) In the case of a loan made under section 428A, 428B, or 428C, the repayment period shall begin on the day the loan is disbursed, or, if the loan is disbursed in multiple install- ments, on the day of the last such disbursement, and shall ex- clude any period of authorized deferment or forbearance. (8) MEANS OF DISBURSEMENT OF LOAN PROCEEDS.Nothing in this title shall be interpreted to prohibit the disbursement of loan proceeds by means other than by check or to allow the Secretary to require checks to be made co-payable to the insti- tution and the borrower. (C) GUARANTY AGREEMENTS FOR REIMBURSING LOSSES. (1) AUTHORITY TO ENTER INTO AGREEMENTS.(A) The Sec- retary may enter into a guaranty agreement with any guar- anty agency, whereby the Secretary shall undertake to reim- burse it, under such terms and conditions as the Secretary may establish, with respect to losses (resulting from the de- fault of the student borrower) on the unpaid balance of the principal and accrued interest of any insured loan. The guar- anty agency shall, be deemed to have a contractual right against the United States, during the life of such loan, to re- ceive reimbursement according to the provisions of this sub- section. Upon receipt of an accurate and complete request by a guaranty agency for reimbursement with respect to stich losses, the Secretary shall pay promptly and without adminis- ( 123 HIGHER EDUCATION ACT OF 1965 Sec. 428 trative delay. Except as provided in subparagraph (B) of this para- graph and in paragraph (7), the amount to be paid a guaranty agency as reimbursement under this subsection shall be equal to 98 1 percent of the amount expended by it in discharge ofits insur- ance obligation incurred under its loan insurance program. A guar- anty agency shall file a claim for reimbursement with respect to losses under this subsection within 45 days after the guaranty agency discharges its insurance obligation on the loan. (B) Notwithstanding subparagraph (A) (i) if, for any fiscal year, the amount of such reim- bursement payments by the Secretary under this sub- section exceeds 5 percent of the loans which are insured by such guaranty agency under such program and which were in repayment at the end of the preceding fiscal year, the amount to be paid as reimbursement under this subsection for such excess shall be equal to 88 1 percent of the amount of such excess; and (ii) if, for any fiscal year, the amount of such reim- bursement payments exceeds 9 percent of such loans, the amount to be paid as reimbursement under this subsection for such excess shall be equal to 78 1 percent of the amount of such excess. (C) For the purpose if this subsection, the amount of loans of a guaranty agency which are in repayment shall be the original principal amount of loans made by a lender which are insured by such a guaranty agency reduced by (i) the amount the insurer has been required to pay to discharge its insurance obligations under this part; (ii) the original principal amount of loans insured by it which have been fully repaid; and (iii) the original principal amount insured on those loans for which payment of the first installment of prin- cipal has not become due pursuant to subsection (b)(1)(E) of this section or such first installment need not be paid pursuant to subsection (b)(1)(M) of this section. (D) Reimbursements of losses made by the Secretary on loans submitted for claim by an eligible lender, set:ricer, or guarPnty agency designated for exceptional performance under section 4281 shall not be subject to additional review by the Secretary or repurchase by the guaranty agency for any reason other than a determination by the Secretary that the eligible lender, servicer, or guaranty agency engaged in fraud or other purposeful misconduct in obtaining designation for exceptional performance. (E)1 Notwithstanding any other provisions of this section, in the case of a loan made pursuant to a lender-of-last-resort program, the Secretary shall apply the provisions of (i) the fourth sentence of subparagraph (A) by sub- stituting "100 percent" for "98 percent"; 'The amendments made by section 4106(a) of P.L. 103-66, changag the reimbursement per- centages and adding subparagraphs (E) and (F), apply to loans for which the first disbursement is made on or after October 1, 1993. 3 3 Sec. 428 HIGHER EDUCATION ACT OF 1965 124 (ii) subparagraph (B)(i) by substituting "100 percent" for "88 percent"; and (iii) subparagraph (B)(ii) by substituting "100 percent" for "78 percent". (F)1 Notwithstanding any other provisions of this section, in the case of an outstanding loan transferred to a guaranty agency from another guaranty agency pursuant to a plan ap- proved by the Secretary in response to the insolvency of the latter such guarantee agency, the Secretary shall apply the provision of (i) the fourth sentence of subparagraph (A) by sub- stituting "100 percent" for "98 percent"; (ii) subparagraph (BXi) by substituting "90 percent" for "88 percent"; and (iii) subparagraph (B)(ii) by substituting "80 percent" for "78 percent". (2) CONTENTS OF GUARANTY AGREEMENTS.The guaranty agreement (A) shall set forth such administrative and fiscal pro- cedures as may be necessary to protect the United States from the risk of unreasonable loss thereunder, to ensure proper and efficient administration of the loan insurance program, and to assure that due diligence will be exercised in the collection of loans insured under the program, in- cluding a requirement that each beneficiary of insurance on the loan submit proof that reasonable attempts were made to locate the borrower (when the location of the bor- rower is unknown) and proof that contact was made with the borrower (when the location is known); (B) shall provide for making such reports, in such form and containing such information, as the Secretary may reasonably require to carry out the Secretary's functions under this subsection, and for keeping such records and for affording such access thereto as the Secretary may find necessary to assure the correctness and verification of such reports; (C) shall set forth adequate assurances that, with re- spect to so much of any loan insured under the loan insur- ance program as may be guaranteed by the Secretary pur- suant to this subsection, the undertaking of the Secretary under the guaranty agreement is acceptable in full satis- faction of State law or regulation requiring the mainte- nance of a reserve; (D) shall provide that if, after the Secretary has made payment under the guaranty agreement pursuant to para- graph (1) of this subsection with respect to any loan, any payments are made in discharge of the obligation incurred by the borrower with respect to such loan (including any payments of interest accruing on such loan after such pay- ment by the Secretary), there shall be paid over to the Sec- retary (for deposit in the fund established by section 431) such proportion of the amounts of such payments as is de- termined (in accordance with paragraph (6)) to represent his equitable share thereof, but (i) shall provide for sub- 'See footnote 1 on previous 125 HIGHER EDUCATION ACT OF 1965 Sec. 428 rogation of the United States to the rights of any insur- ance beneficiary only to the extent required for the pur- pose of paragraph (8); and (ii) except as the Secretary may otherwise by or pursuant to regulation provide, amounts so paid by a borrower on such a loan shall be first applied in reduction of principal owing on such loan; (E) shall set forth adequate assurance that an amount equal to each payment made under paragraph (1) will be promptly deposited in or credited to the accounts main- tained for the purpose of section 422(c); (F) set forth adequate assurances that the guaranty agency will not engage in any pattern or practice which re- sults in a denial of a borrower's access to loans under this part because of the borrower's race, sex, color, religion, na- tional origin, age, handicapped status, income, attendance at a particular eligible institution within the area served by the guaranty agency, length of the borrower's edu- cational program, or the borrower's academic year in school; (G) shall prohibit the Secretary from making any re- imbursement under this subsection to a guaranty agency when a default claim is based on an inability to locate the borrower, unless the guaranty agency, at the time of filing for reimbursement, certifies to the Secretary that diligent attempts have been made to locate the borrower through the use of reasonable skip-tracing techniques in accordance with regulations prescribed by the Secretary;, and (H) set forth assurances that (i) upon the request of an eligible institution, the guaranty agency shall, subject to clauses (ii) and (iii), furnish to the institution information with respect to students (including the names and addresses of such students) who received loans made, insured, or guar- anteed under this part for attendance at the eligible institution and for whom preclaims assistance activi- ties have been requested under subsection (1); (ii) the guaranty agency may require the payment by the institution of a reasonable fee (as determined in accordance with regulations prescribed by the Sec- retary) for such information; and (iii) the guaranty agency will require the institu- tion to use such information only to assist the institu- tion in reminding students of their obligation to repay student loans and shall prohibit the institution from disseminating the information for any other purpose. (1) may include such other provisions as may be nec- essary to promote the purpose of this part. (3) FORBEARANCE.-A guaranty agreement under this subsection (A) shall contain provisions providing that (i) upon written request, a lender shall grant a borrower forbearance, renewable at 12-month inter- vals, on terms agreed to in writing by the parties to the loan with the approval of the insurer, and other- Sec. 428 HIGHER EDUCATION ACT OF 1965 126 wise consistent with the regulations of the Secretary, if the borrower (I) is serving in a medical or dental internship or residency program, the successful completion of which is required to begin professional practice or service, or is serving in a medical or dental intern- ship or residency program leading to a degree or certificate awarded by an institution of higher education, a hospital, or a health care facility that offers postgraduate training, provided that if the borrower qualifies for a deferment under section 427(aX2)(C)(vii) or subsection (b)(1)(M)(vii) of this section as in effect prior to the enactment of the Higher Education Amendments of 1992, or section 427(aX2XC) or subsection (b)(1)(M) of this section as amended by such amendments, the borrower has exhausted his or her eligibility for such deferment; (II) has a debt burden under this title that equals or exceeds 20 percent of income; or (III) is serving in a natioual service position for which the borrower receives a national service educational award under the National and Com- munity Service Trust Act of 1993; (ii) the length of the forbearance granted by the lender(I) under clause (i)(I) shall equal the length of time remaining in the borrower's medical or den- tal internship or residency program, if the bor- rower is not eligible to receive a deferment de- scribed in such clause, or such length of time re- maining in the program after the borrower has ex- hausted the borrower's eligibility for such deferment; (H) under clause (i)(II) shall not exceed 3 years; or (III) under clause (i)(III) shall not exceed the period for which the borrower is serving in a posi- tion described in such clause; and (iii) no administrative or other fee may be charged in connection with the granting of a forbearance under clause (i), and no adverse information regarding a bor- rower may be reported to a credit bureau organization solely because of the granting of such forbearance; (B) may, to the extent provided in regulations of the Secretary, contain provisions that permit such forbearance for the benefit of the student borrower as may be agreed upon by the parties to an insured loan and approved by the insurer; and (C) shall contain provisions that specify that the form of forbearance granted by the lender for purposes of this paragraph shall be the temporary cessation of payments, unless the borrower selects forbearance in the form of an I (4 6' 127 HIGHER EDUCATION ACT OF 1965 Sec. 428 extension of time for making payments, or smaller pay- ments than were previously scheduled. Guaranty agencies shall not be precluded from permitting the parties to such a loan from entering into a forbearance agree- ment solely because the loan is in default. The Secretary shall permit lenders to exercise administrative forbearances that do mit require the agreement of the borrower, under conditions authorized by the Secretary. Such forbearances shall include (i) forbearances for borrowers who are delinquent at the time of the granting of an authorized period of deferment under sec- tion 428(b)(1)(M) or 427(a)(2)(C), and (ii) if the borrower is less than 60 days delinquent on such loans at the time of sale or transfer, forbearances for borrowers on loans whic1i are sold or transferred. (4) DEFINITIONS.For the purpose of this subsection, the terms "insurance beneficiary" and "default" have the meanings assigned to them by section 435. (5) APPLICABILITY TO EXISTING LOANS.In the case of any guaranty agreement with a guaranty agency, the Secretary may, in accordance with the terms of this subsection, under- take to guarantee loans described in paragraph (1) which are insured by such guaranty agency and are outstanding on the date of execution of the guaranty agreement, but only with re- spect to defaults occurring after the execution of such guaranty agreement or, if later, after its effective date. (6) SECRETARY'S EQUITABLE SHARE.(A) For the purpose of paragraph (2XD), the Secretary's equitable share of payments made by the borrower shall be that portion of the payments re- maining after the guaranty agency with which the Secretary has an agreement under this subsection has deducted from such payments (i) a percentage amount equal to the complement of the reinsurance percentage in effect when payment under the guaranty agreement was made with respect to the loan; and (ii) an amount equal to 27 percent of such payments (subject to subparagraph (D) of this paragraph) for costs related to the student loan insurance program, including the administrative costs of collection of loans reimbursed under this subsection, the administrative costs of preclaims assistance for default prevention, the adminis- trative costs of supplemental preclaims assistance for de- fault prevention, and the administrative costs of monitor- ing the enrollment and payment status of students (as such terms are defined in subparagraph (B) or (C) of this paragraph). (B) For the purpose of this paragraph and subsection (f) of this section, the term (i) "administrative costs of collection of' loans" means any administrative costs incurred by a guaranty agency which are directly related to the collection of the loan on which a default claim has been paid to the participating lender, including the attributable compensation of collec- tion personnel (and in the case of personnel who perform 137 See. 428 HIGHER EDUCATION ACT OF 1965 128 several functions for such an agency only the portion of the compensation attributable to the collection activity), attor- ney's fees, fees paid to collection agencies, postage, equip- ment, supplies, telephone and similar charges, but does not include -the overhead costs of such agency whether or not attributable; (ii) "administrative costs of preclaim assistance for de- fault prevention" means any administrative costs incurred by a guaranty agency which are directly related to provid- ing co:tlection assistance to the lender on a delinquent loan, prior to the loan's being legally in a default status, includ- ing the attributable compensation of appropriate personnel (and in the case of personnel who perform several func- tions for such an agency only the portion of compensation attributable to the collection activity), fees paid to locate a missing borrower, postage, equipment, supplies, telephone and similar charges, but does not include the overhead costs of such agency whether or not attributable; and (iii) "administrative costs of monitoring the enrollment and repayment status of students" means any administra- tive costs by a guaranty agency which are directly related to ascertaining the student's enrollment status, prompt no- tification to the lender of such status, an audit of the note or written agreement to determine if the provisions of that note or agreement are consistent with the records of the guaranty agency as to the principal amount of the loan guaranteed, and an examination of the note or agreement to assure that the repayment provisions are consistent with the provisions of this part, subject to such additional criteria as the Secretary may by reg- ulation prescribe. (C)(i) For the purpose of subsection (1), "administrative costs of supplemental preclaims assistance" means (subject to divisions (ii) through (iv)) any administrative costs (I) incurred by a guaranty agency in connection with a loan on which the guarantor has exercised preclaims as- sistance generally comparable in intensiveness to the level of preclaims assistance performed, prior to the 120th day of delinquency, by the guaranty agency as of October 16, 1990, and which has been in delinquent status for at least 120 days; and (II) which are directly related to providing collection assistance to the lender on a delinquent loan, prior to a claim being filed with the guaranty agency. including the attributable compensation of appropriate' person- nel (and in the case of personnel who perform several func- tions, only the portion of compensation attributable to the col- lection assistance), fees paid to locate a missing borrower, post- age, equipment, supplies, telephone, and similar charges, but does not include overhead costs. (ii) The administrative costs for which payment under sub- section (1) is authorized under this subparagraph must be clearly supplemental to the preclaim assistance for default pre- vention described in division (i)(I) of this subparagraph. 138 129 HIGHER EDUCATION ACT OF 1965 Sec. 428 (iii) The services associated with carrying out this sub- paragraph may be provided by the guaranty agency directly or under contract, except that such services may not be carried out by an organization or entity (other than the guaranty agen- cy) (I) that is the holder or servicer of the loan or an orga- nization or entity that owns or controls the holder or servicer of the loan; (II) that is owned or controlled by the same corpora- tion, partnership, association, or individual that owns or controls the holder or servicer of the loan; or (III) that is an organization or entity that has a con- tract with a guaranty agency to perform collection activi- ties with respect to the same loans in the event of default. (iv) In the case of accounts brought into repayment status as a result of performing supplemental preclaims assistance, the cost of such assistance is a permissible charge to the bor- rower (for the cost of collection) for which the borrower shall be liable. (7) NEW PROGRAMS ELIGIBLE FOR 100 PERCENT REINSUR- ANCE.-(A) Notwithstanding paragraph (1)(C), the amount to be paid a guaranty agency for any fiscal year (i) which begins on or after October 1, 1977 and ends before October 1, 1991; and (ii) which is either the fiscal year in which such guar- anty agency begins to actively carry on a student loan in- surance program which is subject to a guaranty agreement under subsection (b) of this section, or is one of the 4 suc- ceeding fiscal years, shall be 100 percent of the amount expended by such guaranty agency in discharge of its insurance obligation insured under such program. (B) Notwithstanding the provisions of paragraph (1)(C), the Secretary may pay a guaranty agency 100 percent of the amount expended by such agency in discharge of such agency's insurance obligation for any fiscal year which (i) begins on or after October 1, 1991; and (ii) is the fiscal year in which such guaranty agency begins to actively carry on a student loan insurance pro- gram which is subject to a guaranty agreement under sub- section (b) or is one of the 4 succeeding fiscal years. (C) The Secretary shall continuously monitor the oper- ations of those guaranty agencies to which the provisions of subparagraph (A) or (B) are applicable and revoke the applica- tion of such subparagraph to any such guaranty agency which the Secretary determines has not exercised reasonable pru- dence in the administration of such program. (8) ASSIGNMENT TO PROTECT FEDERAL FISCAL INTEREST.- (A) If the Secretary determines that the protection of the Fed- eral fiscal interest so requires, a guaranty agency shall assign to the Secretary any loan of which it is the holder and for which the Secretary has made a payment pursuant to para- graph (1) of this subsection. Sec. 428 HIGHER EDUCATION ACT OF 1965 130 (B) An orderly transition from the Federal Family Edu- cation Loan Program under this part to the Federal Direct Stu- dent Loan Program under part D of this title shall be deemed to be in the Federal fiscal interest, and a guaranty agency shall promptly assign loans to the Secretary under this para- graph upon the Secretary's request. (9) GUARANTY AGENCY RESERVE LEVEL.-(A) Each guaranty agency which has entered into an agreement with the Sec- retary pursuant to this subsection shall maintain a current minimum reserve level of at least .5 percent of the total attrib- utable amount of all outstanding loans guaranteed by such agency for the fiscal year of the agency that begins in 1993. For purposes of this paragraph, such total attributable amount does not include amounts of outstanding loans transferred to the guaranty agency from another guaranty agency pursuant to a plan of the Secretary in response to the insolvency of the latter such guaranty agency. The minimum reserve level shall increase to (i) .7 percent of such total attributable amount for the fiscal year of the agency that begins in 1994; (ii) .9 percent of such total attributable amount for the fiscal year of the agency that begins in 1995; and (iii) 1.1 percent of such total attributable amount for each fiscal year of the agency that begins on or after Janu- ary 1, 1996. (B) The Secretary shall collect, on an annual basis, infor- mation from each guaranty agency having an agreement under this subsection to enable the Secretary to evaluate the finan- cial solvency of each such agency. The information collected shall include the level of such agency's current reserves, cash disbursements and accounts receivable. (C) If (i) any guaranty agency falls below the required min- imum reserve level in any 2 consecutive years, (ii) any guar- anty agency's Federal reimbursement payments are reduced to 80 percent pursuant to section 428(cX1)(B)(ii), or (iii) the Sec- retary determines that the administrative or financial condi- tion of a guaranty agency jeopardizes such agency's continued ability to perform its responsibilities under its guaranty agree- ment, then the Secretary shall require, as appropriate, the guaranty agency to submit and implement a management plan acceptable to the Secretary within 30 working days of any such event. (D)(i) If the Secretary is not seeking to terminate the guar- anty agency's agreement under subparagraph (E), or assuming the guaranty agency's functions under subparagraph (F), a management plan described in subparagraph (C) shall include the means by which the guaranty agency will improve its fi- nancial and administrative condition to the required level within 18 months. (ii) If the Secretary is seeking to terminate the guaranty agency's agreement under subparagraph (E), or assuming the guaranty agency's functions under subparagraph (F), a man- agement plan described in subparagraph (C) shall include the means by which the Secretary and the guaranty agency shall I 4 131 HIGHER EDUCATION ACT OF 1965 See: 428 work together to ensure the orderly termination of the oper- ations, and liquidation of the assets, of the guaranty agency. (E) The Secretary may terminate a guaranty agency's agreement in accordance with subparagraph (F) if (i) a guaranty agency required to submit a manage- ment plan under this paragraph fails to submit a plan that is acceptable to the Secretary; (ii) the Secretary determines that a guaranty agency has failed to improve substantially its administrative and financial condition; (iii) the Secretary determines that the guaranty agen- cy is in danger of financial collapse; (iv) the Secretary determines that such action is nec- essary to protect the Federal fiscal interest; (v) the Secretary determines that such action is nec- essary to ensure the continued availability of loans to stu- dent or parent borrowers; or (vi) the Secretary determines that such action is nec- essary to ensure an orderly transition from the loan pro- grams under this part to the direct student loan programs under part D of this title. (F) If a guaranty agency's agreement under this subsection is terminated pursuant to subparagraph (E), then the Sec- retary shall assume responsibility for all functions of the guar- anty agency under the loan insurance program of such agency. In performing such functions the Secretary is authorized to (i) permit the transfer of guarantees to another guar- anty agency; (ii) revoke the reinsurance agreement of the guaranty agency at a specified date, so as to require the merger, consolidation, or termination of the guaranty agency; (iii) transfer guarantees to the Department of Edu- cation for the purpose of payment of such claims and proc- ess such claims using the claims standards of the guaranty agency, if such standards are determined by the Secretary to be in compliance with this Act; (iv) design and implement a plan to restore the guar- anty agency's viability; (v) provide the guaranty agency with additional ad- vance funds in accordance with section 422(c)(7), with such restrictions on the use of such funds as is determined ap- propriate by the Secretary, in order to (I) meet the immediate cash needs of the guaranty agency; (II) ensure the uninterrupted payment of claims; Or (III) ensure that the guaranty agency will make loans as the lender-of-last-resort, in accordance with subsection (j); (vi) use all funds and assets of the guaranty agency to assist in the activities undertaken in accordance with this subparagraph and take appropriate action to require the return, to the guaranty agency or the Secretary, of any Sec. 428 HIGHER EDUCATION ACT OF 1965 132 funds or assets provided by the guaranty agency, under contract or otherwise, to any person or organization; or (vii) take any other action the Secretary determines necessary to ensure the continued availability of loans made under this part to residents of the State or States in which the guaranty agency did business, the full honoring of all guarantees issued by the guaranty agency prior to the Secretary's assumption of the functions of such agency, and the proper servicing of loans guaranteed by the guar- anty agency prior to the Secretary's assumption of the functions of such agency, to avoid disruption of the student loan program, and to ensure an orderly transition from the loan programs under this part to the direct student loan programs under part D of this title. (G) Notwithstanding any other provision of Federal or State law, if the Secretary has terminated or is seeking to ter- minate a guaranty agency's agreement under subparagraph (E), or has assumed a guaranty agency's functions under sub- paragraph (F) (i) no State court may issue any order affecting the Secretary's actions with respect to such guaranty agency; (ii) any contract with respect to the administration of a guaranty agency's reserve funds, or the administration of any assets purchased or acquired with the reserve funds of the guaranty agency, that is entered into or extended by the guaranty agency, or any other party on behalf of or with the concurrence of the guaranty agency, after the date of enactment of this subparagraph shall provide that the contract is terminable by the Secretary upon 30 days notice to the contracting parties if the Secretary determines that such contract includes an impermissible transfer of the reserve funds or assets, or is otherwise in- consistent with the terms or purposes of this section; and (iii) no provision of State law shall apply to the actions of the Secretary in terminating the operations of a guar- anty agency. (H) Notwithstanding any other provision of law, the Sec- retary's liability for any outstanding liabilities of a guaranty agsncy (other than outstanding student loan guarantees under this part), the functions of which the Secretary has assumed, shall not exceed the fair market value of the reserves of the guaranty agency, minus any necessary liquidation or .other ad- ministrative costs. (I) The Secretary shall not take any action under subpara- graph (E) or (F) without giving the guaranty agency notice and the opportunity for a hearing. ' T) Notwithstanding any other provision of law, the infor- mation transmitted to the Secretary pursuant to this para- graph shall be confidential and exempt from disclosure under section 552 of title 5, United States Code, relating to freedom of information, or any other Federal law. (K) The Secretary, within 3 months after the end of each fiscal year, shall submit to the House Committee on Education and Labor and the Senate Committee on Labor and Human 1 ;2 133 HIGHER EDUCATION ACT OF 1965 Sec. 428 Resources a report specifying the Secretary's assessment of the fiscal soundness of the guaranty agency system and the progress of the transition from the loan programs under this part to the direct student loan programs under part D of this title. (d) USURY LAWS INAPPLICABLE.No provision ofany law of the United States (other than this Act) or of any State ii(other than a statute applicable principally to such State's student loan insur- ance program) which limits the rate or amount of interest payable on loans shall apply to a loan (1) which bears interest (exclusive of any premium for in- surance) on the unpaid principal balance at a rate not in ex- cess of the rate specified in this part; and (2) which is insured (i) by the United States under this part, or (ii) by a guaranty agency under a program covered by an agreement made pursuant to subsection (b) of this section. (e) PAYMENTS FOR LENDER REFERRAL SERVICES. (1) IN GENERAL; AGREEMENTS WITH GUARANTY AGENCIES. (A) The Secretary shall make payments in accordance with this paragraph to a guaranty agency with which the Secretary has an agreement under subparagraph (B) which provides a lender referral service for students who meet the requirements of paragraph (2). (B)(i) The Secretary may enter into agreements with guar- anty agencies that meet standards established by the Secretary to provida lender referral services in geographic areas specified by the Secretary. Such guaranty agencies shall be paid in ac- cordance with paragraph (3) for such services. (ii) The Secretary shall publish in the Federal Register whatever standards, criteria, and procedures, consistent with the provisions of this part and part D of this title, the Sec- retary determines are reasonable and necessary to provide lender referral services under this subsection and ensure loan access to student and parent borrowers during the transition from the loan programs under this part to the direct student loan programs under part D of this title. Section 431 of the General Education Provisions Act shall not apply to the publi- cation of such standards, criteria, and procedures. (2) STUDENT ELIGIBILITY.A student is eligible to apply for lender referral services to a guaranty agency with which the Secretary has an agreement under paragraph (1)(B) if (A) such student is either a resident of, or is accepted for enrollment in, or is attending, an eligible institution lo- cated in a geographic area for which the Secretary (i) de- termines that loans are not available to all eligible stu- dents, and (ii) has entered into an agreement with a guar- anty agency under paragraph (1XB) to provide lender re- ferral services; and (B) such student has sought and was unable to find a lender willing to make a loan under this part. (3) AMOUNT OF PAYMENT.From funds available for costs of transition under section 458 of the Act, the amount which the Secretary shall pay to any eligible guaranty agency under this paragraph shall be equal to one-half of 1 percent of the Sec. 428 HIGHER EDUCAllON ACT OF 1965 134 total principal amount of the loans (upon which insurance was issued under this part) to a student described in paragraph (2) who subsequently obtained such loans because of such agency's referral service. (4) INCENTIVE FEES TO LENDERS.Nothing in this or any law shall prohibit an agency from using all or any portion of the funds received under this part for the payment of incentive fees to lenders who agree to participate in a lender referral service. (f) PAYMENTS OF CERTAIN COSTS. (1) PAYMENTS BASED ON INSURANCE PROGRAM AGREE- MENT.(A) For a fiscal year prior to fiscal year 1994, the Sec- retary shall make payments in accordance with the provisions of this paragraph to any guaranty agency for the purposes of (i) the administrative cost of promotion of eligible lender participation; (ii) the administrative costs of collection of loans; (iii) the administrative costs of preclaims assistance for default prevention; (iv) the administrative costs of monitoring the enroll- ment and repayment status of students; or (v) other such costs related to the student loan insur- ance program subject to such agreement. (B) The total amount of payments for any fiscal year prior to fiscal year 1994 made under this paragraph shall be equal to 1 percent of the total principal amount of the loans upon which insurance was issued under this part during such fiscal year by such guaranty agency. The guaranty agency shall, be deemed to have a contractual right against the United States to receive payments according to the provisions of this sub- paragraph. Payments shall be made promptly and without ad- ministrative delay to any guaranty agency submitting an accu- rate and complete application therefor under this subpara- graph.(C) No payment may be made under this paragraph for loans for which the disbursement checks have not been cashed or for which electronic funds transfers have not been com- pleted. (2) APPLICATIONS FOR PAYMENTS.No payment may be made under paragraph (1) of this subsection unless the guar- anty agency submits to the Secretary an application at such time, at least annually, in such manner, and containing or ac- companied by such information, as the Secretary may reason- ably require. Each such application shall (A) set forth assurances that the student loan insur- ance program subject to the guaranty agreement complies with subparagraphs (A), (R), (G), (R), (S), (T), and (U) of subsection (b)(1); (B) contain provisions designed to demonstrate the ca- pability of carrying out a necessary and successful pro- gram of collection of and preclaim assistance for the loan program subject to that agreement; (C) set forth an estimate of the costs which are eligible for payment under the provisions of this subsection; 144 135 HIGHER EDUCATION ACT OF 1965 Sec. 428 (D) provide for such administrative and fiscal proce- dures, including an audit, as are necessary to carry out the provisions of this subsection; and (E) set forth assurances that the guaranty agency will furnish such data and information, including where nec- essary estimates, as the Secretary may reasonably require, to carry out the provisions of this subsection. (g) ACTION ON INSURANCE PROGRAM AND GUARANTY AGREE- MENTS.If a nonprofit private institution or organization (1) applies to enter into an agreement with the Secretary under subsections (b) and (c) with respect to a student loan in- surance program to be carried on in a State with which the Secretary does not have an agreement under subsection (b), and (2) as provided in the application, undertakes to meet the requirements of section 422(c)(6)(B) (i), (ii), and the Secretary shall consider and act upon such application within 180 days, and shall forthwith notify the Committee on Labor and Human Resources of the Senate and the Committee on Education and Labor of the House of Representatives of his actions. (h) LENDING BY GUARANTY AGENCIES. (1) LENDING FROM SALLIE MAE ADVANCES.From sums ad- vanced by the Association pursuant to section 439(p), each guaranty agency or an eligible lender in a State described in section 435(d)(1) (D) or (F) of the Act is authorized to make loans directly to students otherwise unable to obtain loans under this part. (2) AMOUNT OF ADVANCES.(A) Each guaranty agency or an eligible lender in a State described in section 435(d)(1) (D) or (F) which has an application approved under section 439(p)(2) may receive advances under section 439(p) for each fiscal year in an amount necessary to meet the demand for loans under this section. The amount such agency or lender is eligible to receive may not exceed 25 percent of the average of the loans guaranteed by that agency or lender for the 3 years receding the fiscal year for which the determination is made. enever the determination required by the preceding sen- tence cannot be made because the agency or lender does not have 3 years previous experience, the amount such agency or lender is eligible to receive may not exceed 25 percent of the loans guaranteed under a program of a State of comparable size. (B) Each guaranty agency and each eligible lender in a State described in section 435(d)(1) (D) or (F) shall repay ad- vances made under section 439(p) in accordance with agree- ments entered into between the Association and such agency or lender. (3) LOAN TERM, CONDITIONS, AND BENEFITS.Loans made pursuant to this subsection shall have the same terms, condi- tions, and benefits as all other loans made under this part. (i) MULTIPLE DISBURSEMENT OF LOANS. (1) ESCROW ACCOUNTS ADMINISTERED BY ESCROW AGENT. Any guaranty agency or eligible lender (hereafter in this sub- section referred to as the "escrow agent") may enter into an 115 Sec. 428 HIGHER EDUCATION ACT OF 1965 136 agreement with any other eligible lender that is not an eligible institution or an agency or instrumentality of the State (here- after in this subsection referred to as the "lender") for the pur- pose of authorizing disbursements of the proceeds of a loan to a student. Such agreement shall provide that the lender will pay the proceeds of such loans into an escrow account to be ad- ministered by the escrow agent in accordance with the provi- sions of paragraph (2) of this subsection. Such agreement may allow the lender to make payments into the escrow account in amounts that do not exceed the sum of the amounts required for disbursement of initial or subsequent installments to bor- rowers and to make such payments not more than 21 days prior to the date of the disbursement of such installment to such borrowers. Such agreement shall require the lender to no- tify promptly the eligible institution when funds are escrowed under this subsection for a student at such institution. (2) AUTHORITY OF ESCROW AGENT.Each escrow agent en- tering into an agreement under paragraph (1) of this sub- section is authorized to (A) make the disbursements in accordance with the note evidencing the loan; (B) commingle the proceeds of all loans paid to the es- crow agent pursuant to the escrow agreement entered into under such paragraph (1); (C) invest the proceeds of such loans in obligations of the Federal Government or obligations which are insured or guaranteed by the Federal Government; (D) retain interest or other earnings on such invest- ment; and (E) return to the lender undisbursed funds when the student ceases to carry at an eligible institution at least one-half of the normal full-time academic workload as de- termined by the institution. (j) LENDERS-OF-LAST-RESORT. (1) GENERAL REQUIREMENT.In each State, the guaranty agency or an eligible lender in the State described in section 435(d)(1)(D) of this Act shall make loans directly, or through an agreement with an eligible lender or lenders, to students el- igible to receive interest benefits paid on their behalf under subsection (a) of this section who are otherwise unable to ob- tain loans under this part. Loans made under this subsection shall not exceed the amount of the need of the borrower, as de- termined under subsection (a)(2)(B), nor be less than $200. The guaranty agency shall consider the request of any eligible lend- er, as defined under section 435(d)(1)(A) of this Act, to serve as the lender-of-last-resort pursuant to this subsection. (2) RULES AND OPERATING PROCEDURES.The guaranty agency shall develop rules and operating procedures for the lender-of-last-resort program designed to ensure that (A) the program establishes operating hours and meth- ods of application designed to facilitate application by stu- dents and ensure a response within 60 days after the stu- dent's original complete application is filed under this sub- section; 116 17 137 HIGHER EDUCATION ACT OF 1965 Sec. 428 (B) consistent with standards established by the Sec- retary, students applying for loans under this subsection shall not be subject to additional eligibility requirements or requests for additional information beyond what is re- quired under this title in order to receive a loan under this part from an eligible lender, nor be required to receive more than two rejections from eligible lenders in order to obtain a loan under this subsection; (C) information about the availability of loans under the program is made available to institutions of higher education in the State; (D) appropriate steps are taken to ensure that borrow- ers receiving loans under the program are appropriately counseled on their loan obligation; and (E) the guaranty agency notifies the Secretary when the guaranty agency believes or has reason to believe that the Secretary may need to exercise the Secretary's author- ity under section 439(q). (3) ADVANCES TO GUARANTY AGENCIES FOR LENDER-OF- LAST-RESORT SERVICES DURING TRANSITION TO DIRECT LEND- ING.(A) In order to ensure the availability of loan capital dur- ing the transition from the Federal Family Education Loan Program under this part to the Federal Direct Student Loan Program under part D of this title, the Secretary is authorized to provide a guaranty agency with additional advance funds in accordance with section 422(c)(7), with such restrictions on the use of such funds as are determined appropriate by the Sec- retary, in order to ensure that the guaranty agency will make loans as the lender-of-last-resort. Such agency shall make such loans in accordance with this subsection and the requirements of the Secretary. (B) Notwithstanding any other provision in this part, a guaranty agency serving as a lender-of-last-resort under this paragraph shall be paid a fee, established by the Secretary, for making such loans in lieu of interest and special allowance subsidies, and shall be required to assign such loans to the Secretary on demand. Upon such assignment, the portion of the advance represented by the loans assigned shall be consid- ered repaid by such guaranty agency. (k) INFORMATION ON DEFAULTS. (1) PROVISION OF INFORMATION TO ELIGIBLE INSTITU- TIONS.Notwithstanding any other provision of law, in order to notify eligible institutions of former students who are in de- fault of their continuing obligation to repay student loans, each guaranty agency shall, upon the request of an eligible institu- tion, furnish information with respect to students who were en- rolled at the eligible institution and who are in default on the repayment of any loan made, insured, or guaranteed under this part. The information authorized to be furnished under this subsection shall include the names and addresses of such students. (2) PUBLIC DISSEMINATION NOT AUTHORIZED.Nothing in paragraph (1) of this subsection shall be construed to authorize 147 Sec. 428 HIGHER EDUCATION ACT OF 1965 138 public dissemination of the information described in paragraph (1). (3) BORROWER LOCATION INFORMATION.Any information provided by the institution relating to borrower location shall be used by the guaranty agency in conducting required skip- tracing activities. (1) PRECLAIMS ASSISTANCE AND SUPPLEMENTAL PRECLAIMS AS- SISTANCE. (1) ASSISTANCE REQUIRED.Upon receipt of a proper re- quest from the lender, a guaranty agency having an agreement with the Secretary under subsection (c) of this section shall en- gage in preclaims assistance activities (as described in sub- section (cX6XCXi)(I)) and supplemental preclaims assistance activities (as described in subsection (cX6XC)) with respect to each loan covered by such agreement. (2) PAYMENTS FOR SUPPLEMENTAL PRECLAIMS ASSIST- ANCE.The Secretary shall make payments in accordance with the provisions of this paragraph to any guaranty agency that engages in supplemental preclaims assistance (as defmed in subsection (c)(6)(C)) on a loan guaranteed under this part. For each loan on which such assistance is performed and for which a default claim is not presented to the guaranty agency by the lender on or before the 150th day after the loan becomes 120 days delinquent, such payment shall be equal to one percent of the total of the unpaid principal and the accrued unpaid in- terest of the loan. (M) INCOME CONTINGENT REPAYMENT.-1 (1) AUTHORITY OF SECRETARY TO REQUIRE.The Secretary shall require at least 10 percent of the borrowers who have de- faulted on loans made under this part that are assigned to the Secretary under subsection (c)(8) to repay those loans under an income contingent repayment plan, the terms and conditions of which shall be established by the Secretary and the same as, or similar to, an income contingent repayment plan established for purposes of part D of this title. (2) LOANS FOR WHICH INCOME CONTINGENT REPAYMENT MAY BE REQUIRED.A loan made under this part may be required to be repaid under this subsection if the note or other evidence of the loan has been assigned to the Secretary pursuant to sub- section (c)(8). (11) STATE SHARE OF DEFAULT COSTS.-2 (1) IN GENERAL.In the case of any State in which there are located any institutions of higher education that have a co- hort default rate that exceeds 20 percent, such State shall pay to the Secretary an amount equal to (A) the new loan volume attributable to all institutions in the State for the current fiscal year; multiplied by (B) the percentage specified in paragraph (2); multi- plied by (C) the quotient of 'Subsection (m) was completely revised by section 4043(a) of P.L. 103-66. Section 4043(b) of that Public Law provided that these revisions are not effective until July 1, 1994. 2Subsection (n), added by section 4201 of P.L. 103-66, is effective October 1, 1994. 139 HIGHER EDUCATION ACT OF 1965 Sec. 428 (i) the sum of the amounts calculated under para- graph (3) for each such institution in the State; di- vided by (ii) the total amount of loan volume attributable to current and former students of institutions located in that State entering repayment in the period used to calculate the cohort default rate. (2) PERCENTAGE.-For purposes of paragraph (1)(B), the percentage used shall be-- (A) 12.5 percent for fiscal year 1995; (B) 20 percent for fiscal year 1996; and (C) 50 percent for fiscal year 1997 and succeeding fis- cal years. (3) CALCULATION.-FOr purposes of paragraph (1)(C)(i), the amount shall be determined by calculating for each institution the amount by which- (A) the amount of the loans received for attendance by such institution's current and former students who (i) enter repayment during the fiscal year used for the cal- culation of the cohort default rate, and (ii) default before the end of the following fiscal year; exceeds (B) 20 percent of the loans received for attendance by all the current and former students who enter repayment during the fiscal year used for the calculation of the cohort default rate. (4) FEE.-A State may charge a fee to an institution of higher education that participates in the program under this part and is located in that State according to a fee structure, approved by the Secretary, that is based on the institution's co- hort default rate and the State's risk of loss under this sub- section. Such fee structure shall include a process by which an institution with a high cohort default rate is exempt from any fees under this paragraph if such institution demonstrates to the satisfaction of the State that exceptional mitigating cir- cumstances, as determined by the State and approved by the Secretary, contributed to its cohort default rate. (20 U.S.C. 1078) Enacted Nov. 8, 1965, P.L. 89-329, sec. 428, 79 Stat. 1240; amended Aug. 3, 1968, P.L. 90-460, secs. 1, 2, 3, 82 Stat. 634-638; amended Oct. 16, 1968, P.L. 90-575, secs. 111, 112, 113, 115, 116, 117, 1220, 82 Stat. 1020-27; amended June 23, 1972, P.L. 92-318, sec. 132(b), 86 Stat. 261; further amended June 23, 1972, P.L. 92-318, sec. 132C (a) and (b), 86 Stat. 262, 263; sec. 428(e) re- pealed June 23, 1972. P.L. 92-318, sec. 132D(c), 86 Stat. 264; amended April 18, 1974, P.L. 93-269, 88 Stat. 87, 89; amended June 30, 1976, P.L. 94-328, sec. 2(b), 90 Stat. 727; amended Oct. 12, 1976, P.L. 94-482, sec. 127(a), 90 Stat. 2108-2120; amended June 15, 1977, P.L. 95-43, sec. 1(a) (19), (20), (21), (22), (23), (24), (25), (26), (27), (28), (29), 91 Stat. 214, 215, 216; amended November 1, 1978, P.L. 95- 566, sec. 5 (a)(2), (b)(1), (b)(3)-(5), 92 Stat. 2403; amended October 3, 1980, P.L. 96- 374, sees. 411(b), 412 (c), (d), (f), 413(b), (d), 414, 415(a) (3), (4), (5), (b)(2), 417, 423 (b), (c), (d), 1391, 94 Stat. 1416, 1417, 1418, 1419, 1420, 1422, 1432, 1503; amended August 13, 1981, P.L. 97-35, secs. 532(a), (b)(1), 535(c), (d), 536(b), 537(b)(2), (c), (d)(1), (e)(2), 95 Stat. 451, 452, 455, 456, 467; amended August 15, 1983, P.L. 98- 79, sec. 10(b), 97 Stat 484; amended April 7, 1986, P.L. 99-272, secs. 16012(b), 16013(a), (c), (e)(2), (3), 16014(a)(1), (b), 16015(b), 16016, 16018(a)(2), 16021, 16032(c), 100 Stat. 339-343, 348, 349, 355; amended May 23, 1986, P.L. 99-320, sec. 2(a)(2), (b), 100 Stat. 491; amended October 17, 1986, P.L. 99-498, sec. 402, 100 Stat. 1367; amended June 3, 1987, P.L. 100-50, sec. 10(a)-(c), (e)-(m), 101 Stat. 341, 342; amended Dec. 23, 1987, P.L. 100-203, secs. 3001(b) and 3003, 101 Stat. 1330- 38-1330-39; amended July 18, 1988, P.L. 100-369, secs. 5(b)(2), 7(c), 11, 102 Stat. Sec. 428A HIGHER EDUCATION ACT OF 1965 140 836-838; amended Dec. 19, 1989, P.L. 101-239, secs. 2002(a)(2), (b)(1), 2004(b)(3), and 2006(b) (1) and (2); 103 Stat. 2111, 2112, 2116, and 2118; amended Nov. 5, 1990, P.L. 101-508, secs. 3002, 3004(b), 104 Stat. 2222; amended April 9, 1991, P.L. 102-26, sec. 9, 105 Stat. 128; amended November 15, 1991, P.L. 102-164, secs. 601(b), 604, and 605(b), 105 Stat. 1065, 1066, and 1068; amended July 23, 1992, P.L 102-325, secs. 411(b)(2), 416(a)-(e)(1), 416(f)-(p)(7), and 416(q)-(t) 106 Stat. 510, 516, 520, and 527; amended August 10, 1993, P.L. 103-66, secs. 4021, 4041(a), (b), 4043(a), 4044, 4045, 4102(c), 4107, 4108(a), (b), 4110(a), and 4112(a), 107 Stat. 370, 354, 355, 358, 359, 367, 368, 369, and 370; amended September 21, 1993, P.L. 103-82, sec. 102(c)(1), 107 Stat. 823; amended December 20, 1993, P.L. 103-208, sec 2(c)(11)-(28), (m), 107 Stat. 2462-65, 2486. SEC. 428A.1 FEDERAL SUPPLEMENTAL LOANS FOR STUDENTS. (a) Authority To Borrow.- (1) STUDENT ELIGIBILITY.-Graduate and professional stu- dents (as defined by regulations of the Secretary) and under- graduate independent students shall be eligible to borrow funds under this section in amounts specified in subsection (b), and unless otherwise specified in subsections (c) and (d), loans under this section shall have the same terms, conditions, and benefits as all other loans made under this part. In addition, undergraduate dependent students shall be eligible to borrow funds under this section if the financial aid administrator de- termines, after review of the financial information submitted by the student and considering the debt burden of the student, that exceptional circumstances will likely preclude the stu- dent's parents from borrowing under section 428B for purposes of the expected family contribution and that the student's fam- ily is otherwise unable to provide such expected family con- tribution. If the financial aid administrator makes such a de- termination, appropriate documentation of such determination shall be maintained in the institution's records to support such determination. No student shall be eligible to borrow funds under this section until such student has obtained a certificate of graduation from a school providing secondary education, or the recognized equivalent of such certificate. (2) INSTITUTIONAL ELIGIBILITY.-Funds may not be bor- rowed under this section by any undergraduate student who is enrolled at any institution during any fiscal year if the cohort default rate for such institution, for the most recent fiscal year for which such rates are available, equals or exceeds 30 per- cent. The Secretary shall notify institutions to which such re- striction applies annually, and specify the fiscal year covered by the restriction. The Secretary shall afford any institution to which such restriction applies an opportunity to present evi- dence contesting the accuracy of the calculation of the cohort default rate for such institution. (b) LIMITATIONS ON AMOUNTS OF LOANS.- (1) ANNUAL LIMIT.-Subject to paragraphs (2) and (3), the maximum amount a student may borrow in any academic year or its equivalent or in any period of' 7 consecutive months, whichever is longer, is: I Effective July 1, 1994, section 428A is repealed in accordance with section 4047(b) and (d) of Pl. 103-66. 15fl 141 HIGHER EDUCATION ACT OF 1965 E 428A (A) In the case of a student at an eligible institution who has not successfully completed the first and second year of a program of undergrad.uate education (1) $4,000, if such student is enrolled in a program whose length is at least one academic year in length (as determined under section 481); (ii) $2,500, if such student is enrolled in a pro- gram whose length is less than one academic year, but at least 2/13 of such an academic year; and (iii) $1,500, if such student is enrolled in a pro- gram whose length is less than 2/3, but at least 1/3, of such an academic year. (B)1 In the case of a student at an eligible institution who has successfully completed such first and second year but has not successfully completed the remainder of a pro- gram of undergraduate study (i) $5,000, if such student is enrolled in a program whose length is at least one academic year in length (as determined under section 481); (ii) $3,325, if such student is enrolled in a pro- gram whose length is less than one academic year, but at least 2/3 of such an academic year; and (iii) $1,675, if such student is enrolled in a pro- gram whose length is less than 2/3 , but at least 1/3, of such an academic year. (C) For the purposes of this paragraph, the number of years that a student has completed in a program of under- graduate education shall include any prior enrollment in an eligible program of undergraduate education for which the student was awarded an associate or baccalaureate de- gree, if such degree is required by the institution for ad- mission to the program in which the student is enrolled. (D) In the case of a graduate or professional student (as defined in regulations of the Secretary) at an eligible institution, $10,000. (2) AGGREGATE LIMIT.The aggregate insured principal amount of insured loans made to any student under this sec- tion, minus any interest capitalized under subsection ( ), shall not exceed (A) $23,000, in the case of any student who has not successfully completed a program of undergraduate edu- cation; and (B) $73,000, in the case of any graduate or profes- sional student, as such terms are defined by regulations is- sued by the Secretary, including any loans which are in- Effective July 1, 1994, section 2(cX29) of the Higher Education Technical Amendments of 1993 replaces subparagraph (B) with the following: "(13) In the case of a student at an eligible Institution who has successfully completed such first and second years but has not successfully completed the remainder of a program of undergraduate education "(i) $5,000; or "(ii) if such student is enrolled in a program of undergraduate education, the remain- der of which is less than one academic year, the maximum annual loan amount that such student may receive may not exceed the amount that bears the same ratio to the amount specified in subclause (I) as such remainder measured in semester, trimester, quarter, or clock hours bean to one academic year.". 1 5 1 Sec. 428A HIGHER EDUCATION ACT OF 1965 142 sured by the Secretary under this section, or by a guaranty agency, made to such student before the student became a graduate or professional student. (3) LIMITATION BASED ON NEED.Any loan under this sec- tion may be counted as part of the expected family contribution in the determination of need under this title, but no loan may be made to any student under this section for any academic year in excess of (A) the student's eatimated cost of attendance, minus (B) the total of (i) any loan for which the student is eli- gible under section 4281 and (ii) other fmancial aid as certified by the eligible institution under section 428(a)(2)(A). The an- nual insurable limit on account of the student shall not be deemed to be exceeded by a line of credit under which actual payments to the borrower will not be made in any year in ex- cess of the annual limit. (4) DISBURSEMENT.Any loan under this section shall be disbursed in the manner required by subparagraphs (N) and (0) of section 428(b)(1). (C) PAYMENT OF PRINCIPAL AND INTEREST. (1) COMMENCEMENT OF REPAYMENT.Repayment of prin- cipal on loans made under this section shall commence not later than 60 days after the date such loan is disbursed by the lender, or, if the loan is disbursed in multiple installments, not later than 60 days after the disbursement of the last such in- stallment, subject to deferral pursuant to sections 427(a)(2)(C) and 428(b)(1)(M). In the case of a borrower under this section who is also a borrower under a program of student loan insur- ance covered by an agreement under section 427 or 428(b), the lender shall notify the borrower of the option to defer the com- mencement of the repayment for six months after the student ceases to carry at an eligible institution at least one-half the normal full-time academic workload, as determined by the in- stitution, except that interest shall begin to accrue, and shall be paid in accordance with paragraph (2), notwithstanding such delay in the commencement of repayment. The lender shall also notifyr the borrower of the borrower's option to com- mence repayment earlier than the beginning of such repay- ment period and the difference in total cost to the borrower. (2) CAPITALIZATION OF INTEREST.(A) Interest On loans made under this section (i) which are disbursed in installments, (ii) for which payments of principal are deferred under sections 427(a)(2)(C)(i) and 428(b)(1)(M)(i), or (iii) for which the commencement of the repayment pe- riod is delayed in accordance with paragraph (1) to coin- cide with the commencement of the repayment period of a loan made under section 427 or 428, shall, if agreed upon by the borrower and the lender. (I) be paid monthly or quarterly, or (II) be added to the principal amount of the loan not more frequently than quarterly by the lender. Effective February 20, 1994, section 2(c)(31) of the Higher Education Technical Amendments of 1993 strikes "section 428" and inserts "sections 428 and 428H". 152 143 HIGHER EDUCATION ACT OF 1965 Sec. 428A (B) Such capitalization of interest shall not be deemed to exceed the annual insurable limit on account of the student. (3) SUBSIDIES PROHIBITED.No payments to reduce inter- est costs shall be paid pursuant to section 428(a) of this part on loans made pursuant to this section. (4) APPLICABLE RATES OF INTEREST.Interest on loans made pursuant to this section shall be at the applicable rate of interest provided in section 427A(c). (5) AMORTIZATION.The amount of the periodic payment and the repayment schedule for any loan made pursuant to this section shall be established by assuming an interest rate equal to the applicable rate of interest at the time the repay- ment of the principal amount of the loan commences. At the option of the lender, the note or other written evidence of the loan may require that (A) the amount of the periodic payment will be ad- justed annually, or (B) the period of repayment of principal will be length- ened or shortened, in order to reflect adjustments in interest rates occurring as a consequence of section 427A(c)(4). (6) REPAYMENT PERIOD.For purposes of calculating the 10-year repayment period under section 428(b)(1)(D), such pe- riod shall commence at the time the first payment of principal is due from the borrower. (d) REFINANCING. (1) REFINANCING TO SECURE COMBINED PAYMENT.An eli- gible lender may at any time consolidate loans held by it which are made under this section to a borrower, including loans which were made under section 428B as in effect prior to the enactment of the Higher Education Amendments of 1986, under a single repayment schedule which provides for a single principal payment and a single payment of interest, and shall calculate the repayment period for each included loan from the date of the commencement of repayment of the most recent in- cluded loan. Unless the consolidated loan is obtained by a bor- rower who is electing to obtain variable interest under para- graph (2) or (3), such consolidated loan shall bear interest at the weighted average of the rates of all included loans. The ex- tension of any repayment period of an included loan pursuant to this paragraph shall be reported (if required by them) to the Secretary or guaranty agency insuring the loan, as the case may be, but no additional insurance premiums shall be pay- able with respect to any such extension. The extension of the repayment period of any included loan shall not require the formal extension of the promissory note evidencing the in- cluded loan or the execution of a new promissory note, but shall be treated as an administrative forbearance of the repay- ment terms of the included loan. (2) REFINANCING TO SECURE VARIABLE INTEREST RATE.An eligible lender may reissue a loan which was made under this section before July 1, 1987, or under section 428B as in effect prior to the enactment of the Higher Education Amendments of 1986 in order to permit the borrower to obtain the interest Sec. 428A HIGHER EDUCATION ACT OF 1965 144 rate provided under section 427A(c)(4). A lender offering to re- issue a loan or loans for such purpose may charge a borrower an amount not to exceed $100 to cover the administrative costs of reissuing such loan or loans, not more than one-half of which shall be paid to the guarantor of the loan being reissued to recover costs of reissuance. Reissuance of a loan under this paragraph shall not affect any insurance applicable with re- spect to the loan, and no additional insurance fee may be charged to the borrower with respect to the loan. (3) REFINANCING BY DISCHARGE OF PREVIOUS LOAN.-A bor- rower who has applied to an original lender for reissuance of a loan under paragraph (2) and who is denied such reissuance may obtain a loan from another lender for the purpose of dis- charging the loan from such original lender. A loan made for such purpose- (A) shall bear interest at the applicable rate of interest provided under section 427A(c)(4); (B) shall not result in the extension of the duration of the note (other than as permitted under subsection (c)(5)(B)); (C) may be subject to an additional insurance fee but shall not be subject to the administrative cost charge per- mitted by paragraph (2) of this subsection; and (D) shall be applied to discharge the borrower from any remaining obligation to the original lender with re- spect to the original loan. (4) CERTIFICATION IN LIEU OF PROMISSORY NOTE PRESEN- TATION.-Each new lender may accept certification from the original lender of the borrower's original loan in lieu of presen- tation of the original promissory note. (5) NOTIFICATION TO BORROWERS OF AVAILABILITY OF REFI- NANCING OPTIONS.-Each holder of a loan made under this sec- tion or under section 428B as in effect prior to the date of en- actment of this Act shall, not later than October 1, 1987, in the case of loans made before the date of enactment of this Act, no- tify the borrower of such loan- (A) of the refinancing options for which the borrower is eligible under this subsection; (B) of those options which will be made available by the holder and of the practical consequences of such op- tions in terms of interest rates and monthly and total pay- ments for a set of loan examples; and (C) that, with respect to any option that the holder will not make available, the holder will, to the extent prac- ticable, refer the borrower to an eligible lender offering such option. (20 U.S.C. 1078-1) Enacted October 12, 1976, P.L. 94-482, sec. 127(a), 90 Stat. 2120, 2121, 2122, 2123; amended June 16, 1977, P.L. 95-43, sec. 1(a)(30), (31), (32), 91 Stat. 216; amended October 3, 1980; P.L. 96-374, secs. 412(e), (0, 1391, 94 Stat. 1420, 1421, 1503; amended August 13, 1981, P.L. 97-35, sec. 535(e), 95 Stat. 455; amended October 17, 1986, P.L. 99-498, sec. 402(a), 100 Stat. 1384; amended June 3, 1987, P.L. 100-50, sec. 10(n), (o)(1), (p)(1), (q), (r), 101 Stat. 343, 344; amended July 18, 1988, P.L. 100-369, secs. 4 and 5, 102 Stat. 835-836; amended December 19, 1989, P.L. 101-239, sec. 2003(a)(1), (b)(1), and (c), 103 Stat. 2112-2114; amend- ed November 5, 1990, P.L. 101-508, sec. 3006(b), 104 Stat. 2222; amended April 9, 154 145 HIGHER EDUCATION ACT OF 1965 Sec. 428B 1991, P.L. 102-26, sec. 2(c)(1), 105 Stat. 123; amended July 23, 1992, P.L. 102-325, sec. 417, 106 Stat. 529; amended December 20, 1993, P.L. 103-208, sec. 2(c)(29)- (32), (m), 107 Stat. 2465, 2486. SEC. 428B. FEDERAL PLUS LOANS. (a) AUTHORITY To BORROVV.Parents of a dependent student, who do not have an adverse credit history as determined pursuant to regulations of the Secretary, shall be eligible to borrow funds under this section in amounts specified in subsection (b), and un- less otherwise specified in subsections (c), (d), and (e), such loans shall have the same terms, conditions, and benefits as all other loans made under this part. Whenever necessary to carry out the provisions of this section, the terms "student" and "borrower" as used in this part shall include a parent borrower under this sec- tion. (b) LIMITATION BASED ON NEED.Any loan under this section may be counted as part of the expected family contribution in the determination of need under this title, but no loan may be made to any parent under this section for any academic year in excess of (A) the student's estimated cost of attendance, minus (B) other financial aid as certified by the eligible institution under section 428(a)(2)(A). The annual insurable limit on account of any student shall not be deemed to be exceeded by a line of credit under which actual payments to the borrower will not be made in any year in excess of the annual limit. (c) PLUS LOAN DISBURSEMENT.A11 loans made under this section shall be disbursed in accordance with the requirements of section 428G1 and shall be disbursed by (1) an electronic transfer of funds from the lender to the eligible institution; or (2) a check copayable to the eligible institution and the parent borrower. (d) PAYMENT OF PRINCIPAL AND INTEREST. (1) COMMENCEMENT OF REPAYMENT.Repayment, of prin- cipal on loans made under this section shall commence not later than 60 days after the date such loan is disbursed by the lender, subject to deferral during any period during which the parent meets the conditions required for a deferral under sec- tion 427(a)(2)(C) or 428(b)(1)(M). (2) CAPITALIZATION OF INTEREST.Interest on loans made under this section for which payments of principal are deferred pursuant to paragraph (1) of this subsection shall, if agreed upon by the borrower and the lender (A) be paid monthly or quarterly, or (B) be added to the principal amount of the loan not more frequently than quarterly by the lender. Such capital- ization of interest shall not be deemed to exceed the annual in- surable limit on account of the borrower. (3) SUBSIDIES PROHIBITED.No payments to reduce inter- est costs shall be paid pursuant to section 428(a) of this part on loans made pursuant to this section. 'The amendment made by section 4109(a) of P.L. 103-66 to this subsection, adding the ref- erence to multiple disbursement requirements, appliss to loans for which the first disbursement is made on or after October 1,1993. 155 Sec. 428B HIGHER EDUCATION ACT OF 1965 146 (4) APPLICABLE RATES OF INTEREST.Interest on loans made pursuant to this section shall be at the applicable rate of interest provided in section 427A(c). (5) AMORTIZATION.The amount of the periodic payment and the repayment schedule for any loan made pursuant to this section shall be established by assuming an interest rate equal to the applicable rate of interest at the time the repay- ment of the principal amount of the loan commences. At the option of the lender, the note or other written evidence of the loan may require that, (A) the amount of the periodic payment will be ad- justed annually, or (13) the period of repayment of principal will be length- ened or shortened, in order to reflect adjustments in ipterest rates occurring as a consequence of section 427A(c)(4). (e) REFINANCING. (1) REFINANCING TO SECURE COMBINED PAYMENT.An eli- gible lender may at any time consolidate loans held by it which are made under this section to a borrower, including loans which were made under section 428B as in effect prior to the enactment of the Higher Education Amendments of 1986, under a single repayment schedule which provides for a single principal payment and a single payment of interest, and shall calculate the repayment period for each included loan from the date of the commencement of repayment of the most recent in- cluded loan. Unless the consolidated loan is obtained by a bor- rower who is electing to obtain variable interest under para- graph (2) or (3), such consolidated loan shall bear interest at the weighted average of the rates of all included loans. The ex- tension of any repayment period of an included loan pursuant to this paragraph shall be reported (if required by them) to the Secretary or guaranty agency insuring the loan, as the case may be, but no additional insurance premiums shall be pay- able with respect to any such extension. The extension of the repayment period of any included loan shall not require the formal extension of the promissory note evidencing the in- cluded loan or the execution of a new promissory note, but shall be treated as an administrative forbearance of the repay- ment terms of the included loan. (2) REFINANCING TO SECURE VARIABLE INTEREST RATE.An eligible lender may reissue a loan which was made under this section before July 1, 1987, or under section 428B as in effect prior to the enactment of the Higher Education Amendments of 1986 in order to permit the borrower to obtain the interest rate provided under section 427A(c)(4). A lender offering to re- issue a loan or loans for such purpose may charge a borrower an amount not to exceed $100 to cover the administrative costs of reissuing such loan or loans, not more than one-half of which shall be paid to the guarantor of the loan being reissued to cover costs of reissuance. Reissuance of a loan under this paragraph shall not affect any insurance applicable with re- spect to the loan, and no ad.ditional insurance fee may be charged to the borrower with respect to the loan. 1 5 6 147 HIGHER EDUCATION ACT OF 1965 Sec. 428C (3) REFINANCING BY DISCHARGE OF PREVIOUS LOAN.-A bor- rower who has applied to an original lender for reissuance of a loan under paragraph (2) and who is denied such reissuance may obtain a loan from another lender for the purpose of dis- charging the loan from such original lender. A loan made for such purpose- (.A) shall bear interest at the applicable rate of interest provided under section 427A(c)(4); (B) shall not result in the extension of the duration of the note (other than as permitted under subsection (c)(5)(B)); (C) may be subject to an additional insurance fee but shall not be subject to the administrative cost charge per- mitted by paragraph (2) of this subsection; and (D) shall .be applied to discharge the borrower from any remaining obligation to the original lender with re- spect to the original loan. (4) CERTIFICATION IN LIEU OF PROMISSORY NOTE PRESEN- TATION.-Each new lender may accept certification from the original lender of the borrower's original loan in lieu of presen- tation of the original promissory note. (5) NOTIFICATION TO BORROWERS OF AVAILABILITY OF REFI- NANCING OPTIONS.-Each holder of a loan made under this sec- tion or under section 428B as in effect prior to the date of en- actment of this Act shall, not later than October 1, 1987, in the case of loans made before the date of enactment of this Act, no- tif3r the borrower of such loan- (A) of the refinancing options for which the borrower is eligible under this subsection; (B) of those options which will be made available by the holder and of the practical consequences of such op- tions in terms of interest rates and monthly and total pay- ments for a set of loan examples; and (C) that, with respect to any option that the holder will not make available, the holder will, to the extent prac- ticable, refer the borrower . to an eligible lender offering such option. (20 U S C. 1078-2) Enacted October 3, 1980, P.L. 96-374, sec. 419, 94 Stat. 1424; amended August 13, 1981, P.L. 97-35, secs. 532(b)(3), 534(a)(2), (c)(1), (c)(3), 95 Stat 452, 454, 455; amended August 15, 1983, P.L. 98-79, sec. 12, 97 Stat. 484; amended October 17, 1986, P.L. 99-498, sec. 402(a), 100 Stat. 1386; amended June 3, 1987, P L. 100-50, sec. 10(o), (p)(2), (q), (r), 101 Stat. 343, 344; amended July 23, 1992, P L 102-325, sec. 418, 106 Stat. 531; amended August 10, 1993, P.L. 103- 66, sec. 4109(a), 107 Stat. 369; amended December 20, 1993, P.L. 103-208, sec. 2(m), 107 Stat. 2486. SEC. 428C. FEDERAL CONSOLIDATION LOANS.1 (a) AGREEMENTS WITH ELIGIBLE LENDERS.- (I) AGREEMENT REQUIRED FOR INSURANCE COVERAGE.-For the purpose of providing loans to eligible borrowers for consoli- dation of their obligations with respect to eligible student 1Section 428C was extensively amended by section 4046(a) of P.L. 103-66. Section 4046(c) of that Public Law provided that those amendments are effective July 1, 1994, except that (A) the amendment to subsection (b)(4)(C) is effective on the date of enactment of that Public Law, and (B) subsection (f) (as added by section 4106(a) of that Public Law) is effective on that date of enactment 157 Sec. 428C HIGHER EDUCATION ACT OF 1965 148 loans, the Secretary or a guaranty agency shall enter into agreements in accordance with subsection (b) with the follow- ing eligible lenders: (A) the Student Loan Marketing Association; (B) State agencies described in subparagraphs (D) and (F) of section 435(d)(1); and (C) other eligible lenders described in subparagraphs (A), (B), (C), (E), and (J) of such section. (2) INSURANCE COVERAGE OF CONSOLIDATION LOANS.Ex- cept as provided in section 429(e), no contract of insurance under this part shall apply to a consolidation loan unless such loan is made under an agreement pursuant to this section and is covered by a certificate issued in accordance with subsection (b)(2). Loans covered by such a certificate that is issued by a guaranty agency shall be considered to be insured loans for the purposes of reimbursements under section 428(c), but no pay- ment shall be made with respect to such loans under section 428(f) to any such agency. (3) DEFINITION OF ELIGIBLE BORROWERS.(A) For the pur- pose of this section, the term "eligible borrower" means a bor- rower who, at the time of application for a consolidation loan is in repayment status, or in a grace period preceding repay- ment, or is a defaulted borrower who has made arrangements to repay the obligation on the defaulted loans satisfactory to the holders of the defaulted loans. (B)(i) An individual's status as an eligible borrower under this section terminates upon receipt of a consolidation loan under this section, except (I) with respect to eligible student loans received after the date of receipt of the consolidation loan; and (II) that loans received prior to the date of the consoli- dation loan may be added to the consolidation loan during the 180-day period following the making of the consolida- tion loan. (ii) Loans made under this section shall, to the extent used to discharge loans made under this title, be counted against applicable limitations on aggregate indebtedness contained in sections 425(a)(2), 428(b)(1)(B), 428A(b)(2), and 464(a)(2). (C)(i) A married couple, each of whom has eligible student loans, may be treated as if such couple were an individual bor- rowing under subparagraphs (A) and (B) if such couple agrees to be held jointly and severally liable for the repayment of a consolidation loan, without regard to the amounts of the re- spective loan obligations that are to be consolidated, and with- out regard to any subsequent change that may occur in such couple's marital status. (ii) Only one spouse in a married couple applying for a con- solidation loan under this subparagraph need meet any of the requirements of subsection (b) of this section, except that each spouse shall (I) individually make the initial certification that no other application is pending in accordance with subsection (b)(1)(A); and 1 5 8 149 HIGHER EDUCATION ACT OF 1965 Sec. 428C (II) agree to notify the holder concerning any change of address in accordance with subsection (b)(4). (4) DEFINITION OF ELIGIBLE STUDENT LOANS.For the pur- pose of paragraph (1), the term "eligible student loans" means loans (A) made, insured, or guaranteed under this part, in- cluding loans on which the borrower has defaulted (but has made arrangements to repay the obligation on the de- faulted loans satisfactory to the Secretary or guaranty agency, whichever insured the loans); (B) made under part E of this title; or (C) made under subpart II of part A of title VII of the Public Health Service Act. (b) CONTENTS OF AGREEMENTS, CERTIFICATES OF INSURANCE, AND LOAN NOTES. (1) .AGREEMENTS WITH LENDERS.Any lender described in subparagraph (A), (B), or (C) of subsection (a)(1) who wishes to make consolidation loans under this section shall enter into an agreement with the Secretary or a guaranty agency which provides (A) that, in the case of all lenders described in sub- section (a)(1), the lender will make a consolidation loan to an eligible borrower (on request of that borrower) only if the borrower certifies that the borrower has no other appli- cation pending for a loan under this section and (i) the lender holds an outstanding loan of that borrower which is selected by the borrower for consolidation under this sec- tion, or (ii) the borrower certifies that the borrower has sought and has been unable to obtain a consolidation loan with income-sensitive repayment terms from the holders of the outstanding loans of that borrower (which are so se- lected for consolidation); (B) that each consolidation loan made by the lender will bear interest, and be subject to repayment, in accord- ance with subsection (c); (C) that each consolidation loan will be made, notwith- standing any other provision of this part limiting the an- nual or aggregate principal amount for all insured loans made to a borrower, in an amount (i) which is not less than the minimum amount required for eligibility of the borrower under subsection (a)(3), and (ii) which is equal to the sum of the unpaid principal and accrued unpaid inter- est and late charges of all eligible student loans received by the eligible borrower which are selected by the borrower for consolidation; (D) that the proceeds of each consolidation loan will be paid by the lender to the holder or holders of the loans so selected to discharge the liability on such loans; (E) that the lender shall offer an income-sensitive re- payment schedule, established by the lender in accordance with the regulations prontulgated by the Secretary, to the borrower of any consolidation loan made by the lender on or after July 1, 1994; and 159 SeC. 428C HIGHER EDUCATION ACT OF 1965 160 (F) such other terms and conditions as the Secretary or the guaranty agency may specifically require of the lender to caxry out this section. (2) ISSUANCE OF CERTIFICATE OF COMPREHENSIVE INSUR- ANCE COVERAGE.The Secretary shall issue a certificate of comprehensive insurance coverage under section 429(b) to a lend.er which has entered into an agreement with the Secretary under paragraph (1) of this subsection. The guaranty agency may issue a certificate of comprehensive insurance coverage to a lender with which it has an agreement under such para- graph. The Secretary shall not issue a certificate to a lender described in subparagraph (B) or (C) of subsection (a)(1) unless the Secretary determines that such lender has first applied to, and has been denied a certificate of insurance by, the guaranty agency which insures the preponderance of its loans (by value). (3) CONTENTS OF CERTIFICATE.A certificate issued under paragraph (2) shall, at a minimum, provide (A) that all consolidation loans made by such lender in conformity with the requirements of this section will be in- sured by the Secretary or the guaranty agency (whichever is applicable) against loss of principal and interest; (B) that a consolidation loan will not be insured unless the lender has determined to its satisfaction, in accordance with reasonable and prudent business practices, for each loan being consolidated (i) that the loan is a legal, valid, and binding obli- gation of the borrower; (ii) that each such loan was made and serviced in compliance with applicable laws and regulations; and (iii) in the case of loans under this part, that the insurance on such loan is in full force and effect; (C) the effective date and expiration date of the certifi- cate;(D) the aggregate amount to which the certificate ap- plies;(E) the reporting requirements of the Secretary on the lender and an identification of the office of the Department of Education or of the guaranty agency which will process claims and perform other related administrative functions; (F) the alternative repayment terms which will be of- fered to borrowers by the lender; (G) that, if the lender prior to the expiration of the certificate no longer proposes to make consolidation loans, the lender will so notify the issuer of the certificate in order that the certificate may be terminated (without af- fecting the insurance on any consolidation loan made prior to such termination); and (H) the terms upon which the issuer of the certificate may limit, suspend, or terminate the lender's authority to make consolidation loans under the certificate (without af- fecting the insurance on any consolidation loan made prior to such limitation, suspension, or termination). (4) TERMS AND CONDITIONS OF LOANS.A consolidation loan made pursuant to this section shall be insurable by the 1 6 151 HIGHER EDUCATION ACT OF 1965 Sec. 428C Secretary or a guaranty agency pursuant to paragraph (2) only if the loan is made to an eligible borrower who has agreed to notify the holder of the loan promptly concerning any change of address and the loan is evidenced by a note or other written agreement which (A) is made without security and without endorse- ment, except that if the borrower is a minor and such note or other written agreement executed by him or her would not, under applicable law, create a binding obligation, en- dorsement may be required; (B) provides for the payment of interest and the repay- ment of principal in accordance with subsection (c) of this section; (C)(i) provides that periodic installments of principal need not be paid, but interest shall accrue and be paid in accordance with clause (ii), during any period for which the borrower would be eligible for a deferral under section 428(b)(1)(M), and that any such period shall not be in- cluded in determining the repayment schedule pursuant to subsection (c)(2) of this section; and (ii) provides that interest shall accrue and be paid (I) by the Secretary, in the case of a consolidation loan that consolidated only Federal Stafford Loans for which the student borrower received an interest sub- sidy under section 428; or (II) by the borrower, or capitalized, in the case of a consolidation loan other than a loan described in subclause (I); (D).entitles the borrower to accelerate without penalty repayment of the whole or any part of the loan; and (E)(i) contains a notice of the system of disclosure con- cerning such loan to credit bureau organizations under section 430A, and (ii) provides that the lender on request of the borrower will provide information on the repayment status of the note to such organizations. (5) DIRECT LOANS.In the event that a borrower is unable to obtain a consolidation loan from a lender with an agreement under subsection (a)(1), or is unable to obtain a consolidation loan with income-sensitive repayment terms acceptable to the borrower from such a lender, the Secretary shall offer any such borrower who applies for it, a direct consolidation loan. Such direct consolidation loan shall, as requested by the borrower, be repaid either pursuant to income contingent repayment under part D of this title or pursuant to any other repayment provision under this section. The Secretary shall not offer such loans if, in the Secretary's judgment, the Department of Edu- cation does not have the necessary origination and servicing arrangements in place for such loans. (C) PAYMENT OF PRINCIPAL AND INTEREST. (1) INTEREST RATES.(A) Consolidation loans made under this section shall bear interest at rates determined under sub- paragraph (B) or (C). For the purposes of payment of special allowances under section 438(b)(2), the interest rate required 1 f; 1 77-5O 0-94 --6 Sec. 428C HIGHER EDUCATION ACT OF 1965 152 by this subsection is the applicable interest rate with respect to a consolidation loan. (B) A consolidation loan made before July 1, 1994, shall bear interest at an annual rate on the unpaid principal balance of the loan that is equal to the greater of (i) the weighted average of the interest rates on the loans consolidated, rounded to the nearest whole percent; or (ii) 9 percent. (C). A consolidation loan made on or after July 1, 1994, shall bear interest at an annual rate on the unpaid principal balance of the loan that is equal to the weighted average of the interest rates on the loans consolidated, rounded upward to the nearest whole percent. (2) REPAYMENT SCHEDULES.(A) Notwithstanding any other provision of this part, to the extent authorized by its cer- tificate of insurance under subsection (b)(2)(F) and approved by the issuer of such certificate, the lender of a consolidation loan shall establish repayment terms as will promote the objectives of this section, which shall include the establishment of grad- uated or income-sensitive repayment schedules, established by the lender in accordance with the regulations of the Secretary. Except as required by such income-sensitive repayment sched- ules, or by the terms of repayment pursuant to income contin- gent repayment offered by the Secretary under subsection (b)(5), such repayment terms shall require that if the sum of the consolidation loan and the amount outstanding on other student loans to the individual (i) is less than $7,500, then such consolidation loan shall be repaid in not more than 10 years; (ii) is equal to or greater than $7,500 but less than $10,000, then such consolidation loan shall be repaid in not more than 12 years; (iii) is equal to or greater than $10,000 but less than $20,000, then such consolidation loan shall be repaid in not more than 15 years; (iv) is equal to or greater than $20,000 but less than $40,000, then such consolidation loan shall be repaid in not more than 20 years; (v) is equal to or greater than $40,000 but less than $60,000, then such consolidation loan shall be repaid in not more than 25 years; or (vi) is equal to or greater than $60,000, then such con- solidation loan shall be repaid in not more than 30 years. (B) The amount outstanding on other student loans which may be counted for the purpose of subparagraph (A) may not exceed the amount of the consolidation loan. (3) ADDITIONAL REPAYMENT REQUIREMENTS.Notwith- standing paragraph (2) (A) a repayment schedule established with respect to a consolidation loan shall require that the minimum in- stallment payment be an amount equal to not less than the accrued unpaid interest; and 1 f;2 153 HINER EDUCATION ACT OF 1965 Sec. 428C (B) except as required by the terms of repayment pur- suant to income contingent repayment offered by the Sec- retary under subsection (b)(5), the lender of a consolidation loan may, with respect to repayment on the loan, when the amount of a monthly or other similar payment on the loan is not a multiple of $5, round the payment to the next highest whole dollar amount that is a multiple of $5. (4) COMMENCEMENT OF REPAYMENT.Repayment of a con- solidation loan shall commence within 60 days after all holders have, pursuant to subsection (b)(1)(D), discharged the liability of the 1Dorrower on the loans selected for consolidation. (5) INSURANCE PREMIUMS PROHIBITED.No insurance pre- mium shall be charged to the borrower on any consolidation loan, and no insurance premium shall be payable by the lender to the Secretary with respect to any such loan, but a fee may be payable by the lender to the guaranty agency to cover the costs of increased or extended liability with respect to such loan. (d)1 SPECIAL PROGRAM AUTHORIZED. (1) GENERAL RULE AND DEFINITION OF ELIGIBLE STUDENT LOAN. (A) IN GENERAL.Subject to the provisions of this sub- section, the Secretary or a guaranty agency shall enter into agreements with eligible lenders described in subpara- graphs (A), (B), and (C) of subsection (a)(1) for the consoli- dation of eligible student loans. (B) APPLICABILITY RuLE.L-Unless otherwise provided in this subsection, the agreements entered into under sub- paragraph (A) and the loans made under such agreements for the consolidation of eligible student loans under this subsection shall have the same terms, conditions, and ben- efits as all other agreements and loans made under this section. (C) DEFINITION.For the purpose of this subsection, the term "eligible student loans" means loans (i) of the type described in subparagraphs (A), (B), and (C) of subsection (a)(4); and (ii) made under subpart I of part A of title VII of the Public Health Service Act. (2) INTEREST RATE RULE. (A) IN GENERAL.The portion of each consolidated loan that is attributable to an eligible student loan de- scribed in paragraph (1)(C)(ii) shall bear interest at a rate not to exceed the rate determined under subparagraph (B). (B) DETERMINATION OF THE MAXIMUM INTEREST RATE.For the 12-month period beginning after July 1, 1992, and for each 12-month period thereafter, beginning on July 1 and ending on June 30, the interest rate applica- ble under subparagraph (A) shall be equal to the average of the bond equivalent rates of the 91-day Treasury bills auctioned for the quarter prior to July 1, for each 12- 'Section 306(b) of P.L. 102-408 provides that this new subsection (d) is effective December 13,1992. Sec. 428C HIGHER EDUCATION ACT OF 1965 154 month period for which the determination is made, plus 3 percent. (C) PUBLICATION OF MAXIMUM INTEREST RATE.The Secretary shall determine the applicable rate of interest under subparagraph (B) after consultation with the Sec- retary of the Treasury and shall publish such rate in the Federal Register as soon as practicable after the date of such determination. (3) SPECIAL RULES. (A) No SPECIAL ALLOWANCE RULE.No special allow- ance under section 438 shall be paid with respect to the portion of any consolidated loan under this subsection that is attributable to any loan described in paragraph (1)(C)(ii). (B) No INTEREST SUBSIDY RULE.NO interest subsidy under section 428(a) shall be paid on behalf of any eligible borrower for any portion of a consolidated loan under this ubsection that is attributable to any loan described in iragraph (1)(C)(iD. (C) ADDITIONAL RESERVE RULE.Notwithstanding any 91,her provision of this Act, additional reserves shall not be 7equired for any guaranty agency with respect to a loan made under this subsection. (D) INSURANCE RULE.Any insurance premium paid by the borrower under subpart I of part A of title VII of the Public Health Service Act with respect to a loan made under that subpart and consolidated under this subsection shall be retained by the student loan insurance fund estab- lished under section 710 of the Public Health Service Act. (4) REGULATIONS.The Secretary is authorized to promul- gate such regulations as may be necessary to facilitate carrying out the provisions of this subsection. (e)1 TERMINATION OF AUTHORITY.The authority to make loans under this section expires at the close of September 30, 1998. Nothing in this section shall be construed to authorize the Sec- retary to promulgate rules or regulations governing the terms or conditions of the agreements and certificates under subsection (b). Loans made under this section which are insured by the Secretary shall be considered to be new loans made to students for the pur- pose of section 424(a). (f) INTEREST PAYMENT REBATE FEE. (1) IN GENERAL.For any month beginning on or after Oc- tober 1, 1993, each holder of a consolidation loan under this section for which the first disbursement was made on or after October 1, 1993, shall pay to the Secretary, on a monthly basis and in such manner as the Secretary shall prescribe, a rebate fee calculated on an annual basis equal to 1.05 percent of the principal plus accrued unpaid interest on such loan. 'Section 419(g) of the Higher Education Amendments of 1992 (Public Law 102-325) amended section 428C(d) by striking "September 30, 1992" and inserting "September 30, 1998". Section 306(a)(1) of the Health Professions Education Extension Amendments of 1992 (Public Law 102 408) redesignated ubsection (d) as subsection (e). Section 306(b) of Public Law 102-408 at- tempted to amend section 428(e), as redesignated, by striking "1992" and inserting "1997". 4 155 HIGHER EDUCATION ACT OF 1965 Sec. 428F (2) DEPOSIT.-The Secretary shall deposit all fees collected pursuant to sube:,-ction (a) into the insurance fund established in section 431. (20 U.S.C. 1078-3) Enacted April 7, 1986, P.L. 99-272, sec. 16017(a), 100 Stat. 343; amended October 17, 1986, P.L. 99-498, sec. 402(a), 100 Stat. 1388; amended June 3, 1987, P.L. 100-50, sec. 10(s), 101 Stat. 345; amended July 23, 1992, P.L. 102-325, sec. 419, 106 Stat. 532; amended October 13, 1992, P.L. 102-408, sec. 306, 106 Stat. 2084; amended August 10, 1993, P.L. 103-66, sec. 4046(a), (b)(2), and 4106(a), 107 Stat. 360, 363, and 368; amended December 20, 1993, P.L. 103-208, sec. 2(0;33)-(37), (m), 107 Stat. 2466, 2486. SEC. 428D. COMMINGLING OF FUNDS. Notwithstanding any other provision of this part regarding permissible uses of funds from any source, funds received by a guaranty agency under any provision of this part may be commin- gled with funds received under any other provision of this part and may be used to carry out the purposes of such other provision, ex- cept that- (1) the total amount expended for the purposes of such other provision shall not exceed the amount the guaranty agency would otherwise be authorized to expend; and (2) the authority to commingle such funds shall not relieve such agency of any accounting or auditing obligations under this part. (20 U.S.C. 1078-4) Enacted October 17, 1986, P.L. 99-498, sec. 402(a), 100 Stat. 1393; amended December 20, 1993, P.L. 103-208, sec. 2(m), 107 Stat. 2486. [Section 428E was repealed by section 605(b) of Public Law 102-164; 105 Stat. 1068.) SEC. 428F. DEFAULT REDUCTION PROGRAM. (a) OTHER REPAYMENT INCENTIVES.- (1) SALE OF LOAN.- (A) Each guaranty agency shall enter into an agree- ment with the Secretary which shall provide that upon se- curing consecutive payments for 12 months of amounts owed on a loan for which the Secretary has made a pay- ment under paragraph (1) of section 428(c), the guaranty agency (pursuant to an agreement with the Secretary) or the Secretary shall, if practicable, sell the loan to an eligi- ble lender. Such loan shall not be sold to an eligible lender who has been found by the guaranty agency or the Sec- retary to have substantially failed to exercise the due dili- gence required of lenders under this part. Neither the guri anty agency nor the Secretary shall demand from a borrower as monthly payment amounts referred to in this paragraph more than is reasonable and affordable based upon the borrower's total financial circumstances. (B) An agreement between the guaranty agency and the Secretary for purposes of this paragraph shall provide- (i) for the repayment by the agency to the Sec- retary of 81.5 percent of the amount of the principal balance outstanding at the time of such sale, multi- plied by the reinsurance percentage in effect when payment under the guaranty agreement was made with respect to the loan; and Sec. 428G HIGHER EDUCATION ACT OF 1965 156 (ii) for the reinstatement by the Secretary (I) of the obligation to reimburse such agency for the amount expended by it in discharge of its insurance obligation under its loan insurance program, and (II) of the obligation to pay to the holder of such loan a special allowance pursuant to section 438. (C) A loan which does not meet the requirements of subparagraph (A) may also be eligible for sale under this paragraph upon a determination that the loan was in de- fault due to clerical or data processing error and would not, in the absence of such error, be in a delinquent status. (2) USE OF PROCEEDS OF SALES.Amounts received by the Secretary pursuant to the sale of such loans by a guaranty agency under paragraph (1) of this subsection shall be de- ducted from the calculations of the amount of reimbursement for which the agency is eligible under paragraph (1)(B)(ii) of this subsection for the fiscal year in which the amount was re- ceived, notwithstanding the fact that the default occurred in a prior fiscal year. (3) BORROWER ELIGIBILITY.Any borrower whose loan is sold under paragraph (2) shall not be precluded by section 484 from receiving additional loans or grants under this title (for which he or she is otherwise eligible) on the basis of defaulting on the loan prior to such loan sale. (4) APPLICABILITY OF GENERAL LOAN CONDITIONS.A loan which is sold under paragraph (1) of this subsection shall, so long as the borrower continues to make scheduled repayments thereon, be subject to the same terms and conditions and qual- ify for the same benefits and privileges as other loans made under this part. (b) SPECIAL RULE.Each guaranty agency shall establish a program which allows a borrower with a defaulted loan or loans to renew eligibility for all title IV student financial assistance (regard- less of whether the defaulted loan has been sold to an eligible lend- er) upon the borrower's payment of 6 consecutive monthly pay- ments. The guaranty agency shall not demand from a borrower as a monthly payment amount under this subsection more than is rea- sonable and affordable based upon the borrower's total fmancial circumstances. A borrower may only obtain the benefit of this sub- section with respect to renewed eligibility once. (20 U.S.C. 1078-6) Reenacted December 19, 1989, P.L. 101-239, sec. 2005(a), 103 Stat. 2116-2118; amended July 23, 1992, P.L. 102-325, sec. 420, 106 Stat. 534; amended December 20, 1993, P.L. 103-208, sec. 2(c)(38)-(40), (m), 107 Stat. 2466, 2486. SEC. 428G. REQUIREMENTS FOR DISBURSEMENT OF STUDENT LOANS. (a) MULTJPLE DISBURSEMENT REQUIRED. (1) TWO DISBURSEMENTS REQUIRED.The proceeds of any loan made, insured, or guaranteed under this part that is made for any period of enrollment shall be disbursed in 2 or more installments, none of which exceeds one-half of the loan. (2) MINIMUM INTERVAL REQUIRED.The interval between the first and second such installments shall be not less than one-half of such period of enrollment, except as necessary to permit the second installment to be disbursed at the beginning Pq1 157 HIGHER EDUCATION ACT OF 1965 Sec. 428G of the second semester, quarter, or similar division of such pe- riod of enrollment. (b) DISBURSEMENT AND ENDORSEMENT REQUIREMENTS. (1) FIRST YEAR STUDENTS.The first installment of the proceeds of any loan made, insured, or guaranteed under this part that is made to a student borrower who is entering the first year of a program of undergraduate education, and who has not previously obtained a loan under this part, shall not (regardless of the amount of such loan or the d.uration of the period of enrollment) be presented by the institution to the stu- dent for endorsement until 30 days after the borrower begins a course of study, but may be delivered to the eligible institu- tion prior to the end of that 30-day period. (2) OTHER STUDENTS.The proceeds of any loan made, in- sured, or guaranteed under this part that is made to any stu- dent other than a student described in paragraph (1) shall not be disbursed more than 30 days prior to the beginning of the period of enrollment for which the loan is made. (C) METHOD OF MULTIPLE DISBURSEMENT.Disbursements under subsection (a) (1) shall be made in accordance with a schedule provided by the institution (under section 428(a)(2)(A)(i)(IH)) that com- plies with the requirements of this section; (2) may be made directly by the lender or, in the case of a loan under sections 428 and 428A, may be disbursed pursu- ant to the escrow provisions of section 428(1); and (3) notwithstanding subsection (a)(2), may, with the per- mission of the borrower, be disbursed by the lender on a week- ly or monthly basis, provided that the proceeds of the loan are disbursed in substantially equal weekly or monthly install- ments, as the case may be, over the period of enrollment for which the loan is made. (d) WITHHOLDING OF SECOND DISBURSEMENT. (1) WITHDRAWING STUDENTS.A lender or escrow agent that is informed by the borrower or the institution that the borrower has ceased to be enrolled before the disbursement of the second or any succeeding installment shall withhold such disbursement. Any disbursement which is so withheld shall be credited to the borrower's loan and treated as a prepayment thereon. (2) STUDENTS RECEIVING OVER-AWARDS.If the sum of a disbursement for any student and the other financial aid ob- tained by such student exceeds the amount of assistance for which the student is eligible under this title, the institution such student is attending shall withhold and return to the lender or escrow agent the portion (or all) of such installment that exceeds such eligible amount, except that overawards per- mitted pursuant to section 443(b)(4) of the Act shall not be con- strued to be overawards for purposes of this paragraph. Any portion (or all) of a disbursement installment which is so re- turned shall be credited to the borrower's loan and treated as a prepayment thereon. (e) EXCLUSION OF CONSOLIDATION AND FOREIGN STUDY LOANS.The provisions of this section shall not apply in the case VP? Sec. 428H HIGHER EDUCATION ACT OF 1965 158 of a loan made under section 428C or made to a student to cover the cost of attendance at an eligible institution outside the United States. (f) BEGINNING OF PERIOD OF ENROLLMENT.For purposes of this section, a period of enrollment begins on the first day that classes begin for the applicable period of enrollment. (g) SALES PRIOR TO DISBURSEMENT PROHIBITED.An eligible lender shall not sell or transfer a promissory note for any loan made, insured, or guaranteed under this part until the final dis- bursement of such loan has been made, except that the prohibition of this subsection shall not apply if (1) the sale of the loan does not result in a change in the identity of the party to whom payments will be made for the loan; and (2) the first disbursement of such loan has been made. (20 U.S.C. 1078-7) Enacted December 19, 1989, P.L. 101-239, sec. 2004(a), 101 Stat. 2115-2116; amended November 5, 1990, P.L. 101-508, sec. 3003, 104 Stat. 222; amended July 23, 1992, P.L. 102-325, sec. 421, 106 Stat. 534; amended August 10, 1993, P.L. 103-66, sec. 4109(b), 107 Stat. 369; amended December 20, 1993, P.L. 103-208, sec. 2(c)(41), (m), 107 Stat. 2466, 2486. SEC. 428H. UNSUBSIDIZED STAFFORD LOANS FOR MIDDLE-INCOME BORROWERS. (a) IN GENERAL.It is the purpose of this section to authorize insured loans under this part for borrowers who do not qualify for Federal interest subsidy payments under section 428 of this Act. Except as provided in this section, all terms and conditions for Fed- eral Stafford loans established under section 428 shall apply to loans made pursuant to this section. (b) ELIGIBLE BORROWERS.Any student meeting the require- ments fDr student eligibility under section 484 (including graduate and professional students as defined in regulations promulgated by the Secretary) I shall be entitled to borrow an unsubsidized Staf- ford loan. Such student shall provide to the .lender a statement from the eligible iLiztitution at which the student has been accepted for enrollment, or at which the student is in attendance, which (1) sets forth such student's estimated cost of attendance (as determined under section 472); (2) sets forth such student's estimated financial assistance, including a loan which qualifies for subsidy payments under section 428; and (3) certifies the eligibility of the student to receive a loan under this section and the amount of the loan for which such student is eligible, in accordance with subsection (c). (c) DETERMINATION OF AMOUNT OF LOAN.The determination of the amount of a loan by an eligible institution under subsection (b) shall be calculated by subtracting from the estimated cost of at- tendance at the eligible institution any estimated financial assist- Section 4047(a) of P.L. 103-66 added the parenthetical phrase to subsection (b), completely revised subsection (d) of this section and added paragraph (6) to subsection (e). Section 4047(d) stated that "except as otherwise provided" in such amendments, these amendments are effective July 1, 1994. In addition, section 4047(c) provided as follows: (c) TERMS, CONDITIONS AND BENEFITS.Notwithstanding the amendments made by this sec- tion, with respect to loans provided under sections 428A and 428H of the Act (as such sections existed on the date preceding the date of enactment of this Act) the terms, conditions and bene- fits applicable to such loans under such sections shall continue to apply to such loans after the date of enactment of this Act. 159 HIGHER EDUCATION ACT OF 1965 Sec. 428H ance reasonably available to such student. An eligible institution may not, in carrying out the provisions of subsection (b) of this sec- tion, provide a statement which certifies the eligibility of any stu- dent to receive any loan under this section in excess of the amount calculated under the preceding sentence. (d) LOAN LIMITS. (1) IN GENERAL.Except as provided in paragraphs (2) and (3), the annual and aggregate limits for loans under this sec- tion shall be the same as those established under section 428(b)(1), less any amount received by such student pursuant to the subsidized loan program established under section 428. (2) ANNUAL LIMITS FOR INDEPENDENT, GRADUATE, AND PRO- FESSIONAL STUDENTS.The maximum annual amount of loans under this section an independent student (or a student whose parents are unable to borrow under section 428B or the Fed- eral Direct PLUS Loan Program) may borrow in any academic year or its equivalent or in any period of 7 consecutive months, whichever is longer, shall be the amount determined under paragraph (1), plus (A) in tl-t?. case of such a student attending an eligible institution who has not completed such student's first 2 years of undergraduate study (i) $4,000, if such student is enrolled in a program whose length is at least one academic year in length (as determined under section 481); (ii) $2,500, if such student is enrolled in a pro- gram whose length is less than one academic year, but at least 2/3 of such an academic year; and (iii) $1,500, if such student is enrolled in a pro- gram whose length is less than 2/3, but at least 1/3, of such an academic year; (B) in the case of a student at an eligible institution who has successfully completed such first and second years but has not successfully completed the remainder of a pro- gram of undergraduate education (i) $5,000; or (ii) if such student is enrolled in a program of un- dergraduate education, the remainder of which is less than one academic year, the maximum annual loan amount that such student may receive may not exceed the amount that bears the same ratio to the amount specified in subelause (I) as such remainder measured in semester, trimester, quarter, or clock hours bears to one academic year; (C) in the case of such a student who is a graduate or professional student attending an eligible institution, $10,000. (3) AGGREGATE LIMITS FOR INDEPENDENT, GRADUATE, AND PROFESSIONAL STUDENTS.The maximum aggregate amount of loans under this section a student described in paragraph (2) may borrow shall be the amount described in paragraph (1), adjusted to reflect the increased annual limits described in paragraph (2), as prescribed by the Secretary by regulation. (e) PAYMENT OF PRINCIPAL AND INTEREST. 9 Sec. 428H HIGHER EDUCATION ACT OF 1965 160 (1) COMMENCEMENT OF REPAYMENT.Repayment of prin- cipal on loans made under this section shall begin at the begin- ning of the repayment period described in section 428(bX7).1 (2) CAPITALIZATION OF INTEREST.Interest on loans made under this section for which payments of principal are not re- quired during the in-school and grace periods or for which pay- ments are deferred under sections 427(a)(2)(C) and 428(bX1XM) shall, if agreed upon by the borrower and the lender (A) be paid monthly or quarterly, or (B) be added to the principal amount of the loan not more frequently than quar- terly by the lender. Such capitalization of interest shall not be deemed to exceed the annual insurable limit on account of the student. (3) SUBSIDIES PROHIBITED.No payments to reduce inter- est costs shall be paid pursuant to section 428(a) of this part on loans made pursuant to this section. (4) APPLICABLE RATES OF INTEREST.Interest on loans made pursuant to this section shall be at the applicable rate of interest provided in section 427A. (5)1 AMORTIZATION.The amount of the periodic payment and the repayment schedule for any loan made pursuant to this section shall be established by assuming an interest rate equal to the applicable rate of interest at the time the repay- ment of the principal amount of the loan commences. At the option of the lender, the note or other written evidence of the loan may require that (A) the amount of the periodic payment will be ad- justed annually; or (B) the period of repayment of principal will be length- ened or shortened, in order to reflect adjustments in interest rates occurring as a consequence of section 427A(c)(4). (6) REPAYMENT PERIOD.-1For purposes of calculating the 10-year repayment period under section 428(b)(1XD), such pe- riod shall commence at the time the first payment of principal is due from the borrower. (0 ORIGINATION FEE.-2 (1) AMOUNT OF ORIGINATION FEE.The lender shall charge the borrower an origination fee in the amount of 3.0 percent of the principal amount of the loan, to be deducted proportion- ately from each installment payment of the proceeds of the loan prior to payment to the borrower. (2) RELATION TO APPLICABLE INTEREST.Such origination fee shall not be taken into account for purposes of determining compliance with section 427A. 'Effective April 1, 1994, section 2(c)(43XS) of the Higher Education Technical Amendments of 1993 adds at the end the following new sentence: "Not less than 30 days prior to the anticipated commencement of such repayment period, the holder of such loan shall provide notice to the borrower that interest will accrue before repay- ment begins and of the borrower's option to begin loan repayment at an earlier date." 2Subsection (f) was extensively revised by section 4102(b) of P.L. 103-66. Section 4102(d) of that Public Law provided that such revisions are effective on July 1, 1994. 1 7 0 161 HIGHER EDUCATION ACT OF 1965 Sec. 4281 (3) DISCLOSURE REQUIRED.The lender shall disclose to the borrower the amount and method of calculating the origi- nation fee. (4) USE OF ORIGINATION FEE TO OFFSET DEFAULT COSTS. Each lender making loans under this section shall transmit all origination fees authorized to be collected from borrowers to the Secretary, who shall use such fees to pay the Federal costs of default claims paid for loans under this section and to re- duce the cost of special allowances paid thereon, if any, under section 438(b). (5) REVIEW OF ORIGINATION FEE AND INSURANCE PRE- mIum.In fiscal year 1995, the Secretary is directed to analyze the risk rates of borrowers who have participated in this pro- gram in the 2 previous fiscal years. If the Secretary finds, that as a result of this review, the projected defaults and special al- lowance costs of the unsubsidized program do not exceed the combined origination fee under this subsection and the insur- ance premium under subsection (h), the Secretary is directed to lower the origination fee and insurance premium accord- ingly. (g) SINGLE APPLICATION FORM AND LOAN REPAYMENT SCHED- ULE.A guaranty agency shall use a single application form and a single repayment schedule for subsidized Federal Stafford loans made pursuant to section 428 and for unsubsidized Federal Staf- ford loans made pursuant to this section. (h) .INSURANCE FREMIUM.Each State or nonprofit private in- stitution or organization having an agreement with the Secretary under section 428(b)(1) may charge a borrower under this section an insurance premium equal to not more than 1.0 percent of the principal amount of the loan, if such premium will not be used for incentive payments to lenders. (20 U.S.C. 1078-8) Enacted July 23, 1992, P.L. 102-325, sec. 422, 106 Stat. 535; amended August 10, 1993, P.L. 103-66, secs. 4047(a) and 4102(b), 107 Stat. 363 and 366; amended December 20, 1993, P.L. 103-208, sec. 2(c)(42)-(45), (m), 107 Stat. 2466-67, 2486. SEC. 4281. SPECIAL INSURANCE AND RE1NSUR.ANCE RULES. (a) DESIGNATION OF LENDERS, SERVICERS, AND GUARANTY AGENCIES. (1) AUTHORITY.Whenever the Secretary determines that an eligible lender, servicer, or guaranty agency has a compli- ance performance rating that equals or exceeds 97 percent, the Secretary shall designate the eligible lender, servicer, or guar- anty agency, as the case may be, for exceptional performance. The Secretary shall notify each appropriate guaranty agency of the eligible lenders and servicers designated under this section. (2) COMPLIANCE PERFORMANCE RATING.For purposes of paragraph (1), a compliance performance rating is determined with respect to compliance with due diligence in the collection of loans under this part for each year for which the determina- tion is made. Such rating is equal to the percent of all due dili- gence requirements applicable to each loan, on average, as es- tablished by the Secretary by regulation, with respect to Section 4102(b)(2) of P.L. 103-66 added at the end this new subsection effective July 1, 1994. 1 7 Sec. 4281 HIGHER EDUCATION ACT OF 1965 162 (A) loans serviced during the period by the eligible lender or servicer; or (B) loans on which loan collection was attempted by the guaranty agency. (b) PAYMENT TO LENDERS AND SERVICERS. (1) 100 PERCENT PAYMENT RULE.Each guaranty agency shall pay each eligible lender or servicer (as agent for an eligi- ble lender) designated under subsection (a) 100 percent of the unpaid principal, and interest of all loans for which claims are submitted for payment by that eligible lender or servicer for the one-year period following the receipt by the guaranty agen- cy of the notification of designation under this section or until the guaranty agency receives notice from the Secretary that the designation of the lender or servicer under subsection (a) has been revoked. (2) REVOCATION AUTHORITY.The Secretary shall revoke the designation of a lender or servicer under subsection (a) if any quarterly audit required under subsection (c)(5) is not re- ceived by the Secretary by the date established by the Sec- retary or if the audit indicates the lender or servicer failed to maintain 97 percent or higher compliance with program regu- lations, as reflected in the performance of not less than 97 per- cent of all due diligence requirements applicable to each loan, on average, as established by the Secretary for the purpose of this section, for 2 consecutive months or 90 percent for 1 month. (3) DOCUMENTATION.Nothing in this section shall restrict or limit the authority of guaranty agencies to require the sub- mission of claims documentation evidencing servicing per- formed on loans, except that the guaranty agency may not re- quire greater documentation than that required for lenders and servicers not designated under subsection (a). (4) PAYMENTS TO GUAR.ANTY AGENCIES.The Secretary shall pay to each guaranty agency designated under subsection (a) the appropriate percentage under this subsection for the 1- year period following the receipt by the guaranty agency of the notification of designation under subsection (a). (c) SUPERVISION OF DESIGNATED LENDERS AND SERVICERS. (1) AUDITS FOR LENDERS AND SERVICERS.Each eligible lender or servicer desiring a designation under subsection (-.) shall have a financial and compliance audit of the loan port- folio of such eligible lender or servicer conducted annually by a qualified independent organization from a list of qualified or- ganizations promulgated by the Secretary in accordance with standards established by the Comptroller General and the Sec- retary. The standards shall measure the lender's or servicer's compliance with the due diligence standards and shall include a defmed statistical sampling technique designed to measure the performance rating of the eligible lender or servicer for the purpose of this section. Each eligible lender or servicer shall submit the audit required by this section to the Secretary and to each appropriate guaranty agency. (2) ADDITIONAL INFORMATION ON LENDERS AND SERVICERS.Each appropriate guaranty agency shall provide 172 163 HIGHER EDUCATION ACT OF 1965 Sec. 4281 the Secretary with such other information in its possession re- garding an eligible lender or servicer desiring designation as may relate to the Secretary's determination under subsection (a), including but not limited to any information suggesting that the application of a lender or servicer for designation under subsection (a) should not be approved. (3) SECRETARY'S DETERMINATIONS.The Secretary shall make the determination under subsection (a) based upon the audits submitted under this section, such other information as provided by any guaranty agency under paragraph (2), and any information in the possession of the Secretary or submitted by any other agency or office of the Federal Government. If the results of the audit are not persuasively rebutted by such other information, the Secretary shall inform the eligible lender or servicer and the appropriate guaranty agency that its applica- tion for designation as an exceptional lender or servicer has been approved. (4) COST OF AUDIT.Each eligible lender or servicer shall pay for all the costs of the audits required under this section. (5) COMPLIANCE AUDIT.In order to maintain its status as an exceptional eligible lender or servicer, the lender or servicer shall undergo a quarterly compliance audit at the end of each quarter (other than the quarter in which status as an excep- tional lender or servicer is established through a financial and compliance audit, as described in subsection (c)(1)), and submit elf. results of such audit to the Secretary and such appropriate guaranty agency. The compliance audit will review compliance with due diligence requirements for the period since the last audit. (6) Loss OF DESIGNATION.If the audit performed pursu- ant to paragraph (5) fails to meet the standards for designation as an exceptional lender or servicer under subsection (a)(1), the lender or servicer shall lose its designation as an exceptional lender or servicer. A lender or servicer receiving a compliance audit not meeting the standard for designation as an excep- tional lender or servicer may reapply for designation under subsection (a) at any time. (7) DUE DILIGENCE STANDARDS.Due diligence standards used for determining compliance under paragraph (5) shall be promulgated by the Secretary after consultation with lenders, guaranty agencies and servicers and shall consist of a list of specific elements for the Federal regulations selected to provide an indication of systems degradation. (8) ADDITIONAL REVOCATION AUTHORITY.Notwithstanding any other provision of this section, designation under sub- section (a) may be revoked at any time by the Secretary if the Secretary determines that the eligible lender or servicer has failed to maintain an overall level of regulatory compliance consistent with the audit submitted by the eligible lender or servicer under this section or if the Secretary believes the lend- er or servicer may have engaged in fraud in securing designa- tion under subsection (a) or is failing to service loans in accord- ance with program regulations. (d) SUPERVISION OF DESIGNATED GUARANTY AGENCIES. p3 Sec. 4281 HIGHER EDUCATION ACT OF 1965 164 (1) AUDIT OF GUARANTY AGENCIES.EaCh guaranty agency desiring a designation under subsection (a) shall have a finan- cial and compliance audit of the defaulted loan portfolio of such guaranty agency conducted annually by a qualified independ- ent organization or person from a list of qualified organizations or persons promulgated by the Secretary in accordance with standards established by the Comptroller General and the Sec- retary. The standards shall include defined statistical sampling techniques designed to measure the performance rating of the guaranty agency for the purpose of this section. Each guaranty agency shall submit the audit required by this paragraph to the Secretary. (2) QUARTERLY SAMPLE AUDITS.The Secretary may re- quire quarterly sample audits as a means of determining con- tinued qualification of the guaranty agency for designation as an exceptional guaranty agency. (3) SECRETARY'S DETERMINATIONS.The Secretary shall make the determination under subsection (a) based upon the audits submitted under this section and other information in his possession. If the results of the audit are not persuasively rebutted by such other information, the Secretary shall inform the guaranty agency that its application for designation as an exceptional guaranty agency has been approved. (4) COSTS OF AUDITS.Each guaranty agency shall pay for all of the costs of the audits regulated by this section. (5) REVOCATION FOR FRAUD.The Secretary may revoke the designation of a guaranty agency under subsection (a) at any time if the Secretary has reason to believe the guaranty agency secured its designation under subsection (a) through fraud or fails to comply with applicable regulations. (6) REVOCATION BASED ON PERFORMANCE.Designation as an exceptional guaranty agency may be revoked at any time by the Secretary upon 30 days notice and an opportunity for a hearing before the Secretary upon a finding by the Secretary that the guaranty agency has failed to maintain an acceptable overall level of regulatory compliance. (e) SPECIAL RULE.Reimbursements made by the Secretary on loans submitted for claim by an eligible lender or loan servicer des- ignated for exceptional performance under this section shall not be subject to additional review by the Secretary or repurchase by the guaranty agency for any reason other than a determination by the Secretary that the eligible lender, loan servicer, or guaranty agency engaged in fraud or other purposeful misconduct in obtaining des- ignation for exceptional performance. (f) LIMITATION.Nothing in this section shall be construed to affect the processing of claims on student loans of eligible lenders not subject to this paragraph. (g) CLAIMS.A lender, servicer, or guaranty agency designated under subsection (a) failing to service loans or otherwise comply with applicable program regulations shall be considered in viola- tion of section 3729 of title 31, United States Code, 1. 1So in law. The comma probably should be deleted. Section 2(0(46) of the Higher Education Technical Amendroenta of 1993 struck "the Federal Fake Claims Act" and inserted "section 3729 of title 31, United States Code,". 174 165 HIGHER EDUCATION ACT OF 1965 Sec. 4281 (h) EVALUATION.Not later than 3 years after the date of en- actment of this Act, the Comptroller General shall submit to the Chairman of the Senate Labor and Human Resources Committee and the House Committee on Education and Labor, an evaluation of the provisions of this section including, but not limited to, the following: (1) The effectiveness of due diligence performed by lenders and servicers receiving designation as exceptional lenders or servicers from the perspective of securing maximum collections from borrowers. (2) A quantification of the dollar volume of claims that were paid to exceptional lenders and servicers that would not have been paid under applicable program provisions prior to the enactment of this section. (3) An assessment of the impact of this section on the fi- nancial condition of guaranty agencies. (4) An assessment of the savings to lenders, servicers, and guaranty agencies resulting from designation as exceptional performance. (5) An identification of specific administration steps that lenders, servicers, and guaranty agencies do not have to per- form as a result of designation as exceptional lenders, servicers, or guaranty agencies. (6) A recommendation for program modifications applicable to all program participants based on the findings of the evalua- tion. (7) A recommendation for modifications to this section and whether the program should be continued. (i) TERMINATION.After receipt of the study authorized in sub- section (h), the Secretary may terminate such program if he deter- mines such termination to be in the fiscal interest of the United States. (j) DEFINITIONS.For the purpose of this section (1) the term "due diligence requirements" means the ac- tivities required to be performed by lenders on delinquent loans pursuant to regulations issued by the Secretary; (2) the term "eligible loan" means a loan made, insured or guaranteed under part B of title IV; (3) the term "servicer" means an entity servicing and col- lecting student loans which (A) has substantial experience in servicing and collect- ing consumer loans or student loans; (B) has an independent financial audit annually which is furnished to the Secretary and any other parties des- ignated by the Secretary; (C) has business systems which are capable of meeting the requirements of part B of title IV; (D) has adequate personnel who are knowledgeable about the student loan programs authorized by part B of title IV; and (E) does not have any owner, majority shareholde,r, di- rector, or officer of the entity who has been convicted of a felony. Sec. 428J HIGHER EDUCATION ACT OF 1965 166 (20 U.S.C. 1078-9) Enacted July 23, 1992, P.L. 102-325, sec. 422, 106 Stat. 536; amended December 20, 1993, P.L. 103-208, sec. 2(c)(46), (m), 107 Stat. 2467, 2486. SEC. 428J. LOAN FORGIVENESS FOR TEACHERS, INDIVIDUALS PER- FORMING NATIONAL COMMUNITY SERVICE .AND NURSES. (a) STATEMENT OF PURPOSE.R is the purpose of this section to encourage individuals to (1) enter the teaching and nursing profession; and (2) perform national and community service. (b) DEMONSTRATION PROGRAM. (1) IN GENERAL.The Secretary, in consultation with the Secretary of Health and Human Services, is authorized to carry out a demonstration program of assuming the obligation to repay a loan made, insured or guaranteed under this part (excluding loans made under section 428A, 428B, or 4280) for any new borrow lr after October 1, 1989, who (A) is employed as a full-time teacher (i) in a school which qualifies under section 465(a)(2)(A) for loan cancellation for Perkins loan re- cipients who teach in such schools; and (ii) of mathematics, science, foreign languages, special education, bilingual education, or any other field of expertise where the State educational agency determines there is a shortage of qualified teachers; (B) serves as a full-time volunteer under the Peace Corps Act or under the Domestic Volunteer Service Act of 1973, or to perform comparable service as a full-time em- ployee of an organization which is exempt from taxation under section 501(c)(3) of the Internal Revenue Code of 1986, if the borrower does not receive compensation which exceeds the greater of (i) the minimum wage rate described in section 6 of the Fair Labor Standards Act of 1938; or (ii) an amount equal to 100 percent of the poverty line for a family of two (as defined in section 673(2) of the Community Services Block Grant Act); or (C) is employed full-time as a nurse in a public hos- pital, a rural health clinic, a migrant health center, an In- dian Health Service, an Indian health center, a Native Ha- waiian health center or in an acute care or long-term care facility. (2) REGULATIONS.The Secretary is authorized to issue such regulations as may be necessary to carry out the provi- sions of this section. (C) LOAN REPAYMENT. (1) IN GENERAL.The Secretary shall assume the obliga- tion to repay (A) 15 percent of the total amount of Stafford loans in- curred by the student borrower during such borrower's last 2 years of undergraduate education for the first or second year of service in which such borrower meets the require- ments described in subsection (a); (B) 20 percent of such total amount for such third or fourth year of service; and 1 7 6 167 HIGHER EDUCATION ACT OF 1965 Sec. 428J (C) 30 percent of such total amount for such fifth year of service. (2) CONSTRUCTION.Nothing in this subsection shall be construed to authorize the refunding of any repayment of a Stafford loan. (3) INTEREST.If a portion of a loan is repaid by the Sec- retary under this section for any year, the proportionate amount of interest on such loan which accrues for such year shall be repaid by the Secretary. (4) SPECIAL RULE.In the case where a student borrower who is not participating in loan repayment pursuant to this section returns to an institution of higher education after grad- uation from an institution of higher education for the purpose of obtaining a teaching certificate, the Secretary is authorized to assume the obligation to repay the total amount of Stafford loans incurred for a maximum of 2 academic years in returning to an institution of higher education for the purpose of obtain- ing a teaching certificate or additional certification. Such Staf- ford loans shall only be repaid for borrowers who qualify for loan repayment pursuant to the provisions of this section, and shall be repaid in accordance with the provisions of paragraph (1). (5) INELIGIBILITY OF NATIONAL SERVICE EDUCATIONAL AWARD RECIPIENTS.No student borrower may, for the same volunteer service, receive a benefit under both this section and subtitle D of title I of the National and Community Service Act of 1990 (42 U.S.C. 12571 et seq.). (d) REPAYMENT TO ELIGIBLE LENDERS.The Secretary shall pay to each eligible lender ar holder for each fiscal year an amount equal to the aggregate amount of Stafford loans which are subject to repaymmt pursuant to tb Is section for such year. (e) APPLICATION FOR ; .2PAYMENT. (1) IN GENERAL.Each eligible individual desiring loan re- payment under this section shall submit a complete and accu- rate application to the Secretary at such time, in such manner, and containing such information as the Secretary may reason- ably require. Loan repayment under this section shall be on a first-come, first-served basis and subject to the availability of appropriations. (2) CONDITIONS.An eligible individual may apply for re- payment after completing each year of qualifying service. The borrower shall receive forbearance while engaged in qualifying service unless the borrower is in deferment while so engaged. DEFINITIONS.For the purpose of this section the term "eli- gible lender" has the same meaning given such term in section 435(d). (g) EVALUATION. (1) IN GENERAL.The Seuetary shall conduct, by grant or contract, an independent national evaluation of the impact of the program assisted under this part on the fields of teaching, nursing, and community service. (2) COMPETITIVE I3ASIS.The grant or contract described in paragraph (1) shall be awarded on a competitive basis. I 77 Sec. 429 HIGHER EDUCATION ACT OF 1965 168 (3) ,CONTENTS.The evaluation described in this section shall (A) assess whether the program assisted under this section has brought into teaching, nursing, and community service a significant number of highly capable individuals who otherwise would not have entered such fields; (B) assess whether a significant number of students perform the service described in subsection (b) or opt to repay the loans instead of remaining in the career for which such student received loan repayment under this section; (C) identify the barriers to the effectiveness of the pro- gram assisted under this section; (D) assess the cost-effectiveness of such program in improving teacher, nursing, and community service worker quality and quantity and the ways to improve the cost-ef- fectiveness of such program; (E) identify the reasons for which participants in the program have chosen to take part in such program; and (F) identify other areas of community service or em- ployment which may serve as appropriate methods of loan repayment. (4) INTERIM EVALUATION REPORTS.The Secretary shall prepare and submit to the President and the Congress such in- terim reports on the evaluation described in this section as the Secretary deems appropriate, and shall submit such a fmal re- port by January 1, 1997. (5) AUTHORIZATION OF APPROPRIATIONS.There are au- thorized to be appropriated to carry out this section $10,000,000 for fiscal year 1993 and such sums as may be nec- essary for each of the 4 succeeding fiscal years. (20 U.S.C. 1078-10) Enacted July 23, 1992, P.L. 102-325, sec. 422, 106 Stat. 541; amended September 21, 1993, P.L. 103-82, sec. 102(c)(2), 107 Stat. 824; amended December 20, 1993, P.L. 103-208, sec. 2(c)(47)(51), (m), 107 Stat. 2467, 2486. SEC. 429. CERTIFICATE OF FEDERAL LOAN INSURANCEEFFECTIVE DATE OF INSURANCE. (a) LOAN-BY-LOAN INSURANCE. (1) AUTHORM TO ISSUE CERTIFICATES ON APPLICATION.If, upon application by an eligible lender, made upon such form, containing such information, and supported by such evidence as the Secretary may require, and otherwise in conformity with this section, the Secretary finds that the applicant has made a loan to an eligible student which is insurable under the pro- visions of this part, he may issue to the applicant a certificate of insurance covering the loan and setting forth the amount and terms of the insurance. (2) EFFECTIVENESS OF CERTIFICATE.Insurance evidenced by a certificate of insurance pursuant to subsection (a)(1) shall become effective upon the date of issuance of the certificate, ex- cept that the Secretary is authorized, in accordance with regu- lations, to issue commitments with respect to proposed loans, or with respect to lines (or proposed lines) of credit, submitted by eligible lenders, and in that event, upon compliance with subsection (a)(1) by the lender, the certificate of insurance may P8 169 HIGHER EDUCATION ACT OF 1965 Sac. 429 be issued effective as of the date when any loan, or any pay- ment by the lender pursuant to a line of credit, to be covered by such insurance was made. Such insurance shall cease to be effective upon 60 days' default by the lender in the payment of any installment of the premiums payable pursuant to sub- section (c). (3) CONTENTS OF APPLICATIONS.An application submitted pursuant to subsection (a)(1) shall contain (A) an agreement by the applicant to pay, in accordance with regulations, the pre- miums fixed by the Secretary pursuant to subsection (c), and (B) an agreement by the applicant that if the loan is covered by insurance the applicant will submit such supplementary re- ports and statement during the effective period of the loan agreement, upon such forms, at such times, and containing such information as the Secretary may prescribe by or pursu- ant to regulation. (b) COMPREHENSIVE INSURANCE COVERAGE CERTIFICATE. (1) ESTABLISHMENT OF SYSTEM BY REGULATION.In lieu of requiring a separate insurance application and issuing a sepa- rate certificate of insurance for each student loan made by an eligible lender as provided in subsection (a), the Secretary may, in accordance with regulations consistent with section 424, issue to any eligible lender applying therefor a certificate of comprehensive insurance coverage which shall, without further action by the Secretary, insure all insurable loans made by that lender, on or after the date of the certificate and before a specified cutoff date, within the limits of an aggregate maxi- mum amount stated in the certificate. Such regulations may provide for conditioning such insurance, with respect to any loan, upon compliance by the lender with such requirements (to be stated or incorporated by reference in the certificate) as in the Secretary's judgment will best achieve the purpose of this subsection while protecting the United States from the risk of unreasonable loss and promoting the objectives of this part, including (but not limited to) provisions as to the report- ing of such loans and information relevant thereto to the Sec- retary and as to the payment of initial and other premiums and the effect of default therein, and including provision for confirmation by the Secretary from time to time (through en- dorsement of the certificate) of the coverage of specific new loans by such certificate, which confirmation shall be incontest- able by the Secretary in the absence of fraud or misrepresenta- tion of fact or patent error. (2) UNCOVERED LOANS.If the holder of a certificate of comprehensive insurance coverage issued under this subsection grants to a student a line of credit extending beyond the cutoff date specified in that certificate, loans or payments thereon made by the holder after that date pursuant to the line of cred- it shall not be deemzld to be included in the coverage of that certificate except as may be specifically provided therein; but, subject to the limitations of section 424, the Secretary may, in accordance with regulations, make commitments to insure such future loans or payments, and such commitments may be hon- ored either as provided in subsection (a) or by inclusion of such Sec. 429 HIGHER EDUCATION ACT OF 1965 170 insurance on comprehensive coverage under the subsection for the period or periods in which such future loans or payments are made. (C) CHARGES FOR FEDERAL INSURANCE.The Secretary shall, pursuant to regulations, charge for insurance on each loan under this part a premium in an amount not to exceed one-fourth of 1 percent per year of the unpaid principal amount of such loan (ex- cluding interest added to principal), payable in advance, at such times and in such manner as may be prescribed by the Secretary. Such regulations may provide that such premium shall not be pay- able, or if paid shall be refundable, with respect to any period after default in the payment of principal or interest or after the borrower has died or becomes totally and permanently disabled, if (1) notice of such default or other event has been duly given, and (2) requests for payment of the loss insured against has been made or the Sec- retary has made such payment on his own motion pursuant to sec- tion 430(a). (d) ASSIGNABILITY OF INSURANCE.The rights of an eligible lender arising under insurance evidenced by a certificate of insur- ance issued to it under this section may be assigned as security by such lender only to another eligible lender, and subject to regula- tion by the Secretary. (e) CONSOLIDATION NOT TO AFFECT INSURANCE.The consoli- dation of the obligations of two or more federally insured loans ob- tained by a student borrower in any fiscal year into a single obliga- tion evidenced by a single instrument 'of indebtedness shall not af- fect the insurance by the United States. If the loans thus consoli- dated are covered by separate certificates of insurance issued under subsection (a), the Secretary may upon surrender of the original certificates issue a new certificate of insurance in accordance with that subsection upon the consolidated obligation; if they are cov- ered by a single comprehensive certificate issued under subsection (b), the Secretary may amend that certificate accordingly. (20 U.S.C. 1079) Enacted Nov. 8, 1965, P.L. 89-329, sec. 429, 79 Stat. 1243; amended October 12, 1976, P.L. 94-482, sec. 127(a), 90 Stat. 2123, 2124, 2125; amended October 3, 1980, P.L. 96-374, sec. 1351, 94 Stat. 1503; amended October 17, 1986, P.L. 99-498, sec. 402(a), 100 Stat. 1395; amended December 20, 1993, P.L. 103-208, sec. 2(m), 107 Stat. 2486. SEC. 430. DEFAULT OF STUDENT UNDER FEDERAL LOAN INSURANCE PROGRAM. (a) NOTICE TO SECRETARY AND PAYMENT OF LOSS.UpOn de- fault by the student borrower on any loan covered by Federal loan insurance pursuant to this part, and prior to the commencement of suit or Gther enforcement proceedings upon security for that loan, the insurance beneficiary shall promptly notify the Secretary, and the Secretary shall if requested (at that time or after further collec- tion efforts) by the beneficiary, or may on the Secretary's own mo- tion, if the insurance is still in effect, pay to the beneficiary the amount of the loss sustained by the insured upon that loan as soon as that amount has been determined. The "amount of the loss" on any loan shall, for the purposes of this subsection and subsection (b), be deemed to be an amount equal to the unpaid balance of the principal amount and accrued interest, including interest accruing from the date of submission of a valid default claim (as determined ) o 171 HIGHER EDUCATION ACT OF 1965 Sec. 430 by the Secretary) to the date on which payment is authorized by the Secretary, reduced to the extent required by section 425(b). Such beneficiary shall be required to meet the standards of due diligence in the collection of the loan and shall be required to sub- mit proof that reasonable attempts were made to locate the bor- rower (when the location of the borrower is unknown) and proof that contact was made with the borrower (when the location is known). The Secretary shall make the determination required to carry out the provisions of this section not later than 90 days after the notification by the insurance beneficiary and shall ma.ke pay- ment in full on the amount of the beneficiary's loss pending com- pletion of the due diligence investigation. (b) EFFECT OF PAYMENT OF Loss.Upon payment of the amount of the loss pursuant to subsection (a), the United States shall be subrogated for all of the rights of the holder of the obliga- tion upon the msured loan and shall be entitled to an assignment of the note or other evidence of the insured loan by the insurance beneficiary. If the net recovery made by the Secretary on a loan after deduction of the cost of that recovery (including reasonable administrative costs and collection costs, to the extent set forth in regulations issued by the Secretary) exceeds the amount of the loss, the excess shall be paid over to the insured. The Secretary may, in attempting to make recovery on such loans, contract with pri- vate business concerns, State student loan insurance agencies, or State guaranty agencies, for payment for services rendered by such concerns or agencies in assisting the Secretary in making such re- covery. Any contract under this subsection entered into by the Sec- retary shall provide that attempts to make recovery on such loans shall be fair and reasonable, and do not involve harassment, in- timidation, false or misleading representations, or unnecessary communications concerning the existence of any such loan to per- sons other than the student borrower. (c) FORBEARANCE NOT PRECLUDED.Nothing in this section or in this part shall be construed to preclude any forbearance for the benefit of the student borrower which may be agreed upon by the parties to the insured loan and approved by the Secretary, or to preclude forbearance by the Secretary in the enforcement of the in- sured obligation after payment on that insurance. Any forbearance which is approved by the Secretary under this subsection with re- spect to the repayment of a loan, including a forbearance during default, shall not be considered as indicating that a holder of a fed- erally insured loan has failed to exercise reasonable care and due diligence in the collection of the loan. (d) CARE AND DILIGENCE REQUIRED OF HOLDERS.Nothing in this section or in this part shall be construed to excuse the holder of a federally insured loan from exercising reasonable care and dili- gence in the making and collection-of loans under the provisions of this part. If the Secretary, after a reasonable notice and oppor- tunity for hearing to an eligible lender, finds that it has substan- tially failed to exercise such care and diligence or to make the re- ports and statements required under section 428(a)(4) and section 429(a)(3), or to pay the required Federal loan insurance premiums, the Secretary shall disqualify that lender for further Federal insur- ance on loans granted pursuant to this part until the Secretary is Sec. 430 HIGHER EDUCATION ACT OF 1965 172 satisfied that its failure has ceased and finds that there is reason- able assurance that the lender will in the future exercise necessary care and diligence or comply with such requirements, as the case may be. (e) DEFAULT RATE OF LENDERS, HOLDERS, AND GUARANTY AGENCIES.- (1) IN GENERAL.-The Secretary shall annually publish a list indicating the cohort default rate (determined in accord- ance with section 435(m)) for each originating lender, subse- quent holder, and guaranty agency participating in the pro- gram assisted under this part and an average cohort default rate for all institutions of higher education within each State. (2) REGULATIONS.-The Secretary shall prescribe regula- tions designed to prevent an institution from evading the appli- cation to that institution of a cohort default rate through the use of such measures as branching, consolidation, change of ownership or control, or any similar device. (3) RATE ESTABLISHMENT AND CORRECTION.-The Secretary shall establish a cohort default rate for lenders, holders, and guaranty agencies (determined consistent with section 435(m)), except that the rate for lenders, holders, and guaranty agencies shall not reflect any loans issued in accordance with section 428(j).The Secretary shall allow institutions, lenders, holders, and guaranty agencies the opportunity to correct such cohort default rate information. (20 U.S.C. 1080) Enacted Nov. 8, 1965, P.L. 89-329, sec. 430, 79 Stat. 1244; amended Oct. 16, 1968, P.L. 90-575, sec. 113, 82 Stat. 1021; amended June 23, 1972, P.L. 92-318, sec. 132B(c), 86 Stat. 262; amended October 12, 1976, P.L. 94- 482, sec. 127(a), 90 Stat. 2125, 2126; amended June 15, 1977, P.L. 95-43, sec. 1(a)(33), 91 Stat. 216; amended October 3, 1980, P.L. 96-374, secs. 416(a)(1), (b), 422, 1391, 94 Stat. 1421, 1422, 1432, 1503; amended April 7, 1986, P.L. 99-272, secs. 16014(a)(2), 16022, 100 Stat. 341, 349; amended October 17, 1986, P.L. 99-498, sec. 402(a), 100 Stat. 1397; amended July 23, 1992, P.L. 102-325, sec. 423, 106 Stat. 543; amended December 20, 1993, P.L. 103-208, sec. 2(m), 107 Stat. 2486. SEC. 430A. REFORM TO CREDIT BUREAUS AND INSTITUTIONS OF HIGHER EDUCATION. (a) AGREEMENTS TO EXCHANGE INFORMATION.-For the pur- pose of promoting responsible repayment of loans covered by Fed- eral loan insurance pursuant to this part or covered by a guaranty agreement pursuant to section 428, the Secretary, each guaranty agency, eligible lender, and subsequent holder shall enter into agreements with credit bureau organizations to exchange informa- tion concerning student borrowers, in accordance with the require- ments of this section. For the purpose of assisting such organiza- tions in complying with the Fair Credit Reporting Act, such agree- ments may provide for timely response by the Secretary (concern- ing loans covered by Federal loan insurance), by a guaranty agen- cy, eligible lender, or subsequent holder (concerning loans covered by a guaranty agreement), or to requests from such organizations for responses to objections raised by borrowers. Subject to the re- quirements of subsection (c), such agreements shall require the Secretary, the guaranty agency, eligible lender, or subsequent hold- er, as appropriate, to disclose to such organizations, with respect to any loan under this part that has not been repaid by the borrower- 152 173 HIGHER EDUCATION ACT OF 1965 Sec. 430A (1) the total amount of loans made to any borrower under this part and the remaining balance of the loans; (2) information concerning the date of any default on the loan and the collection of the loan, including information con- cerning the repayment status of any defaulted loan on which the Secretary has made a payment pursuant to section 430(a) or the guaranty agency has made a payment to the previous holder of the loan; and (3) the date of cancellation of the note upon completion of repayment by the borrower of the loan or payment by the Sec- retary pursuant to section 437; (b) ADDITIONAL INFORMATION.Such agreements may also pro- vide for the disclosure by such organizations to the Secretary or a guaranty agency, whichever insures or guarantees a loan, upon re- ceipt of a notice under subsection (a)(2) that such a loan is in de- fault, of information concerning the borrower's location or other in- formation which may assist the Secretary, the guaranty agency, the eligible lender, or the subsequent holder in collecting the loan. (c) CONTENTS OF AGREEMENTS.Agreements entered into pur- suant to this section shall contain such provisions as may be nec- essary to ensure that (1) no information is disclosed by the Secretary or the guaranty agency, eligible lender, or subsequent holder unless its accuracy and completeness have been verified and the Sec- retary or the guaranty agency has determined that disclosure would accomplish the purpose of this section; (2) as to any information so disclosed, such organizations will be promptly notified of, and will promptly record, any change submitted by the Secretary, the guaranty agency, eligi- ble lender, or subsequent holder with respect, to such informa- tion, or any objections by the borrower with respect to any such information, as required by section 611 of the Fair Credit Reporting Act (15 U.S.C. 1681i); (3) no use will be made of any such information which would result in the use of collection practices with respect to such a borrower that are not fair and reasonable or that in- volve harassment, intimidation, false or misleading representa- tions, or unnecessary communication concerning the existence of such loan or concerning any such information; and (4) with regard to notices of default under subsection (a)(2) of this section, except for disclosures made to obtain the bor- rower's location, the Secretary, or the guaranty agency, eligible lender, or subsequent holder whichever is applicable (A) shall not disclose any such information until the borrower has been notified that such information will be disclosed to credit bureau organizations unless the borrower enters into repayment of his or her loan, but (B) shall, if the borrower has not entered into repayment within a reasonable period of time, but not less than 30 days, from the date such notice has been sent to the borrower, disclose the information required by this subsection. (d) CONTRACTOR STATUS OF PARTICIPANTS.A guaranty agen- cy, eligible lender, or subsequent holder or credit bureau organiza- tion which discloses or receives information under this section shall I 3 Sec. 430A HIGHER EDUCATION ACT OF 1965 174 not be considered a Government contractor within the meaning of section 552a of title 5, United States Code. (e) DISCLOSURE TO INSTITUTIONS.The Secretary and each guaranty agency, eligible lender, and subsequent holder of a loan are authorized to disclose information described in subsections (a) and (b) concerning student borrowers to the eligible institutions such borrowers attend or previously attended. To further the pur- pose of this section, an eligible institution may enter into an ar- rangement with any or all of the holders of delinquent loans made to borrowers who attend or previously attended such institution for the purpose of providing current information regarding the borrow- er's location or employment or for the purpose of assisting the hold- er in contacting and influencing borrowers to avoid default. (f) DURATION OF AUTHORITY.Notwithstanding paragraphs (4) and (6) of subsection (a) of section 605 of the Fair Credit Reporting Act (15 U.S.C. 1681c (a)(4), (a)(6)), a consumer reporting agency may make a report containing information received from the Sec- retary or a guaranty agency, eligible lender, or subsequent holder regarding the status of a borrower's defaulted account on a loan guaranteed under this part until (1) 7 years from the date on which the Secretary or the agency paid a claim to the holder on the guaranty; (2) 7 years from the date the Secretary, guaranty agency, eligible lender, or subsequent holder first reported the account to the consumer reporting agency; or (3) in the case of a borrower who reenters repayment after defaulting on a loan and subsequently goes into default on such loan, 7 years from the date the loan entered default such subsequent time. (20 U.S.C. 1080a) Enacted April 7, 1986, P.L. 99-272, sec. 16023, 100 Stat. 349; amended May 23, 1986, P.L. 99-320, sec. (c), 100 Stat. 491; amended October 17, 1986, P.L. 99-498, sec. 402(a), 100 Stat. 1398; amended June 3, 1987, P.L. 100-50, sec. 10(v), 101 Stat. 346; amended July 23, 1992, P.L. 102-325, sec. 424, 106 Stat. 543; amended December 20, 1993, P.L. 103-208, sec. 2(c)(52), (m), 107 Stat. 2467, 2486. SEC. 431. INSURANCE FUND. (a) ESTABL1SHMENT.There is hereby established a student loan insurance fund (hereinafter in this section called the "fund") which shall be available without fiscal year limitation to the Sec- retary for making payments in connection with the default of loans insured by the Secretary under this part, or in connection with payments under a guaranty agreement under section 428(c). All amounts received by the Secretary as premium charges for insur- ance and as receipts, earnings, or proceeds derived from any claim or other assets acquired by the Secretary in connection with oper- ations under this part, any excess advances under section 422, and any other moneys, property, or assets derived by the Secretary from operations in connection with this section, shall be deposited in the fund. All payments in connection with the default of loans insured by the Secretary under this part, or in connection with such guaranty agreements shall be paid from the fund. Moneys in the fund not needed for current operations under this section may be invested in bonds or other obligations guaranteed as to principal and interest by the United States. 4 175 HIGHER EDUCATION ACT OF 1965 Sec. 432 (b) BORROWING AUTHORITY.If at any time the moneys in the fund are insufficient to make payments in connection with the de- fault of any loan insured by the Secretary under this part, or in connection with any guaranty agreement made under section 428(c), the Secretary is authorized, to the extent provided in ad- vance by appropriations Acts, to issue to the Secretary of the Treasury notes or other obligations in such forms and denomina- tions, bearing such maturities, and subject to such terms and con- ditions as may be prescribed by the Secretary with the approval of the Secretary of the Treasury. Such notes or other obligations shall bear interest at a rate determined by the Secretary of the Treas- ury, taking into consideration the current average market yield on outstanding marketable obligations of the United States of com- parable maturities during the month preceding the issuance of the notes or other obligations. The Secretary of the Treasury is author- ized and directed to purchase any notes and other obligations is- sued hereunder and for that purpose is authorized to use as a pub- lic debt transaction the proceeds from the sale of any securities is- sued under the Second Liberty Bond Act, as amended, and the pur- poses for which securities may be issued under that Act, as amend- ed, are extended to include any purchase of such notes and obliga- tions. The Secretary of the Treasury may at any time sell any of the notes or other obligations acquired under this subsection. All redemptions, purchases, and sales by the Secretary of the Treasury of such notes or other obligations shall be treated as public debt transactions of the United States. Sums borrowed under the sub- section shall be deposited in the fund and redemption of such notes and obligations shall be made by the Secretary from such fund. (20 U.S.C. 1081) Enacted Nov. 8, 1965, P.L. 89-329, sec. 431, 79 Stat. 1245; amended Aug. 3, 1968, P.L. 90-460, sec. 3, 82 Stat. 638; amended October 12, 1976, P L. 94-482, sec. 127(a), 90 Stat. 2126, 2127; amended October 3, 1980, P.L. 96- 374, sec. 1391, 94 Stat. 1503; amended October 17, 1986, P.L. 99-498, sec. 402(a), 100 Stat. 1400; amended June 3, 1987, P.L. 100-50, sec. 10(w), 101 Stat. 346; amended December 20, 1993, P.L. 103-208, sec. 2(m), 107 Stat. 2486. SEC. 432. LEGAL POWERS AND RESPONSIBILITIES. (a) GENERAL POWERS.In the performance of, and with respect to, the functions, powers, and duties, vested in him by this part, the Secretary may (1) prescribe such regulations as may be necessary to carry out the purposes of this part, including regulations applicable to third party servicers (including regulations concerning fi- nancial responsibility standards for, and the assessment of li- abilities for program violations against, such servicers) to es- tablish minimum standards with respect to sound management and accountability of programs under this part, except that in no case shall damages be assessed against the United States for the actions or inactions of such servicers; (2) sue and be sued in any court of record of a State hav- ing general jurisdiction or in any district court of the United States, and such district courts shall have jurisdiction of civil actions arising under this part without regard to the amount in controversy, and action instituted under this subsection by or against the Secretary shall survive notwithstanding any change in the person occupying the office of Secretary or any 1 Sec. 432 HIGHER EDUCATION ACT OF 1965 176 vacancy in that office; but no attachment, injunction, garnish- ment, or other similar process, mesne or final, shall be issued against the Secretary or property under the Secretary's control and nothing herein shall be construed to except litigation aris- ing out of activities under this part from the application of sec- tions 509, 517, 547, and 2679 of title 28 of the United States Code;(3) include in any contract for Federal loan insurance such terms, conditions, and covenants relating to repayment of prin- cipal and payment of interest, relating to the Secretary's obli- gations and rights to those of eligible lenders, and borrowers m case of default, and relating to such other matters as the Secretary determines to be necessary to assure that the pur- poses of this part will be achieved; and any term, condition, and covenant made pursuant to this paragraph or pursuant to any other provision of this part may be modified 1Dy the Sec- retary, after notice and opportunity for a hearing, if the Sec- retary finds that the modification is necessary to protect the United States from the risk of unreasonable loss; (4) subject to the specific limitations in this part, consent to modification, with respect to rate of interest, time of pay- ment of any installment of principal and interest or any por- tion thereof, or any other provision of any note or other instru- ment evidencing a loan which has been insured by the Sec- retary under this part; (5) enforce, pay, or compromise, any claim on, or arising because of, any such insurance or any guaranty agreement under section 428(c); and (6) enforce, pay, compromise, waive, or release any right, title, claim, lien, or demand, however acquired, including any equity or any right of redemption. (b) FINANCIAL OPERATIONS RESPONSIBILITIES.The Secretary shall, with respect to the financial operations arising by reason of this part (1) prepare annually and submit a budget program as pro- vided for wholly owned Government corporations by chapter 91 of title 31, United States Code; and (2) maintain with respect to insurance under this part an integral set of accounts and prepare fmancial statements in ac- cordance with generally accepted accounting principles, which shall be audited annually by the General Accounting Office in conformity with generally accepted Government auditing standards except that the transactions of the Secretary, includ- ing the settlement of insurance claims and of claims for pay- ments pursuant to section 428, and transactions related there- to and vouchers approved by the Secretary in connection with such transactions, shall be final and conclusive upon all ac- counting and other officers of the Government. (c) DATA COLLECTION. (1) COLLECTION BY CATEGORY OF LOAN.--(A) For loans in- sured after December 31, 1976, or in the case of each insurer after such earlier date where the data required by this sub- section are available, the Secretary and all other insurers under this part shall collect and accumulate all data relating 1c56 177 HIGHER EDUCATION ACT OF 1965 Sec. 432 to (i) loan volume insured and (ii) defaults reimbursed or de- fault rates according to the categories of loans listed in sub- paragraph (B) of this paragraph. (B) The data indicated in subparagraph (A) of this para- graph shall be accumulated according to the category of lender ma.king the loan and shall be accumulated separately for lend- ers who are (i) eligible institutions, (ii) State or private, non- profit direct lenders, (iii) commercial financial institutions who are banks, savings and loan associations, or credit unions, and (iv) all other types of institutions or agencies. (C) The Secretary may designate such additional subcategories within the categories specified in subparagraph (B) of this paragraph as the Secretary deems appropriate. (D) The category or designation of a loan shall not be changed for any reason, including its purchase or acquisition by a lender of another category. (2) COLLECTION AND REPORTING REQUIREMENTS.--(A) The Secretary shall collect data under this subsection from all in- surers under this part and shall publish not less often than once every fiscal year a report showing loan volume guaran- teed and default data for each category specified in subpara- graph (B) of paragraph (1) of this subsection and for the total of all lenders. (B) The reports specified in subparagraph (A) of this para- graph shall include a separate report for each insurer under this part including the Secretary, and where an insurer insures loans for lenders in more than one State, such insurer's report shall list all data separately for each State. (3) INSTITUTIONAL, PUBLIC, OR NONPROFIT LENDERS.For purposes of clarity in communications, the Secretary shall sep- arately identify loans made by the lenders referred to in clause (i) and' loans made by the lenders referred to in clause (ii) of paragraph (1)(B) of this subsection. (d) DELEGATION. (1) REGIONAL OFFICES.The functions of the Secretary under this part listed in paragraph (2) of this subsection may be delegated to employees in the regional office of the Depart- ment. (2) DELEGABLE FUNCTIONS.The functions which may be delegated pursuant to this subsection are (A) reviewing applications for loan insurance under section 429 and issuing contracts for Federal loan insur- ance, certificates of insurance, and certificates of com- prehensive insurance coverage to eligible lenders which are financial or credit institutions subject to examination and supervision by an agency of the United States or of any State; (B) receiving claims for payments under section 430(a), examining those claims, and pursuant to regula- tions of the Secretary, approving claims for payment, or re- quiring lenders to take additional collection action as a condition for payment of claims; and (C) certi6ing to the central office when collection of defaulted loans has been completed, compromising or c Sec. 432 HIGHER EDUCATION ACT OF 1965 178 agreeing to the modification of any Federal claim against a borrower (pursuant to regulations of the Secretary issued under section 432(a)), and recommending litigation with respect to any such claim. (e) USE OF INFORMATION ON BORROINERS.Notwithstanding any other provision of law, the Secretary may provide to eligible lenders, and to any guaranty agency having a guaranty agreement under section 428(c)(1), any information with respect to the names and addresses of borrowers or other relevant information which is available to the Secretary, from whatever source such information may be derived. (f) AUDIT OF FINANCIAL TRANSACTIONS. (1) COMPTROLLER GENERAL AND INSPECTOR GENERAL AU- THORITY.The Comptroller General and the Inspector General of the Department of Education shall each have the authority to conduct an audit of the financial transactions of (A) any guaranty agency operating under an agree- ment with the Secretary pursuant to section 428(b); (B) any eligible lender as defined in section 435(d)(1) (D), (F), or (H); (C) a representative sample of eligible lenders under this part, upon the request of the Committee on Education and Labor of the House of Representatives or the Commit- tee on Labor and Human Resources of the Senate, with re- spect to the payment of the special allowance under sec- tion 438 in order to evaluate the program authorized by this part; and (D) any Authority required to file a plan for doing business under section 438(d). (2) ACCESS TO RECORDS.For the purpose of carrying out this subsection, the records of any entity described in subpara- graph (A), (B), (C), or (D) of paragraph (1) shall be available to the Comptroller General and the Inspector General of the Department of Education. For the purpose of section 716(c) of title 31, United States Code, such records shall be considered to be records to which the Comptroller General has access by law, and for the purpose of section 6(a)(4) of the Inspector Gen- eral Act of 1978, such records shall be considered to be records necessary in the performance of functions assigned by that Act to the Inspector General. (3) DEFINITION OF RECORDS.For the purpose of this sub- section, the term "record" includes any information, document, report, answer, account, paper, or other data or documentary evidence. (4) AUDIT PROCEDURES.In conducting audits pursuant to this subsection, the Comptroller General and the Inspector General of the Department of Education shall audit the records to determine the extent to which they, at a minimum, comply with Federal statutes, and rules and regulations prescribed by the Secretary, in effect at the time that the record was made, and in no case shall the Comptroller General or the Inspector General apply subsequently determined standards, procedures, or regulations to the recorois of such agency, lender, or Author- ity. 1'18 179 HIGHER EDUCATION ACT OF 1965 Sec. 432 (g) CIVIL PENALTIES. (1) AUTHORITY TO IMPOSE PENALTIES.Upon determina- tion, after reasonable notice and opportunity for a hearing, that a lender or a guaranty agency (A) has violated or failed to carry out any provision of this part or any regulation prescribed under this part, or (B) has engaged in substantial misrepresentation of the nature of its financial chargea, the Secretary may impose a civil penalty upon such lender or agency of not to exceed $25,000 for each violation, failure, or misrepresentation. (2) LIMITATIONS.No civil penalty may be imposed under paragraph (1) of this subsection unless the Secretary deter- mines that (A) the violation, failure, or substantial misrepresenta- tion referred to in that paragraph resulted from a viola- tion, failure, or misrepresentation that is material; and (B) the lender or guaranty agency knew or should have known that its actions violated or failed to carry out the provisions of this part or the regulations thereunder. (3) CORRECTION OF FAILURE.A lender or guaranty agency has no liability under paragraph (1) of this subsection if, prior to the notification by the Secretary under that paragraph, the lender or guaranty agency cures or corrects the violation or failure or notifies the person who received the substantial mis- representation of the actual nature of the financial charges in- volved. (4) CONSIDERATION AS SINGLE VIOLATION.For the purpose of paragraph (1) of this subsection, violations, failures, or sub- stantial misrepresentations arising from a specific practice of a lender or guaranty agency, and occurring prior to notification by the Secretary under that paragraph, shall be deemed to be a single violation, failure, or substantial misrepresentation even if the violation, failure, or substantial misrepresentation affects more than one loan or more than one borrower, or both. The Secretary may only impose a single civil penalty for each such violation, failure, or substantial misrepresentation. (5) ASSIGNEES NOT LIABLE FOR VIOLATIONS BY OTHERS.If a loan affected by a violation, failure, or substantial misrepre- sentation is assigned to another holder, the lender or guaranty agency responsible for the violation, failure, or substantial mis- representation shall remain liable for any civil money penalty provided for under paragraph (1) of this subsection, but the as- signee shall not be liable for any such civil money penalty. (6) COMPROMISE.Until a matter is referred to the Attor- ney General, any civil penalty under paragraph (1) of this sub- section may be compromised loy the Secretary. In determining the amount of such penalty, or the amount agreed upon in compromise, the Secretary shall consider the appropriateness of the penalty to the resources of the lender or guaranty agen- cy subject to the determination; the gravity of the violation, failure, or substantial misrepresentation; the frequency and persistence of the violation, failure, or substantial misrepresen- tation; and the amount of any losses resulting from the viola- S.C. 432 HIGHER EDUCATION ACT OF 1965 180 tion, failure, or substantial misrepresentation. The amount of such penalty, when finally determined, or the amount agreed upon in compromise, may be deducted from any sums owing by the United States to the lender or agency charged, unless the lender or agency has, in the case of a fmal agency determina- tion, commenced proceedings for judicial review within 90 days of the determination, in which case the deduction may not be made during the pendency of the proceeding. (h) AUTHORITY OF THE SECRETARY To IMPOSE AND ENFORCE LIMITATIONS, SUSPENSIONS, AND TERMINATIONS.- (1) IMPOSITION OF SANCTIONS.-(A) If the Secretary, after a reasonable notice and opportunity for hearing to an eligible lender, finds that the eligible lender (i) has substantially failed (I) to exercise reasonable care and diligence in the making and collecting of loans under the provisions of this part, (II) to make the reports or statements under sec- tion 428(a)(4), or (III) to pay the required loan insurance premiums to any guaranty agency, or (ii) has engaged in (I) fraudulent or misleading advertising or in so- licitatiom; that have resulted in the making of loans insured or guaranteed under this part to borrowers who are ineligible; or (II) the practice of making loans that violate the certification for eligibility provided in section 428, the Secretary shall limit, suspend, or terminate that lender from participation in the insurance programs operated by guar- anty agencies under this part. (B) The Secretary shall not lift any such limitation, sus- pension, or termination until the Secretary is satisfied that the lender's failure under subparagraph (A)(i) of this paragraph or practice under subparagraph (A)(ii) of this paragraph has ceased and finds that there are reasonable assurances that the lender will (i) exercise the necessary care and diligence, (ii) comply with the requirements described in sub- paragraph (A.)(i), or (iii) cease to engage in the practices described in sub- paragraph (A)(ii), as the case may be. (2) REVIEW OF SANCTIONS ON LENDERS.-(A) The Secretary shall review each limitation, suspension, or termination im- posed by any guaranty agency pursuant to section 428(b)(1)(U) within 60 days after receipt by the Secretary of a notice from the guaranty agency o Ile imposition of such limitation, sus- pension, or termination, unless the right to such review is waived in writing by the lender. The Secretary shall uphold the imposition of such limitation, suspension, or termination in the student loan insurance program of each of the guaranty agencies under this part, and shall notify such guaranty agen- cies of such sanction- 9 0 181 HIGHER EDUCATION ACT OF 1965 Sec. 432 (i) if such review is waived; or (ii) if such review is not waived, unless the Secretary determines that the limitation, suspension, or termination was not imposed in accordance with requirements of such section. (B) The Secretary's review under this paragraph of the limitation, suspension, or termination imposed by a guaranty agency pursuant to section 428(bX1)(U) shall be limitedto (i) a review of the written record of the proceedings in which the guaranty agency imposed such sanctions; and (ii) a determination as to whether the guaranty agency complied with section 428(b)(1)(U) and any notice and hearing requirements prescribed in regulations of the Sec- retary under this part. (C) The Secretary shall not lift any such sanction until the Secretary is satisfied that the lender has corrected the failures which led to the limitation, suspension, or termination, and finds that there are reasonable assurances that the lender will, in the fixture, comply with the requirements of this part. The Secretary shall notify each guaranty agency of the lifting of any such sanction. (3) REVIEW OF SANCTIONS ON ELIGIBLE INSTITUTIONS.-(A) The Secretary shall review each limitation, suspension, or ter- mination imposed by any guaranty agency pursuant to section 428(b)(1)(T) within 60 days after receipt by the Secretary of a notice from the guaranty of the imposition of such limitation, suspension, or termination, unless the right to such review is waived in writing by the institution. The Secretary shall up- hold the imposition of such limitation, suspension, or termi- nation in the student loan insurance program of each of the guaranty agencies under this part, and shall notify such guar- anty agencies of such sanctions (i) if such review is waived; or (ii) if such review is not waived, unless the Secretary determines that the limitation, suspension, or termination was not imposed in accordance with requirements of such section. (B) The Secretary's review under this paragraph of the limitation, suspension, or termination imposed by a guaranty agency pursuant to section 428(b)(1)(T) shall be limited to (i) a review of the written record of the proceedings in which the guaranty agency imposed such sanctions; and (ii) a determination as to whether the guaranty agency complied with section 428(b)(1)(T) and any notice and hearing requirements prescribed in regulations of the Sec- retary under this part. (C) The Secretary shall not lift any such sanction until the Secretary is satisfied that the institution has corrected the fail- ures which led to the limitation, suspension, or termination, and finds that there are reasonable assurances that the insti- tution will, in the future, comply with the requirements of this part. The Secretary shall notify each guaranty agency of the lifting of any such sanction. Sec. 432 HIGHER EDUCATION ACT OF 1965 182 (1) AUTHORITY To SELL DEFAULTED LOANS.In the event that all other collection efforts have failed, the Secretary is authorized to sell defaulted student loans assigned to the United States under this part to collection agencies, eligible lenders, guaranty agencies, or other qualified purchaser on such terms as the Secretary deter- mines are in the best financial interests of the United States. A loan may not be sold pursuant to this subsection if such loan is in repayment status. (j) AUTHC,ITY OF THE SECRETARY To TAKE EMERGENCY Ac- TIONS AGAINST LENDERS. (1) IMPOSITION OF SANCTIONS.If the Secretary (A) receives information, determined by the Secretary to be reliable, that a lender is violating any provision of this title, any regulation prescribed under this title, or any applicable special arrangement, agreement, or limitation; (B) determines that immediate action is necessary to prevent misuse of Federal funds; and (C) determines that the likelihood of loss outweighs the importance of following the limitation, suspension, or termination procedures authorized in subsection (h); the Secretary shall, effective on the date on which a notice and statement of the basis of the action is mailed to the lender (by registered mail, return receipt requested), take emergency ac- tion to stop the issuance of guarantee commitments and the payment of interest benefits and special allowance to the lend- er. (2) LENGTH OF EMERGENCY ACTION.An emergency action under this subsection may not exceed 30 days unless a limita- tion, suspension, or termination proceeding is initiated against the lender under subsection (h) before the expiration of that period. (3) OPPORTUNITY TO SHOW CAUSE.The Secretary shall provide the lender, if it so requests, an opportunity to show cause that the emergency action is unwarranted. (k) PROGRAM OF ASSISTANCE FOR BORROWERS. (I) IN GENERAL.The Secretary shall undertake a program to encourage corporations and other private and public employ- ers, including the Federal Government, to assist borrowers in repaying loans received under this title, including providing employers with options for payroll deduction of loan payments and offering loan repayment matching provisions as part of employee benefit packages. (2) PUBLICATION.The Secretary shall publicize models for providing the repayment assistance described in paragraph (1) and each year select entities that deserve recognition, through means devised by the Secretary, for the development of innova- tive plans for providing such assistance to employees. (3) RECOMMENDATION.Within 1 year after the date of en- actment of the Higher Education Amendments of 1992, the Secretary shall recommend to the appropriate committees in the Senate and House of Representatives changes to statutes that could be made in order to further encourage such efforts. (1) UNIFORM ADMINISTRATIVE AND CLAIMS PROCEDURES. 183 HIGHER EDUCATION ACT OF 1965 Sec. 432 (1) IN GENERAL.The Secretary shall, by regulation devel- oped in consultation with guaranty agencies, lenders, institu- tions of higher education, secondary markets, students, third party servicers and other organizations involved in providing loans under this part, prescribe standardized forms and proce- dures regarding (A) origination of loans; (B) electronic funds transfer; (C) guaranty of loans; (D) deferments; (E) forbearance; (F) servicing; (G) claims filing; (H) borrower status change; and (I) cures. (2) SPECIAL RULES.(A) The forms and procedures de- scribed in paragraph (1) shall include all aspects of the loan process as such process involves eligible lenders and guaranty agencies and shall be designed to minimize administrative costs and burdens (other than the costs and burdens involved in the transition to new forms and procedures) involved in ex- changes of data to and from borrowers, schools, lenders, sec- ondary markets, and the Department. (B) Nothing in this paragraph shall be construed to limit the development of electronic forms and procedures. (3) SIMPLIFICATION REQUIREMENTS.Such regulations shall include (A) standardization of computer formats, forms design, and guaranty agency procedures relating to the origina- tion, servicing, and collection of loans made under this part; (B) authorization of alternate means of document re- tention, including the use of microfilm, microfiche, laser disc, compact disc, and other methods allowing the produc- tion of a facsimile of the original documents; (C) authorization of the use of computer or similar electronic methods of maintaining records relating to the performance of servicing, collection, and other regulatory requirements under this Act; and (D) authorization and implementation of electronic data linkages for the exchange of information to and from lenders, guarantors, institut:ons of higher education, third party servicers, and the Department of Education for stu- dent status confirmation reports, claim filing, interest and special allowance billing, deferment processing, and all other administrative, steps relating to loans made pursuant to this part where using electronic data linkage is feasible. (4) ADDITIONAL RECOMMENDATIONS.The Secretary shall review regulations prescribed pursuant to paragraph (1) and seek additional recommendations from guaranty agencies, lenders, institutions of higher education, students, secondary markets, third party servicers and other organizations involved in providing loans under this part, not less frequently than an- dEST COPY AVAILABLE 193 77-530 0-94--7 t? Sec. 432 HIGHER EDUCATION ACT OF 1965 184 nually, for additional methods of simplifying and standardizing the administration of the programs authorized by this part. (rn) COMMON FORMS AND FORMATS. (1) COMMON GUARANTEED STUDENT LOAN APPLICATION FORM AND PROMISSORY NOTE. (A) IN GENERAL.The Secretary, in cooperation with representatives of guaranty agencies, eligible lenders, and organizations involved .in student financial assistance, shall prescribe a common application form and promissory note to be used for applying for loans under part B of this title.(B) REQUIREMENTS.The form prescribed by the Sec- retary shall (i) use clear, concise, and simple language to facili- tate understanding of loan terms and conditions by ap- plicants; (ii) be formatted to require the applicant to clearly indicate a choice of lender; and (iii) permit, to the maximum extent practicable, application for any loan under part B. (C) APPROVAL OF FORM.The Secretary shall approve a form for use not later than 360 days after the date of en- actment of the Higher Education Amendments of 1992. (D) SPECIAL RULE.Nothing in this section shall be construed to limit the development of electronic forms and procedures. (2) COMMON DEFERMENT FORM.The Secretary, in coopera- tion with representatives of guaranty agencies, institutions of Ligher education, and lenders involved in loans made under part B of this title, shall prescribe a common deferment report- ing form to be used for the processing of deferments of loans made under this title. (3) COMMON REPORTING FORMATS.The Secretary shall promulgate standards including necessary rules, regulations (including the definitions of all relevant terms), and precedures so as to require all lenders and guaranty agencies to report in- formation on all aspects of loans made under this part in uni- form formats, so as to permit the direct comparison of data submitted by individual lenders, servicers, or guaranty agen- cies. (n) DEFAULT REDUCTION MANAGEMENT. (1) AUTHORIZATION.There are authorized to be appro- priated $25,000,000 for fiscal year 1993 and each of the four succeeding fiscal years, for the Secretary to expend for default reduction management activities for the purposes of establish- ing a performance measure that will reduce defaults by 5 per- cent relative to the prior fiscal year. Such funds shall be in ad- dition to, and not in lieu of, other appropriations made for such purposes. (2) ALLOWABLE ACTIVITIES.Allowable activities for which such funds shall be expended by the Secretary shall include the following: (A) program reviews; (B) audits; (C) debt man- agement programs; (D) training activities; and (E) such other 194 185 HIGHER EDUCATION ACT OF 1965 Sec. 432 management improvement activities approved by the Sec- retary. (3) PLAN FOR USE REQUIRED.The Secretary shall submit a plan, for inclusion in the materials accompanying the Presi- dent's budget each fiscal year, detailing the expenditure of fimds authorized by this section to accomplish the 5 percent re- duction in defaults. At the conclusion of the fiscal year, the Secretary shall report the Secretary's findings and activities concerning the expenditure of funds and whether the perform- ance measure was met. If the performance measure was not met, the Secretary shall report the following: (A) why the goal was not met, including an indication of any managerial deficiencies or of any legal obstacles; (B) plans and a schedule for achieving the established performance goal; (C) recommended legislative or regulatory changes necessary to achieve the goal; and (D) if the performance standard or goal is impractical or infeasible, why that is the case and what action is rec- ommended, including whether the goal should be changed or the program altered or eliminated. This report shall be submitted to the Appropriations Commit- tees of the House of Representatives and the Senate and to the Committee on Education and Labor of the House of Represent- atives and the Committee on Labor and Human Resources of the Senate. (o) CONSEQUENCES OF GUARANTY AGENCY INSOLVENCY.In the event that the Secretary has determined that a guaranty agency is unable to meet its insurance obligations under this part, the holder of loans insured by the guaranty agency may sulDmit insurance claims directly to the Secretary and the Secretary shall pay to the holder the full insurance obligation of the guaranty agency, in ac- cordance with insurance requirements no more stringent than those of the guaranty agency. Such arrangements shall continue until the Secretary is satisfied that the insurance obligations have been transferred to another guarantor who can meet those obliga- tions or a successor will assume the outstanding insurance obliga- tions. (p) REPORTING REQUIREMENT.All officers and directors, and those employees and paid consultants of eligible institutions, eligi- ble lenders, guaranty agencies, loan servicing agencies, accrediting agencies or associations, State licensing agencies or boards, State postsecondary reviewing entities designated under subpart 1 of part H, and entities acting as secondary markets (including the Student Loan Marketing Association), who are engaged in making decisions as to the administration of any program or funds under this title or as to the eligibility of any entity or individual to par- ticipate under this title, shall report to the Secretary, in such man- ner and at such time as the Secretary shall require, on any finan- cial interest which such individual may hold in any other entity participating in any program assisted under this title. (20 U.S.C. 1082) Enacted Nov. 8, 1965, P.L. 89-329, sec. 432, 79 Stat. 1246; amended Aug. 3, 1968, P.L. 90-460, sec. 3, 82 Stat. 638; amended Oct. 12, 1976, P.L. 94-482, sec. 127(a), 90 Stat. 2127, 2128, 2129; amended October 3, 1980, P.L. 1 5 See. 433 HIGHER EDUCATION ACT OF 1965 186 96-374, secs. 416(c), 1391, 94 Stat. 1421, 1503; amended April 7, 1986, P.L. 99-272, sec. 16024, 100 Stat. 351; amended October 17, 1986, P.L. 99-498, sec. 402(a), 100 Stat. 1401; amended June 3, 1987, P.L. 100-50, sec. 10(x), (y), 101 Stat. 346; amend- ed December 19, 1989, P.L. 101-239, sec. 2001(a), 103 Stat. 2118; amended July 23, 1992, P.L. 102-325, sec. 425, 106 Stat. 543; amended December 20, 1993, P.L. 103- 208, sec. 2(k)(2), (3), (m), 107 Stat. 2485, 2486. SEC. 433, STUDENT LOAN INFORMATION BY ELIGIBLE LENDERS. (a) REQUIRED DISCLOSURE BEFORE DISBURSEMENT.-Each eligi- ble lender shall, at or prior to the time such lender disburses a loan which is insured or guaranteed under this' part (other than a loan made under section 428C), provide thorough and accurate loan in- formation on such loan to the borrower. Any disclosure required by this subsection may be made by an eligible lender as part of the written application material provided to the borrower, or as part of the promissory note evidencing the loan, or on a separate written form provided to the borrower. The disclosure shall include- (1) a statement prominently and clearly displayed and in bold print that the borrower is receiving a loan that must be repaid; (2) the name of the eligible lender, and the address to which communications and payments should be sent; (3) the principal amount of the loan; (4) the amount of any charges, such as the origination fee and insurance premium, collected by the lender at or prior to the disbursal of the loan and whether such charges are de- ducted from the proceeds of the loan or paid separately by the borrower; (5) the stated interest rate on the loan; (6) the yearly and cumulative maximum amounts that may be borrowed; (7) an explanation of when repayment of the loan will be required and when the borrower will be obligated to pay inter- est that accrues on the loan; (8) a statement as to the minimum and maximum repay- ment term which the lender may impose, and the minimum annual payment required by law; (9) a statement of the total cumulative balance, including the loan applied for, owed by the student to that lender, and an estimate of the projected monthly payment, given such cu- mulative balance; (10) an explanation of any special options the borrower may have for loan consolidation or other refinancing of the loan;(11) a statement that the borrower has the right to prepay all or part of the loan, at any time, without penalty, a state- ment summarizing circumstances in which repayment of the loan or interest that accrues on the loan may be deferred, and a brief notice of the program for repayment of loans, on the basis of military service, pursuant to section 902 of the Depart- ment of Defense Authorization Act, 1981 (10 U.S.C. 2141, note);(12) a defmition of default and the consequences to the borrower if the borrower defaults, including a statement that the default will be reported to a credit bureau or credit report- ing agency; 1 6 187 HIGHER EDUCATION ACT OF 1965 Sec. 433 (13) to the extent practicable, the effect of accepting the loan on the eligibility of the borrower for other forms of stu- dent assistance; and (14) an explanation of any cost the borrower may incur in the making or collection of the loan. (b) REQUIRED DISCLOSURE BEFORE REPAYMENT.Each eligible lender shall, at or prior to the start of the repayment period of the student borrower on loans made, insured, or guaranteed under this part, disclose to the borrower the information required under this subsection. For any loan made, insured, or guaranteed under this part, other than a loan made under section 428B or 428C, such dis- closure required by this subsection shall be made not less than 60 days1 nor more than 240 days before the first payment on the loan is due from the borrOwer. The disclosure shall include (1) the name of the eligible lender, and the address to which communications and payments should be sent; (2) the scheduled date upon which the repayment period is to begin; (3) the estimated balance owed by the borrower on the loan or loans covered by the disclosure as of the scheduled date on which the repayment period is to begin (including, if appli- cable, the estimated amount of interest to be capitalized); (4) the stated interest rate on the loan or loans, or the combined interest rate of loans with different stated interest rates; (5) the nature of any fees which may accrue or be charged to the borrower during the repayment period: (6) the repayment schedule for all loans covered by the dis- closure including the date the first installment is due, and the number, amount, and frequency of required payments; (7) an explanation of any special options the borrower may have for loan consolidation or other refinancing of the loan and of the availability and terms of such other options, except that such explanation is not required when the loan being made is a consolidation loan under section 428C; (8) except as provided in subsection (e), the projected total of interest charges which the borrower will pay on the loan or loans, assuming that the borrower makes payments exactly in accordance with the repayment schedule; and (9) a statement that the borrower has the right to prepay all or part of the loan or loans covered by the disclosure at any time without penalty. (C) COST OF DISCLOSURE AND CONSEQUENCES OF NONDISCLOSURE.Such information shall be available without cost to the borrower. The failure of an eligible lender to provide infor- mation as required by this section shall not (1) relieve a borrower of the obligation to repay a loan in accordance with its terms, (2) provide a basis for a claim for civil damages, or (3) be deemed to abrogate the obligation of the Secretary under a contract of insur- ance or reinsurance, or the obligation of a guaranty agency under a contract of guaranty. Nothing in this section shall be construed Effective February 20, 1994, section 2(c)(63) of the Higher Education Technical Amendments of 1993 strikes "60 days" and inserts "30 days". I 7 Sec. 434 HIGHER EDUCATION ACT OF 1965 188 as subjecting the lender to the Truth in Lending Act with regard to loans made under this part. The Secretary may limit, suspend, or terminate the continued participation of an eligible lender in making loans under this part for failure by that lender to comply with this section. (d) SEPARATE STATEMENT.-Each eligible lender shall, at the time such lender notifies a borrower of approval of a loan which is insured or guaranteed under this part, provide the borrower with a separate paper which summarizes (in plain English) the rights and responsibilities of the borrower with respect to the loan, in- cluding a statement of the consequences of defaulting on the loan and a statement that each borrower who defaults will be reported to a credit bureau. The requirement of this subsection shall be in addition to the information required by subsection (a) of this sec- tion.(e) SPECIAL DISCLOSURE RULES ON SLS LOANS AND PLUS LOANS AND UNSUBSIDIZED LOANS.-Loans made under sections 428A, 4288, and 428H shall not be subject to the disclosure of pro- jected monthly payment amounts required under subsection (b)(8) if the lender, in lieu of such disclosure, provides the borrower with sample projectioni of monthly repayment amounts assuming dif- ferent levels of borrowing and interest accruals resulting from cap- italization of interes: while the borrower is in school. Such sample projections shall disckse the cost to the student ofcapitalizing- (1) principal ard interest; and (2) interest only. (20 U S C 1083) Enacted Nov. 8, 1965, P.L. 89-329, sec. 433, 78 Stat. 1247; amended Oct 16, 1968, P.L. 90-575, sec. 116, 82 Stat. 102; amended June 23, 1972; P.L 92-318, sec. 132(c), 86 Stat. 261; amended Oct. 12, 1976, P.L. 94-482, sec. 127(a), 90 Stat. 2129; amended June 15, 1977, P.L. 95-43, sec. 1(a)(34), 91 Stat. 216, amended October 3, 1980, P.L. 96-374, sec. 1391, 94 Stat. 1503; amended Octo- ber 17, 1986, P.L. 99-498, sec. 402(a), 100 Stat. 1406; amended June 3, 1987, P.L. 100-50, sec 10(z), 101 Stat. 346; amended July 23, 1992, P.L. 102-325, sec. 426, 106 Stat. 548, amended December 20, 1993, P.L. 103-208, sec. 2(c)(53), (54), (k)(4), (m), 107 Stat 2468, 2485, 2486. SEC. 434. PARTICIPATION BY FEDERAL CREDIT UNIONS IN FEDERAL, STATE, AND PRIVATE STUDENT LOAN INSURANCE PRO- GRAMS. Notwithstanding any other provision of law, Federal credit unions shall, pursuant to regulations of the National Credit Union Administration, have power to make insured loans to student mem- bers in accordance with the provisions of this part relating to feder- ally insured loans, or in accordance with the provisions of any State or nonprofit private student loan insurance program which meets the requirements of section 428(a)(1)(B). (20 U S C 1084) Enacted Nov. 8, 1965, P.L. 89-329, sec. 434, 79 Stat. 1247; amended Oct. 16, 1969, P.L. 90-575, sec. 116, 82 Stat. 1024; amended June 23, 1972, P L. 92-318, sec. 132D(e), 86 Stat 264; amended Oct. 12, 1976, P.L. 94-482, sec 127(a), 90 Stat. 2129, 2130; amended October 17, 1986, P.L. 99-448, sec. 402(a), 100 Stat. 1408; amended December 20, 1993, P.L. 103-208, sec. 2(m), 107 Stat. 2486 SEC. 435. DEFINITIONS FOR Sl'UDENT LOAN INSURANCE PROGRAM. As used in this part: (a) ELIGIBLE INSTITUTION.- 189 HIGHER EDUCATION ACT OF 1965 Sec. 435 (1) IN GENERAL.Except as provided in paragraph (2), the term "eligible institution" means an institution of higher edu- cation, as defined in section 481, except that, for the purposes of sections 427(a)(2)(C)(i) and 428(b)(1)(M)(1), an eligible insti- tution includes any institution that is within this definition without regard to whether such institution is participating in any program under this title and includes any institution ineli- gible for participation in any program under this part pursuant to paragraph (2) of this subsection. (2) INELIGIBILITY BASED ON HIGH DEFAULT RATES.(A) An institution whose cohort default rate is equal to or greater than the threshold percentage specified in subparagraph (B) for each of the three most recent fiscal years for which data are avail- able shall not be eligible to participate in a program under this part for the fiscal year for which the determination is made and for the two succeeding fiscal years, unless, within 30 days of receiving notification from the Secretary of the loss of eligi- bility under this paragraph, the institution appeals the loss of its eligibility to the Secretary. The Secretary shall issue a deci- sion on any such appeal within 45 days after its submission. Such decision may permit the institution to continue to partici- pate in a program under this part if (i) the institution demonstrates to the satisfaction of the Secretary that the Secretary's calculation of its cohort default rate is not accurate, and that recalculation would reduce its cohort default rate for any of the three fiscal years below the threshold percentage specified in subpara- graph (B); or (ii) there are, in the judgment of the Secretary, excep- tional mitigating circumstances that would make the ap- plication of this paragraph inequitable. During such appeal, the Secretary may permit the institution to continue to participate in a program under this part. (B) For purposes of determinations under subparagraph (A), the threshold percentage is (i) 35 percent for fiscal year 1991 and 1992; (ii) 30 percent for fiscal year 1993; and (iii) 25 percent for any succeeding fiscal year. (C) Until July 1, 1994, this paragraph shall not apply to any institution that is (i) a part B institution within the meaning of section 322(2) of this Act; (ii) a tribally controlled community college within the meaning of section 2(a)(4) of the Tribally Controlled Com- munity College Assistance Act of 1978; or (iii) a Navajo Community College under the Navajo Community College Act. (3)1 APPEALS BASED UPON ALLEGATIONS OF IMPROPER LOAN SERVICING.An institution that- 1Section 5(6)(8) of the Higher Education Technical Amendments of 1993 provides as follows: (8) COHORT DEFAULT RATE DETERMINATION9.The amendments made to subsection (a)(3) and (mX1X13) of section 435 of this Act shall apply with respect to the determina. Continued 1 t. 9 Sec. 435 HIGHER EDUCATION ACT OF 1965 190 (A) is subject to loss of eligibility for the Federal Fam- ily Education Loan Program pursuant to paragraph (2)(A) of this subsection; (B) is subject to loss of eligibility for the Federal Sup- plemental Loans for Students pursuant to section 428A(a)(2); or (C) is an institution whose cohort default rate equals or exceeds 20 percent for the most recent year for which data are available; may include in its appeal of such loss or rate a defense based on improper loan servicing (in addition to other defenses). In any such appeal, the Secretary shall take whatever steps are necessary to ensure that such institution has access to a rep- resentative sample (as determined by the Secretary) of the rel- evant loan servicing and collection records of the affected guar- anty agencies and loan servicers for a reasonable period of time, not to exceed 30 days. The Secretary shall reduce the in- stitution's cohort default rate to reflect the percentage of de- faulted loans in the representative sample that are required to be excluded pursuant to subsection (m)(1)(B). (d)1 ELIGIBLE LENDER. (1) IN GENERAL.Except as provided in paragraphs (2) through (6), the term "eligible lender" means (A) a National or State chartered bank, a mutual sav- ings bank, a savings and loan association, a stock savings bank, or a credit union which (i) is subject to examination and supervision by an agency of the United States or of the State in which its principal place of operation is established, and (ii) does not have as its primary consumer credit function the making or holding of loans made to stu- dents under this part unless (I) it is a bank which is wholly owned by a State, or a bank which is subject to examination and supervision by an agency of the United States, makes student loans as a trustee pur- suant to an express trust, operated as a lender under this part prior to January 1, 1975, and which meets the requirements of this provision prior to the enact- ment of the Higher Education Amendments of 1992, or (II) it is a single wholly owned subsidiary of a bank holding company which does not have as its primary consumer credit function the making or holding of loans made to students under this part; (B) a pension fund as defined in the Employee Retire- ment Income Security Act; (C) an insurance company which is subject to exam- ination and supervision by an agency of the United States or a State; (D) in any State, a single agency of the State or a sin- gle nonprofit private agency designated by the State; tion (and appeals from determinations) of cohort default rates for fiscal year 1989 and any succeeding fiscal year. 'Subsections (b) and (c) were repealed by P.L. 102-325, sec. 427(b)(1) and (2), 106 Stat. 549. (1 0 191 HIGHER EDUCAIION ACT OF 1965 Sec. 435 (E) an eligible institution which meets the require- ments of paragraphs (2) through (5) of this subsection; (F) for purposes only of purchasing and holding loans made by oth.er lenders uncle: this part, the Student Loan Marketing Association or an agency of any State function- ing as a secondary market; (G) for purposes of making loans under sections 428A(d), 428B(d), 428C, and 439(q), the Student Loan Marketing Association; (H) for purposes of making loans under sections 428(h) and 428(j), a guaranty agency; (I) a Rural Rehabilitation Corporation, or its successor agency, which has received Federal funds under Public Law 499, Eighty-first Congress (64 Stat. 98 (1950)); and (J) for purpose of making loans under section 428C, any nonprofit private agency functioning in any State as a secondary market. (2) ADDITIONAL REQUIREMENTS OF ELIGIBLE INSTITU- TIONS.To be an eligible lender under this part, an eligible institution (A) shall employ at least one person whose full-time responsibilities are limited to the administration of pro- grams of financial aid for students attending such institu- tion; (B) shall not be a home study school; (C) shall make loans to not more than 50 percent of the undergraduate students at the institution; (D) shall not make a loan, other than a loan to a grad- uate or professional student, unless the borrower has pre- viously received a loan from the school or has been denied a loan by an eligible lender; (E) shall not have a cohort default rate (as defined in section 435(m)) greater than 1.5 percent; and (F) shall use the proceeds from special allowance pay- ments and interest payments from borrowers for need- based grant programs, except for reasonable reimburse- ment for direct administrative expenses; except that the requirements of subparagraphs (C) and (D) shall not apply with respect to loans made, and loan commit- ments made, after the date of enactment of the Higher Edu- cation Amendments of 1986 and prior to July 1, 1987. (3) DISQUALIFICATION FOR HIGH DEFAULT RATES.The term "eligible lender" does not include any eligible institution in any fiscal year immediately after the fiscal year in which the Sec- retary determines, after notice and opportunity for a hearing, that for each of 2 consecutive years, 15 percent or more of the total amount of such loans as are described in section 428(a)(1) made by the institution with respect to students at that insti- tution and repayable in each such year, are in default, as de- fined in section 435(m). (4) WAIVER OF DISQUALIFICATION.Whenever the Sec- retary determines that (A) there is reasonable possibility that an eligible in- stitution may, within 1 year after a determination is made 0 I Sec. 435 HIGHER EDUCATION ACT OF 1965 192 under paragraph (3), improve the collection of loans de- scribed in section 428(a)(1), so that the application of para- graph (3) would be a hardship to that institution, or (B) the termination of the lender's status under para- graph (3) would be a hardship to the present or for pro- spective students of the eligible institution, after consider- ing the management of that institution, the ability of that institution to improve the collection of loans, the opportu- nities that institution offers to economically disadvantaged students, and other related factors, the Secretary shall waive the provisions of paragraph (3) with respect to that institution. Any determination required under this paragraph shall be made by the Secretary prior to the ter- mination of an eligible institution as a lender under the excep- tion of paragraph (3). Whenever the Secretary grants a waiver pursuant to thiE paragraph, the Secretary shall provide tech- nical assistance to the institution concerned in order to im- prove the collection rate of such loans. (5) DISQUALIFICATION FOR USE OF CERTAIN INCENTIVES. The term "eligible lender" does not include any lender that the Secretary determines, after notice and opportunity for a hear- ing, has after the date of enactment of this paragraph (A) offered, directly or indirectly, points, premiums, payments, or other inducements, to any educational insti- tution or individual in order to secure applicants for loans under this part; (B) conducted unsolicited mailings to students of stu- dent loan application forms, except to students who have previously received loans under this part from such lender; (C) offered, directly or indirectly, loans under this part as an inducement to a prospective borrower to purchase a policy of insurance or other product; or (D) engaged in fraudulent or misleading advertising. (6) REBATE FEE REQUIREMENT.To be an eligible lender under this part, an eligible lender shall pay rebate fees in ac- cordance with section 428C(f). (e) LINE OF CREDIT.The term "line of credit" means an ar- rangement or agreement between the lender and the borrower whereby a loan is paid out by the lender to the borrower in annual installments, or whereby the lender agrees to make, in addition to the initial loan, additional loans in subsequent years. (f) DUE DILIGENCE.The term "due diligence" requires the uti- lization by a lender, in the servicing and collection of loans insured under this part, of servicing and collection practices at least as ex- tensive and forceful as those generally practiced by financial insti- tutions for the collection of consumer loans. (i)1 HOLDER.The term "holder" means an eligible lender who owns a loan. (j) GUARANTY AGENCY.The term "guaranty agency" means any State or nonprofit private institution or organization with which the Secretary has an agreement under section 428(b). ISection 427(f) amended section 435 by striking subsections (g), (h), and (n), but failed to re- designate remaining oubsectiona. 2 2 193 HIGHER EDUCATION ACT OF 1965 Sec. 435 (k) INSURANCE BENEFICIARY.The term "insurance bene- ficiary" means the insured or its authorized representative as- signed in accordance with section 429(d). (1) DEFAULT.Except as provided in subsection (m), the term "default" includes only such defaults as have existed for (1) 180 days in the case of a loan which is repayable in monthly install- ments, or (2) 240 days in the case of a loan which is repayable in less frequent installments. (m) COHORT DEFAULT RATE. (1) IN GENERAL.(A) Except as provided in paragraph (2), the term "cohort default rate" means, for any fiscal year in which 30 or more current and former students at the institu- tion enter repayment on loans under section 428, 428A, or 42811, received for attendance at the institution, the percent- age of those current and former students who enter repayment on such loans (or on the portion of a loan made under section 428C that is used to repay any such loans)1 received for at- tendance at that institution in that fiscal year who default be- fore the end of the following fiscal year.2 (B) In determining the number of students who default be- fore the end of such fiscal year, the Secretary shall include only loans for which the Secretary or a guaranty agency has paid claims for insurance, and, in considering appeals with re- spect to cohort default rates pursuant to subsection (a)(3), ex- clude any loans which, due to improper servicing or collection, would, as demonstrated by the evidence submitted in support of the institution's timely appeal to the Secretary, result in an inaccurate or incomplete calculation of such cohort default rate. (C) For any fiscal year in which fewer than 30 of the insti- tution's current and former students enter repayment, the term "cohort default rate" means the percentage of such cur- rent and former students who entered repayment on such loans (or on the portion of a loan made under section 428C that is used to repay any such loans) 2 in any of the three most recent fiscal years, who default before the end of the fiscal year immediately following the year in which they entered repay- ment. (2) SPECIAL RULES.(A) In the case of a student who has attended and borrowed at more than one school, the student (and such student's subsequent repayment or default) is attrib- uted to each school for attendance at which the student re- ceived a loan that entered repayment in the fiscal year. (B) A loan on which a payment is made by the school, such school's owner, agent, contractor, employee, or any other entity or individual affiliated with such school, in order to avoid de- 1The parenthetical phrases in subparagraphs (A) and (C), added by section 4046(b) of P.L. 103-66, are effective July 1, 1994. 2 Effective October 1, 1994, section 2(c)(60)(A) of the Higher Education Technical Amendments of 1993 inserts at the end the following new sentence: "The Secretary shall require that each guaranty agency that has insured loans for current or former students of the institution afford such institution a reasonable opportunity (as specified by the Secretary) to review and correct errors in the information required to be provided to the Secretary by the guaranty agency for che purposes of calculating a cohort default rate for such institution, prior to the calculation of such rate.". 0 ' Sec. 435 HIGHER EDUCATION ACT OF 1965 194 fault by the borrower, is considered as in default for purposes of this subsection. (C) Any loan which has been rehabilitated before the end of such following fiscal year is not considered as in default for the purposes of this subsection. (D) For the purposes of this subsection, a loan made in ac- cordance with section 428A (or the portion of a loan made under section 428C that is used to repay a loan made under section 428A) shall not be considered to enter repayment until after the borrower has ceased to be enrolled in a course of study leading to a degree or certificate at an eligible institution on at least a half-time basis (as determined by the institution) and ceased to be in a period of forbearance based on such en- rollment. Each eligible lender of a loan made under section 428A (or a loan made under section 428C a portion of which is used to repay a loan made under section 428A) shall provide the guaranty agency with the information necessary to deter- mine when the loan entered repayment for purposes of this subsection, and the guaranty agency shall provide such infor- mation to the Secretary. (3) REGULATIONS TO PREVENT EVASIONS.The Secretary shall prescribe regulations designed to prevent an institution from evading the application to that institution of a default rate determination under this subsection through the use of such measures as branching, consolidation, change of owner- ship or control, or any similar device. (4) COLLECTION AND REPORTING OF COHORT DEFAULT RATES.(A) The Secretary shall collect data from all insurers under this part and shall publish not less often than once every fiscal year a report showing default data for each cat- egory of institution, including (i) 4-year public institutions, (ii) 4-year private institutions, (iii) 2-year public institutions, (iv) 2-year private institutions, (v) 4-year proprietary institutions, (vi) 2-year proprietary institutions, and (vii) less than 2-year proprietary institutions. (B) The Secretary may designate such additional subcategories within the categories specified in subparagraph (A) as the Secretary deems appropriate. (C) The Secretary shall publish not less often than once every fiscal year a report showing default data for each institu- tion for which a cohort default rate is calculated under this subsection. (o) 1 ECONOMIC HARDSHIP. (1) IN GENERAL.For purposes of this part and part E, a borrower shall be considered to have an economic hardship if (A) such borrower is working full-time and is earning an amount which does not exceed the greater of (1) the minimum wage rate described in section 6 of the Fair Labor Standards Act of 1938; or (ii) an amount equal to 100 percent of the poverty line for a family of 2 as determined in accordance with Subsection (n) repealed br sec. 427(f) of P.L. 102-325. See footnote 1 on page 195. 2'1_/ 4 195 HIGHER EDUCATION ACT OF 1965 Sec. 436 section 673(2) of the Community Service Block Grant Act; or (B) such borrower meets such other criteria as are es- tablished by the Secretary by regulation in accordance with paragraph (2). (2) CONSIDERATIONS.-In establishing criteria for purposes of paragraph (1)(B), the Secretary shall consider the borrower's income and debt-to-income ratio as primary factors. (20 U.S.C. 1085) Enacted Nov. 8, 1965, P.L. 89-329, sec. 435, 79 Stat. 1247; as amended Oct. 29, 1966, P.L. 89-698, sec. 204, 80 Stat. 1072; amended Oct. 16, 1968, P.L. 90-575, secs. 116, 118, 82 Stat. 1023-26; amended October 12, 1976, P.L. 94- 482, sec. 127(a), 90 Stat. 2130, 2131; amended June 15, 1977, P.L. 95-43, sec. 1 (a)(35), (a)(36), 91 Stat. 216; amended October 3, 1980, P.L. 96-374, secs. 412(e), 421(e)(2), 1391, 94 Stat. 1418, 1432, 1503; amended April 7, 1986, P.L. 99-272, secs. 16017(b)(2), 16020, 100 Stat. 343, 349; amended October 17, 1986, P.L. 99-498, sec. 402(a), 100 Stat. 1408; amended June 3, 1987, P.L. 100-50, sec. 10(aa), 101 Stat. 347; amended December 19, 1989, P.L. 101-239, secs. 2003(a)(2), 2007(a)(2), 103 Stat. 2113 and 2120; amended November 5, 1990, P.L. 101-508, sec. 3004(a), 104 Stat. 1388-26; amended November 8, 1990, P.L. 101-542, sec. 301, 104 Stat. 2387- 2388; amended April 9, 1991, P.L. 102-26, sec. 2(a)(1), 105 Stat. 123; amended July 23, 1992, P.L. 102-325, sec. 416(e)(2), and 427, 106 Stat. 519, 549; amended August 10, 1993, P.L. 103-66, sec. 4046(b)(1), 4106(b), 107 Stat. 362, 368; amended Decem- ber 20, 1993, P.L. 103-208, sec. 2(c)(55)-(62), (m), 107 Stat. 2468-69, 2486. SEC. 436. DISTRICT OF COLUMBIA STUDENT LOAN INSURANCE PRO- GRAM. (a) Aunio Rrry.-The government of the District of Columbia is authorized (1) to establish a student loan insurance program which meets the requirements of this part for a State loan insurance pro- gram in order to enter into agreements with the Secretary for the purposes of this title, (2) to enter into such agreements with the Secretary, (3) to use amounts appropriated for the purposes of this section to establish a fund for such purposes and for expenses in connection therewith, and (4) to accept and use donations for the purposes of this section. (b) BINDING EFFECT ON MINORS.-Notwithstanding the provi- sions of any applicable law, if the borrower, on any loan insured under the program established pursuant to this section, is a minor, any otherwise valid vote or other written agreement executed by him for the purposes of such loan shall create a binding obligation. (c) APPROPRIATIONS AUTHORIZED.-There are authorized to be appropriated such amounts as may be necessary for the purposes of this section. (20 U.S.C. 1086) Enacted Nov. 3, 1966, P.L. 89-752, sec. 12, 80 Stat. 1244; amended Oct. 16, 1968, PL. 90-575, sec. 116, 82 Stat. 1024; amended Oct. 12, 1976, P.L. 94-482, sec. 127(a), 90 Stat. 2132, 2133; amended October 3, 1980, P.L. 96- 374, sec. 1391, 94 Stat. 1503; amended October 17, 1986, P.L. 99-498, sec. 402(a), 100 Stat. 1413; amended December 20, 1993, P.L. 103-208, sec. 2(m), 107 Stat. 2486. SEC. 497. REPAYMENT BY THE SECRETARY OF LOANS OF BANKRUPT, DECEASED, OR DISABLED BORROWERS; TREATMENT OF BORROWERS ATTENDING CLOSED SCHOOLS OR FALSELY CERTIFIED AS ELIGIBLE TO BORROW. (a) REPAYMENT IN FULL FOR DEATH AND DISABILITY.-If a stu- dent borrower who has received a loan described in subparagraph (A) or (B) of section 428(a)(1) dies or becomes permanently and to- tally disabled (as determined in accordance with regulations of the Sec. 437 HIGHER EDUCATION ACT OF 1965 196 Secretary), then the Secretary shall discharge the borrower's liabil- ity on th.e loan by repaying the amount owed on the loan. (b) PAYMENT OF CLAIMS ON LOANS IN BANKRUPTCY.The Sec- retary shall pay to the holder of a loan described in section 428(a)(1) (A) or (B), 428A, 428B, 428C, or 428H, the amount of the unpaid balance of principal and interest owed on such loan (1) when the borrower files for relief under chapter 12 or 13 of title 11, United States Code; (2) when the borrower who has filed for relief under chap- ter 7 or 11 of such title commences an action for a determina- tion of dischargeability under section 523(a)(8)(B) of such title; or (3) for loans described in section 523(a)(8)(A) of such title, when the borrower files for relief under chapter 7 or 11 of such title. (C) DISCHARGE. (1) IN GENERAL.If a borrower who received, on or after January 1, 1986, a loan made, insured, or guaranteed under this part and the student borrower, or the student on whose behalf a parent borrowed, is unable to complete the program in which such student is enrolled due to the closure of the in- stitution or if such student's eligibility to borrow under this part was falsely certified by the eligible institution, then the Secretary shall discharge the borrower's liability on the loan (including interest and collection fees) by repaying the amount owed on the loan and shall subsequently pursue any claim available to such borrower against the institution and its affili- ates and principals or settle the loan obligation pursuant to the financial responsibility authority under subpart 3 of part H. (2) ASSIGNMENT.A borrower whose loan has been dis- charged pursuant to this subsection shall be deemed to have assigned to the United States the right to a loan refund up to the amount discharged against the institution and its affiliates and pirincipals. (3) ELIGIBILITY FOR ADDITIONAL ASSISTANCE.The period of a student's attendance at an institution at which the student was unable to complete a course of study due to the closing of the institution shall not be considered for purposes of calculat- ing the student's period of eligibility for additional assistance under this title. (4) SPECIAL RULE.A borrower whose loan has been dis- charged pursuant to this subsection shall not be precluded from receiving additional grants, loans, or work assistance under this title for which the borrower would be otherwise eli- gible (but for the default on such discharged loan). The amount discharged under this subsection shall be treated the same as loans under section 465(a)(5) of this title. (5) REPORTING.The Secretary shall report to credit bu- reaus with respect to loans which have been discharged pursu- ant to this subsection. (d) REPAYMENT OF LOANS TO PARENTS.If a student on whose behalf a parent has received a loan described in section 428B dies, then the Secretary shall discharge the borrower's liability on the loan by repaying the amount owed on the loan. " n, 197 HIGHER EDUCATION ACT OF 1965 Sec. 437A (20 U.S.C. 1087) Enacted Oct. 16, 1968, P.L. 90-575, sec. 113, 82 Stat. 1020; amended June 23, 1972, P.L. 92-318, sec. 132D, 86 Stat. 263; amended Oct. 12, 1976, P.L. 94-482, sec. 127(a), 90 Stat. 2133; amended October 3, 1980, P.L. 96- 374, sec. 1391, 94 Stat. 1503; amended October 17, 1986, P.L. 99-498, sec. 402(a), 100 Stat. 1414; amended July 23, 1992, P.L. 102-325, sec. 428, 106 Stat. 551; amended December 20, 1993, P.L. 103-208, sec. 2(c)(63)-(65), (m), 107 Stat. 2469, 2486. SEC. 437A. DEBT MANAGEMENT OPTIONS. (a) PROGRAM AUTHORITY.-For the purpose of offering addi- tional debt management options, the Secretary is authorized, to the extent of funds appropriated- (1) to acquire from eligible holders the notes of borrowers under this part (other than section 428B) who are considered to be at high risk of default and who submit a request to the Secretary for an alternative repayment option; (2) to offer such borrowers one or more alternative repay- ment options, which may include graduated or extended repay- ment and which shall, subject to subsection (b)(2), include an income contingent repayment option established in accordance with subsection (b); and (3) to enter into contracts or other agreements with private firms or other agencies of the Government as necessary to carry out the purposes of this section. (b) INCOME CONTINGENT REPAYMENT OPTION.- (1) REGULATIONS.-For the purposes of subsection (a)(2), the Secretary shall, by regulation, establish the terms and con- ditions for an income contingent repayment option. Such regu- lations shall specify the schedules under which income will be assessed for repayment of loans, shall permit the discharge of the remaining obligation on the loan not later than 25 years after the commencement of income contingent repayment, and may provide for the potential collection of amounts in excess of the principal and interest owed on the original loan or loans. (2) COLLECTION MECHANISM DETERMINATION REQUIRED.- Such regulations shall not be effective unless the Secretary publishes a finding that- (A) the Secretary has, pursuant to subsection (a)(3), established a collection mechanism that will provide a high degree of certainty that collections will be made in accord- ance with the repayment option established under para- graph (1); and (B) the use of such repayment option and collection mechanism will result in an increase in the net amount the Government will collect. (C) DETERMINATIONS OF HIGH RISK OF DEFAULT.-In making determinations under subsection (a)(1), the Secretary shall- (1) consider the ratio of part B debt repayment to income; (2) establish, by regulation, such other indicators of high risk as the Secretary considers appropriate. (d) LOAN LIMITATION.-Not more than $200,000,000 may be used to acquire loans under this section in any fiscal year. (20 U.S.C. 1087-0) Enacted July 23, 1992, P.L. 102-325, sec. 429, 106 Stat. 552; amended December 20, 1993, P.L. 103-208, sec. 2(c)(66)-(68), (m), 107 Stat. 2469, 2486. or Sec. 438 HIGHER EDUCATION ACT OF 1965 198 SEC. 438. SPECIAL ALLOWANCES. (a) FINDINGS.In order to assure (1) that the limitation on in- terest payments or other conditions (or both) on loans made or in- sured under this part, do not impede or threaten to impede the car- rying out of the purposes of this part or do not cause the return to halders of loans to be less than equitable, (2) that incentive pay- ments on such loans are paid promptly to eligible lenders, and (3) that appropriate consideration of relative administrative costs and money market conditions is made in setting the quarterly rate of such payments, the Congress finds it necessary to establish an im- proved method for the determination of the quarterly rate of the special allowances on such loans, and to provide for a thorough, ex- peditious, and objective examination of alternative methods for the determination of the quarterly rate of such allowances. (b) COMPUTATION AND PAYMENT. (1) QUARTERLY PAYMENT BASED ON UNPAID BALANCE.A special allowance shall be paid for each of the 3-month periods ending March 31, June 30, September 30, and December 31 of every year and the amount of such allowance paid to any hold- er with respect to any 3-month period shall be a percentage of the average unpaid balance of principal (not including un- earned interest added to principal) of all eligible loans held by such holder during such period. (2) RATE OF SPECIAL ALLOWANCE.(A) Subject to subpara- graphs (B), (C), (D), (E), and (F) and paragraph (4), the special allowance paid pursuant to this subsection on loans shall be computed (i) by determining the average of the bond equivalent rates of 91-day Treasury bills auctioned for such 3-month pe- riod, (ii) by subtracting the applicable interest rate on such loans from such average, (iii) by adding 3.10 percent to the re- sultant percent, and (iv) by dividing the resultant percent by 4. If such computation produces a number less than zero, such loans shall be subject to section 427A(0.1 (B)(i) The quarterly rate of the special allowance for hold- ers of loans which were made or purchased with funds ob- tained by the holder from the issuance of' obligations, the in- come from which is exempt from taxation under the Internal Revenue Code of' 1954 shall be one-half the quarterly rate of the special allowance established under subparagraph (A), ex- cept that, in determining the rate for the purpose of this divi- sion, subparagraph (A)(iii) shall be applied by substituting "3.5 percent" for "3.10 percent" . Such rate shall also apply to hold- ers of loans which were made or purchased with funds ob- tained by the holder from collections or default reimburse- ments on, or interests or other income pertaining to, eligible loans made or purchased with funds described in the preceding sentence of this subparagraph or from income on the invest- ment of such funds. This subparagraph shall not apply to loans which were made or insured prior to October 1, 1980. (ii) The quarterly rate of the special allowance set under division (i) of this subparagraph shall not be less than 9.5 per- 1So in 'aw. Should refer to section 427A(i). 2'18 199 HIGHER EDUCATION ACT OF 1965 Sec. 438 cent minus the applicable interest rate on such loans, divided by 4. (iii) No special allowance may be paid under this subpara- graph unless the issuer of such obligations complies with sub- section (d) of this section. (iv) Notwithstanding clauses (i) and (ii), the quarterly rate of the special allowance for holders of loans which are financed with funds obtained by the holder from the issuance of obliga- tions originally issued on or after October 1, 1993, the income from which is excluded from gross income under the Internal Revenue Code of 1986, shall be the quarterly rate of the special allowance established under subparagraph (A), (E), or (F), as the case may be. Such rate shall also apply to holders of loans which were made or purchased with funds obtained by the holder from collections or default reimbursements, on, or inter- est or other income pertaining to, eligible loans made or pur- chased with funds described in the preceding sentence of this subparagraph or from income on the investment of such funds. (C)(i) In the case of loans made before October 1, 1992, pursuant to section 428A or 428B for which the interest rate is determined under section 427A(c)(4), a special allowance shall not be paid unless the rate determined for any 12-month period under subparagraph (B) of such section exceeds 12 per- cent. (ii) In the case of loans disbursed on or after October 1, 1992, pursuant to section 428A or 428B for which the interest rate is determined under section 427A(c)(4), a special allow- ance shall not be paid unless the rate determined for any 12- month period under section 427A(c)(4)(B) exceeds (I) 11 percent in the case of a loan under section 428A; (II) 10 percent in the case of a loan under section 428B. (D)(i) In the case of loans made or purchased directly from funds loaned or advanced pursuant to a qualified State obliga- tion, subparagraph (A)(iii) shall be applied by substituting "3.5 percent" for "3.10 percent". (ii) For the purpose of division (i) of this subparagraph, the term "qualified State obligation" means (I) an obligation of the Maine Educational Loan Mar- keting Corporation to the Student Loan Marketing Asso- ciation pursuant to an agreement entered into on January 31, 1984; or (II) an obligation of the South Carolina Student Loan Corporation to the South Carolina National Bank pursu- ant to an agreement entered into on July 30, 1986. (E) In the case of any loan for which the applicable rate of interest is described in section 427A(g)(2), subparagraph (A)(iii) shall be applied by substituting "2.5 percent" for "3.10 percent". (F) Subject to paragraph (4), the special allowance paid pursuant to this subsection on loans for which the applicable rate of interest is determined under section 427A(h) shall be computed (i) by determining the applicable bond equivalent or 4?, Sec. 438 HIGHER EDUCATION ACT OF 1965 200 rate of the security with a comparable maturity, as established by the Secretary, (ii) by subtracting the applicable interest rates on such loans from such applicable bond equivalent rate, (iii) by adding 1.0 percent to the resultant percent, and (iv) by dividing the resultant percent by 4. If such computation pro- duces a number less than zero, such loans shall be subject to section 427A(f). 1 (3) CONTRACTUAL RIGHT OF HOLDERS TO SPECIAL ALLOW- ANCE.The holder of an eligible loan shall be deemed to have a contractual right against the United States, during the life of such loan, to receive the special allowance according to the provisions of this section. The special allowance determined for any such 3-month period shall be paid promptly after the close of such period, and without administrative delay after receipt of an accurate and complete request for payment, pursuant to procedures established by regulations promulgated under this section. (4) PENALTY FOR LATE PAYMENT.(A) If payments of the special allowances payable under this section or of interest payments under section 428(a) with respect to a loan have not been made within 30 days after the Secretary has received an accurate, timely, and complete request for payment thereof, the special allowance payable to such holder shall be increased by an amount equal to the daily interest accruing on the special allowance and interest benefits payments due the holder. (B) Such daily interest shall be computed at the daily equivalent rate of the sum of the special allowance rate com- puted pursuant to paragraph (2) and the interest rate applica- ble to the loan and shall be paid for the later of (i) the 31st day after the receipt of such request for payment from the holder, or (ii) the 31st day after the final day of the period or periods covered by Such request, and shall be paid for each suc- ceeding day until, and including, the date on which the Sec- retary authorizes payment. (C) For purposes of reporting to the Congress the amounts of special allowances paid under this section, amounts of spe- cial allowances paid pursuant to this paragraph shall be seg- regated and reported separately. (5) DEFINITION OF ELIGIBLE LOAN.As used in this section, the term "eligible loan" means a loan (A)(i) on which a portion of the interest is paid on be- half of the student and for the student's account to the holder of the loan under section 428(a); (ii) which is made under section 428A, 428B, 428C, 428H, or 439(o); or (iii) which was made prior to October 1, 1981; and (B) which is insured under this part, or made under a program covered by an agreement under section 428(b) of this Act. As used in this section, the term "eligible loan" includes all loans subject to section 4281.2 1So in law. Should refer to section 427A(D. 2 Indentation so in law. 201 HIGHER EDUCATION ACT OF 1965 Sec. 438 (6) REGULATION OF TIME AND MANNER OF PAYMENT.The Secretary shall pay the holder of an eligible loan, at such time or times as are specified in regulations, a special allowance prescribed imrsuant to this subsection subject to the condition that such holder shall submit to the Secretary, at such time or times and in such a manner as the Secretary may deem prop- er, such information as may be required by regulation for the purpose of enabling the Secretary to carry out his functions under this section and to carry out the purposes of this section. (7) USE OF AVERAGE QUARTERLY BALANCE.The Secretary shall permit lenders to calculate interest benefits and special allowance through the use of the average quarterly balance method until July 1, 1988. (C) ORIGINATION FEES FROM STUDENTS. (1) DEDUCTION FROM INTEREST AND SPECIAL ALLOWANCE SUBSIDIES.Notwithstanding subsection (b), the total amount of interest and special allowance payable under section 428(a)(3XA) and subsection (b) of this section, respectively, to any holder shall be reduced by the Secretary by the amount which the lender is authorized to charge as an origination fee in accordance with paragraph (2) of this subsection. If the total amount of interest and special allowance payable under section 428(a)(3)(A) and subsection (b) of this section, respectively, is less than the amount the lender was authorized to charge bor- rowers for origination fees in that quarter, the Secretary shall deduct the excess amount from the subsequent quarters' pay- ments until the total amount has been deducted. (2) AMOUNT OF ORIGINATION FEES.Subject to paragraph (6) of this subsection, with respect to any loan (other than loans made under sections 428C 1 and 439(o)) for which a com- pleted note or other written evidence of the loan was sent or delivered to the borrower for signing on or after 10 days after the date of enactment of the Postsecondary Student Assistance Amendments of 1981, each eligible lender under this part is authorized to charge the borrower an origination fee in an amount not to exceed 3.01 percent of the principal amount of the loan, to be deducted proportionately from each installment payment of the proceeds of the loan prior to payment to the borrower. (3) RELATION TO APPLICABLE INTEREST.Such origination fee shall not be taken into account for purposes of determining compliance with section 427A. (4) DISCLOSURE REQUIRED.The lender shall disclose to the borrower the amount and method of calculating the origi- nation fee. (5) PROHIBITION ON DEPARTMENT COMPELLING ORIGINATION FEE COLLECTIONS BY LENDERS.Nothing in this subsection shall be construed to permit the Secretary to require any lend- er that is making loans that are insured or guaranteed under this part, but for which no amount will be payable for interest under section 428(a)(3)(A) or for special allowances under sub- I The amendments made 4 section 4102(a) of P.L. 103-66 to this subsection (changing the origination fee maximum from 6 tn 3 percent and applying them to SLS and PLUS loans) are effective July 1, 1994. Sec. 438 HIGHER EDUCATION ACT OF 1965 202 sectien (b) of this section, to collect any origination fee or to submit the sums collected as origination fees to the United States. The Secretary shall, not later than January 1, 1987, re- turn to any such lender any such sums collected before the en- actment of this paragraph, together with interest thereon. (6) SLS AND PLUS LOANS.With respect to any loans made under section 428A or 428B on or after October 1, 1992, each eligible lender under this part shall charge the borrower an origination fee of 3.01 percent of the principal amount of the loan, t6 be deducted proportionately from each installment pay- ment of the proceeds of the loan prior to payments to the bor- rower. (7) DISTRIBUTION OF ORIGINATION FEES.All origination fees collected pursuant to this section on loans authorized under section 428A or 428B shall be paid to the Secretary by the lender and deposited in the fund authorized under section 431 of this part. (d) LOAN FEES FROM LENDERS. (1) DEDUCTION FROM INTEREST AND SPECIAL ALLOWANCE SUBSIDIES.Notwithstanding subsection (b), the Secretary shall reduce the total amount of interest and special allowance payable under section 428(a)(3)(A) and subsection (b) of this section, respectively, to any holder of a loan by a loan fee in an amount determined in accordance with paragraph (2) of this subsection. If the total amount of interest and special allow- ance payable under section 428(a)(3XA) and subsection (b) of this section, respectively, is less than the amount of such loan fee, then the Secretary shall deduct such excess amount from subsequent quarters' payments until the total amount has been deducted. (2) AMOUNT OF LOAN FEES.With respect to any loan under this part for which the first dicbursement was made on or after October 1, 1993, the amount of the loan fee which shall be deducted under paragraph (1) shall be equal to 0.50 percent of the principal amount of the loan. (3) DISTRIBUTION OF LOAN FEES.The Secretary shall de- posit all fees collected pursuant to paragraph (3) into the in- surance fund established in section 431. (e) LENDING FROM PROCEEDS OF TAX EXEMPT OBLIGATIONS. (1) PLAN FOR DOING BUSINESS REQUIRED.In order for the holders of loans any portion of which were made or purchased with funds obtained by the holder from an Authority issuing obligations, the income from which is exempt from taxation under the Internal Revenue Code of 1986, to be eligible to re- ceive a special allowance under subsection (b)(2) of this section, the Authority shall submit to the Governor of the State, and to the guaranty agency determined by the Secretary to be the principal guaranty agency for the State, a plan for doing busi- ness. The Governor shall, after consultation with the guaranty agency, approve or disapprove the plan within 30 days of the receipt of the proposed plan from the Authority. Such plan shall also be transmitted to the Secretary within 60 days after approval. 2 I 2 203 HIGHER EDUCATION ACT OF 1965 Sec. 438 (2) CONTENTS OF PLAN.Each such plan shall contain pro- visions designed to assure that (A) no eligible lender in the area served by the Author- ity will be excluded from participation in the program of the Authority and all eligible lenders may participate in the program on the same terms and conditions if eligible lenders are going to participate in the program; (B) no director or staff member of the Authority who receives compensation from the Authority may own stock in, or receive compensation from, any agency that would contract to service and collect the loans of the Authority; (C) student loans will not be purchased from partici- pating lenders at a premium amounting to more than 1 percent of the unpaid principal amount borrowed plus ac- crued interest to the date of acquisition, but a reasonable loan transfer fee may be paid by the purchaser; (D) the Authority will, within the limit of funds avail- able and subject to the applicable State and Federal law, make loans to, or purchase loans incurred by, all eligible students who are residents of, or who attend an eligible in- stitution within, the area served by the Authority; (E) the Authority has a plan under which the Author- ity will pursue the development of new lender participa- tion in a continuing program of benefits to students to- gether with essurances of existing lender commitments to the program; and (F) there will be an annual audit of the Authority by a certified public accounting firm which will include review of compliance by the Authority with the provisions of the plan. (3) NONDISCRIMINATION.In order for the holders of loans which were made or purchased with funds obtained by the holder from an Authority issuing obligations, the income from which is exempt from taxation under the Internal Revenue Code of 1986, to be eligible to receive a special allowance under subsection (bX2) of this section on any such loans, the Author- ity shall not engage in any pattern or practice which results in a denial of a 'borrower's access to loans under this part be- cause of the borrower's race, sex, color, religion, national ori- gin, age, handicapped status, income, attendance at a particu- lar eligible institution within the area served by the Authority, length of the borrower's educational program, or the borrower's academic year in school. (4) REPORT BY THE SECRETARY.The Secretary shall, no later than September 30, 1988, and each succeeding September 30th, submit a report to the Committee on Education and Labor of the House of Representatives and the Committee on Labor and Human Resources of the Senate specifying (A) the amount of student loan credit provided through the use of tax-exempt obligations for the most re- cent fiscal year; (B) an assessment of the impact of the availability of such financing on the availability of student credit in the areas served by the authorities issuing such obligations; 12I3 Sec. 439 HIGHER EDUCATION ACT OF 1965 204 (C) an assessment of the need for additional tax-ex- empt financing for student credit for the next fiscal year; and (D) any other information determined by the Secretary to be relevant to the purposes of the report. (f) REGULATTONS To PREVENT DENIAL OF LOANS TO ELIGIBLE STUDENTS.-The Secretary shall adopt or amend appropriate regu- lations pertaining to programs carried out under this part to pre- vent, where practicable, any practices which the Secretary finds have denied loans to a substantial number of eligible students. (20 U S C. 1087-1) Enacted June 23, 1972, P.L. 92-318, sec. 132E(a), 86 Stat. 264; amended Oct. 12, 1976, P.L. 94-482, sec. 127(a), 90 Stat. 2133, 2134, 2135, 2136; amended June 15, 1977, P.L. 95-43, sec. 1(a)(37) (A), (B), (C), (D), (E), (F), 91 Stat. 216, 217, amended October 3, 1980, P.L. 96-374, sec. 420, 94 Stat. 1425; amended August 13, 1981, P.L. 97-35, sees. 532(b)(4), 534(b), 536(a), 95 Stat. 452, 453, 454, 455, 456, amended August 15, 1983, P.L. 98-79, sec. 7, 97 Stat. 482; amended April 7, 1986, P L. 99-272, secs. 16013(d), 16017(b)(3), (c), 100 Stat. 340, 347; amended October 17, 1986, P.L. 99-498, sec. 402(a), 100 Stat. 1414; amended June 3, 1987, P L 100-50, sec. 10(d)(2), (bb), (cc), 101 Stat. 342, 347; amended July 18, 1988, P.L. 100-369, sec. 7(c), 102 Stat. 837; amended July 23, 1992, P.L. 102-325, sec. 430, 106 Stat 553; amended August 10, 1993, P.L. 103-66, secs. 4102, 4103, 4105, and 4111, 107 Stat. 366, 367, 368, and 370; amended December 20, 1993, P.L. 103-208, sec 2(m), 107 Stat. 2486. SEC. 939. STUDENT LOAN MARKETING ASSOCIATION. (a) PURPOSE.-The Congress hereby declares that it is the pur- pose of this section (1) to establish a private corporation which will be financed by private capital and which will serve as a secondary market and warehousing facility for student loans, including loans which are insured by the Secretary under this part or by a guar- anty agency, and which will provide liquidity for student loan in- vestments; (2) in order to facilitate secured transactions involving student loans, to provide for perfection of security interests in stu- dent loans either through the taking of possession or by notice fil- ing; and (3) to assure nationwide the establishment of adequate loan insurance programs for students, to provide for an additional program of loan insurance to be covered by agreements with the Secretary. (b) ESTABLISHMENT.- (1) IN GENERAL.-There is hereby created a body corporate to be known as the Student Loan Marketing Association (here- inafter referred to as the "Association"). The Association shall have succession until dissolved. It shall maintain its principal office in the District of Columbia and shall be deemed, for pur- poses of venue and jurisdiction in civil actions, to be a resident and citizen thereof. Offices may be established by the Associa- tion in such other place or places as it may deem necessary or appropriate for the conduct of its business. (2) EXEMPTION FROM STATE AND LOCAL TAXES.-The AS90- ciation, including its franchise, capital, reserves, surplus, mort- gages, or other security holdings, and income shall be exempt from all taxation now or hereafter imposed by any State, terri- tory, possession, Commonwealth, or depaidency of the United States, or by the District of Columbia, or by any county, mu- nicipality, or local taxing authority, except that any real prop- erty of the Association shall be subject to State, territorial, 214 205 HIGHER EDUCATION ACT OF 1965 Sec. 439 county, municipal, or local taxation to the same extent accord- ing to its value as other real property is taxed. (3) APPROPRIATIONS AUTHORIZED FOR ESTABLISHMENT. There is hereby authorized to be appropriated to the Secretary $5,000,000 for making advances for the purpose of helping to establish the Association. Such advances shall be repaid within such period as the Secretary may deem to be appropriate in light of the maturity and solvency of the Association. Such ad- vances shall bear interest at a rate not less than (A) a rate de- termined by the Secretary of the Treasury taking into consider- ation the current average market yield on outstanding market- able obligations of the United States with remaining period to maturity comparable to the maturity of such advances, ad- justed to the nearest one-eighth of 1 percent, plus (B) an allow- ance adequate in the judgment of tine Secretary to cover ad- ministrative costs and probable losses. Repayments of such ad- vances shall be deposited into miscellaneous receipts of the Treasury. (C) BOARD OF DIRECTORS. (1) COMPOSITION OF BOARD; CHAIRMAN.(A) The Associa- tion shall have a Board of Directors which shall consist of 21 persons, 7 of whom shall be appointed by the President and shall be representative of the general public. The remaining 14 directors shall be elected by the common stockholders of the Association entitled to vote pursuant to subsection (0. Com- mencing with the annual shareholders meeting to be held in 1993 (i) 7 of the elected directors shall be affiliated with an eligible institution; and (ii) 7 of the elected directors shall be affiliated with an eligible lender. (B) The President shall designate 1 of the directors to serve as Chairman. (2) TERMS OF APPOINTED AND ELECTED MEMBERS.The di- rectors appointed by President shall serve at the pleasure of the President and until their successors have been appointed and have qualified. The remaining directors shall each be elect- ed for a term ending on the date of the next annual meeting of the common stockholders of the Association, and shall serve until their successors have been elected and have qualified. Any appointive seat on the Board which becomes vacant shall be filled by appointment of the President. Any elective seat on the Board which becomes vacant after the annual election of the directors shall be filled by the Board, but only for the unexpired portion of the term. (3) AFFILIATED MEMBERS.For the purpose of this sub- section, the references to a director "affiliated with the eligible institution" or a director "affiliated with an eligible lender" means an individual who is, or within 5 years of election to the Board has been, an employee, officer, director, or similar offi- cial of (A) an eligible institution or an eligible lender; (B) an association whose members consist primarily of eligible institutions or eligible lenders; or 0 SOC. 439 HIGHER EDUCATION ACT OF 1965 206 (C) a State agency, authority, instrumentality, com- mission, or similar institution, the primary purpose of which relates to educational matters or banking_ matters. (4) MEETINGS AND FUNCTIONS OF THE BOARD.The Board of Directors shall meet at the call of its Chairman, but at least semiannually. The Board shall determine the general policies which shall govern the operations of the Association. The Chairman of the Board shall, with the approval of the Board, select, appoint, and compensate qualified persons to fill the of- fices as may be provided for in the bylaws, with such functions, powers, and duties as may be prescribed by the bylaws or by the Board of Directors, and such persons shall be the officers of the Association and shall discharge all such functions, pow- ers, and duties. (d) AUTHORITY OF ASSOCIATION. (1) IN GENERALThe Association is authorized, subject to the provisions of this section (A) pursuant to commitments or otherwise to make ad- vances on the security of, purchase, or repurchase, service, sell or resell, offer participations, or pooled interests or otherwise deal in, at prices and on terms and conditions determined by the Association, student loans which are in- sured by the Secretary under this part or by a guaranty agency; (B) to buy, sell, hold, underwrite, and otherwise deal in obligations, if such obligations are issued, for the pur- pose of making or purchasing insured loans, by a guaranty agency or by an eligible lender in a State described in sec- tion 435(d)(1) (D) or (F); (C) to buy, sell, hold, insure, underwrite, and other- wise deal in obligations issued for the purpose of financing or refinancing the construction, reconstruction, renovation, improvement, or purchase at institutions of higher edu- cation of any of the following facilities (including the un- derlying property) and materials at an eligible institution of higher education: (i) educational and training facilities; (ii) housing for students and faculties; (iii) library facilities, including the acquisition of library materials at institutions of higher education; and (iv) related equipment, instrumentation, and fur- nishings for facilities and materials described in clause (i) or (iii); except that not more than 15 percent of the value of trans- actions entered into under this subparagraph shall involve transactions of the type described in clause (ii); (D) to undertake a program of loan insurance pursu- ant to agreements with the Secretary under section 428, and except with respect to loans under subsection (a) of this section or under section 428C, the Secretary may enter into an agreement with the Association for such pur- pose only if the Secretary determines that (i) eligible bor- rowers are seeking and unable to obtain loans under this 207 HIGHER EDUCATION ACT OF 1965 Sec. 439 part, and (ii) no guaranty agency is capable of or willing to provide a program of loan insurance for such borrowers; and (E) to undertake any other activity which the Board of Directors of the Association determines to be in further- ance of the programs of insured student loans authorized under this part or will otherwise support the credit needs of students, except that (i) in carrying out all such activities the purpose shall always be to provide secondary market and other support for lending programs offered by other organi- zations and not to replace or compete with such other programs; (ii) nothing in this subparagraph (E) shall be deemed to authorize the Association to acquire, own, operate, or control any bank, savings and loan associa- tion, savings bank or credit union; and (iii) not later than 30 days prior to the initial im- plementation of a program undertaken pursuant to this subparagraph (E), the Association shall advise the Chairman and the Ranking Member on the Committee on Labor and Human Resources of the Senate and the Chairman and the Ranking Member of the Committee on Education and Labor of the House of Representa- tives in writing of its plans to offer such program and shall provide information relating to the general terms and conditions of such program. The Association is further authorized to undertake any activity with regard to student loans which are not insured or guaran- teed as provided for in this subsection as it may undertake with regard to insured or guaranteed student loans. Any warehousing advance made on the security of such loans shall be subject to the provisions of paragraph (3) of this subsection to the same extent as a warehousing advance made on the se- curity of insured loans. (2) WAREHOUSING ADVANCES.Any warehousing advance made under 7.aragraph (1)(A) of this subsection shall be made on the sect. :Ay of (A) insured loans, (B) marketable obligations and secunties issued, guaranteed, or insured by, the United States, or for which the full faith and credit of the United States is pledged for the repayment of principal and interest thereof, or (C) marketable obligations issued, guaranteed, or insured by any agency, instrumentality, or corporation of the United States for which the credit of such agency, instrumen- tality, or corporation is pledged for the repayment of principal and interest thereof, in an amount equal to the amount of such advance. The proceeds of any such advance secured by insured loans shall either be invested in additional insured loans or the lender shall provide assurances to the Association that during the period of the borrowing it will maintain a level of insured loans in its portfolio not less than the aggregate outstanding balance of such loans held at the time of the borrowing. The proceeds from any such advance secured by collateral described 2 ! 7 Sec. 439 HIGHER EDUCATION ACT OF 1965 208 in clauses (B) and (C) shall be invested in additional insured student loans. (3) PERFECTION OF SECURITY INTERESTS IN STUDENT LOANS.Notwithstanding the provisions of any State law to the contrary, including the Uniform Commercial Code as in ef- fect in any State, a security interest in insured student loans created on behalf of the Association or any eligible lender as defined in section 435(a) may be perfected either through the taking of possession of such loans or by the filing of notice of such security interest in such loans in the manner provided by such State law for perfection of security interests in accounts. (4) FORM OF SECURITIES.Securities issued pursuant to the offering of participations or pooled interests under para- graph (1) of this subsection may be in the form of debt obliga- tions, or trust certificates of beneficial ownership, or both. Stu- dent loans set aside pursuant to the offering of participations or pooled interests shall at all times be adequate to ensure the timely principal and interest payments on such securities. (5) RESTRICTIONS ON FACILITIES AND HOUSING ACTIVITIES. Not less than 75 percent of the aggregate dollar amount of ob- ligations bought, sold, held; insured, underwritten, and other- wise supported in accordance with the authority contained in paragraph (1)(C) shall be obligations which are listed by a na- tionally recognized statistical rating organization at a rating below the second highest rating of such organization. (e) ADVANCES TO LENDERS THAT DO NOT DISCRIMINATE.The Association, pursuant to such criteria as the Board of Directors may prescribe, shall make advances on security or purchase stu- dent loans pursuant to subsection (d) only after the Association is assured that the lender (1) does not discriminate by pattern or practice against any particular class or category of students by re- quiring that, as a condition to the receipt of a loan, the student or his family maintain a business relationship with the lender, except that this clause shall not apply in the case of a loan made by a credit union, savings and loan association, mutual savings bank, institution of higher education, or any other lender with less than $75,000,000 in deposits, and (2) does not discriminate on the basis of race, sex, color, creed, or national origin. (f) STOCK OF THE ASSOCIATION. (1) VOTING COMMON STOCK.The Association shall have voting common stock having such par value as may be fixed by its Board of Directors from time to time. Each share of voting common stock shall be entitled to one vote with rights of cumu- lative voting at all elections of directors. (2) NUMBER OF SHARES; TRANSFERABILITY.The maximum number of shares of voting common stock that the Association may issue and have outstanding at any one time shall be fixed by the Board of Directors from time to time. Any voting com- mon stock issued shall be fully transferable, except that, as to the Association, it shall be transferred only on the books of the Association. (3) DIVIDENDS.To the extent that net income is earned and realized, subject to subsection (g)(2), dividends may be de- clared on voting common stock by the Board of Directors. Such 2 ! 8 209 HIGHER EDUCAT7:1 ACT OF 1965 Sec. 439 dividends as may be declared by the Board of Directors shall be paid to the holders of outstanding shares of voting common stock, except that no such dividends shall be payable with re- spect to any share which has been called for redemption past the effective date of such call. (4) SINGLE CLASS OF VOTING COMMON STOCK.As of the ef- fective date of the Higher Education Amendments of 1992, all of the previously authorized shares of voting common stock and nonvoting common stock of the Association shall be converted to shares of a single class of voting common stock on a share- for-share basis, without any further action on the part of the Association or any holder. Each outstanding certificate for vot- ing or nonvoting common stock shall evidence ownership of the same number of shares of voting stock into which it is con- verted. All preexisting rights and obligations with respect to any class of common stock of the Association shall be deemed to be rights and obligations with respect to such converted shares. (g) PREFERRED STOCK. (1) AUTHORITY OF BOARD.The Association is authorized to issue nonvoting preferred stock having such par value as may be fixed by its Board of Directors from time to time. Any preferred share issued shall be freely transferable, except that, as to the Association, it shall be transferred only on the books of the Association. (2) RIGHTS OF PREFERRED STOCK.The holders of the pre- ferred shares shall be entitled to such rate of cumulative divi- dends and such shares shall be subject to such redemption or other conversion provisions as may be provided for at the time of issuance. No dividends shall be payable on any share of com- mon stock at any time when any dividend is due on any share of preferred stock and has not been paid. (3) PREFERENCE ON TERMINATION OF BUSINESS.In the event of any liquidation, dissolution, or winding up of the Asso- ciation's business, the holders of the preferred shares shall be paid in full at par value thereof, plus all accrued dividends, be- fore the holders of the common shares receive any payment. (h) DEBT OBLIGATIONS. (1) APPROVAL BY SECRETARIES OF EDUCATION AND THE TREASURY.The Association is authorized with the approval of the Secretary of Education and the Secretary of the Treasury to issue and have outstanding obligations having such matu- rities and bearing such rate or rates of interest as may be de- termined by the Association. The authority of the Secretary of Education to approve the issuance of such obligations is lim- ited to obligations issued by the Association and guaranteed by the Secretary pursuant to paragraph (2) of this subsection. Such obligations may be redeemable at the option of the Asso- ciation before maturity in such manner as may be stipulated therein. The Secretary of the Treasury may not direct as a con- dition of his approval that any such issuance of obligations by the Association be made or sold to the Federal Financing Bank. To the extent that the average outstanding amount of the obligations owned by the Association pursuant to the au- Sec. 439 HIGHER EDUCATION ACT OF 1965 210 thority contained in subsection (d)(1) (B) and (C) of this section and as to which the income is exempt from taxation under the Internal Revenue Code of 1986 does not exceed the average stockholders' equity of the Association, the interest on obliga- tions issued under this paragraph shall not be deemed to be interest on indebtedness incurred or continued to purchase or carry obligations for the purpose of section 265 of the Internal Revenue Code of 1986. (2) GUARANTEE OF DEBT.The Secretary is authorized, prior to October 1, 1984, to guarantee payment when due of principal and interest on obligations issued by the Association in an aggregate amount determined by the Secretary in con- sultation with the Secretary of the Treasury. Nothing in this section shall be construed so as to authorize the Secretary of Education or the Secretary of the Treasury to limit, control, or constrain programs of the Association or support of the Guar- anteed Student Loan Program by the Association. (3) BORROWING AUTHORITY TO MEET GUARANTEE OBLIGA- TIONS.To enable the Secretary to discharge his responsibil- ities under guarantees issued by him, he is authorized to issue to the Secretary of the Treasury notes or other obligations in such forms and denominations, bearing such maturities, and subject to such terms and conditions, as may be prescribed by the Secretary with the approval of the Secretary of the Treas- ury. Such notes or other obligations shall bear interest at a rate determined by the Secretary of the Treasury, taking into consideration the current average market yield on outstanding marketable obligations of the United States of comparable ma- turities during the months preceding the issuance of the notes or other obligations. The Secretary of the Treasury is author- ized and directed to purchase any notes and other obligations issued hereunder and for that purpose he is authorized to use as a public debt transaction the proceeds from the sale of any securities issued under the Second Liberty Bond Act, as amended, and the purposes for which securities may be issued under that Act, as amended, are extended to include any pur- chase of such notes and obligations. The Secretary of the Treasury may at any time sell any of the notes or other obliga- tions acquired by him under this subsection. All redemptions, purchases, and sales by the Secretary of the Treasury of such notes or other obligations shall be treated as public debt trans- actions of the United States. There is authorized to be appro- priated to the Secretary such sums as may be necessary to pay the principal and interest on the notes or obligations issued by him to the Secretary of the Treasury. (4) ACTION ON REQUEST FOR GUARANTEES.Upon receipt of a request from the Association under this subsection requiring approvals by the Secretary of Education or the Secretary of the Treasury, the Secretary of Education or the Secretary of the Treasury shall act promptly either to grant approval or to ad- vise the Association of the reasons for withholding approval. In no case shall such an approval be withheld for a period longer than 60 days unless, prior to the end of such period, the Sec- ) ()4 d. ma- 211 HIGHER EDUCATION ACT OF 1965 Sec. 439 retary of Education and the Secretary of the Treasury submit to the Congress a detailed explanation of reasons for doing so. (5) AUTHORITY OF TREASURY TO PURCHASE DEBT.The Sec- retary of the Treasury is authorized to purchase any obliga- tions issued by the Association pursuant to this subsection as now or hereaft.ar in force, and for such purpose the Secretary of the Treasury is authorized to use as a public debt trans- action the proceeds of the sale of any securities hereafter is- sued under the Second Liberty Bond Act, as now or hereafter in force, and the purposes for which securities may be issued under the Second Liberty Bond Act, as now or hereafter in force are extended to include such purchases. The Secretary of the Treasury shall not at any time purchase any obligations under this subsection if such purchase would increase the ag- gregate principal amount of his then outstanding holdings of such obligations under this subsection to an amount greater than $1,000,000,000. Each purchase of obligations by the Sec- retary, of the Treasury under this subsection shall be upon such terms and conditions as to yield a return at a rate deter- mined by the Secretary of the Treasury, taking into consider- ation the current average rate on outstanding marketable obli- gations of the United States of comparable maturities as of the last day of the month preceding the making of such purchase. The Secretary of the Treasury may, at any time, sell, upon such terms and conditions and at such price or prices as he shall determine, any of the obligations acquired by him under this subsection. All redemptions, purchases, and sales by the Secretary of the Treasury of such obligations under this sub- section shall be treated as public debt transactions of the Unit- ed States. (6) SALE OF DEBT TO FEDERAL FINANCING BANK.Notwith- standing any other provision of law the Association is author- ized to sell or issue obligations on the security of student loans, the payment of interest or principal of which has at any time been guaranteed under section 428 or 429 of this part, to the Federal Financing Bank. (7) OFFSET FEE.(A) The Association shall pay to the Sec- retary, on a monthly basis, an offset fee calculated on an an- nual basis in an amount equal to 0.30 percent of the principal amount of each loan made, insured or guaranteed under this part that the Association holds (except for loans made pursu- ant to sections 428C, 439(o), or 439(q)) and that was acquired on or after the date of enactment of this paragraph. (B) If the Secretary determines that the Association has substantially failed to comply with subsection (q), subpara- graph (A) shall be applied by substituting "1.0 percent" for "0.3 percent". (C) The Secretary shall deposit all fees collected pursuant to this paragraph into the insurance fund established in sec- tion 431. (i) GENERAL CORPORATE POWERS.The Association shall have power (I) to sue and be sued, complain and defend, in its cor- porate name and through its own counsel; 2 Sec. 439 HIGHER EDUCATION ACT OF 1965 212 (2) to adopt, alter, and use the corporate seal, which shall be judicially noticed; (3) to adopt, amend, and repeal by its Board of Directors, bylaws, rules, and regulations as may be necessary for the con- duct of its business; (4) to conduct its business, carry on its operations, and have officers and exercise the power granted by this section in any State without regard to any qualification or similar statute in any State; (5) to lease, purchase, or otherwise acquire, own, hold, im- prove, use, or otherwise deal in and with any property, real, personal, or mixed, or any interest therein, wherever situated; (6) to accept gifts or donations of services, or of property, real, personal, or mixed, tangible or intangible, in aid of any of the purposes of the Association; (7) to sell, convey, mortgage, pledge, lease, exchange, and otherwise dispose of its property and assets; (8) to appoint such officers, attorneys, employees, and agents as may be required, to determine their qualifications, to define their duties, to fix their salaries, require bonds for them, and fix the penalty thereof; and (9) to enter into contracts, to execute instruments, to incur liabilities, and to do all things as are necessary or incidental to the proper management of its affairs and the proper conduct of its business. (j) ACCOUNTING, AUDITING, AND REPORTING.The accounts of the Association shall be audited annually. Such audits shall be con- ducted in accordance with generally accepted auditing standards by independent certified public accountants or by independent licensed public accountants, licensed on or before December 31, 1970, who are certified or licensed by a regulatory authority of a State or other political subdivision of the United States, except that inde- pendent public accountants licensed to practice by such regulatory authority after December 31, 1970, and persons who, although not so certified or licensed, meet, in the opinion of the Secretary, stand- ards of education and experience representative of the highest standards prescribed by the licensing authorities of the several States which provide for the continuing licensing of public account- ants and which are prescribed by the Secretary in appropriate reg- ulations may perform such audits until December 31, 1975. A re- port of each such audit shall be furnished to the Secretary of the Treasury. The audit shall be conducted at the place or places where the accounts are normally kept. The representatives of the Sec- retary shall have access to all books, accounts, financial records, re- ports, files, and all other papers things, or property belonging to or in use by the Association and necessary to facilitate the audit, and they shall be afforded full facilities for verifying transactions with the balances or securities held by depositaries, fiscal agents, and custodians. (k) REPORT ON AUDITS BY TREASURY.A report of each such audit for a fiscal year shall be made by the Secretary of the Treas- ury to the President and to the Congress not later than 6 months following the close of such fiscal year. The report shall set forth the scope of the audit and shall include a statement (showing 213 HIGHER EDUCATION ACT OF 1965 Sec. 439 intercorporate relations) of assets and liabilities, capital and sur- plus or deficit; a statement of surplus or deficit analysis; a state- ment of income and expense; a statement of sources and applica- tion of funds; and such comments and information as may be deemed necessary to keep the President and the Congress informed of the operations and financial condition of the Association, to- gether with such recommendations with respect thereto as the Sec- retary may deem advisable, including a report of an3r impairment of capital or lack of sufficient capital noted in the audit. A. copy of each report shall be furnished to the Secretary, and to the Associa- tion. (1) LAWFUL INVESTMENT INSTRUMENTS; EFFECT OF AND EXEMP- TIONS FROM OTHER LAWS.All obligations issued by the Associa- tion including those made under subsection (dX4) shall be lawful investments, and may be accepted as security for all fiduciary, trust, and public funds, the investment or deposit of which shall be under authority or control of the United States or of any officer or officers thereof. All stock and obligations issued by the Association pursuant to this section shall be deemed to be exempt securities within the meaning of laws administered by the Securities and Ex- change Commission, to the same extent as securities which are di- rect obligations of, or obligations guaranteed as to principal or in- terest by, the United States. The Association shall, for the purposes of section 14(b)(2) of the Federal Reserve Act, be deemed to be an agency of the United States. The obligations of the Association shall be deemed to be obligations of the United States for the pur- pose of section 3124 of title 31, United States Code. For the pur- pose of the distribution of its property pursuant to section 726 of title 11, United States Code, the Association shall be deemed a per- son within the meaning of such title. The priority established in favor of the United States by section 3713 of title 31, United States Code, shall not establish a priority over the indebtedness of the As- sociation issued or incurred on or before September 30, 1992. The Federal Reserve Banks are authorized to act as depositaries, custodians, or fiscal agents, or a combination thereof, for the Asso- ciation in the general performance of its powers under this section. (m) PREPARATION OF OBLIGATIONS.In order to furnish obliga- tions for delivery by the Association, the Secretary of the Treasury is authorized to prepare such obligations in such form as the Board of Directors may approve, such obligations when prepared to be held in the Treasury subject to delivery upon order by the Associa- tion. The engraved plates, dies, bed pieces, and so forth, executed in connection therewith shall remain in the custody of the Sec- retary of the Treasury. The Association shall reimburse the Sec- retary of the Treasury for any expenditures made in the prepara- tion, custody, and delivery of such obligations. The Secretary of the Treasury is authorized to promulgate regulations on behalf of the Association so that the Association may utilize the book-entry sys- tem of the Federal Reserve Banks. (n) REPORT ON OPERATIONS AND ACTIVITIES.The Association shall, as soon as practicable after the end of each fiscal year, trans- mit to the Presid.ent and the Congress a report of its operations and activities during each year. (a) LOAN CONSOLIDATIONS. 2 ? 3 Sec. 439 HIGHER EDUCATION ACT OF 1965 214 (1) IN GENERAL.The Association or its designated agent may, upon request of a borrower, consolidate loans received under this title in accordance with section 428C. (2) USE OF EXISTING AGENCIES AS AGENT.The Association in making loans pursuant to this subsection in any State served by a guaranty agency or an eligible lender in a State described in section 435(dX1) (D) or (F) may designate as its agent such agency or lender to perform such functions as the Association d.etermines appropriate. Any agreements made pursuant to this subparagraph shall be on such terms and con- ditions as agreed upon by the Association and such agency or lender. (p) ADVANCES FOR DIRECT LOANS BY GUARANTY AGENCIES. (1) IN GENERAL.The Association shall make advances in each fiscal year from amounts available to it to each guaranty agency and eligible lender described in subsection 428(h)(1) which has an agreement with the Association which sets forth that advances are necessary to enable such agency or lender to make student loans in accordance with section 428(h) and that such advances will be repaid to the Association in accordance with such terms and conditions as may be set forth in the agreement and agreed to by the Association and such agency or lender. Advances made under this subsection shall not be subject to subsection (d)(2) of this section. (2) LIMITATION.No advance may be made under this sub- section unless the guaranty agency or lender makes an applica- tion to the Association, which shall be accompanied by such in- formation as the Association determines to be reasonably nec- essary. (q) LENDER-OF-LAST-RESORT. (1) ACTION AT REQUEST OF SECRETARY.(A) Whenever the Secretary determines that eligible borrowers are seeking and are unable to obtain loans under this part, the Association or its designated agent shall, not later than 90 days after the date of enactment of the Student Loan Reform Act of 1993, begin making loans to such eligible borrowers in accordance with this subsection at the request of the Secretary. The Secretary may request that the Association make loans to borrowers within a geographic area or for the benefit of students attending institu- tions of higher education that certify, in accordance with stand- ards established by the Secretary, that their students are seek- ing and unable to obtain loans. (B) Loans made pursuant to this subsection shall be insur- able by the Secretary under section 429 with a certificate of comprehensive insurance coverage provided for under section 429(b)(1) or by a guaranty agency under paragraph (2)(A) of this subsection. (2) ISSUANCE AND COVERAGE OF LOANS.(A) Whenever the Secretary, after consultation with, and with the agreement of, representatives of the guaranty agency in a State, or an eligi- ble lender in a State described in section 435(d)(1)(D), deter- mines that a substantial portion of eligible borrowers in such State or within an area of such State are seeking and are un- able to obtain loans under this part, the Association or its des- 2 ? 4 215 HIGHER EDUCATION ACT OF 1965 Sec. 439 ignated agent shall begin making such loans to borrowers in such State or within an area of such State in accordance with this subsection at the request of the Secretary. (B) Loans made pursuant to this subsection shall be insur- able by the agency identified in subparagraph (A) having an agreement pursuant to section 428(b). For loans insured by such agency, the agency shall provide the Association with a certificate of comprehensive insurance coverage, if the Associa- tion and the agency have mutually agreed upon a means to de- termine that the agency has not already guaranteed a loan under this part to a student which would cause a subsequent loan made by the Association to be in violation of any provision under this part. (3) TERMINATION OF LENDING.The Association or its des- ignated agent shall cease making loans under this subsection at such time as the Secretary determines that the conditions which caused the implementation of this subsection have ceased to exist. (r) SAFETY AND SOUNDNESS OF ASSOCIATION. (1) REPORTS BY THE ASSOCIATION.The Association shall promptly furnish to the Secretary of Education and Secretary of the Treasury copies of all (A) periooiic financial reports publicly distributed by the Association; and (B) reports concerning the Association that are re- ceived by the Association and prepared by nationally rec- ognized statistical rating organizations. (2) AUDIT BY SECRETARY OF THE TREASURY.(A) The Sec- retary of the Treasury may (i) appoint auditors to conduct audits of the Associa- tion from time to time to determine the condition of the Association for the purpose of assessing its financial safety and soundness; and (ii) enter into contracts to obtain the services of such technical experts as the Secretary of the Treasury deter- mines necessary and appropriate to provide technical as- sistance to any auditor appointed under this paragraph. (B) Each auditor appointed under this paragraph shall conduct an audit of the Association to the extent requested by the Secretary of the Treasury and shall prepare and submit a report to the Secretary of the Treasury concerning the results of such audit. A copy of such report shall be furnished to the Association and the Secretary of Education on the date on which it is delivered to the Secretary of the Treasury. (C) The Association shall provide full and prompt access to the Secretary of the Treasury to its books and records and other information requested by the Secretary of the Treasury. (3) MONITORING OF SAFETY AND SOUNDNESS.The Sec- retary of the Treasury shall conduct such studies as may be necessary to monitor the financial safety and soundness of the Association. In the event that the Secretary of the Treasury de- termines that the financial safety and soundness of the Asso- ciation is at risk, the Secretary of the Treasury shall inform the Chairman and ranking minority member of the Committee 77-M0 0-94 (1 ) r es. k) Sec. 439 HIGHER EDUCATION ACT OF 1965 216 on Labor and Human Resources of the Senate, the Chairman and ranking minority member of the Committee on Education and Labor of the House of Representatives, and the Secretary of Education of such determination and identify any corrective actions that should be taken to ensure the safety and sound- ness of the Association. (4) CAPITAL STANDARD.-If the capital ratio is less than 2 percent and is greater than or equal to 1.75 percent at the end of the Association's most recent calendar quarter the Associa- tion shall, within 60 days of such occurrence, submit to the Secretary of the Treasury a capital restoration plan, in reason- able detail, that the Association believes is adequate to cause the capital ratio to equal or exceed 2 percent within 36 months. (5) CAPITAL RESTORATION PLAN.- (A) SUBMISSION, APPROVAL, AND IMPLEMENTATION.- The Secretary of the Treasury and the Association shall consult with respect to any capital restoration plan sub- mitted pursuant to paragraph (4) and the Secretary of the Treasury shall approve such plan (or a modification there- of accepted by the Association) or disapprove such plan within 30 days after such plan is first submitted to the Secretary of the Treasury by the Association, unless the Association and Secretary of the Treasury mutually agree to a longer consideration period. If the Secretary of the Treasury approves a capital restoration plan (including a modification of a plan accepted by the Association), the As- sociation shall forthwith proceed with diligence to imple- ment such plan to the best of its ability. (B) DISAPPROVAL-If the Secretary of the Treasury does not approve a capital restoration plan as provided in subparagraph (A), then not later than the earlier of the date the Secretary of the Treasury disapproves of such plan by written notice to the Association or the expiration of the 30-day consideration period referred to in subpara- graph (A) (as such period may have been extended by mu- tual agreement), the Secretary of the Treasury shall sub- mit the Association's capital restoration plan, in the form most recently proposed to the Secretary of the Treasury by the Association, together with a report on the Secretary of the Treasury's reasons for disapproval of such plan and an alternative capital restoration plan, to the Chairman and ranking minority member of the Senate Committee on Labor and Human Resources and to the Chairman and ranking minority member of the House Committee on Edu- cation and Labor. A copy of such submission simulta- neously shall be sent to the Association and the Secretary of Education by the Secretary of the Treasury. (C) ASSOCIATION IMPLEMENTATION AND RESPONSE.- Upon receipt of the submission by the Association, the As- sociation shall forthwith proceed with diligence to imple- ment the most recently proposed capital restoration plan of the Association. The Association, within 30 days after re- ceipt from the Secretary of the Treasury of such submis- sion, shall submit to such Chairmen and ranldng minority 2,VG 217 HIGHER EDUCATION ACT OF 1965 Sec. 439 members a written response to such submission, setting out fully the nature and extent of the Association's agree- ment or the disagreement with the Secretary of the Treas- ury with respect to the capital restoration plan submitted to the Secretary of the Treasury and any findings of the Secretary of the Treasury. (6) SUBSTANTIAL CAPITAL RATIO REDUCTION.- (A) ADDITIONAL PLAN REQUIRED.-If the capital ratio is less than 1.75 percent and is greater than or equal to 1 percent at the end of the Association's most recent cal- endar quarter, the Association shall submit to the Sec- retary of the Treasury within 60 days after such occur- rence a capital restoration plan (or an appropriate modi- fication of any plan previously submitted or approved under paragraph (4)) to increase promptly its capital ratio to equal or exceed 1.75 percent. The Secretary of the Treasury and the Association shall consult with respect to any plan or modified plan submitted pursuant to this paragraph. The Secretary of the Treasury shall approve such plan or modified plan (or a modification thereof ac- cepted by the Association) or disapprove such plan or modified plan within 30 days after such plan or modified plan is first submitted to the Secretary of the Treasury by the Association, unless the Association and Secretary of the Treasury mutually agree to a longer consideration pe- riod. If the Secretary of the Treasury approves a plan or modified plan (including a modification of a plan accepted by the Association), the Association shall forthwith proceed with diligence to implement such plan or modified plan to the best of the Association's ability. (B) DISAPPROVAL.-If the Secretary of the Treasury disapproves a capital restoration plan or modified plan submitted pursuant to subparagraph (A), then, not later than the earlier of the date the Secretary of the Treasury disapproves of such plan or modified plan (by written no- tice to the Association) or the expiration of the 30-day con- sideration period described in subparagraph (A) (as such period may have been extended by mutual agreement), the Secretary of the Treasury shall prepare and submit an al- ternative capital restoration plan, together with a report on his reasons for disapproval of the Association's plan or modified plan, to the Chairman and ranking minority member of the Committee on Labor and Human Resources of the Senate and to the Chairman and ranking minority member of the Committee on Education and Labor of the House of Representatives. A copy of such submission si- multaneously shall be sent to the Association and the Sec- retary of Education by the Secretary of the Treasury. The Association, within 5 days after receipt from the Secretary of the Treasury of such submission, shall submit to the Chairmen and ranking minority members of such Commit- tees, and the Secretary of the Treasury, a written response to such submission, setting out fully the nature and extent of the Association's agreement or disagreement with the ,27 Set. 439 HIGHER EDUCATION ACT OF 1965 218 Secretary of the Treasury with respect to the disapproved plan and the alternative plan of the Secretary of the Treasury and any findings of the Secretary of the Treas- ury. (C) REVIEW BY CONGRESS; ASSOCIATION IMPLEMENTA- TION.Congress shall have 60 legislative days after the date on which Congress receives the alternative plan under subparagraph (B) from the Secretary of the Treas- ury to review such plan. If Congress does not take statu- tory action with respect to any such plan within such 60- day period, the Association shall immediately proceed with diligence to implement the alternative capital restoration plan of the Secretary of the Treasury under subparagraph (B). If Congress is out of session when any such alter- native plan is received, such 60-day period shall begin on the first day of the next session of Congress. (7) ACTIONS BY SECRETARY OF THE TREASURY.If the cap- ital ratio of the Association does not equal or exceed 1.75 per- cent at the end of the Association's most recent calendar quar- ter, the Secretary of the Treasury may, until the capital ratio equals or exceeds 1.75 percent, take any one or more of the fol- lowing actions: (A) LIMIT INCREASE IN LIABILITIES.Limit any in- crease in, or order the reduction of, any liabilities of the Association, except as necessary to fimd student loan pur- chases and warehousing advances. (B) RESTRICT GROWTH.Restrict or eliminate growth of the Association's assets, other than student loans pur- chases and warehousing advances. (C) RESTRICT DISTRIBUTIONS.Restrict the Association from making any capital distribution. (D) REQUIRE ISSUANCE OF NEW CAPITAL.Require the Association to issue new capital in any form and in any amount sufficient to restore at least a 1.75 percent capital ratio. (E) LIMIT EXECUTIVE COMPENSATION.Prohibit the As- sociation from increasing for any executive officer any com- pensation including bonuses at a rate exceeding that offi- cer's average rate of compensation during the previous 12 calendar months and prohibiting the Board from adopting any new employment severance contracts. (8) CRITICAL CAPITAL STANDARD.(A) If the capital ratio is less than 1 percent at the end of the Association's most recent calendar quarter and the Association has already submitted a capital restoration plan to the Secretary of the Treasury pursu- ant to paragraph (4) or (6)(A), the Association shall forthwith proceed with diligence to implement the most recently pro- posed plan with such modifications as the Secretary of the Treasury determines are necessary to cause the capital ratio to equal or exceed 2 percent within 60 months. (B) If the capital ratio is less than 1 percent at the end of the Association's most recent calendar quarter and the Associa- tion has not submitted a capital restoration plan to the Sec- 219 HIGHER EDUCATION ACT OF 1965 Sec. 439 retary of the Treasury pursuant to paragraph (4) or (6)(A), the Association shall (i) within 14 days of such occurrence submit a capital restoration plan to the Secretary of the Treasury which the Association believes is adequate to cause the capital ratio to equal or exceed 2 percent within 60 months; and (ii) forthwith proceed with diligence to implement such plan with such modifications as the Secretary of the Treas- ury determines are necessary to cause the capital ratio to equal or exceed 2 percent within 60 months. (C) Immediately upon a determination under subpara- graph (A) or (B) to implement a capital restoration plan, the Secretary of the Treasury shall submit the capital restoration plan to be implemented to the Chairman and ranking minority member of the Committee on Labor and Human Resources of the Senate, the Chairman and ranking minority member of the Committee on Education and Labor of the House of Represent- atives, and the Secretary of Education. (9) ADDITIONAL REPORTS TO COMMITrEES.The Association shall submit a copy of its capital restoration plan, modifica- tions proposed to the Secretary of the Treasury, and proposed modifications received from the Secretary of the Treasury to the Congressional Budget Office E. nd General Accounting Office upon their submission to the Secretary of the Treasury or re- ceipt from the Secretary of the Treasury. Notwithstanding any othe: provision of law, the Congressional Budget Office and General Accounting Office shall maintain the confidentiality of information received pursuant to the previous sentence. In the event that the Secretary of the Treasury does not approve a capital restoration plan as provided in paragraph (5)(A) or (6)(A), or in the event that a capital restoration plan is modi- fied by the Secretary of the Treasury pursuant to paragraph (6)(B) or (8), the Congressional Budget Office and General Ac- counting Office shall each submit a report within 30 days of the Secretary of the Treasury's submission to the Chairmen and ranking minority members as required in paragraphs (5)(B), (6)(B), and (8)(C) to such Chairmen and ranking memb ers (A) analyzing the financial condition of the Associa- tion; (B) analyzing the capital restoration plan and reasons for disapproval of the plan contained in the Secretary of the Treasury's submission made pursuant to paragraph (5)(B), or the capital restoration plan proposed by the As- sociation and the modifications made by the Secretary of the Treasury pursuant to paragraph (6)(B) or (8); (C) analyzing the impact of the capital restoration plan and reasons for disapproval of the plan contained in the Secretary of the Treasury's submission made pursuant to paragraph (5)(B), or the impact of the capital restoration plan proposed by the Association and the modifications made by the Secretary of the Treasury pursuant to para- graph (6)(B) or (8), and analyzing the impact of the rec- 2 ? 9 Sec. 439 HIGHER EDUCATION ACT OF 1965 220 ommendations made pursuant to subparagraph (D) of this paragraph, on (i) the ability of the Association to fulfill its pur- pose and authorized activities as provided in this sec- tion, and (ii) the operation of the student loan programs; and (D) recommending steps which the Association should take to increase its capital ratio without impairing its abil- ity to perform its purpose and authorized activities as pro- vided in this section. (10) REVIEW BY SECRETARY OF EDUCATION.The Secretary of Education shall review the Secretary of the Treasury's sub- mission required pursuant to paragraph (5)(B), (6)(B), or (8) and shall submit a report within 30 days to the Chairman and ranking minority member of the Senate Committee on Labor and Human Resources and to the Chairman and ranking mi- nority member of the House Committee on Education and Labor (A) describing any administrative or legislative provi- sions governing the student loan programs which contrib- uted to the decline in the Association's capital ratio; and (B) recommending administrative and legislative changes in the student loan programs to maintain the or- derly operation of such programs and to enable the Asso- ciation to fulfill its purpose and authorized activities con- sistent with the capital ratio specified in paragraph (4). (11) SAFE HARBOR.The Association shall be deemed in compliance with the capital ratios described in paragraphs (4) and (6)(A) if the Association is rated in 1 of the 2 highest full rating categories (such categories to be determined without re- gard to designations within categories) by 2 nationally recog- nized statistical rating organizations, determined without re- gard to the Association's status as a federally chartered cor- poration. (12) TREATMENT OF CONFIDENTIAL INFORMATION.Not- withstanding any other provision of law, the Secretary of the Treasury, the Secretary of Education, the Congressional Budg- et Office, and the General Accounting Office shall not disclose any information treated as confidential by the Association and obtained pursuant to this subsection. Nothing in this para- graph shall authorize the Secretary of the Treasury, the Sec- retary of Education, the Congressional Budget Office, and the General Accounting Office to withhold information from Con- gress, or prevent the Secretary of Education, the Congressional Budget Office, and the General Accounting Office from comply- ing with a request for information from any other Federal de- partment or agency requesting the information for purposes within the scope of its jurisdiction, or complying with an order of a court of the United States in an action brought by the United States. For purposes of section 552 of title 5, United States Code, this paragraph shall be considered a statute de- scribed in subsection (b)(3) of such section 552. (13) DEFINITIONS.As used in this subsection: 221 HIGHER EDUCATION ACT OF 1965 Sec. 439 (A) The term "nationally recognized statistical rating organization" means any entity recognized as such by the Securities and Exchange Commission. (B) The term "capital ratio" means the ratio of total stockholders' equity, as shown on the Association's most recent quarterly consolidated balance sheet prepared in the ordinary course of its business, to the sum of- (i) the total assets of the Association, as shown on the balance sheet prepared in the ordinary course of its business; and (ii) 50 percent of the credit equivalent amount of the following off-balance sheet items of the Association as of the date of such balance sheet- (I) all fmancial standby letters of credit and other irrevocable guarantees of the repayment of financial obligations of others; and (II) all interest rate contracts and exchange rate contracts, including interest exchange agree- ments, floor, cap, and collar agreements and simi- lar arrangements. For purposes of this subparagraph, the calculation of the credit equivalent amount of the items set forth in clause (ii) of this subparagraph, the netting of such items and eliminations for the purpose of avoidance of double-count- ing of such items shall be made in accordance with the measures for computing credit conversion factors for off- balance sheet items for capital maintenance purposes es- tablished for commercial banks from time to time by the Federal Reserve Board, but without regard to any risk weighting provisions in such measures. (C) The term "legislative days" means only days on which either House of Congress is in session. (20 U S C. 1087-2) Enacted June 23, 1972, P.L. 92-318, sec. 133(a), 86 Stat. 265, 269, amended April 21, 1976, P.L. 94-273, sec. 3(9), 90 Stat. 376; amended October 12, 1976, P L. 94-482, sec. 127(a), 90 Stat. 2136-2141; amended June 15, 1977, P.L. 95-43, sec 1(a)(38), 91 Stat. 217; amended October 3, 1980, P.L. 96-374, secs. 421, 1391, 94 Stat. 1427, 1503; amended August 13, 1981, P.L. 97-35, sec. 538, 95 Stat. 457, amended December 29, 1981, P.L. 97-115, sec. 18, 95 Stat. 1610; amended Oc- tober 13, 1982, P.L. 97-301, sec. 14, 96 Stat. 1405; amended August 15, 1983, P.L. 98-79, secs. 2, 8, 97 Stat. 476, 483; amended April 7, 1986, P.L. 99-272, secs. 16017(b)(4), 16018(a)(3), 100 Stat. 347, 348; amended October 17, 1986, P.L. 99-498, sec 402(a), 100 Stat. 1418; amended June 3, 1987, P.L. 100-50, sec. 10(dd), 101 Stat 347, amended July 18, 1988, P.L. 100-369, sec. 7(c), 102 Stat. 837; amended July 23, 1992, P.L. 102-325, sec. 431, 106 Stat. 554; amended August 10, 1993, P.L. 103-66, secs. 4041(c) and 4104, 107 Stat. 356 and 367; amended December 20, 1993, P L 103-208, sec. 2(c)(69), (m), 107 Stat. 2470, 2486. PART C-FEDERAL WORK-STUDY PROGRAMS SEC. 441. PURPOSE; APPROPRIATIONS AUTHORIZED. (a) PURPOSE.-The purpose of this part is to stimulate and pro- mote the part-time employment of students who are enrolled as un- dergraduate, graduate, or professional students and who are in need of earnings from employment to pursue courses of study at el- igible institutions, and to encourage students receiving Federal stu- dent financial assistance to participate in community service activi- Sec. 441 HIGHER EDUCA110N ACT OF 1965 222 ties that will benefit the Nation and engender in the students a sense of social responsibility and commitment to the community. (b) AUTHORIZATION OF APPROPRIATIONS.-There are authorized to be appropriated to carry out this part, $800,000,000 for fiscal year 1993 and such sums as may be necessary for each of the 4 succeeding fiscal years. (c) COMMUNITY SERVICES.-For purposes of this part, the term "community services" means services which are identified by an in- stitution of higher education, through formal or informal consulta- tion with local nonprofit, governmental, and community-based or- ganizations, as designed to improve the quality of life for commu- nity residents, particularly low-income individuals, or to solve par- ticular problems related to their needs, including- (1) such fields as health care, child care, literacy training, education (including tutorial services), welfare, social services, transportation, housing and neighborhood improvement, public safety, crime prevention and control, recreation, rural develop- ment, and community improvement; (2) work in a project, as defined in section 101(20) of the National and Community Service Act of 1990 (42 U.S.C. 12511(20)); (3) support services to students with disabilities; and (4) activities in which a student serves as a mentor for such purposes as- (A) tutoring; (B) supporting educational and recreational activities; and (C) counseling, including career counseling. (42 U.S.C. 2751) Enacted Aug. 20, 1964, P.L. 88-452, sec. 121, 78 Stat. 515; amended Nov. 8, 1965, P.L. 89-329, sec. 441(2), 79 Stat. 1249; amended Oct. 16, 1968, P.L. 90-575, secs. 131, 132, 133, 82 Stat. 1028-1029; amended Oct. 22, 1969, P.L. 91-95, sec. 5, 83 Stat. 143; amended June 23, 1972; P.L. 92-318, sec. 135 and sec. 135A, 86 Stat. 270; amended October 12, 1976, P.L. 94-482, sec. 128(a), 90 Stat. 2143; amended October 3, 1980, P.L. 96-374, sec. 431, 94 Stat. 1433; amended Octo- ber 17, 1986, P.L. 99-498, sec. 403(a), 100 Stat. 1429; amended July 23, 1992, P.L. 102-325, sec. 441(b), (c), and (d), 106 Stat. 563; amended September 21, 1993, P.L. 103-82, sec. 111(b)(3), 107 Stat. 860; amended December 20, 1993, P.L. 103-208, sec. 2(m), 107 Stat. 2486. SEC. 442. ALLOCATION OF FUNDS. (a) ALLOCATION BASED ON PREVIOUS ALLOCATION.-(1) From the amount appropriated pursuant to section 441(b) for each fiscal year, the Secretary shall first allocate to each eligible institution for each succeeding fiscal year, an amount equal to 100 percent of the amount such institution received and used under this part for fiscal year 1985. (2)(A) From the amount so appropriated, the Secretary shall next allocate to each eligible institution that began participation in the program under this part after fiscal year 1985 but is not a first or second time participant, an amount equal to the greater of- (i) $5,000; or (ii) 90 percent of the amount received and used under this part for the first year it participated in the program. (B) From the amount so appropriated, the Secretary shall next allocate to each eligible institution that began participation in the 232 223 HIGHER EDUCATION ACT OF 1965 Sec. 442 program under this part after fiscal year 1985 and is a first or sec- ond time participant, an amount equal to the greatest of. (i) $5,000; (ii) an amount equal to (I) 90 percent of the amount re- ceived and used under this part in the second preceding fiscal year by eligible institutions offering comparable programs of instruction, divided by (H) the number of students enrolled at such comparable institutions in such fiscal year, multiplied by (III) the number of students enrolled at the applicant institu- tion in such fiscal year; or (iii) 90 percent of the institution's allocation under this part for the preceding fiscal year. (C) Notwithstanding subparagraphs (A) and (B) of this para- graph, the Secretary shall allocate to each eligible institution w hich (i) was a first-time participant in the program in fiscal year 1986 or any subsequent fiscal year, and (ii) received a larger amount under this subsection in the second year of participation, an amount equal to 90 percent of the amount it received under this subsection in its second year of participation. (3)(A) If the amount appropriated for any fiscal year is less than the amount required to be allocated to all institutions under paragraph (1) of this subsection, then the amount of the allocation to each such institution shall be ratably reduced. (B) If the amount appropriated for any fiscal year is more than the amount required to be allocated to all institutions under para- graph (1) but less than the amount required to be allocated to all institutions under paragraph (2), then (i) the Secretary shall allot the amount required to be allo- cated to all institutions under paragraph (1), and (ii) the amount of the allocation to each institution under paragraph (2) shall be ratably reduced. (C) If aoiditional amounts are appropriated for any such fiscal year, such reduced amounts shall be increased on the same basis as they were reduced (until the amount allocated equals the amount required to be allocated under paragraphs (1) and (2) of this subsection). (4)(A) Notwithstanding any other provision of this section, the Secretary may allocate an amount equal to not more than 10 per- cent of the amount by which the amount appropriated in any fiscal year to carry out this part exceeds $700,000,000 among eligible in- stitutions described in subparagraph (B). (B) In order to receive an allocation pursuant to subparagraph (A) an institution shall be an eligible institution from which 50 per- cent or more of the Pell Grant recipients attending such eligible in- ' stitution graduate or transfer to a 4-year institution of higher edu- cation. (b) ALLOCATION OF EXCESS BASED ON PRO RATA SHARE.From one-quarter of the remainder of the amount appropriated pursuant to section 441(b) for any fiscal year (after making the allocations required by subsection (a)), the Secretary shall allocate to each eli- gible institution an amount which bears the same ratio to such one-quarter as the amount the eligible institution receives for such 233 Sec. 442 HIGHER EDUCATION ACT OF 1965 224 fiscal year under subsection (a) bears to the amount all such insti- tutions receive under such subsection (a). (c) ALLOCATION OF EXCESS BASED ON SHARE OF EXCESS ELIGI- BLE AMOUNTS.-(1) From three-quarters of the remainder of the amount appropriated pursuant to section 441(b) after making the allocations required by subsection (a), the Secretary shall allocate to each eligible institution which has an excess eligible amount an amount which bears the same ratio to such remainder as such ex- cess eligible amount bears to the sum of the excess eligible amounts of all such eligible institutions (having such excess eligible amounts). (2) For any eligible institution, the excess eligible amount is the amount, if any, by which (A)(i) the amount of that institution's need (as determined under subsection (d)), divided by (ii) the sum of the need of all institutions (as so determined), multiplied by (iii) the amount appropriated pursuant to section 441(b) for the fiscal year; ex- ceeds(B) the amount required to be allocated to that institution under subsection (a). (d) DETERMINATION OF INSTITUTION'S NEED.-(1) The amount of an institution's need is equal to the sum of the self-help need of the institution's eligible undergraduate students and the self- help need of the institution's eligible graduate and professional stu- dents.(2) To determine the self-help need of an institution's eligible undergraduate students, the Secretary shall (A) establish various income categories fbr dependent and independent undergraduate students; (B) establish an expected family contribution for each in- come category of dependent and independent undergraduate students, determined on the basis of the average expected fam- ily contribution (computed in accordance with part F of this title) of a representative sample within each income category for the second preceding fiscal year; (C) compute 25 percent of the average cost of attendance for all undergraduate students; (D) multiply the number of eligible dependent students in each income category by the lesser of (i) 25 percent of the average cost of attendance for all undergraduate students determined under subparagraph (C); or(ii) the average cost of attendance for all undergradu- ate students minus the expected family contribution deter- mined under subparagraph (B) for that income category, except that the amount computed by such subtraction shall not be less than zero; (E) add the amounts determined under subparagraph (D) for each income category of dependent students; and (F) multiply the number of eligible independent students in ach income category by the lesser of (i) 25 percent of the average cost of attendance for all undergraduate students determined under subparagraph (C); or 234 225 HIGHER EDUCATION ACT OF 1965 Sec. 442 (ii) the average cost of attendance for all undergradu- ate students minus the expected family contribution deter- mined under subparagraph (B) for that income category, except that the amount computed by such subtraction for any income category shall not be less than zero; (G) add the amounts determined under subparagraph (F) for each income category of independent students; and (H) add the amounts determined under subparagraphs (E) and (G). (3) To determine the self-help need of an institution's eligible graduate and professional students, the Secretary, for academic year 1988-1989 shall use the procedures employed for academic year 1986-1987, and, for any subsequent academic years, the Sec- retary shall (A) establish various income categories of graduate and professional students; (B) establish an expected family contribution for each in- come category of graduate and professional students, deter- mined on the basis of the average expected family contribution (computed in accordance with part F of this title) of a rep- resentative sample within each income category for the second preceding fiscal year; (C) determine the average cost of attendance for all grad- uate and professional students; (D) subtract from the average cost of attendance for all graduate and professional students (determined under sub- paragraph (C)), the expected family contribution (determined under subparagraph (B)) for each income category, except that the amount computed by such subtraction for any income cat- egory shall not be less than zero; (E) multiply the amounts determined under subparagraph (D) by the number of eligible students in each category; and (F) add the amounts determined under subparagraph (E) of this paragraph for each income category. (4)(A) For purposes of paragraphs (2) and (3), the term "aver- age cost of attendance" means the average of the attendance costs for undergraduate students and for graduate and professional stu- dents, which shall include (i) tuition and fees determined in accord- ance with subparagraph (B), (ii) standard living expenses deter- mined in accordance with subparagraph (C), and (iii) books and supplies determined in accordance with subparagraph (D). (B) The average undergraduate and graduate and professional tuition and fees described in subparagraph (A)(i) shall be computed on the basis of information reported by the institution to the Sec- retary, which shall include (i) total revenue received by the institu- tion from undergraduate and graduate tuition and fees for the sec-, ond year preceding the year for which it is applying for an alloca- tion, and (ii) the institution's enrollment for such second preceding year. (C) The standard living expense described in subparagraph (A)(ii) is equal to 150 percent of the difference between the income protection allowance for a family of five with one in college and the income protection allowance for a family of six with one in college for a single independent student. 2 '3 5 Sec. 443 HIGHER EDUCATION ACT OF 1965 226 (D) The allowance for books and supplies described in subpara- graph (A)(iii) is equal to $450. (e) REALLOCATION OF EXCESS ALLOCATIONS.--(1) If institutions return to the Secretary any portion of the sums allocated to such institutions under this section for any fiscal year, the Secretary shall reallot such excess to eligible institutions which used at least 10 percent of the total amount of funds granted to such institution under this section to compensate students employed in community service in the preceding fiscal year. Such excess funds shall be real- lotted to institutions which qualify under this subsection on the same basis as excess eligible amounts are allocated to institutions pursuant to subsection (c). Funds received by institutions pursuant to this subsection shall be used to compensate students employed in community service. (2) If, under paragraph (1) of this subsection, an institution re- turns more than 10 percent of its allocation, the institution's alloca- tion for the next fiscal year shall be reduced by the amount re- turned. The Secretary may waive this paragraph for a specific in- stitution if the Secretary finds that enforcing this paragraph would be contrary to the interest of the program. (f) FILING DEADLINES.-The Secretary shall, from time to time, set dates before which institutions must file applications for alloca- tions under this part. (42 U.S.C. 2752) Enacted Aug. 20, 1964, P.L. 88-452, sec. 122, 78 Stat. 514; amended Nov. 8, 1965, P.L. 89-329, sec. 441(1), 79 Stat. 1249; amended Oct. 16, 1968, P.L. 90-575, secs. 131, 135, 82 Stat. 1028-1029; amended June 23, 1972, P.L. 92-318, sec. 135B, 86 Stat. 270, 271; amended October 3, 1980, P.L. 96-374, secs. 431, 432, 1391, 94 Stat. 1433, 1503; amended October 17, 1986, P.L. 99-498, sec. 403(a), 100 Stat. 1429; amended June 3, 1987, P.L. 100-50, sec. 11(a), 101 Stat. 348; amended July 23, 1992, P.L. 102-325, sec. 442, 106 Stat. 564; amended December 20, 1993, P.L. 103-208, sec. 2(d)(1) and (2), (m), 107 Stat. 2470, 2486. SEC. 443. GRANTS FOR FEDERAL WORK-STUDY PROGRAMS. (a) AGREEMENTS REQUIRED.-The Secretary is authorized to enter into agreements with institutions of higher education under which the Secretary will make grants to such institutions to assist in the operation of work-study programs as provided in this part. (b) CONTENTS OF AGREEMENTS.-An agreement entered into pursuant to this section shall- (1) provide for the operation by the institution of a pro- gram for the part-time employment of its students in work for the institution itself, work in community service or work in the public interest for a Federal, State, or local public agency or private nonprofit organization under an arrangement between the institution and such agency or organization, and such work-- (A) will not result in the displacement of employed workers or impair existing contracts for services; (B) will be governed by such conditions of employment as will be appropriate and reasonable in light of such fac- tors as type of work performed, geographical region, and proficiency of the employee; (C) does not involve the construction, operation, or maintenance of so much of any facility as is used or is to be used for sectarian instruction or as a place for religious worship; and 227 HIGHER EDUCATION ACT OF 1965 Sec. 443 (D) will not pay any wage to students employed under this subpart that is less than the current Federal mini- mum wage as mandated by section 6(a) of the Fair Labor Standards Act of 1938; (2) provide that funds granted an institution of higher edu- cation, pursuant to section 443, may be used only to make pay- ments to students participating in work-study programs, ex- cept that (A) in fiscal year 1994 and succeeding fiscal years, an institution shall use at least 5 percent of the total amount of funds granted to such institution under this section in any fiscal year to compensate students employed in com- munity service, except that the Secretary may waive this subparagraph if the Secretary determines that enforcing it would cause hardship for students at an institution; and (B) an institution may use a portion of the sums granted to it to meet administrative expenses in accord- ance with section 489 of this Act, may use a portion of the sums granted to it to meet the cost of a job location and development program in accordance with section 446 of this part, and may transfer funds in accordance with the provisions of section 488 of this Act; (3) provide that in the selection of students for employ- ment under such work-study program, only students, who dem- onstrate financial need in accordance with part F of this title, and who meet the requirements of section 484 will be assisted, except that (A) if the institution's grant under this part is directly or indirectly based in part on the fmancial need dem- onstrated by students who are (i) attending the institution less than full time, or (ii) independent students; and (B) if the total financial need of all such less than full- time and independent students at the institution exceeds 5 percent of the total financial need of all students at such institution, then at least 5 percent of the grant shall be made available to such less than full-time and independent students; (4) provide that for a student employed in a work-study program under this part, at the time income derived from any need-based employment is in excess of the determination of the amount of such student's need by more than $300, continued employment shall not be subsidized with funds appropriated under this part; (5) provide that the Federal share of the compensation of students employed in the work-study program in accordance with the agreement shall not exceed 75 percent for academic year 1993-1994 and succeeding academic years, except that the Federal share may exceed such amounts of compensation if the Secretary determines, pursuant to regulations promul- gated by the Secretary establishing objective criteria for such determinations, that a Federal share in excess of such amounts is required in furtherance of the purpose of this part; (6) include provisions to make employment under such work-study program reasonably available (to the extent of Sec. 443 HIGHER EDUCATION ACT OF 1965 228 available funds) to all eligible students in the institution in need thereof, and to make equivalent employment offered or arranged by the institution reasonably available (to the extent of available funds) to all students in the institution who desire such employment; (7) provide assurances that employment made available from funds under this part will, to the maximum extent prac- ticable, complement and reinforce the educational program or vocational goals of each student receiving assistance under this part;(8) provide assurances, in the case of each proprietary in- stitution, that students attending the proprietary institution receiving assistance under this part who are employed by the institution may be employed in jobs (A) that are only on campus and that (i) to the maximum extent practicable, com- plement and reinforce the education programs or voca- tional goals of such students; and (ii) furnish student services that are directly relat- ed to the student's education, as determined by the Secretary pursuant to regulations, except that no stu- dent shall be employed in any position that would in- volve the solicitation of other potential students to en- roll in the school; or (B) in community service in accordance with para- graph (2)(A) of this subsection; (9) provide assurances that employment made available from funds under this part may be used to support programs for supportive services to students with disabilities; (10) provide assurances that the institution will inform all eligible students of the opportunity to perform community serv- ice, and will consult with local nonprofit, governmental, and community-based organizations to identify such opportunities; and (11) include such other reasonable provisions as the Sec- retary shall deem necessary or appropriate to carry out the purpose of this part. (C) PRIVATE SECTOR EMPLOYMENT AGREEMENT.As part of its agreement described in subsection (b), an institution of higher edu- cation may, at its option, enter into an additional agreement with the Secretary which shall (1) provide for the operation by the institution of a pro- gram of part-time employment of its students in work for a pri- vate for-profit organization under an arrangement between the institution and such organization that complies with the re- quirements of subparagraphs .(A) through (D) of subsection (b)(1) and subsection (b)(3); (2) provide that the institution will use not more than 25 percent of the funds made available to such institution under this part for any fiscal year for the operation of the program described in paragraph (1); (3) provide that, notwithstanding subsection (b)(5), the Federal share of the compensation of students employed in such program will not exceed 60 percent for academic years 229 HIGHER EDUCATION ACT OF 1965 Sec. 445 1987-1988 and 1988-1989, 55 percent for academic year 1989- 1990, and 50 percent for academic year 1990-1991 and suc- ceeding academic years, and that the non-Federal share of such compensation will be provided by the private for-profit or- ganization in which the student is employed; (4) provide that jobs under the work study program will be academically relevant; and (5) provide that the for-profit organization will not use funds made available under this part to pay any employee who would otherwise be employed by the organization. (42 U.S.C. 2753) Enacted Aug. 20, 1964, P.L. 88-452, sec. 123, 78 Stat. 514; amended Nov. 8, 1965, P.L. 89-329, sec. 441(3), 79 Stat. 1249; amended Oct. 16, 1968, P.L. 90-575, secs. 131, 133, 139, 82 Stat. 1028-1030; amended Oct. 12, 1976, P.L. 94-482, sec. 128(b), 90 Stat. 2143; amended Oct. 3, 1980, P.L. 96-374, sec. 434, 94 Stat. 1434; amended October 17, 1986, P.L. 99-498, sec. 402(a), 100 Stat. 1432; amended June 3, 1987, P.L. 100-50, sec. 11(b), (c), 101 Stat. 348; amended July 23, 1992, P.L. 102-325, sec. 442(a)(2), 106 Stat. 563; amended July 23, 1992, P.L. 102- 325, secs. 441(a)(2) and 443, 106 Stat. 563 and 564; amended December 20, 1993, P.L. 103-208, sec. 2(d)(3)-(5), (m), 107 Stat. 2470, 2486. SEC. 444. SOURCES OF MATCHING FUNDS. Nothing in this part shall be construed as restricting the source (other than this part) from which the institution may pay its share of the compensation of a student employed under a work- study program covered by an agreement under this part, and such share may be paid to such student in the form of services and equipment (including tuition, room, board, and books) furnished by such institution. (20 U.S.C. 2754) Enacted October 17, 1986, P.L. 99-498, sec. 403(a), 100 Stat. 1435; amended December 20, 1993, P.L. 103-208, sec. 2(m), 107 Stat. 2486. SEC. 445. FLEXIBLE USE OF FUNDS. (a) CARRY-OVER AUTHORITY.-(1) Of the sums granted to an el- igible institution under this part for any fiscal year, 10 percent may, at the discretion of the institution, remain available for ex- penditure during the succeeding fiscal year to carry out programs under this part. (2) Any of the sums so granted to an institution for a fiscal year which are not needed by that institution to operate work- study programs during that fiscal year, and which it does not wish to use during the next fiscal year as authorized in the preceding sentence, shall remain available to the Secretary for making grants under section 443 to other institutions in the same State until the close of the second fiscal year next succeeding the fiscal year for which such funds were appropriated. (b) CARRY-BACK AUTHORITY.-(1) Up to 10 percent of the sums the Secretary determines an eligible institution may receive from funds which have been appropriated for a fiscal year may be used by the Secretary to make grants under this part to such institution for expenditure during the fiscal year preceding the fiscal year for which the sums were appropriated. (2) An eligible institution may make payments to students of wages earned after the end of the academic year, but prior to the beginning of the succeeding fiscal year, from such succeeding fiscal year's appropriations. 239 Sec. 446 HIGHER EDUCA110N ACT OF 1965 230 (42 U.S.C. 2755) Enacted Aug. 20, 1964, P.L. 88-452, sec. 125, 78 Stat. 516; amended Nov. 8, 1966, P.L. 89-329, sec. 441(6), 79 Stat. 1250; amended Oct. 16, 1968, P.L. 90-575, sec. 131, 82 Stat. 1028; amended October 17, 1986, P.L. 99-498, sec. 403(a), 100 Stat. 1435; amended July 23, 1992, P.L. 102-325, sec. 444, 106 Stat. 566; amended December 20, 1993, P.L. 103-208, sec. 2(m), 107 Stat.2486. SEC. 446. JOB LOCATION AND DEVELOPMENT PROGRAMS. (a) AGREEMENTS REQUIRED.-(1) The Secretary is authorized to enter into agreements with eligible institutions under which such institution may use not more than 10 percent or $50,000 of its al- lotment under section 442, whichever is less, to establish or expand a program under which such institution, separately or in combina- tion with other eligible institutions, locates and develops jobs, in- cluding community service jobs, for currently enrolled students. (2) Jobs located and developed under this section shall be jobs that are suitable to the scheduling and other needs of such stu- dents and that, to the maximum extent practicable, complement and reinforce the educational programs or vocational goals of such students. (b) CONTENTS OF AGREEMENTS.-Agreements under subsection (a) shall-(1) provide that the Federal share of the cost of any pro- gram under this section will not exceed 80 percent of such cost; (2) provide satisfactory assurance that funds available under this section will not be used to locate or develop jobs at an eligible institution; (3) provide satisfactory assurance that funds available under this section will not be used for the location or develop- ment of jobs for students to obtain upon graduation, but rather for the location and development of jobs available to students during and between periods of attendance at such institution; (4) provide satisfactory assurance that the location or de- velopment of jobs pursuant to programs assisted under this section will not result in the displacement of employed workers or impair existing contracts for services; (5) provide satisfactory assurance that Federal funds used for the purpose of this section can realistically be expected to help generate student wages exceeding, in the aggregate, the amount of such funds, and that if such funds are used to con- tract with another organization, appropriate performance standards are part of such contract; and (6) provide that the institution will submit to the Secretary an annual report on the uses made of funds provided under this section and an evaluation of the effectiveness of such pro- gram in benefiting the students of such institution. (42 U.S.C. 2756) Enacted Aug. 20, 1964, P.L. 88-452, sec. 126, 78 Stat. 516; amended Nov. 8, 1965, P.L. 89-329, sec. 441(1), 79 Stat. 1249; amended Oct. 16, 1968, P.L. 90-575, sec. 131, 82 Stat. 1028; amended June 28, 1975, P.L. 94-43, sec. 2, 89 Stat. 233; amended Oct. 3, 1980, P.L. 96-374, secs. 435(b), 1391, 94 Stat. 1435, 1503; amended October 17, 1986, P.L. 99-498, sec. 403(a), 100 Stat. 1435; amended June 3, 1987, P.L. 100-50, sec. 11(d), 101 Stat. 348; amended July 23, 1992, P.L. 102-325, sec. 445, 106 Stat. 566; amended December 20, 1993, P.L. 103-208, sec. 2(m), 107 Stat. 2486. 231 HIGHER EDUCATION ACT OF 1965 Sec. 447 SEC. 441. ADDITIONAL FUNDS TO CONDUCT COMMUNITY SERVICE WORK-STUDY PROGRAMS. Each institution participating under this part may use up to 10 percent of the funds made available under section 489(a) and at- tributable to the amount of the institution's expenditures under this part to conduct that institution's program of community serv- ice-learning, including (1) development of mechanisms to assure the academic quality of the student experience, (2) assuring student access to educational resources, exper- tise, and supervision necessary to achieve community service objectives, and (3) collaboration with public and private nonprofit agen- cies, and programs assisted under the National and Commu- nity Service Act of 1990 in the planning, development, and ad- ministration of such programs. (42 U.S.C. 2756a) Enacted June 23, 1972, P.L. 92-318, sec. 135F, 86 Stat. 271, 272, amended Oct. 12, 1976, see. 128(d), 90 Stat. 2143, 2144; amended Oct. 3, 1980, P L 96-374, secs. 436, 1391, 94 Stat. 1436, 1503; amended October 17, 1986, P.L. 99-498, sec. 403(a), 100 Stat. 1436; amended July 23, 1992, P.L. 102-325, sec. 446(a), and (b), 106 Stat. 567; amended December 20, 1993, P.L. 103-208, sec. 2(m), 107 Stat. 2486. SEC. 448. WORK COLLEGES. (a) PURPOSE.The purpose of this section is to recognize, en- courage, and promote the use of comprehensive work-learning pro- grams as a valuable educational approach when it is an integral part of the institution's educational program and a part of a finan- cial plan which decreases reliance on grants and loans. (b) SOURCE AND USE FUNDS. (1) SOURCE OF FUNDS.In addition to the sums appro- priated under subsection (f), funds allocated to the institution under part C and part E of this title may be transferred for use under this section to provide flexibility in strengthening the self-help-through-work element in fmancial aid packaging. (2) ACTIVITIES AUTHORIZED.From the sums appropriated pursuant to subsection (1), and from the funds available under paragraph (1), eligible institutions may, following approval of an application under subsection (c) by the Secretary (A) support the educational costs of qualified students through self-help payments or credits provided under the work-learning program of the institution within the limits of part F of this title; (B) promote the work-learning-service experience as a tool of postsecondary education, financial self-help and community service-learning opportunities; (C) carry out activities described in section 443 or 446; and (D) be used for the administration, development and assessment of comprehensive work-learning programs, including (i) community-based work-learning alternatives that expand opportunities for community service and career-related work; and 41 4 1 K., h. Sec. 451 HIGHER EDUCATION ACT OF 1965 232 (ii) alternatives that develop sound citizenship, en- courage student persistence, and make optimum use of assistance under this part in education and student development. (c) APPLICATION.Each eligible institution may submit an ap- plication for funds authorized by subsection (f) to use funds under subsection (b)(1) at such time and in such manner as the Secretary, by regulation, may reasonably require. (d) MATCH REQUIRED.Funds made available to work-colleges pursuant to this section shall be matched on a dollar-for-dollar basis from non-Federal sources. (e) DEFINITIONS.For the purpose of this section (1) the term "work-college" means an eligible institution that. (A) has been a public or private nonprofit institution with a commitment to community service; (IS) has operated a comprehensive work-learning pro- gram for at least 2 years; (C) requires all resident students who reside on cam- pus to participate in a comprehensive work-learning pro- gram and the provision of services as an integral part of the institution's educational program and as part of the in- stitution's educational philosophy; and (D) provides students participating in the comprehen- sive work-learning program with the opportunity to con- tribute to their education and to the welfare of the commu- nity as a whole; and (2) the term "comprehensive student work-learning pro- gram" means a student work/service program that is an inte- gral and stated part of the institution's educational philosophy and program; requires participation of all resident students for enrollment, participation, and graduation; includes learning objectives, evaluation and a record of work performance as part of the student's college record; provides programmatic leader- ship by college personnel at levels comparable to traditional academic programs; recognizes the educational role of work- learning supervisors; and includes consequences for non- performance or failure in the work-learning program similar to the consequences for failure in the regular academic program. (f) AUTHORIZATION OF APPROPR1ATIONS.There are authorized to be appropriated to carry out this section $5,000,000 for fiscal year 1993 and such sums as may be necessary for each of the 4 succeeding fiscal years. (42 U.S.C. 2756h) Enacted July 23, 1992, P.L. 102-325, sec. 447, 106 Stat. 567; amended December 20, 1993, P.L. 103-208, sec. 2(m), 107 Stat. 2486. PART D-FEDERAL DIRECT STUDENT LOAN PROGRAM SEC. 451. PROGRAM AUTHORITY. There are hereby made available, in accordance with the provi- sions of this part, such sums as may be necessary to make loans to all eligible students (and the eligible parents of such students) 233 HIGHER EDUCATION ACT OF 1965 Sec. 452 in attendance at participating institutions of higher education se- lected by the Secretary, to enable such students to pursue their courses of study at such institutions during the period beginning July 1, 1994. Such loans shall be made by participating institu- tions, or consortia thereof, that have agreements with the Sec- retary to originate loans, or by alternative originators designated by the Secretary to make loans for students in attendance at par- ticipating institutions (and their parents). (20 U.S.C. 1087a) Enacted August 10, 1993, P.L. 103-66, sec. 4021, 107 Stat. 341. SEC. 452. FUNDS FOR ORIGINATION OF DIRECT STUDENT LOANS. (a) IN GENERAL.The Secretary shall provide, on the basis of the need and the eligibility of students at each participating insti- tution, and parents of such students, for such loans, funds for stu- dent and parent loans under this part (1) directly to an institution of higher education that has an agreement with the Secretary under section 454(a) to par- ticipate in the direct student loan programs under this part and that also has an agreement with the Secretary under sec- tion 454(b) to originate loans under this part; or (2) through an alternative originator designated by the Secretary to students (and parents of students) attending insti- tutions of higher education that have an agreement with the Secretary under section 454(a) but that do not have an agree- ment with the Secretary under section 454(b). (b) FEES FOR ORIGINATION SERVICES. (1) FEES FOR INSTITUT1ONS.The Secretary shall pay fees to institutions of higher education (or a consortium of such in- stitutions) with agreements under section 454(b), in an amount established by the Secretary, to assist in meeting the costs of loan origination. Such fees (A) shall be paid by the Secretary based on all the loans made under this part to a particular borrower in the same academic year; (B) shall be subject to a sliding scale that decreases the per borrower amount of such fees as the number of borrowers increases; and (C)(i) for academic year 1994-1995, shall not exceed a program-wide average of $10 per borrower for all the loans made under this part to such borrower in the same aca- demic year; and (ii) for succeeding academic years, shall not exceed such average fee as the Secretary shall establish pursuant to regulations. (2) FEES FOR ALTERNATIVE ORIGINATORS.The Secretary shall pay fees for loan origination services to alternative origi- nators of loans made under this part in an amount established by the Secretary in accordance with the terms of the contract described in section 456(b) between the Secretary and each such alternative originator. (c) No ENTITLEMENT To PARTICIPATE OR ORIGINATE.No insti- tution of higher education shall have a right to participate in the programs authorized by this part, to originate loans, or to perform any program function under this part. Nothing in this subsection 2 4 3 Sec. 453 HIGHER EDUCATION ACT OF 1965 234 shall be construed so as- to limit the entitlement of an eligible stu- dent attending a participating institution (or the eligible parent of such student) to borrow under this part. (d) DELIVERY OF LOAN FUNDS.Loan funds shall be paid and delivered to an institution by the Secretary prior to the beginning of the payment period established by the Secretary in a manner that is consistent with payment and delivery of basic grants under subpart 1 of part A of this title. (20 U.S.C. 1087b) Enacted August 10, 1993, P.L. 103-66, sec. 4021, 107 Stat. 341. SEC. 453. SELECTION OF INSTITUTIONS FOR PARTICIPATION AND ORIGINATION. (a) PHASE-IN OF PROGRAM. (1) GENERAL AUTHORITY.The Secretary shall enter into agreements pursuant to section 454(a) with institutions of higher education to participate in the direct student loan pro- gram under this part, and agreements pursuant to section 454(b) with institutions of higher education, or consortia there- of, to originate loans in such program, for academic years be- ginning on or after July 1, 1994. Alternative origination serv- ices, through which an entity other than the participating in- stitution at which the student is in attendance originates the loan, shall be provided by the Secretary, through 1 or more contracts under section 456(b) or such other means as the Sec- retary may provide, for students attending participating insti- tutions that do not originate direct student loans under this part. Such agreements for the academic year 1994-1995 shall, to the extent feasible, be entered into not later than January 1, 1994. (2) TRANSITION PROVISIONS.In order to ensure an expedi- tious but orderly transition from the loan programs under part B of this title to the direct student loan program under this part, the Secretary shall, in the exercise of the Secretary's dis- cretion, determine the number of institutions with which the Secretary shall enter into agreements under subsections (a) and (b) of section 454 for any academic year, except that the Secretary shall exercise such discretion so as to achieve the fol- lowing goals: (A) for academic year 1994-1995, loans made under this part shall represent 5 percent of the new student loan volume for such year; (B) for academic year 1995-1996, loans made under this part shall represent 40 percent of the new student loan volume for such year; (C) for academic years 1996-.1997 and 1997-1998, loans made under this part shall represent 50 percent of the new student loan volume for such years; and (D) for the academic year that begins in fiscal year 1998, loans made under this part shall represent 60 per- cent of the new student loan volume for such year. (3) EXCEPTION.The Secretary may exceed the percentage goals described in subparagraphs (C) or (D) of paragraph (2) if the Secretary determines that a higher percentage is war- ranted by the number of institutions of higher education that 214 235 HIGHER EDUCATION ACT OF 1965 Sec. 453 desire to participate in the program under this part and that meet the eligibility requirements for such participation. (4) NEW STUDENT LOAN VOLUME.For the purpose of this subsection, the term "new student loan volume" means the es- timated sum of all loans (other than consolidation loans) that will be made, insured or guaranteed under this part and part B in the year for which the determination is made. The Sec- retary shall base the estimate described in the preceding sen- tence on the most recent program data available. (b) SELECTION CRITERIA. (1) APPLICATION.Each institution of higher education de- siring to participate in the direct student loan program under this part shall submit an application satisfactory to the Sec- retary containing such information and assurances as the Sec- retary may require. (2) SELECTION PROCEDURE.The Secretary shall select in- stitutions for participation in the direct student loan program under this part, and shall enter into agreements with -such in- stitutions under section 454(a), from among those institutions that submit the applications described in paragraph (1), and meet such other eligibility requirements as the Secretary shall prescribe, by, to the extent possible (A)(i) categorizing such institutions according to antici- pated loan volume, length of academic program, control of the institution, highest degree offered, size of student en- rollment, geographic location, annual loan volume, and de- fault experience; and (ii) beginning in academic year 1995-1996 selecting in- stitutions that are reasonably representative of each of the categories described pursuant to clause (i); and (B) if the Secretary determines it necessary in order to carry out the purposes of subparagraph (A) and attain such reasonable representation (as required by subpara- graph (A)), selecting additional institutions. (C) SELECTION CRITERIA FOR ORIGINATION. (1) IN GENERALThe Secretary may enter into a supple- mental agreement with an institution (or a consortium of such institutions) that (A) has an agreement under subsection 454(a); (B) desires to originate loans under this part; and (C) meets the criteria described in paragraph (2). (2) TRANSITION SELECTION CRITERIA.For academic year 1994-1995, the Secretary may approve an institution to origi- nate loans only if such institution (A) made loans under part E of this title in academic year 1993-1994 and did not exceed the applicable maxi- mum default rate under section 462(g) for the most recent fiscal year for which data are available; (B) is not on the reimbursement system of payment for any of the programs under subpart 1 or 3 of part A, part C, or part E of this title; (C) is not overdue on program or financial reports or audits required under this title; o 4 Sec. 454 HIGHER EDUCATION ACT OF 1965 236 (D) is not subject to an emergency action, or a limita- tion, suspension, or termination under section 428(b)(1)(T), 432(h), or 487(c); (E) in the opinion of the Secretary, has not had signifi- cant deficiencies identified by a State postsecondary review entity under subpart 1 of part H of this title; (F) in the opinion of the Secretary, has not had severe performance deficiencies for any of the programs under this title, including such deficiencies demonstrated by au- dits or program reviews submitted or conducted during the 5 calendar years immediately preceding the date of appli- cation;(G) provides an assurance that such institution has no delinquent outstanding debts to the Federal Government, unless such debts are being repaid under or in accordance with a repayment arrangement satisfactory to the Federal Government, or the Secretary in the Secretary's discretion determines that the existence or amount of such debts has not been finally determined by the cognizant Federal agen- cy; and (H) meets such other criteria as the Secretary may es- tablish to protect the financial interest of the United States and to promote the purposes of this part. (3) REGULATIONS GOVERNING APPROVAL AFTER TRANSI- TION.For academic year 1995-4996 and subsequent academic years, the Secretary shall promulgate and publish in the Fed- eral Register regulations governing the approval of institutions to originate loans under this part in accordance with section 457(a)(2). (d) ELIGIBLE INSTITUTIONS.The Secretary may not select an institution of higher education for participation under this section unless such institution is an eligible institution under section 435(a). (e) CONSORTIA.Subject to such requirements as the Secretary may prescribe, eligible institutions of higher education (as deter- mined under subsection (d)) with agreements under section 454(a) may apply to the Secretary as consortia to originate loans under this part for students in attendance at such institutions. Each such institution shall be required to meet the requirements of subsection (c) with respect to loan origination. (20 U S.C. 1087c) Enacted August 10, 1993, P.L. 103-66, sec. 4021, 107 Stat. 342; amended December 20, 1993, P.L. 103-208, sec. 2(e), 107 Stat. 2470. SEC. 454. AGREEMENTS WITH INSTITUTIONS. (a) PARTICIPATION AGREEMENTS.A11 agreement with any in- stitution of higher education for participation in the direct student loan program under this part shall (1) provide for the establishment and maintenance of a di- rect student loan program at the institution under which the institution will (A) identify eligible students who seek student finan- cial assistance at such institution in accordance with sec- tion 484; 37 HIGHER EDUCATION ACT OF 1965 Sec. 454 (B) estimate the need of each such student as required by part F of this title for an academic year, except that, any loan obtained by a student under this part with the same terms as loans made under section 428H (except as otherwise provided in this part), or a loan obtained by a parent under this part with the same terms as loans made under section 428B (except as otherwise provided in this part), or obtained under any State-sponsored or private loan program, may be used to offset the expected family contriloution of the student for that year; (C) provide a statement that certifies the eligibility of any student to receive a loan under this part that is not in excess of the annual or aggregate limit applicable to such loan, except that the institution may, in exceptional circumstances identified by the Secretary, refuse to certify a statement that permits a student to receive a loan under this part, or certify a loan amount that is less than the student's determination of need (as determined under part F of this title), if the reason for such action is documented and provided in written form to such student; (D) set forth a schedule for disbursement of the pro- ceeds of the loan in installments, consistent with the re- quirements of section 428G; and (E) provide timely and accurate information. (i) concerning the status of student borrowers (and students on whose behalf parents borrow under this part) while such students are in attendance at the in- stitution and concerning any new information of which the institution becomes aware for such students (or their parents) after such borrowers leave the institu- tion, to the Secretary for the servicing and collecting of loans made under this part; and (ii) if the institution does not have an agreement with the Secretary under subsection (b), concerning student eligibility and need, as determined under sub- paragraphs (A) and (B), to the Secretary as needed for the alternative origination of loans to eligible students and parents in accordance with this part; (2) provide assurances that the institution will comply with requirements established by the Secretary relating to stu- dent loan information with respect to loans made under this part; (3) provide that the institution accepts responsibility and financial liability stemming from its failure to perform its func- tions pursuant to the agreement; (4) provide that students at the institution and their par- ents (with respect to such students) will be eligible to partici- pate in the programs under part B of this title at the discretion of the Secretary for the period during which such institution participates in the direct student loan program under this part, except that a student or parent may not receive loans under both this part and part B for the same period of enrollment; (5) provide for the implementation of a quality assurance system, as established by the Secretary and eieveloped in con- 247 Sec. 455 HIGHER EDUCATION ACT OF 1965 238 sultation with institutions of higher education, to ensure that the institution is complying with program requirements and meeting program objectives; (6) provide that the institution will not charge any fees of any kind, however described, to student or parent borrowers for origination activities or the provision of any information necessary for a student or parent to receive a loan under this part, or any benefits associated with such loan; and (7) include such other provisions as the Secretary deter- mines are necessary to protect the interests of the United States and to promote the purposes of this part. (b) ORIGINATION.An agreement with any institution of higher education, or consortia thereof, for the origination of loans under this part shall (1) supplement the agreement entered into in accordance with subsection (a); (2) include provisions established by the Secretary that are similar to the participation agreement provisions described in paragraphs (1)(E)(ii), (2), (3), (4), (5), (6), and (7) of subsection (a), as modified to relate to the origination of loans by the in- stitution or consortium; (3) provide that the institution or consortium will originate loans to eligible students and parents in accordance with this part; and (4) provide that the note or evidence of obligation on the loan shall be the property of the Secretary. (C) WITHDRAWAL AND TERMINATION PROCEDURES.The Sec- retary shall establish procedures by which institutions or consortia may withdraw or be terminated from the program under this part. (20 U.S.C. 1087d) Enacted August 10, 1993, P.L. 103-66, sec. 4021, 107 Stat. 345. SEC. 455. TERMS AND CONDITIONS OF LOANS. (a) IN GENERAL. (1) PARALLEL TERMS, CONDITIONS, BENEFITS, AND AMOUNTS.Unless otherwise specified in this part, loans made to borrowers under this part shall have the same terms, condi- tions, and benefits, and be available in the same amounts, as loans made to borrowers under sections 428, 428B, and 428H of this title. (2) DESIGNATION OF LOANS.Loans made to borrowers under this part that, except as otherwise specified in this part, have the same terms, conditions, and benefits as loans made to borrowers under (A) section 428 shall be known as "Federal Direct Staf- ford Loans"; (B) section 428B shall be known as "Federal Direct PLUS Loans"; and (C) section 428H shall be known as "Federal Direct Unsubsidized Stafford Loans". (b) INTEREST RATE. (1) RATES FOR FDSL AND FDUSL.For Federal Direct Staf- ford Loans and Federal Direct Unsubsidized Stafford Loans for which the first disbursement is made on or after July 1, 1994, the applicable rate of interest shall, during any 12-month pe- 24 8 239 HIGHER EDUCATION ACT OF 1965 Sec. 455 riod beginning on July 1 and ending on June 30, be determined on the preceding June 1 and be equal to (A) the bond equivalent rate of 91-day Treasury bills auctioned at the final auction held prior to such June 1; plus (B) 3.1 percent, except that such rate shall not exceed 8.25 percent. (2) IN SCHOOL AND GRACE PERIOD RULES.(A) Notwith- standing the provisions of paragraph (1), but subject to para- graph (3), with respect to any Federal Direct Stafford Loan or Federal Direct Unsubsidized Stafford Loan for which the first disbursement is made on or after July 1, 1995, the applicable rate of interest for interest which accrues (i) prior to the beginning of the repayment period of the loan; or (ii) during the period in which principal need not be paid (whether or not such principal is in fact paid) by rea- son of a provision described in section 428(b)(1)(M) or 427(a)(2)(C), shall not exceed the rate determined under subparagraph (B). (B) For the purpose of subparagraph (A), the rate deter- mined under this subparagraph shall, during any 12-month pe- riod beginning on July 1 and ending on June 30, be determined on the preceding June 1 and be equal to (i) the bond equivalent rate of 91-day Treasury bills auctioned at the final auction prior to such June 1; plus (ii) 2.5 percent, except that such rate shall not exceed 8.25 percent. (3) OUT-YEAR RULE.Notwithstanding paragraphs (1) and (2), for Federal Direct Stafford Loans and Federal Direct Unsubsidized Stafford Loans made on or after July 1, 1998, the applicable rate of interest shall, during any 12-month period beginning on July 1 and ending on June 30, be determined on the preceding June 1 and be equal to (A) the bond equivalent rate of the security with a comparable maturity as established by the Secretary; plus (B) 1.0 percent, except that such rate shall not exceed 8.25 percent. (4) RATES FOR FDPLUS.(A) For Federal Direct PLUS Loans for which the first disbursement is made on or after July 1, 1994, the applicable rate of interest shall, during any 12-month period beginning on July 1 and ending on June 30, be determined on the preceding June 1 and be equal to (i) the bond equivalent rate of 52-week Treasury bills auctioned at final auction held prior to such June 1; plus (ii) 3.1 percent, except that such rate shall not exceed 9 percent. (B) For Federal Direct PLUS loans made on or after July 1, 1998, the applicable rate of interest shall, during any 12- month period beginning on July 1 and ending on June 30, be determined on the preceding June 1 and be equal to (i) the bond equivalent rate of the security with a com- parable maturity as established by the Secretary; plus (ii) 2.1 percent, 2 4 9 Sec. 455 HIGHER EDUCATION ACT OF 1965 240 except that such rate shall not exceed 9 percent. (5) PUBLICATION.The Secretary shall determine the ap- plicable rates of interest under this subsection after consulta- tion with the Secretary of the Treasury and shall publish such rate in the Federal Register as soon as practicable after the date of determination. (c) LOAN FEE.The Secretary shall charge the borrower of a loan made under this part an origination fee of 4.0 percent of the princi al amount of loan. ( REPAYMENT PLANS. (1) DESIGN AND SELECTION.Consistent with criteria es- tablished by the Secretary, the Secretary shall offer a borrower of a loan made under this part a variety of plans for repayment of such loan, incl Siding principal and interest on the loan. The borrower shall be entitled to accelerate, without penalty, re- payment on the borrower's loans under this part. The borrower may choose (A) a standard repayment plan, with a fixed annual repayment amount paid over a fixed period of time, con- sistent with subsection (a)(1) of this section; (B) an extended repayment plan, with a fixed annual repayment amount paid over an extended period of time, except that the borrower shall annually repay a minimum amount determined by the Secretary in accordance with section 428(b)(1)(L); (C) a graduated repayment plan, with annual repay- ment amounts established at 2 or more graduated levels and paid over a fixed or extended period of time, except that the borrower's scheduled payments shall not be less than 50 percent, nor more than 150 percent, of what the amortized payment on the amount owed would be if the loan were repaid under the standard repayment plan; and (D) an income contingent repayment plan, with vary- ing annual repayment amounts based on the income of the borrower, paid over an extended period of time prescribed by the Secretary, not to exceed 25 years, except that the plan described in this subparagraph shall not be available to the borrower of a Federal Direct PLUS loan. (2) SELECTION BY SECRETARY.If a borrower of a loan made under this part does not select a repayment plan de- scribed in paragraph (1), the Secretary may provide the bor- rower with a repayment plan described in subparagraph (A), (B), or (C) of paragraph (1). (3) CHANGES IN SELECTIONS.The borrower of a loan made under this part may change the borrower's selection of a repay- ment plan under paragraph (1), or the Secretary's selection of a plan for the borrower under paragraph (2), as the case may be, under such terms and conditions as may be established by the Secretary. (4) ALTERNATIVE REPAYMENT PLANS.The Secretary may provide, on a case by case basis, an alternative repayment plan to a borrower of a loan made under this part who demonstrates to the satisfaction of the Secretary that the terms and condi- tions of the repayment plans available under paragraph (1) are 241 HIGHER EDUCATION ACT OF 1965 Sec. 455 not adequate to accommodate the borrower's exceptional cir- cumstances. In designing such alternative repayment plans, the Secretary shall ensure that such plans do not exceed the cost to the Federal Government, as determined on the basis of the present value of future payments by such borrowers, of loans made using the plans available under paragraph (1). (5) REPAYMENT AFTER DEFAULT.The Secretary may re- quire any borrower who has defaulted on a loan made under this part to (A) pay all reasonable collection costs associated with such loan; and (B) repay the loan pursuant to an income contingent repayment plan. (e) INCOME CONTINGENT REPAYMENT. (1) INFORMATION AND PROCEDURES.The Secretary may obtain such information as is reasonably necessary regarding the income of a borrower (and the borrower's spouse, if applica- ble) of a loan made under this part that is, or may be, repaid pursuant to income contingent repayment, for the purpose of determining the annual repayment obligation of the borrower. Returns and return information (as defined in section 6103 of the Internal Revenue Code of 1986) may be obtained under the preceding sentence only to the extent authorized by section 6103(1)(13) of such Code. The Secretary shall establish proce- dures for determining the borrower's repayment obligation on that loan for such year, and such other procedures as are nec- essary to implement effectively income contingent repayment. (2) REPAYMENT BASED ON ADJUSTED GROSS INCOME.A re- payment schedule for a loan made under this part and repaid pursuant to income contingent repayment shall be based on the adjusted gross income (as defined in section 62 of the Inter- nal Revenue Code of 1986) of the borrower or, if the borrower is married and files a Federal income tax return jointly with the borrower's spouse, on the adjusted gross income of the bor- rower and the borrower's spouse. (3) ADDITIONAL DOCUMENTS.A borrower who chooses, or is required, to repay a loan made under this part pursuant to income contingent repayment, and for whom adjusted gross in- come is unavailable or does not reasonably reflect the bor- rower's current income, shall provide to the Secretary other documentation of income satisfactory to the Secretary, which documentation the Secretary may use to determine an appro- priate repayment schedule. (4) REPAYMENT SCHEDULES.Income contingent repayment schedules shall be established by regulations promulgated by the Secretary and shall require payments that vary in relation to the appropriate portion of the annual income of the borrower (and the borrower's spouse, if applicable) as determined by the Secretary. (5) CALCULATION OF BALANCE DUE.The balance due on a loan made under this part that is repaid pursuant to income contingent repayment shall equal the unpaid principal amount of the loan, any accrued interest, and any fees, such as late charges, assessed on such loan. The Secretary may promulgate .251 Sec. 455 HIGHER EDUCATION ACT OF 1965 242 regulations limiting the amount of interest that may be cap- italized on such loan, and the timing of any such capitalization. (6) NOTIFICATION TO BORROWERS.The Secretary shall es- tablish procedures under which a borrower of a loan made under this part who chooses or is required to repay such loan pursuant to income contingent repayment is notified of the terms and conditions of such plan, including notification of such borrower (A) that the Internal Revenue Service will disclose to the Secretary tax return information as authorized under section 6103(1)(13) of the Internal Revenue Code of 1986; and (B) that if a borrower considers that special cir- cumstances, such as a loss of employment by the borrower or the borrower's spouse, warrant an adjustment in the borrower's loan repayment as determined using the infor- mation described in subparagraph (A), or the alternative documentation described in paragraph (3), the borrower may contact the Secretary, who shall determine whether such adjustment is appropriate, in accordance with criteria established by the Secretary. (fl DEFERMENT. (1) EFFECT ON PRINCIPAL AND INTEREST.A borrower of a loan made under this part who meets the requirements de- scribed in paragraph (2) shall be eligible for a deferment, dur- ing which periodic installments of principal need not be paid, and interest-- (A) shall not accrue, in the case of a (i) Federal Direct Stafford Loan; or (ii) a Federal Direct Consolidation Loan that con- solidated only Federal Direct Stafford Loans, or a com- bination of such loans and Federal Stafford Loans for which the student borrower received an interest sub- sidy under section 428; or (B) shall accrue and be capitalized or paid by the bor- rower, in the case of a Federal Direct PLUS Loan, a Fed- eral Direct Unsubsidized Stafford Loan, or a Federal Di- rect Consolidation Loan not described in subparagraph (A)(ii). (2) ELIGIBILITY.A borrower of a loan made under this part shall be eligible for a deferment during any period (A) during which the borrower (i) is carrying at least one-half the normal full- time work load for the course of study that the borrower is pursuing, as determined by the eligible in- stitution (as such term is defined in section 435(a)) the borrower is attending; or (ii) is pursuing a course of study pursuant to a graduate fellowship program approved by the Sec- retary, or pursuant to a rehabilitation training pro- gram for individuals with disabilities approved by the Secretary, except that no borrower shall be eligible for a deferment under this subparagraph, or a loan made under this part 252 243 HIGHER EDUCATION ACT OF 1965 Sec. 455 (other than a Federal Direct PLUS Loan or a Federal Di- rect Consolidation Loan), while serving in a medical in- ternship or residency program; (B) not in excess of 3 years during which the borrower is seeking and unable to find full-time employment; (C) not in excess of 3 years during which the Secretary determines, in accordance with regulations prescribed under section 435(o), that the borrower has experienced or will experience an economic hardship. (g) FEDERAL DIRECT CONSOLIDATION LOANS.A borrower of a loan made under this part may consolidate such loan with the loans described in section 428C(a)(4) only under such terms and conditions as the Secretary shall establish pursuant to section 457(a)(1) or regulations promulgated under this part. Loans made under this subsection shall be known as "Federal Direct Consolida- tion Loans". (h) BORROWER DEFENSES.Notwithstanding any other provi- sion of State or Federal law, the Secretary shall specify in regula- tions (except as authorized under section 457(a)(1)) which acts or omissions of an institution of higher education a borro wer may as- sert as a defense to repayment of a loan made under this part, ex- cept that in no event may a borrower recover from the Secretary, in any action arising from or relating to a loan made under this part, an amount in excess of the amount such borrower has repaid on such loan. (i) LOAN APPLICATION AND PROMISSORY NOTE.The common fi- nancial reporting form required in section 483(a)(1) shall constitute the application for loans made under this part (other than a Fed- eral Direct PLUS loan). The Secretary shall develop, print, and dis- tribute to participating institutions a standard promissory note and loan disclosure form. (j) LOAN DISBURSEMENT. (1) IN GENERAL.Proceeds of loans to students under this part shall be applied to the student's account for tuition and fees, and, in the case of institutionally owned housing, to room and board. Loan proceeds that remain after the application of the previous sentence shall be delivered to the borrower by check or other means that is payable to and requires the en- dorsement or other certification by such borrower. (2) PAYMENT PERIODS.The Seuetary shall establish peri- ods for the payments described in paragraph (1) in a manner consistent with payment of basic grants under subpart 1 of part A of this title. (k) FISCAL CONTROL AND FUND ACCOUNTABILITY. (1) IN GENERAL.(A) An institution shall maintain finan- cial records in a manner consistent with records maintained for other programs under this title. (B) Except as otherwise required by regulations of the Sec- retary, or in a notice under section 457(a)(1), an institution may maintain loan funds under this part in the same account as other Federal student financial assistance. (2) PAYMENTS AND REFUNDS.Payments and refunds shall be reconciled in a manner consistent with the manner set forth for the submission of a payment summary report required of 23 Sec. 456 HIGHER EDUCATION ACT OF 1965 244 institutions participating in the program under subpart 1 of part A, except that nothing in this paragraph shall prevent such reconciliations on a monthly basis. (3) TRANSACTION HISTORIES.All transaction histories under this part shall be maintained using the same system designated by the Secretary for the provision of basic grants under subpart 1 of part A of this title. (20 U.S.C. 1087e) Enacted August 10, 1993, P.L. 103-66, sec. 4021, 107 Stat. 346. SEC. 456. CONTRACTS. (a) CONTRACTS FOR SUPPLIES AND SERVICES. (1) IN GENERAL.The SeCretary shall, to the extent prac- ticable, award contracts for origination, servicing, and collec- tion described in subsection (b). In awarding such contracts, the Secretary shall ensure that such services and supplies are provided at competitive prices. (2) ENTITIES.The entities with which the Secretary may enter into contracts shall include only entities which the Sec- retary determines are qualified to provide such services and supplies and will comply with the procedures applicable to the award of such contracts. In the case of awarding contracts for the origination, servicing, and collection of loans under this part, the Secretary shall enter into contracts only with entities that have extensive and relevant experience and demonstrated effectiveness. The entities with which the Secretary may enter into such contracts shall include, where practicable, agencies with agreements with the Secretary under sections 428(b) and (c), if such agencies meet the qualifications as determined by the Secretary under this subsection and if those agencies have such experierice and demonstrated effectiveness. In awarding contracts to such State agencies, the Secretary shall, to the ex- tent practicable and consistent with the purposes of this part, give special consideration to State agencies with a history of high quality performance to perform services for institutions of higher education within their State. (3) RULE OF CONSTRUCT ION.Nothing in this section shall be construed as a limitation of the authority of any State agen- cy to enter into an agreement for the purposes of this section as a member of a consortium of State agencies. (b) CONTRACTS FOR ORIGINATION, SERVICING, AND DATA Sys- TEMS.The Secretary may enter into contracts for (1) the alternative origination of loans to students attend- ing institutions of higher education with agreements to partici- pate in the program under this part (or their parents), if such institutions do not have agreements with the Secretary under section 454(b); (2) the servicing and collection of loans made under this part;(3) the establishment and operation of 1 or more data sys- tems for the maintenance of records on all loans made under this part; (4) services to assist in the orderly transition from the loan programs under part B to the direct student loan program under this part; and 254 245 HIGHER EDUCATION ACT OF 1965 Sec. 457 (5) such other aspects of the direct student loan program as the Secretary determines are necessary to ensure the suc- cessful operation of the program. (20 U.S.C. 10871) Enacted August 10, 1993, P.L. 103-66, sec. 4021, 107 Stat. 352. SEC. 457. REGULATORY ACTWITIES. (a) NOTICE IN LIEU OF REGULATIONS FOR FIRST YEAR OF PRO- GRAM. (1) NOTICE IN LIEU OF REGULATIONS FOR FIRST YEAR OF PROGRAM.The Secretary shall publish in the Federal Register whatever standards, criteria, and procedures, consistent with the provisions of this part, the Secretary, in consultation with members of the higher education community, determines are reasonable and necessary to the successful implementation of the first year of the direct student loan program a ithorized by this part. Section 431 of the General Education Provisions Act shall not apply to the publication of such standards, criteria, and 'Procedures. (2) NEGOTIATED RULEMAKING.Beginning with academic year 1995-1996, all standards, criteria, procedures, and regula- tions implementing this part as amended by the Student Loan Reform Act of 1993 shall, to the extent practicable, be subject to negotiated rulemaking, including all such standards, cri- teria, procedures, and regulations promulgated from the date of enactment of such Act. (b) CLOSING DATE FOR APPLICATIONS FROM INSTITUTIONS.The Secretary shall establish a date not later than October 1, 1993, as the closing date for receiving applications from institutions of high- er education desiring to participate in the first year of the direct loan program under this part. (C) PUBLICATION OF LIST OF PARTICIPATING INSTITUTIONS.Not later than January 1, 1994, the Secretary shall publish in the Fed- eral Register a list of the institutions of higher education selected to participate in the first year of the direct loan program under this part. (20 U.S.C. 1087g) Enacted August 10, 1993, P.L. 103-66, sec. 4021, 107 Stat. 352. SEC. 458. FUNDS FOR ADMINISTRATIVE EXPENSES. (a) IN GENERAL.Each fiscal year, there shall be available to the Secretary of Education from funds available pursuant to section 422(g) and from funds not otherwise appropriated, funds to be obli- gated for administrative costs under this part, including the costs of the transition from the loan programs under part B to the direct student loan programs under this part (including the costs of annu- ally assessing the program under this part and the progress of the transition) and transition support (including administrative costs) for the expenses of guaranty agencies in servicing outstanding loans in their portfolios and in guaranteeing new loans, not to ex- ceed (from such funds not otherwise appropriated) $260,000,000 in fiscal year 1994, $345,000,000 in fiscal year 1995, $550,000,000 in fiscal year 1996, $595,000,000 in fiscal year 1997, and $750,000,000 in fiscal year 1998. If in any fiscal year the Secretary determines that additional funds for administrative expenses are needed as a result of such transition or the expansion of the direct student loan programs under this part, the Secretary is authorized to use funds Sec. 458 HIGHER EDUCATION ACT OF 1965 246 available under this section for a subsequent fiscal year for such expenses, except that the total expenditures by the Secretary (from such funds not otherwise appropriated) shall not exceed 82,500,000,000 in fiscal years 1994 through 1998. The Secretary is also authorized to carry over funds available under this section to a subsequent fiscal year. (b) AvAILABILITY.Funds made available under subsection (a) shall remain available until expended. (C) BUDGET JUSTIFICATION.No funds may be expended wider this section unless the Secretary includes in the Department of Education's annual budget justification to Congress a detailed de- scription of the specific activities for which the funds made avail- able by this section have been used in the prior and current years (if applicable), the activities and costs planned for the budget year, and the projection of activities and costs for each remaining year for which administrative expenses under this section are made available. (d) NOTIFICATION.In the event the Secretary finds it nec- essary to use the authority provided to the Secretary under sub- section (a) to draw funds for administrative expenses from a future year's funds, no funds may be expended under this section unless the Secretary immediately notifies the Committees on Appropria- tions of the Senate and of the House of Representatives, and the Labor and Human Resources Committee of the Senate and the Education and Labor Committee of the House of Representatives, of such action and explain the reasons for such action. (20 U.S.C. 1087h) Enacted August 10, 1993, P.L. 103-66, sec. 4021, 107 Stat. 353. PART EFEDERAL PERKINS LOANS SEC. 461. APPROPRIATIONS AUTHORIZED. (a) PROGRAM AUTHORITY.The Secretary shall carry out a pro- gram of stimulating and assisting in the establishment and mainte- nance of funds at institutions of higher education for the making of low-interest loans to students in need thereof to pursue their courses of study in such institutions or while engaged in programs of study abroad approved for credit by such institutions. Loans made under this part shall be known as "Federal Perkins Loans". (b) AUTHORIZATION OF APPROPRIATIONS.(1) For the purpose of enabling the Secretary to make contributions to student loan funds established under this part, there are authorized to be appro- priated $250,000,000 for fiscal year 1993 and such sums as may be necessary for each of the 4 succeeding fiscal years. (2) In addition to the funds authorized under paragraph (1), there are hereby authorized to be appropriated such sums for fiscal year 1997 and each of the 5 succeeding fiscal years as may be nec- essary to enable students who have received loans for academic years ending prior to October 1, 1997, to continue or complete courses of st udy. (c) USE OF APPROPRIATIONS.Any sums appropriated pursuant to subsection (b) for any fiscal year shall be available for apportion- ment pursuant to section 462 and for payments of Federal capital contributions therefrom to institutions of higher education which have agreements with the Secretary under section 463. Such Fed- 2 5 247 HIGHER EDUCATION ACT OF 1965 Sec. 462 eral capital contributions and all contributions from such institu- tions shall be used for the establishment, expansion, and mainte- nance of student loan funds. (20 U.S.C. 1087aa) Enacted June 23, 1972, P.L. 92-318, sec. 137(b), 86 Stat. 273; amended October 12, 1976, P.L. 94-482, secs. 130(a) and 130(b), 90 Stat. 2146; amended October 3, 1980, P.L. 96-374, secs. 441, 1391, 94 Stat. 1436, 1503; amend- ed October 17, 1986, P.L. 99-498, sec. 405(a), 100 Stat. 1439; amended July 23, 1992, P.L. 102-325, sec. 461(a)(2)-(c), 106 Stat. 576; amended December 20, 1993, P.L. 103-208, sec. 2(m), 107 Stat. 2486. SEC. 462. ALLOCATION OF FUNDS. (a) ALLOCATION BASED ON PREVIOUS ALLOCATION.(1) From the amount appropriated pursuant to section 461(b) for each fiscal year, the Secretary shall first allocate to each eligible institution an amount equal to (A) 100 percent of the amount of Federal capital contribu- tion allocated to such institution under this part for fiscal year 1985, multiplied by (B) the institution's default penalty, as determined under subsection (f), except that if the institution has a default rate in excess of the ap- plicable maximum default rate under subsection (g), the institution may not receive an allocation under this paragraph. (2)(A) From the amount so appropriated, the Secretary shall next allocate to each eligible institution that began participation in the program under this part after fiscal year 1985 but is not a first or second time participant, an amount equal to the greater of (i) $5,000; or (ii) 100 percent of the amount received and expended under this part for the first year it participated in the pro- gram. (B) From the amount so appropriated, the Secretary shall next allocate to each eligible institution that began participation in the program under this part after fiscal year 1985 and is a first or sec- ond time participant, an amount equal to the greatest of (i) $5,000; (ii) an amount equal to (I) 90 percent of the amount re- ceived and used under this part in the second preceding fiscal year by eligible institutions offering comparable programs of instruction, divided by (II) the number of students enrolled at such comparable institutions in such fiscal year, multiplied by (III) the number of students enrolled at the applicant institu- tion in such fiscal year; or (iii) 90 percent of the institution's allocation under this part for the preceding fiscal year. (C) Notwithstanding subparagraphs (A) and (B) of this para- graph, the Secretary shall allocate to each eligible institution which (i) was a first-time participant in the program in fiscal year 1986 or any subsequent fiscal year, and (ii) received a larger amount under this subsection in the second year of participation, an amount equal to 90 percent of the amount it received under this subsection in its second year of participation. 2 7 77-530 0-94-9 Sec. 462 HIGHER EDUCATION ACT OF 1965 248 (D) For any fiscal year after a fiscal year in which an institu- tion receives an allocation under subparagraph (A), (B), or (C), the Secretary shall allocate to such institution an amount equal to the product of-- (i) the amount determined under subparagraph (A), (B), or (C), multiplied by (ii) the institution's default penalty, as determined under subsection (f), except that if the institution has a default rate in excess of the ap- plicable maximum default rate under subsection (g), the institution may not receive an allocation under this paragraph. (3XA) If the amount appropriated for any fiscal year is less than the amount required to be allocated to all institutions under paragraph (1) of this subsection, then the mount of the allocation to each such institution shall be ratably reduced. (B) If the amount appropriated for any fiscal year is more than the amount required to be allocated to all institutions under para- graph (1) but less than the amount required to be allocated to all institutions under paragraph (2), then (i) the Secretary shall allot the amount required to be allo- cated to all institutions under paragraph (1), and (ii) the amount of the allocation to each institution under paragraph (2) shall be ratably reduced. (C) If additional amounts are appropriated for any such fiscal year, such reduced amounts shall be increased on the same basis as they were reduced (until the amount allocated equals the amount required to be allocated under paragraphs (1) and (2) of this subsection). (b) ALLOCATION OF EXCESS BASED ON PRO RATA SHARE.From one-quarter of the remainder of the amount appropriated pursuant to section 461(b) for any fiscal year (after ma.king the allocations required by subsection (a) of this section), the Secretary shall allo- cate to each eligible institution an amount which bears the same ratio to such one-quarter as (1) the amount the eligible institution receives for such fis- cal year under subsection (a), bears to (2) the amount all such institutions receive under such subsection (a). (C) ALLOCATION OF EXCESS BASED ON SHARE OF EXCESS ELIGI- BLE AMOUNTS.(1) From three-quarters of the remainder of the amount appropriated pursuant to section 461(b) after making the allocations required by subsection (a) of this section, the Secretary shall allocate to each eligible institution which has an excess eligi- ble amount an amount which bears the same ratio to such remain- der as such excess eligible amount bears to the sum of the excess eligible amounts of all such eligible institutions (having such excess eligible amounts). (2) For any eligible institution, the excess eligible amount is the amount, if any, by which (A)(i) that institution's eligible amount (as determined under paragraph (3)), divided by (ii) the sum of the eligible amounts of all institutions (as so determined), multiplied by (iii) the amount appropriated pursuant to section 461(b) for the fiscal year; exceeds 258 249 HIGHER EDUCATION ACT OF 1965 Sec. 462 (B) the amount required to be allocated to that institution under subsection (a), except that an eligible institution which has a default rate in ex- cess of the applicable maximum default rate under subsection (g) may not receive an allocation under this paragraph. (3) For any eligible institution, the eligible amount of that in- stitution is equal to (A) the amount of the institution's self-help need, as deter- mined under subsection (d); minus (B) the institution's anticipated collections; multiplied by (C) the institution's default penalty, as determined under subsection (f); except that, if the institution has a default rate in excess of the ap- plicable maximum default rate under subsk..:ttion (g), the eligible amount of that institution is zero. (d) DETERMINATION OF INSTITUTION'S SELF-HELP NEED.-(1) The amount of an institution's self-help need is equal to the sum of the self-help need of the institution's eligible undergraduate stu- dents and the self-help need of the institution's eligible graduate and professional students. (2) To determine the self-help need of an institution's eligible undergraduate students, the Secretary shall (A) establish various income categories for dependent and independent undergraduate students; (B) establish an expected family contribution for each in- come category of dependent and independent undergraduate students, determined on the basis of the average expected fam- ily contribution (computed in accordance with part F of this title) of a representative sample within each income category for the second preceding fiscal year; (C) compute 25 percent of the average cost of attendance for all undergraduate students; (D) multiply the number of eligible dependent students in each income category by the lesser of (i) 25 percent of the average cost of attendance for all undergraduate students determined under subparagraph (C); or (ii) the average cost of attendance for all undergradu- ate students minus the expected family contribution deter- mined under subparagraph (B) for that income category, except that the amount computed by such subtraction shall not be less than zero; (E) add the amounts determined under subparagraph (D) for each income category of dependent students; (F) multiply the number of eligible independent students in each income category by the lesser of (i) 25 percent of the average cost of attendance for all undergraduate students determined under subparagraph (C); or (ii) the average cost of attendance for all undergradu- ate students minus the expected family contribution deter- mined under subparagraph (B) for that income category, except that the amount computed by such subtraction for any income category shall not be less than zero; 9 P Sec. 462 HIGHER EDUCATION ACT OF 1965 250 (G) add the amounts determined under subparagraph (F) for each income category of independent students; and (H) add the amounts determined under subparagraphs (E) and (G). (3) To determine the self-help need of an institution's eligible graduate and professional students, the Secretary, for academic year 1988-1989, shall use the procedures employed for academic year 1986-1987, and, for any subsequent academic years, the Sec- retary shall (A) establish various income categories for graduate and professional students; (B) establish an expected family contribution for each in- come category of graduate and professional students, deter- mined on the basis of the average expected family contribution (computed in accordance with part F of this title) of a rep- resentative sample within each income category for the second preceding f5ical year; (C) de' c- mine the average cost of attendance for all grad- uate and i.r. nsional students; (D) E tht 'Act from the average cost of attendance for all graduate ari, professional students (determined under sub- paragraph 0)), the expected family contribution (determined under subparagraph (B)) for each income category, except that the amount computed by such subtraction for any income cat- egory shall not be less than zero; (E) multiply the amounts determined under subparagraph (D) by the number of eligible students in each category; (F) add the amounts determined under subparagraph (E) for each income category. (4)(A) For purposes of paragraphs (2) and (3), the term "aver- age cost of attendance" means the average of the attendance costs for undergraduate students and for graduate and professional stu- dents, which shall include (i) tuition and fees determined in accord- ance with subparagraph (B), (ii) standard living expenses deter- mined in accordance with subparagraph (C), and (iii) books and supplies determined in accordance with subparagraph (D). (B) The average undergraduate and graduate and professional tuition and fees described in subparagraph (A)(i) shall be computed on the basis of information reported by the institution to the Sec- retary, which shall include (i) total revenue received by the institu- tion from undergraduate and graduate tuition and fees for the sec- ond year preceding the year for which it is applying for an alloca- tion, and (ii) the institution's enrollment for such second preceding year. ;C) The standard living expense described in subparagraph (A)(ii) is equal to 150 percent of the difference between the income protection allowance for a family of five with one in college and the income protection allowance for a family of six with one in college for a single independent student. (D) The allowance for books and supplies described in subpara- graph (A)(iii) is equal to $450. (e) ANTICIPATED C0LLECTI0NS.(1) An institution's anticipated collections are equal to the amount which was collected during the 2 60 251 HIGHER EDUCATION ACT OF 1965 Sec. 462 second year preceding the beginning of the award period, multi- plied by 1.21. (2) The Secretary shall establish an appeals process by which the anticipated collections required in paragraph (1) may be waived for institutions with low default rates in the program assisted under this part. (f) DEFAULT REDUCTION AND DEFAULT PENALTIES.-(1) For any fiscal year prior to fiscal year 1994, any institution which has a de- fault rate which equals or exceeds 7.5 percent but does not exceed the maximum default rate applicable to the award year under sub- section (g), the institution's default penalty is a percentage equal to the complement of such default rate. For any institution which has a default rate that does not exceed 7.5 percent, the institution's default penalty is equal to one. (2) F'or fiscal year 1994 and any succeeding fiscal year, any in- stitution with a cohort default rate (as defined under subsection (h)) which (A) equals or exceeds 15 percent, shall establish a default reduction plan pursuant to regulations issued by the Secretary; (B) equals or exceeds 20 percent, but is less than 25 per- cent, shall have a default penalty of 0.9; (C) equals or exceeds 25 percent, but is less than 30 per- cent, shall have a default penalty of 0.7; and (D) equals or exceeds 30 percent shall have a default pen- alty of zero. (g) APPLICABLE MAXIMUM DEFAULT RATE.-(1) For award years 1992 and 1993, the applicable maximum default rate is 15 percent. (2) For award year 1994 and subsequent years, the maximum cohort default rate is 30 percent. (h) DEFINITIONS OF DEFAULT RATE AND COHORT DEFAULT RATE.-(1) For any award year prior to award year 1994, for the purpose of this section, the default rate is computed by dividing (A) the total principal amount of defaulted loans; by (B) the total principal amount of loans made under this part, less the principal amount of all loans made to borrowers who are eligible for deferment under section 464(c)(2)(A)(i) or are in a grace period preceding repayment. (2) For the purpose of paragraph (1)(A), the total principal amount of defaulted loans is equal to the total amount borrowed under loans that have reached repayment status and that are in default, minu (A) amounts that have been repaid or cancelled on such loans; (B) loans discharged in bankruptcy; (C) loans referred or assigned to the Secretary for collec- tion under paragraph (5)(A), (5)(B)(i), or (6) of section 463(a); and (D) loans that are in default but on which the borrowers have made satisfactory arrangements to resume payment. (3)(A) For award year 1994 and any succeeding year, the term "cohort default rate" means, for any award year in which 30 or more current and former students at the institution enter repayment on loans under this part (received for attendance at the institution), the percentage of those current and former Sec. 462 HIGHER EDUCATION ACT OF 1965 252 students who enter repayment on such loans (received for at- tendance at that institution) in that award year who default before the end of the following award year. (B) In determining the number of students who default be- fore the end of such award year, the Secretary shall, in cal- culating the cohort default rate, exclude any loans which, due to improper servicing or collection, would result in an inac- curate or incomplete calculation of the cohort default rate. (C) For any award year in which less than 30 of the insti- tution's current and former students enter repayment, the term "cohort default rate" means the percentage of such cur- rent and former students who entered repayment on such loans in any of the three most recent award years and who de- fault before the end of the award year immediately following the year in which they entered repayment. (D) A loan on which a payment is made by the institution of higher education, its owner, agency, contractor, employee, or any other entity or individual affiliated with such institution, in order to avoid default by the borrower, is considered as in default for the purposes of this subsection. (E) Any loan that is in default but on which the borrower has made satisfactory arrangements to resume payment or any loan which has been rehabilitated before the end of such fol- lowing award year is not considered as in default for purposes of this subsection. (F) In the case of a student who has attended and bor- rowed at more than one school, the student (and his or her subsequent repayment or default) is attributed to the school for attendance at which the student received the loan that entered repayment in the award year. (G) The Secretary shall prescribe regulations designed to prevent an institution from evading the application to that in- stitution of a default rate determination under this subsection through the use of such measures as branching, consolidation, change of ownership or control or other means as determined by the Secretary. (4) A loan shall be considered to be in default-- (A) 240 days (in the case of a loan repayable monthly), or (B) 270 days (in the case of a loan repayable quarterly), after the borrower fails to make an installment payment when due or to comply with other terms of the promissory note, (i) FILING DEADLINES.The Secretary shall, from time to time, set dates before which institutions must file applications for alloca- tions under this part. (j) REALLOCATION OF EXCESS ALLOCATIONS. (1) IN GENERAL.(A) If an institution of higher education returns to the Secretary any portion of the sums allocated to such institution under this section for any fiscal year, the Sec- retary shall reallocate 80 percent of such returned portions to participating institutions in an amount not to exceed such par- ticipating institution's excess eligible amounts as determined under paragraph (2). 262 253 HIGHER EDUCATION ACT OF 1965 Sec. 463 (B) For the purpose of this subsection, the term "partici- pating institution" means an institution of higher education that (i) was a participant in the program assisted under this part in fiscal year 1985; and (ii) did not receive an allocation under subsection (a) in the fiscal year for which the reallocation determination is made. (2) EXCESS ELIGIBLE AMOUNT.For any participating insti- tution, the excess eligible amount is the amount, if any, by which (A)(i) that institution's eligible amount (as determined under paragraph (3) ef subsection (c)), divided by (ii) the sum of the eligible amounts of all participating institutions (as determined under paragraph (3)), multiplied by (iii) the amount of funds available for reallocation under this sub- section; exceeds (B) the amount required to be allocated to that institu- tion under subsection (c) of section 462. (3) REMAINDER.The Secretary shall reallocate the re- mainder of such returned portions in accordance with regula- tions of the Secretary. (4) ALLOCATION REDUCTIONS.If under paragraph (1) of this subsection an institution returns more than 10 percent of its allocation, the institution's allocation for the next fiscal year shall be reduced by the amount returned. The Secretary may waive this paragraph for a specific institution if the Secretary finds that enforcing it is contrary to the interest of the pro- gram. (20 U.S.C. 1087bb) Enacted June 23, 1972, P.L. 92-318, sec. 137(b), 86 Stat. 273, 274; amended October 3, 1980, P.L. 96-374, secs. 448(a), 1391, 94 Stat. 1443, 1503; amended October 17, 1986, P.L. 99-498, sec. 405(a), 100 Stat. 1440; amended June 3, 1987, P.L. 100-50, sec. 13(a)(d), 101 Stat. 348; amended July 23, 1992, P.L. 102 325, sec. 462, 106 Stat. 576; amended December 20, 1993, P.L. 103-208, sec. 2(0(1) (4), (in), 107 Stat. 2470-71, 2486. SEC. 483. AGREEMENTS WITH INSTITUTIONS OF HIGHER EDUCATION. (a) CONTENTS OF AGREEMENTS.An agreement with any insti- tution of higher education for the payment of Federal capital con- tributions under this part shall (1) provide for the establishment and maintenance of a student loan fund for the purpose of this part; (2) provide for the deposit in such fund of (A) Federal capital contributions from funds appro- priated under section 461; (B) a capital contribution (i) by an institution that (I) is granted permission by the Secretary to participate in an Expanded Lending Option under the program, and (II) has a default rate which does not exceed 7.5 percent for award year 1993-1994 and has a cohort default rate which does not exceed 15 per- cent for award year 1994-1995 or for any succeed- ing award year, Sec. 463 HIGHER EDUCATION ACT OF 1965 254 in an amount not less than the amount of the Federal capital contributions described in subparagraph (A); or (ii) by any other institution, in an amount not less than three-seventeenths of such Federal capital con- tribution in fiscal year 1993, and one-third of such Federal capital contribution in each of the succeeding fiscal years, of the amount of the Federal capital con- tributions described in subparagraph (A); (C) collections of principal and interest on student loans made from deposited funds; (D) charges collected pursuant to regulations under section 464(c)(1)(H); and (E) any other earnings of the funds; (3) provide that such student loan fund shall be used only for (A) loans to students, in accordance with the provi- sions of this part; (B) administrative expenses, as provided in subsection (b); (C) capital distributions, as provided in section 466; and (D) costs of litigation, and other collection costs agreed to by the Secretary in connection with the collection of a loan from the fund (and interest thereon) or a charge as- sessed pursuant to regulations under section 464(c)(1)(H); (4) provide that where a note or written agreement evi- dencing a note has been in default for (A) 120 days, in the case of a loan which is repayable in monthly installments, or (B) 180 days, in the case of a loan which is repayable in less fre- quent installments, notice of such default shall be given to the Secretary in an annual report describing the total number of loans from such fund which are in such default; (5) provide that where a note or written agreement evi- dencing a loan has been in default despite due diligence on the part of the institution in attempting collection thereon (A) if the institution has knowingly failed to maintain an acceptable collection record with respect to such loan, as determined by the Secretary in accordance with criteria established by regulation, the Secretary may (i) require the institution to assign such note or agreement to the Secretary, without recompense; and (ii) apportion any sums collected on such a loan, less an amount not to exceed 30 percent of any sums collected to cover the Secretary's collection costs, among other institutions in accordance with section 462; or (B) if the institution is not one described in subpara- graph (A), the Secretary may (i) allow such institution to transfer its interest in such loan to the Secretary, for collection, and the Sec- retary may use any collections thereon (less an amount not to exceed 30 percent of any such sums col- lected to cover the Secretary's collection costs) to make 255 HIGHER EDUCATION ACT OF 1965 Sec. 463 allocations to institutions of additional capital con- tributions in accordance with section 462; or (ii) allow such institution to refer such note or agreement to the Secretary, without recompense, ex- cept that any sums collected on such a loan (less an amount not to exceed 30 percent of any such sums col- lected to cover the Secretary's collection costs) shall be repaid to such institution no later than 180 days after collection by the Secretary and treated as an addi- tional capital contribution; (6) provide that, if an institution of higher education deter- mines not to service and collect student loans made available from funds under this part, the institution will assign, at the beginning of the repayment period, notes or evidence of obliga- tions of student loans made from such funds to the Secretary and the Secretary shall apportion any sums collected on such notes or obligations (less an amount not to exceed 30 percent of any such sums collected to cover that Secretary's collection costs) among other institutions in accordance with section 462; (7) provide that, notwithstanding any other provision of law, the Secretary will provide to the institution any informa- tion with respect to the names and addresses of borrowers or other relevant information which is available to the Secretary, from whatever source such information may be derived; (8) provide assurances that the institution will comply with the provisions of section 463A; (9) provide that the institution of higher education will make loans first to students with exceptional need; and (10) include such other reasonable provisions as may be necessary to protect the United States from unreasonable risk of loss and as are agreed to by the Secretary and the institu- tion. (b) ADMINISTRATIVE EXPENSES.An institution which has en- tered into an agreement under subsection (a) shall be entitled, for each fiscal year during which it makes student loans from a stu- dent loan fund established under such agreement, to a payment in lieu of reimbursement for its expenses in administering its student loan program under this part during such year. Such payment shall be made in accordance with section 489. (C) COOPERATIVE AGREEMENTS WITH CREDIT BUREAU ORGANI- ZATIONS.(1) For the purpose of promoting responsible repayment of loans made pursuant to this part, the Secretary shall enter into cooperative agreements with credit bureau organizations to provide for the exchange of information concerning student borrowers con- cerning whom the Secretary has received a referral pursuant to section 467. (2) Each cooperative agreement made pursuant to paragraph (1) shall be made in accordance with the requirements of section 430A except that such agreement shall provide for the disclosure by the Secretary to such organizations, with respect to any loan for which the Secretary is responsible, of (A) the date of disbursement and the amount of any such loan; 6") r Sec. 463A HIGHER EDUCAIION ACT OF 1965 256 (B) information concerning collection of any such loan, in- cluding information concerning the status of any defaulted loan; and (C) the date of cancellation of the note upon completion of repayment by the borrower of any such loan. (3) Notwithstanding paragraPhs (4) and (6) of subsection (a) of section 605 of the Fair Crit Reporting Act (15 U.S.C. 1681c (a)(4), (a)(6)), a consumer reporting agency may make a report containing information received from the Secretary regarding the status of a borrower's account on a loan made under this part until- (A) 7 years from the date on which the Secretary accepted an assignment or referral of a loan, or (B) 7 years from the date the Secretary first reports the ac- count to a consumer reporting agency. (4) Each institution of higher ed.ucation, after consultation with the Secretary and pursuant to the agreements entered into under paragraph (1), shall disclose at least annually to any credit bureau organization with which the Secretary has such an agreement-- (A) the amount of loans made to any borrower under this part at the time of the disbursement of the loan; and (B) the information set forth in section 430A(a). (d) LIMITATION ON USE OF INTEREST BEARING ACCOUNTS.-In carrying out the provisions of subsection (a)(10), the Secretary may not require that any collection agency, collection attorney, or loan servicer collecting loans made under this part deposit amounts col- lected on such loans in interest bearing accounts, unless such agen- cy, attorney, or servicer holds such amounts for more than 45 days. (e) SPECIAL DUE DILIGENCE RULE.-In carrying out the provi- sions of subsection (aX5) relating to due diligence, the Secretary shall make every effort to ensure that institutions of higher edu- cation may use Internal Revenue Service skip-tracing collection procedures on loans made under this part. (20 U S.C. 1087cc) Enacted June 23, 1972, P.L. 92-318, sec. 137(b), 86 Stat. 274, 275, amended October 12, 1976, P.L. 94-482, sec. 130(c), 90 Stat. 2146, 2147; amended October 3, 1980, P.L. 96-374, secs. 442(b) (1), (2), (3), 445(a), (b)(1), 447(a), 448(b), 1391, 94 Stat. 1439, 1440, 1442, 1443, 1503; amended April 7, 1986, P.L. 99- 272, secs. 16025, 16026, 100 Stat. 352, 353; amended October 17, 1986, P.L. 99-498, sec 405(a), 100 Stat. 1444; amended June 3, 1987, P.L. 100-50, sec. 13(e)-(f), 101 Stat. 349, amended July 23, 1992, P.L. 102-325, sec. 463(a), (b), 106 Stat. 579; amended December 20, 1993, P.L. 103-208, sec. 2(f)(5)-(7), (m), 107 Stat. 2471, 2486. SEC. 463A. STUDENT LOAN INFORMATION BY ELIGIBLE INSTITUTIONS. (a) DISCLOSURE REQUIRED PRIOR TO DISBURSEMENT.-Each in- stitution of higher education, in order to carry out the provisions of section 463(aX8), shall, at or prior to the time such institution makes a loan to a student borrower which is made under this part, provide thorough and adequate loan information on such loan to the student borrower. Any disclosure required by this subsection may be made by an institution of higher education as part of the written application material provided to the borrower, or as part of the promissory note evidencing the loan, or on a separate written form provided to the borrower. The disclosures shall include- (1) the name of the institution of higher education, and the address to which communications and payments should be sent; 257 HIGHER EDUCATION ACT OF 1965 Sec. 463A (2) the principal amount of the loan; (3) the amount of any charges collected by the institution at or prior to the disbursal of the loan and whether such charges are deducted from the proceeds of the loan or paid sep- arately by the borrower; (4) the stated interest rate on the loan; (5) the yearly and cumulative maximum amounts that may be borrowed; (6) an explanation of when repayment of the loan will be required and when the borrower will be obligated to pay inter- est that accrues on the loan; (7) a statement as to the minimum and maximum repay- ment term which the institution may impose, and the mini- mum monthly payment required by law and a description of any penalty imposed as a consequence of default, such as li- ability for expenses reasonably incurred in attempts by the Secretary or institutions to collect on a loan; (8) a statement of the total cumulative balance, including the loan applied for, owed by the student to that lender, and an estimate of the projected monthly payment, given such cu- mulative balance; (9) an explanation of any special options the borrower may have for loan consolidation or other refinancing of the loan; (10) a statement that the borrower has the right to prepay all or part of the loan, at any time, without penalty, a state- ment summarizing circumstances in which repayment of the loan or interest that accrues on the loan may be deferred, and a brief notice of the program for repayment of loans, on the basis of military service, pursuant to the Department of De- fense educational loan repayment program (10 U.S.C. 2172); (11) a definition of default and the consequences to the borrower if the borrower defaults, together with a statement that the disbursement of, and the default on, a loan under this part, shall be reported to a credit bureau or credit reporting agency; (12) to the extent practicable, the effect of accepting the loan on the eligibility of the borrower for other forms of stu- dent assistance; and (13) an explanation of any cost the borrower may incur in the making or collection of the loan. (b) DISCLOSURE REQUIRED PRIOR TO REPAYMENT.Each insti- tution of higher education shall enter into an agreement with the Secretary under which the institution will, prior to the start of the repayment period of the student borrower on loans made under this part, disclose to the student borrower the information required under this subsection. Any disclosure required by this subsection may be made by an institution of higher education either in a promissory note evidencing the loan or loans or in a written state- ment provided to the borrower. The disclosures shall include (1) the name of the institution of higher education, and the address to which communications and payments should be sent; (2) the scheduled date upon which the repayment period is to begin; Sec. 464 HIGHER EDUCATION ACT OF 1965 258 (3) the estimated balance owed by the borrower on the loan or loans covered by the disclosure as of 9ie scheduled date on which the repayment period is to begin (mcluding, if appli- cable, the estimated amount of interest to be capitalized); (4) the stated interest rate on the loan or loans, or the combined interest rate of loans with different stated interest rates; (5) the nature of any fees which may accrue or be charged to the borrower during the repayment period; (6) the repayment schedule for all loans covered by the dis- closure including the date the first installment is due, and the number, amount, and frequency of required payments; (7) an explanation of any special options the borrower may have for loan consolidation or other refinancing of the loan; (8) the projected total of interest charges which the bor- rower will pay on the loan or loans, assuming that the bor- rower makes payments exactly in accordance with the repay- ment schedule; and (9) a statement that the borrower has the right to prepay all or part of the loan or loans covered by the disclosure at any time without penalty. (c) COSTS AND EFFECTS OF DISCLOSURES.-Such information shall be available without cost to the borrower. The failure of an eligible institution to provide information as required by this sec- tion shall not (1) relieve a borrower of the obligation to repay a loan in accordance with its terms, (2) provide a basis for a claim for civil damages, or (3) be deemed to abrogate the obligation of the Secretary to make payments with respect to such loan. (20 U.S.C. 1087cc-1) Enacted October 3, 1980, P.L. 96-374, sec. 447(b), 94 Stat. 1443; amended October 13, 1982, P.L. 97-301, sec. 13(b), 96 Stat. 1404; amended August 15, 1983, P.L. 98-79, sec. 3(b), 97 Stat. 478; amended April 7, 1986, P.L. 99-272, sec. 16027, 100 Stat. 353; amended October 17, 1986, P.L. 99-498, sec. 405(a), 100 Stat. 1446; amended June 3, 1987, P.L. 100-50, sec. 13(g)-(h), 101 Stat. 349; amended July 23, 1992, P.L. 102-325, sec. 463(c), 106 Stat. 579; amended De- cember 20, 1993, P.L. 103-208, sec. 2(0(8), is amended, 107 Stat. 2471, 2486. SEC. 464. TERMS OF LOANS. (a) TERMS AND CONDITIONS.-(1) Loans from any student loan fund established pursuant to an agreement under section 463 to any student by any institution shall, subject to such conditions, limitations, and requirements as the Secretary shall prescribe by regulation, be made on such terms and conditions as the institution may determine. (2)(A) Except as provided in paragraph (4), the total of loans made to a student in any academic year or its equivalent by an in- stitution of higher education from a loan fund established pursuant to an agreement under this part shall not exceed- (i) for institutions that have an agreement with the Sec- retary to participate in the Expanded Lending Option under section 463(aX2X13Xi)- (I) $4,000, in the case of a student who has not suc- cessfully completed a program of undergraduate education; Or (II) $6,000, in the case of a graduate or professional student (as defined in regulations issued by the Secretary). 259 HIGHER EDUCATION ACT OF 1965 Sec. 464 (ii) for all other institutions (I) $3,000, in the case of a student who has not suc- cessfully completed a program of undergraduate education; Or (II) $5,000, in the case of a graduate or professional student (as defined in regulations issued by the Secretary). (B) Except as provided in paragraph (4), the aggregate of the loans for all years made to a student by institutions of higher edu- cation from loan funds established pursuant to agreements under this part may not exceed (i) for institutions that have an agreement with the Sec- retary to participate in the Expanded Lending Option under section 463(a)(2)(B)(i) (I) $40,000 in the case of any graduate or professional student (as defined by regulations of the Secretary, and in- cluding any loans from such funds made to such person be- fore he became a graduate or professional student); (II) $20,000 in the case of a student who has success- fully completed 2 years of a program of education leading to a bachelor's degree but who has not completed the work necessary for such a degree (determined under regulations of the Secretary, and including any loans from such funds made to such person before he became such a student); and (III) $8,000 in the case of any other student; or (ii) for all other institutions (I) $15,000, in the case of any student who has not successfully completed a program of undergraduate edu- cation; or (H) $30,000, in the case of any graduate or profes- sional student (as defined by regulations issued by the Sec- retary) and including any loans from such funds made to such student before the student became a graduate or pro- fessional student. (3) Regulations of the Secretary under paragraph (1) shall be designed to prevent the impairment of the capital student loan funds to the maximum extent practicable and with a view toward the objective of enabling the student to complete his course of study. (4) In the case of a program of study abroad that is approved for credit by the home institution at which a student is enrolled and that has reasonable costs in excess of the home institution's budget, the annual and aggregate loan limits for the student may exceed the amounts described in paragraphs (2XA) and (2XB) by 20 percent. (b) DEMONSTRATION OF NEED AND ELIGIBILITY REQUIRED.-(1) A loan from a student loan fund assisted under this part may be made only to a student who demonstrates financial need in accord- ance with part F of this title, who meets the requirements of sec- tion 484, and who provides the institution with the student's driv- ers license number, if any, at the time of application for the loan. (2) If the institution's capital contribution under section 462 is directly or indirectly based in part on the financial need dem- onstrated by students who are (A) attending the institution less Sec. 464 HIGHER EDUCATION ACT OF 1965 260 than full time, or (B) independent students, and if the total finan- cial need of all such less than full-time and independent students at the institution exceeds 5 percent of the total financial need of all students at such institution, then at least 5 percent of such loans shall be made available to such less than full-time and inde- pendent students. (c) CONTENTS OF LOAN AGREEMENT.-(1) Any agreement be- tween an institution and a student for a loan from a student loan fund assisted under this part (A) shall be evidenced by note or other written instrument which, except as provided in paragraph (2), provides for repay- ment of the principal amount of the loan, together with inter- est thereon, in equal installments (or, if the borrower so re- quests, in graduated periodic installments determined in ac- cordance with such schedules as may be approved by the Sec- retary) payable quarterly, bimonthly, or monthly, at the option of the institution, over a period beginning nine months after the date on which the student ceases to carry, at an institution of higher education or a comparable institution outside the United States approved for this purpose by the Secretary, at least one-half the normal full-time academic workload, and ending 10 years and 9 months after such date except that such period may begiu earlier than 9 months after such date upon the request of the borrower; (B) shall include provision for acceleration of repayment of the whole, or any part, of such loan, at the option of the bor- rower; (C)(i) may provide, at the option of the institution, in ac- cordance with regulations of the Secretary, that during the re- payment period of the loan, payments of principal and interest by the borrower with respect to all outstanding loans made to the student from a student loan fund assisted under this part shall be at a rate equal to not less than $40 per month, except that the institution may, subject to such regulations, permit a borrower to pay less than $40 per month for a period of not more than one year where necessary to avoid hardship to the borrower, but without extending the 10-year maximum repay- ment period provided for in subparagraph (A) of this para- graph; and (ii) may provide that the total payments by a borrower for a monthly or similar payment period with respect to the aggre- gate of all loans held by the institution may, when the amount of a monthly or other similar payment is not a multiple of $5, be rounded to the next highest whole dollar amount that is a multiple of $5; (D) shall provide that the loan shall bear interest, on the unpaid balance of the loan, at the rate of (i) 3 percent per year, (ii) 4 percent per year in the case of any loan made on or after July 1, 1981, or (iii) 5 percent per year in the case of any loan made on or after October 1, 1981, except that no interest shall accrue (I) prior to the beginning date of repayment determined under subparagraph (A)(i), or (II) during any period in which repayment is suspended by reason of paragraph (2); ors, 261 HIGHER EDUCATION ACT OF 1965 Sec. 464 (E) shall provide that the loan shall be made without secu- rity and without endorsement; (F) shall provide that the liability to repay the loan shall be canceled upon the death of the borrower, or if he becomes permanently and totally disabled as determined in accordance with regulations of the Secretary; (G) shall provide that no note or evidence of obligation may be assigned by the lender, except upon the transfer of the borrower to another institution participating under this part (or, if not so participating, is eligible to do so and is approved by the Secretary for such purpose), to such institution, and ex- cept as necessary to carry out section 463(a)(6); (H) pursuant to regulations of the Secretary, shall provide for an assessment of a charge with respect to the loan for fail- ure of the borrower to pay all or part of an installment when due, which shall include the expenses reasonably incurred in attempting collection of the loan, to the extent permitted by the Secretary, except that no charge imposed under this sub- paragraph shall exceed 20 percent of the amount of the month- ly payment of the borrower; and (I) shall contain a notice of the system of disclosure of in- formation concerning default on such loan to credit bureau or- ganizations under section 463(c). (2XA) No repayment of principal of, or interest on, any loan from a student loan fund assisted under this part shall be required during any period (i) during which the borrower (I) is pursuing at least a half-time course of study as determined by an eligible institution; or (H) is pursuing a course of study pursuant to a grad- uate fellowship program approved by the Secretary, or pursuant to a rehabilitation training program for disabled individuals approved by the Secretary, except that no borrower shall be eligible for a deferment under this clause, or loan made under this part while serving in a medical internship or residency program; (ii) not in excess of 3 years during which the borrower is seeking and unable to find full-time employment; (iii) not in excess of 3 years for any reason which the lend- er determines, in accordance with regulations prescribed by the Secretary under section 435(o), has caused or will cause the borrower to have an economic hardship; or (iv) during which the borrower is engaged in service de- scribed in section 465(a)(2); and provides that any such period shall not be included in deter- mining the 10-year period described in subparagraph (B). (B) No repayment of principal of, or interest on, any loan for any period described in subparagraph (A) shall begin until 6 months after the completion of such period. (3)(A) The Secretary is authorized, when good cause is shown, to extend, in accordance with regulations, the 10-year maximum re- payment period provided for in subparagraph (A) of paragraph (1) with respect to individual loans. " 1 / Sec. 464 HIGHER EDUCATION ACT OF 1965 262 (B) Pursuant to uniform criteria established by the Secretary, the repayment period for any student borrower who during the re- payment period is a low-income individual may be extended for a period not to exceed 10 years and the repayment schedule may be adjusted to reflect the income of that individual. (4) The repayment period for a loan made under this part shall begin on the day immediately following the expiration of the pe- riod, specified in paragraph (1)(A), after the student ceases to carry the required academic workload, unless the borrower requests and is granted a repayment schedule that provides for repayment to commence at an earlier point in time, and shall exclude any period of authorized deferment, forbearance, or cancellation. (5) The institution may elect (A) to add the amount of any charge imposed under para- graph (1)(H) to the principal amount of the loan as of the first day after the day on which the installment was due and to no- tify the borrower of the assessment of the charge; or (B) to make the amount of the charge payable to the insti- tution not later than the due date of the next installment. (6) Requests for deferment of repayment of loans under this part by students engaged in graduate or post-graduate fellowship- supported study (such as pursuant to a Fulbright grant) outside the United States shall be approved until completion of the period of the fellowship. (d) AVAILABILITY OF LOAN FUND TO ALL ELIGIBLE STUDENTS. An agreement under this part for payment of Federal capital con- tributions shall include provisions designed to make loans from the student loan fund established pursuant to such agreement reason- ably available (to the extent of the available funds in such fund) to all eligible students in such institutions in need thereof. (e) FORBEARANCE.The Secretary shall ensure that, upon writ- ten request, an institution of higher education shall graqt a bor- rower forbearance of principal and interest or principal only, re- newable at 12-month intervals for a period not to excecd 3 years, on such terms as are otherwise consistent with the regulations is- sued by the Secretary and agreed upon in writing by the parties to the loan, if (1) the borrower's debt burden equals or exceeds 20 per- cent of such borrower's gross income; or (2) the instituthn determines that the borrower should qualify for forbearance for other reasons. (f) SPECIAL REPAYMENT RULE AUTHORITY.(1) Subject to such restrictions as the Secretary may prescribe to protect the interest of the United States, in order to encourage repayment of loans made under this part which are in default, the Secretary may, in the agreement entered into under this part, authorize an institu- tion of higher education to compromise on the repayment of such defaulted loans in accordance with paragraph (2). The Federal share of the compromise repayment shall bear the same relation to the institution's share of' such compromise repayment as the Fed- eral capital contribution to the institution's loan fund under this part bears to the institution's capital contribution to such fund. (2) No compromise repayment of a defaulted loan as authorized by paragraph (1) may be made unless the student borrower pays- 263 HIGHER EDUCATION ACT OF 1965 Sec. 465 (A) 90 percent of the loan under this part; (B) the interest due on such loan; and (C) any collection fees due on such loan; in a lump sum payment. (20 U.S.C. 1087dd) Enacted June 23, 1972, P.L. 92-318, sec. 137(b), 86 Stat. 275, 277; amended October 12, 1976, P.L. 94-482, sec. 130(d), 130(e), 130(0, 130 (g)(1) and (g)(2), 90 Stat. 2147; amended June 15, 1977, P.L. 95-43, secs. 1(a)(39), 91 Stat. 217; amended October 3, 1980, P.L. 96-374, secs. 442(b) (4), (5), 443, 444, 445(b)(2), 446, 448(c), 1391, 94 Stat. 1440, 1441, 1442, 1443, 1503; amended August 13, 1981, P.L. 97-35, sec. 539, 95 Stat. 458; amended April 7, 1986, P.L. 99-272, sec. 16028, 100 Stat. 353; amended October 17, 1986, P.L. 99-498, sec. 405(a), 100 Stat. 1448; . amended June 3, 1987, P.L. 100-50, sec. 13(i), 101 Stat. 349; amended July 18, 1988, P.L. 100-369, sec. 7(c), 102 Stat. 837; amended December 19, 1989, P.L. 101- 239, sec. 2001(3), 103 Stat. 2111; amended July 23, 1992, P.L. 102-325, sec. 464, 106 Stat. 580; amended December 20, 1993, P.L. 103-208, sec. 2(f)(9)-(11), (m), 107 Stat. 2471, 2486. SEC. 465. CANCELLATION OF LOANS FOR CERTAIN PUBLIC SERVICE. (a) CANCELLATION OF PERCENTAGE OF DEBT BASED ON YEARS OF QUALIFYING SERVICE.-(1) The percent specified in paragraph (3) of this subsection of the total amount of any loan made after June 30, 1972, from a student loan fund assisted under this part shall be canceled for each complete year of service after such date by the borrower under circumstances described in paragraph (2). (2) Loans shall be canceled under paragraph (1) for service- (A) as a full-time teacher for service in an academic year in a public or other nonprofit private elementary or secondary school which is in the school district of a local educational agency which is eligible in such year for assistance pursuant to chapter 1 of the Education Consolidation and Improvement Act of 1981, and which for the purpose of this paragraph and for that year has been determined by the Secretary (pursuant to regulations and after consultation with the State edu- cational agency of the State in which the school is located) to be a school in which the enrollment of children counted under section 111(c) of the Elementary and Secondary Education Act of 1965 exceeds 30 percent of the total enrollment of that school; (B) as a full-time staff member in a preschool program car- ried on under the Head Start Act which is operated for a pe- riod which is comparable to a full school year in the locality if the salary of such staff member is not more than the salary of a comparable employee of the local educational agency; (C) as a full-time special education teacher, including teachers of infants, toddlers, children, or youth with disabil- ities in a public or other nonprofit elementary or secondary school system, or as a full-time qualified professional provider of early intervention services in a public or other nonprofit pro- gram under public supervision by the lead agency as author- ized in section 676(b)(9) of the Individuals With Disabilities Education Act; (D) as a member of the Armed Forces of the United States, for service that qualifies for special pay under section 310 of title 37, United States Code, as an area of hostilities; (E) as a volunteer under the Peace Corps Act or a volun- teer under the Domestic Volunteer Service Act of 1973; 2 Sec. 465 HIGHER EDUCATION ACT OF 1965 264 (F) as a fall-time law enforcement officer or corrections of- ficer for service to local, State, or Federal law enforcement or corrections agencies; (G) as a full-time teacher of mathematics, science, foreign languages, bilingual education, or any other field of expertise where the State educational agency determines there is a shortage of qualified teachers; (H) as a full-time nurse or medical technician providing health care .services; or (I) as a full-time employee of a public or private nonprofit child or family service agency who is providing, or supervising the provision of, services to high-risk children who are from low-income communities and the families of such children. For the purpose of this paragraph, the term "children with disabil- ities" has the meaning set forth in section 602(a)(1) of the Individ- uals with Disabilities Education Act. (3XA) The percent of a loan which shall be canceled under paragraph (1) of this subsection is (i) in the case of service described in subparagraph (A), (C), (F), (G), (H), or (I) of paragraph (2), at the rate of 15 per- cent for the first or second year of such service, 20 percent for the third or fourth year of such service, and 30 percent for the fifth year of such service; (ii) in the case of service described in subparagraph (B) of paragraph (2), at the rate of 15 percent for each year of such service; (iii) in the case of service described in subparagraph (D) of paragraph (2), not to exceed a total of 50 percent of such loan at the rate of 121/2 percent for each year of qualifying service; or (iv) in the case of service described in subparagraph (E) of paragraph (2) at the rate of 15 percent for the first or second year of such service and 20 percent for the third or fourth year of such service. (B) If a portion of a loan is canceled under this subsection for any year, the entire amount of interest on such loan which accrues for such year shall be canceled. (C) Nothing in this subsection shall be construed to authorize refunding of any repayment of a loan. (4) For the purpose of this subsection, the term "year" where applied to service as a teacher means academic year as defined by the Secretary. (5) The amount of a loan, and interest on a loan, which is can- celed under this section shall not be considered income for purposes of the Internal Revenue Code of 1986. (6) No borrower may, for the same volunteer service, receive a benefit under both this section and subtitle D of title I of the Na- tional and Community Service Act of 1990 (42 U.S.C. 12571 et seq.). (b) REIMBURSEMENT FOR CANCELLATION.The Secretary shall pay to each institution for each fiscal year an amount equal to the aggregate of the amounts of loans from its student loan fund which are canceled pursuant to this section for such year, minus an amount equal to the aggregate of the amounts of any such loans 265 HIGHER EDUCATION ACT OF 1965 Sec. 466 so canceled which were made from Federal capital contributions to its student loan fund provided by the Secretary under section 468. None of the funds appropriated pursuant to section 461(b) shall be available for payments pursuant to this subsection. (c) SPECIAL RULES.- (1) LIsT.-If the list of schools in which a teacher may per- form service pursuant to subsection (a)(2)(A) is not available before May 1 of any year, the Secretary may use the list for the year preceding the year for which the determination is made to make such service determination. (2) CONTINUING ELIGIBILITY.-Any teacher who performs service in a school which- (A) meets the requirements of subsection (a)(2)(A) in any year; and (B) in a subsequent year fails to meet the require- ments of such subsection, may continue to teach in such school and shall be eligible for loan cancellation pursuant to subsection (a)(1) such subsequent years. (20 U.S.C. 1087ee) Enacted June 23, 1972, P.L. 92-318, sec. 137(b), 86 Stat. 277, 278, amended Nov. 1, 1978, P.L. 95-561, sec. 1323, 92 Stat. 2363; amended October 3, 1980, P.L. 96-374, secs. 442(b)(6), 448 (d), (e), 1391, 94 Stat. 1440, 1443, 1503; amended October 17, 1986, P.L. 99-498, sec. 405(a), 100 Stat. 1451; amended June 3, 1987, P.L. 100-50, sec. 13(j), 101 Stat. 349; amended July 18, 1988, P.L. 100- 369, sec. 7(c), 102 Stat. 837; amended November 29, 1990, P.L. 101-647, sec. 2101(a) and (b), 104 Stat. 4856; amended October 7, 1991, P.L. 102-119, sec. 26(h), 105 Stat. 607, amended July 23, 1992, P.L. 102-325, sec. 465(a)-(c), 106 Stat. 582; amended September 21, 1993, P.L. 103-82, sec. 102(c)(3), 107 Stat. 824; amended December 20, L93, P.L. 103-208, sec. 2(0(12)-(14), (k)(7), (m), 107 Stat. 2471, 2486. SEC. 466. DISTRIBUTION OF ASSETS FROM STUDENT LOAN FUNDS. (a) IN GENERAL.-After September 30, 1996, and not later than March 31, 1997, there shall be a capital distribution of the balance of the student loan fund established under this part by each insti- tution of higher education as follows: (1) The Secretary shall first be paid an amount which bears the same ratio to the balance in such fund at the close of September 30, 1996, as the total amount of the Federal cap- ital contributions to such fund by the Secretary under this part bears to the sum of such Federal contributions and the institu- tion's capital contributions to such fund. (2) The remainder of such balance shall be paid to the in- stitution. (b) DISTRIBUTION OF LATE COLLECTIONs.-After March 31, 2005, each institution with which the Secretary has made an agree- ment under this part, shall pay to the Secretary the same propor- tionate share of amounts received by this institution after Septem- ber 30, 1996, in payment of principal and interest on student loans made from the student loan fund established pursuant to such agreement (which amount shall be determined after deduction of any costs of litigation incurred in collection of the principal or in- terest on loans from the fund and not already reimbursed from the fund or from such payments of principal or interest), as was deter- mined for the Secretary under subsection (a). (c) DISTRIBUTION OF EXCESS CAPITAL.-(1) Upon a finding by the institution or the Secretary prior to October 1, 1997, that the t) Sec. 467 HIGHER EDUCATION ACT OF 1965 266 liquid assets of a student loan fund established pursuant to an agreement under this part exceed the amount required for loans or otherwise in the foreseeable future, and upon notice to such institu- tion or to the Secretary, as the case may be, there shall be, subject to such limitations as may be included in regulations of the Sec- retary or in such agreement, a capital distribution from such fund. Such capital distribution shall be made as follows: (A) The Secretary shall first be paid an amount which bears the same ratio to the total to be distributed as the Fed- eral capital contributions by the Secretary to the student loan fund prior to such distribution bear to the sum of such Federal capital contributions and the capital contributions to the fund made by the institution. (B) The remainder of the capital distribution shall be paid to the institution. (2) No finding that the liquid assets of a student loan fund es- tablished under this part exceed the amount required under para- graph (1) may be made prior to a date which is 2 years after the date on which the institution of higher education received the funds from such institution's allocation under section 462. (20 U.S.C. 1087ff) Enacted June 23, 1972, P.L. 92-318, sec. 137(b), 86 Stat. 278, 279; amended October 12, 1976, P.L. 94-482, sec. 130(h), 90 Stat. 2147; amended October 3, 1980, P.L. 96-374, secs. 442(c), 1391, 94 Stat. 1440, 1503; amended Octo- ber 17, 1986, P.L. 99-498, sec. 405(a), 100 Stat. 1453; amended July 23, 1992, P.L. 102-325, sec. 466, 106 Stat. 584; amended December 20, 1993, P.L. 103-208, sec. 2(0(15), (m), 107 Stat. 2471, 2486. SEC. 467. COLLECTION OF DEFAULTED LOANS: PERKINS LOAN RE- VOLVING FUND. (a) AUTHORITY OF SECRETARY TO COLLECT REFERRED, TRANS- FERRED, OR ASSIGNED LOANS.-With respect to any loan- (1) which was made under this part, and (2) which is referred, transferred, or assigned to the Sec- retary by an institution with an agreement under section 463(a), the Secretary is authorized to attempt to collect such loan by any means authorized by law for collecting claims of the United States (including referral to the Attorney General for litigation) and under such terms, and conditions as the Secretary may prescribe, includ- ing reimburser-ent for expenses reasonably incurred in attempting such collection. (b) COLLECTION OF REFERRED, TRANSFERRED, OR ASSIGNED LOANS.-The Secretary shall continue to attempt to collect any loan referred, transferred, or assigned under paragraph (5)(A), (5)(B)(i), or (6) of section 463(a) until all appropriate collection efforts, as de- termined by the Secretary, have been expended. (c) PERKINS LOAN REVOLVING FUND.-(1) Mere is established a Perkins Loan Revolving Fund which shall be available without fiscal year limitation to the Secretary to make payments under this part, in accordance with paragraph (2) of this subsection. There shall be deposited in the Perkins Revolving Loan Fund- (A) all funds collected by the Secretary on any loan re- ferred, transferred, or assigned under paragraph (5)(A), (5)(B)(i), or (6) of section 463(a); 2?6 267 HIGHER EDUCATION ACT OF 1965 Sec. 468 (B) all funds collected by the Secretary on any loan re- ferred under paragraph (5)(B)(ii) of section 463(a); (C) all funds paid to the Secretary under section 466(c)(1)(A); (D) all funds from a student loan fund under this part re- ceived by the Secretary as the result of the closure of an insti- tution of higher education; (E) all funds received by the Secretary as a result of an audit of a student loan fund established under this part; and (F) all funds which have been appropriated and which the Secretary determines are not necessary for carrying out section 465, relating to the cancellation of certain loans under this part for qualifying service. (2) Notwithstanding any other provision of law, the Secretary shall, from the Perkins Loan Revolving Fund established under paragraph (1), pay allocations of additional capital contributions to eligible institutions of higher education in accordance with section 462, except that funds described in subparagraph (B) of paragraph (1) shall be repaid to the institution of higher education which re- ferred the loan, as specified in section 463(a)(5)(B)(ii). The Sec- retary shall make the payments required by this paragraph in a manner designed to maximize the availability of capital loan funds under this part. (20 U.S.C. 1087gg) Enacted August 13, 1979, P.L. 96-49, sec. 5(d)(3), 93 Stat. 352; amended October 3, 1980, P.L. 96-374, secs. 445(c), 1391, 94 Stat. 1442, 1503; amended April 7, 1986, P.L. 99-272, sec. 16029, 100 Stat. 354; amended October 17, 1986, P.L. 99-498, sec. 405(a), 100 Stat. 1453; amended July 23, 1992, P.L. 102- 325, sec. 467, 106 Stat. 584; amended December 20, 1993, P.L. 103-208, sec. 2(m), 107 Stat. 2486. SEC. 468. GENERAL AUTHORITY OF SECRETARY. In carrying out the provisions of this part, the Secretary is authorized- (1) to consent to modification, with respect to rate of inter- est, time of payment of any installment of principal and inter- est or any portion thereof, or any other provision of any note evidencing a loan which has been made under this part; (2) to enforce, pay, compromise, waive, or release any right, title, claim, lien, or demand, however acquired, including any equity or any right of redemption; (3) to conduct litigation in accordance with the provisions of section 432(a)(2); and (4) to enter into a contract or other arrangement with State or nonprofit agencies and, on a competitive basis, with collection agencies for servicing and collection of loans under this part. (20 U.S.C. 1087hh) Enacted October 3, 1980, P.L. 96-374, sec. 442(a), 94 Stat. 1437; amended October 17, 1986, P.L. 99-498, sec. 405(a), 100 Stat. 1454; amended December 20, 1993, PL. 103-208, sec. 2(m), 107 Stat. 2486. SEC. 469. DEFINITIONS. (a) Low-INcora COMMUNITIES.-For the purpose of this part, the term "low-income communities" means communities in which there is a high concentration of children eligible to be counted under chapter 1 of title I of the Elementary and Secondary Edu- cation Act of 1965. 2'17 Sec. 471 HIGHER EDUCATION ACT OF 1965 268 (b) HIGH-RISK CHILDREN.For the purposes of this part, the term "high-risk children" means individuals under the age of 21 who are low-income or at risk of abuse or neglect, have been abused or neglected, have serious emotional, mental, or behavioral disturbances, reside in placements outside their homes, or are in- volved in the juvenile justice system. (C) INFANTS, TODDLERS, CHILDREN, AND You'll' WITH DISABIL- ITIES.For purposes of this part, the term "infants, toddlers, chil- dren, and youth with disabilities" means children with disabilities and infants and toddlers with disabilities as defined in sections 602(a)(1) and 672(1), respectively, of the Individuals with Disabil- ities Education Act, and the term "qualified professional provider of early intervention services" has the meaning specified in section 672(2) of such Act. (20 U.S.C. 1087ii) Enacted July 23, 1992, P.L. 102-325, sec. 465(d), 106 Stat. 583; amended December 20, 1993, P.L. 103-208, sec. 2(m), 107 Stat. 2486. PART F-NEED ANALYSIS SEC. 471. AMOUNT OF NEED. Except as otherwise provided therein, the amount of need of any student for financial assistance under this title (except sub- parts 1 or 4 of part A) is equal to (1) the cost of attendance of such student, minus (2) the expected family contribution for such student, minus (3) estimated financial assistance not received under this title (as defined in section 480(j)). (20 U.S.C. 1087kk) Enacted October 17, 1986, P.L. 99-498, sec. 406(a), 100 Stat. 1454; amended July 23, 1992, P.L. 102-325, sec. 471(a), 106 Stat. 585. SEC. 472. COST OF ATTENDANCE. For the purpose of this title, the term "cost of attendance" means (1) tuition and fees normally assessed a student carrying the same academic workload as determined by the institution, and including costs for rental or purchase of any equipment, materials, or supplies required of all students in the same course of study; (2) an allowance for books, supplies, transportation, and miscellaneous personal expenses for a student attending the institution on at least a half-time basis, as determined by the institution; (3) an allowance (as determined by the institution) for room and board costs incurred by the student which (A) shall be an allowance of not less than $1,500 for a student without dependents residing at home with par- ents; (B) for students without dependents residing in insti- tutionally owned or operated housing, shall be a standard allowance determined by the institution based on the amount normally assessed most of its residents for room and board; and 269 HIGHER EDUCATION ACT OF 1965 Sec. 472 (C) for all other students shall be an allowance based on the expenses reasonably incurred by such students for room and board, except that the amount may not be less than $2,500; (4) for less than half-time students (as determined by the institution) tuition and fees and an allowance for only books, supplies, and transportation (as determined by the institution) and dependent care expenses (in accordance with paragraph (8)); (5) for a student engaged in a program of study by cor- respondence, only tuition and fees and, if required, books and supplies, travel, and room and board costs incurred specifically in fulfilling a required period of residential training; (6) for incarcerated students only tuition and fees and, if required, books and supplies; (7) for a student enrolled in an academic program in a pro- gram of study abroad approved for credit by the student's home institution, reasonable costs associated with such study (as determined by the institution at which such student is en- rolled); (8) for a student with one or more dependents, an allow- ance based on the estimated actual expenses incurred for such dependent care, based on the number and age of such depend- ents, except that, (A) such allowance shall not exceed the reasonable cost in the community in which such student resides for the kind of care provided; and (B) the period for which dependent care is required in- cludes, but is not limited to, class-time, study-time, field work, internships, and commuting time; (9) for a student with a disability, an allowance (as deter- mined by the institution) for those expenses related to the stu- dent's disability, including special services, personal assistance, transportation, equipment, and supplies that are reasonably incurred and not provided for by other assisting agencies; (10) for a student receiving all or part of the student's in- struction by means of telecommunications technology, no dis- tinction shall be made with respect to the mode of instruction in determining costs, but this paragraph shall not be construed to permit including the cost of rental or purchase of equipment; (11) for a student placed in a work experience under a co- operative education program, an allowance for reasonable costs associated with such employment (as determined by the insti- tution); and (12) for a student who receives a loan under this or any other Federal law, or, at the option of the institution, a conven- tional student loan incurred by the student to cover a student's cost of attendance at the institution, an allowance for the ac- tual cost of any loan fee, origination fee, or insurance premium charged to such student or such parent on such loan, or the av- erage cost of any such fee or premium charged by the Sec- retary, lender, or guaranty agency making or insuring such loan, as the case may be. Sec. 473 HIGHER EDUCATION ACT OF 1965 270 (20 U.S.C. 108711) Enacted October 17, 1986, P.L. 99-498, sec. 406(a), 100 Stat. 1454; amended July 23, 1992, P.L. 102-325, sec. 471, 106 Stat. 585; amended De- cember 20, 1993, P.L. 103-208, sec. 2(g)(1), 107 Stat. 2471. SEC. 473. FAMILY CONTRIBUTION. For the purpose of this title, except subpart 4 of part A, the term "family contribution" with respect to any student means the amount which the student and the student's family may be reason- ably expected to contribute toward the student's postsecondary edu- cation for the academic year for which the determination is made, as determined in accordance with this part. (20 U.S.C. 1087mm) Enacted October 17, 1986, P.L. 99-498, sec. 406(a), 100 Stat. 1455, amended July 23, 1992, P.L. 102-325, sec. 471, 106 Stat. 586; amended July 23, 1992, P.L. 102-325, sec. 471(a), 106 Stat. 586. SEC. 474. DETERMINATION OF EXPECTED FAMILY CONTRIBUTION; DATA ELEMENTS. (a) GENERAL RULE FOR DETERMINATION OF EXPECTED FAMILY CONTRIBUTION.The expected family contribution (1) for a dependent student shall be determined in accord- ance with section 475; (2) for a single independent student or a married inde- pendent student without dependents (other than a spouse) shall be determined in accordance with section 476; and (3) for an independent student with dependents other than a spouse shall be determined in accordance with section 477. (b) DATA ELEMENTS.The following data elements are consid- ered in determining the expected family contribution: (1) the available income of (A) the student and the stu- dent's spouse, or (B) the student and the student's parents, in the case of a dependent student; (2) the number of dependents in the family of the student; (3) the number of dependents in the family of the student who are enrolled or accepted for enrollment, on at least a half- time basis, in a degree, certificate, or other program leading to a recognized educational credential at an institution of higher education that is an eligible institution in accordance with the provisions of section 487 and for whom the family may reason- ably be expected to contribute to their postsecondary edu- cation;(4) the net assets of (A) the student and the student's spouse, and (B) the student and the student's parents, in the case of a dependent student; (5) the marital status of the student; (6) the age of the older parent, in the case of a dependent student, and the student; and (7) the additional expenses incurred (A) in the case of a de- pendent student, when both parents of the student are em- ployed or when the family is headed by a single parent who is employed, or (B) in the case of an independent student, when the student is married and the student's spouse is employed, or when the employed student qualifies as a surviving spouse or as a head of a household under section 2 of the Internal Revenue Code of 1986. 0 271 HIGHER EDUCATION ACT OF 1965 Sec. 475 (20 U.S.C. 1087nn) Enacted October 17, 1986, P.L. 99-498, sec. 406(a), 100 Stat. 1456; amended July 18, 1988, P.L. 100-369, sec. 7(c), 102 Stat. 837; amended July 23, 1992, P.L. 102-325, sec. 471(a), 106 Stat. 587. SEC. 475. FAMILY CONTRIBUTION FOR DEPENDENT STUDENTS. (a) COMPUTATION OF EXPECTED FAMILY CONTRIBUTION.For each dependent student, the expected family contribution is equal to the sum of (1) the parents' contribution from adjusted available in- come (determined in accordance with subsection (b)); (2) the student contribution from available income (deter- mined in accordance with subsection -(g)); and (3) the student contribution from assets (determined in ac- cordance with subsection (h)). (b) PARENTS' CONTRIBUTION FROM ADJUSTED AVAILABLE IN- COME.The parents' contribution from adjusted available income is equal to the amount determined by (1) computing adjusted available income by adding (A) the parents' available income (determined in ac- cordance with subsection (c)); and (B) the parents' contribution from assets (determined in accordance with subsection (d)); (2) assessing such adjusted available income in accordance with the assessment schedule set forth in subsection (e); and (3) dividing the assessment resulting under paragraph (2) by the number of the family members who are enrolled or ac- cepted for enrollment, on at least a half-time basis, in a degree, certificate, or other program leading to a recognized edu- cational credential at an institution of higher education that is an eligible institution in accordance with the provisions of sec- tion 487 during the award period for which assistance under this title is requested; except that the amount determined under this subsection shall not be less than zero. (C) PARENTS' AVAILABLE INCOME. (1) IN GENERAL.The parents' available income is deter- mined by deducting from total income (as defined in section 480) (A) Federal income taxes; (B) an allowance for State and other taxes, determined in accordance with paragraph (2); (C) an allowance for social security taxes, determined in accordance with paragraph (3); (D) an income protection allowance, determined in ac- cordance with paragraph (4); and (E) an employment expense allowance, determined in accordance with paragraph (5). (2) ALLOWANCE FOR STATE AND OTHER TAXES.The allow- ance for State and other taxes is equal to an amount deter- mined by multiplying total income (as defined in section 480) by a percentage determined according to the following table (or a successor table prescribed by the Secretary under section 478): s 1 Sec. 475 HIGHER EDUCATION ACT OF 1965 272 Percentages for Computation of State and Other Tax Allowance And parents' total income is If parents' State or territory of residence is- less than $15,000 or 5,000 $1 or more Alaska, Puerto Rico, Wyoming 3 2 American Samoa, Guam, Louisiana, Nevada, Texas, Trust Territory, Virgin Islands 4 3 Florida, South Dakota, Tennessee, New Mexico 5 4 North Dakota, Washington 6 5 Alabama, Arizona, Arkansas, Indiana, Mississippi, Missouri, Montana, New Hampshire, Oklahoma, West Virginia 7 6 Colorado, Connecticut, Georgia, Illinois, Kansas, Kentucky 8 7 California, Delaware, Idaho, Iowa, Nebraska, North Caro- lina, Ohio, Pennsylvania, South Carolina, Utah, Vermont, Virginia, Canada, Mexico 9 8 Maine, New Jersey 10 9 District of Columbia, Hawaii, Maryland, Massachusetts, Or- egon, Rhode Island 11 10 Michigan, Minnesota 12 11 Wisconsin 13 12 New York 14 13 Other 9 8 (3) ALLOWANCE FOR SOCIAL SECURITY TAxEs.The allow- ance for social security taxes is equal to the amount earned by each parent multiplied by the social security withholding rate appropriate to the tax year of the earnings, up to the maxi- mum statutory social security tax withholding amount for that same tax year. (4) INCOME PROTECTION ALLOWANCE.The income protec- tion allowance is determined by the following table (or a suc- cessor table prescribed by the Secretary under section 478): 22 273 HIGHER EDUCATION ACT OF 1965 Sec. 475 Income Protection Allowance Family Size Number in College For each (including student) 1 2 3 4 5 additional subtract: 2 $10,520 $8,720 $1,790 3 13,100 11,310 $9,510 4 16,180 14,380 12,590 $10,790 5 19,090 17,290 15,500 13,700 $11,910 6 22,330 20,530 18,740 16,940 15,150 For each additional add 2,520 2,520 2,520 2,520 2,520 (5) EMPLOYMENT EXPENSE ALLOWANCE.The employment expense allowance is determined as follows (or using a succes- sor provision prescribed by the Secretary under section 478): (A) If both parents were employed in the year for which their income is reported and both have their in- comes reported in determining the expected family con- tribution, such allowance is equal to the lesser of $2,500 or 35 percent of the earned income of the parent with the lesser earned income. (B) If a parent qualifies as a surviving spouse or as a head of household as defined in section 2 of the Internal Revenue Code, such allowance is equal to the lesser of $2,500 or 35 percent of such parent's earned income. (d) PARENTS' CONTRIBUTION FROM ASSETS. (1) IN GENERAL.The parents' contribution from assets is equal to (A) the parental net worth (determined in accordance with paragraph (2)); minus (B) the education savings and asset protection allow- ance (determined in accordance with paragraph (3)); multi- plied by (C) the asset conversion rate (determined in accord- ance with paragraph (4)), except that the result shall not be less than zero. 2 3 Sec. 475 HIGHER EDUCATION ACT OF 1965 274 (2) PARENTAL NET WORTH.The parental net worth is cal- culated by adding (A) the current balance of checking and savings ac- counts and cash on hand; (B) the net value of investments and real estate, ex- cluding the net value of the principal place of residence; and (C) the adjusted net worth of a business or farm, com- puted on the basis of the net worth of such business or farm (hereafter in this subsection referred to as "NW"), de- termined in accordance with the following table (or a suc- cessor table prescribed by the Secretary under section 478), except as provided under section 480(f): Adjusted Net Worth of a Business or Farm If the net worth of a business or farm is Then the adjusted net worth is: Less than $1 $0 $1$75,000 40 percent of NW $75,001$225,000 $30,000 plus 50 percent of NW over $75,000 $225,001$375,000 $105,000 plus 60 percent of NW over $225,000 $375,001 or more $195,000 plus 100 percent of NW over $375,000 (3) EDUCATION SAVINGS AND ASSET PROTECTION ALLOW- ANCE.The education savings and asset protection allowance is calculated according to the following table (or a successor table prescribed by the Secretary under section 478): 275 HIGHER EDUCATION ACT OF 1965 Sec. 475 Education Savings and Asset Protection Allowances for Families and Students If the age of the oldest parent is- And there are two parents one parent 25 or less $ 0 $0 26 2,200 1,600 27 4,300 3,200 28 6,500 4,700 29 8,600 6,300 30 10,800 7,900 31 13,000 9,500 32 15,100 11,100 33 17,300 12,600 34 19,400 14,200 35 21,600 16,800 36 23,800 17,400 37 25,900 19,000 38 28,100 20,500 39 30,200 22,100 40 32,400 23,700 41 33,300 24,100 42 34,100 24,700 43 35,000 25,200 44 35,700 25,800 45 36,600 26,300 46 37,600 26,900 47 38,800 27,600 48 39,800 28,200 49 40,800 28,800 50 41,800 29,500 51 43,200 30,200 52 44,300 31,100 53 45,700 31,800 54 47,100 32,600 55 48,300 33,400 56 49,800 34,400 57 51,300 35,200 58 52,900 36,200 59 54,800 37,200 60 56,500 38,100 61 58,500 39,200 62 60,300 40,300 63 62,400 41,500 64 64,600 42,800 65 or more 66,800 44,000 (4) ASSET CONVERSION RATE.-The asset conversion rate is 12 percent. (e) ASSESSMENT SCHEDULE.-The adjusted available income (as determined under subsection (b)(1) and hereafter in this subsection referred to as "AAI") is assessed according to the following table (or a successor table prescribed by the Secretary under section 478): 0r . Sec. 475 HIGHER EDUCATION ACT OF 1965 276 Parents' Assessment From Adjusted Available Income (AAI) If AAI is Then the assessment is Less than $3,409 $750 $3,409 to $9,400 22% of AAI $9,401 to $11,800 $2.068 + 25% of AAI over $9,400 $11,801 to $14,200 $2,668 + 29% of AAI over $11,800 $14,201 to $16,600 $3,364 + 34% of AM over $14,200 $16,601 to $19,000 $4,180 + 40% of AAI over $16,600 $19,001 or more $5,140 + 47% of AM over $19,000 (f) COMPUTATIONS IN CASE OF SEPARATION, DIVORCE, REMAR- RIAGE, OR DEATH. (1) DIVORCED OR SEPARATED PARENTS.Parental income and assets for a student whose parents are divorced or sepa- rated is determined under the following procedures: (A) Include only the income and assets of the parent with whom the student resided for the greater portion of the 12-month period preceding the date of the application. (B) If the preceding criterion does not apply, include only the income and ar7ets of the parent who provided the greater portion of the student's support for the 12-month period preceding the date of application. (C) If neither of the preceding criteria apply, include only the income and assets of the parent who provided the greater support during the most recent calendar year for which parental support was provided. (2) DEATH OF A PARENT,Parental income and assets in the case of the death of any parent is determined as follows: (A) If either of the parents has died, the student shall include only the income and assets of the surviving parent. (B) If both parents have died, the student shall not re- port any parental income or assets. (3) REMARRIED PARENTS.If a parent whose income and assets are taken into account under paragraph (1) of this sub- section, or if a parent who is a widow or widower and whose income is taken into account under paragraph (2) of this sub- section, has remarried, the income of that parent's spouse shall be included in determining the parent's adjusted available in- come only if (A) the student's parent and the stepparent are mar- ried as of the date of application for the award year con- cerned; and (B) the student is not an ir riependent student. (g) STUDENT CONTRIBUTION FROM ,VAILABLE INCOME. (1) IN GENERAL.The student contribution from available income is equal to (A) the student's total income (determined in accord- ance with section 480); minus (B) the adjustment to student income (determined in accordance with paragraph (2)); multiplied by 277 HIGHER EDUCATION ACT OF 1965 Sec. 475 (C) the assessment rate as determined in paragraph (5); except that the amount determined under this subsection shall not be less than zero. (2) ADJUSTMENT TO STUDENT INCOME.The adjustment to student income is equal to the sum of (A) Federal income taxes of the student; (B) an allowance for State and other income taxes (de- termined in accordance with paragraph (3)); (C) an allowance for social security taxes determined in accordance with paragraph (4); and (D) an income protection allowance of $1,750. (3) ALLOWANCE FOR STATE AND OTHER INCOME TAXES.The allowance for State and other income taxes is equal to an amount determined by multiplying total income (as defined in sectim 480) by a percentage determined according to the fol- lowing table (or a successor table prescribed by the Secretary under section 478): Percentages for Computation of State and Other Tax Allowance If the students' State or territory of residence is- The per- centage is Alaska, American Samoa, Florida, Guam, Nevada, South Dakota, Ten- nessee, Texas, Trust Territory, Virgin Islands, Washington, Wyoming 0 Connecticut, Louisiana, Puerto Rico 1 Arizona, New Hampshire, New Mexico, North Dakota 2 Alabama, Colorado, Illinois, Indiana, Kansas, Mississippi, Missouri, Montana, Nebraska, New Jersey, Oklahoma 3 Arkansas, Georgia, Iowa, Kentucky, Maine, Pennsylvania, Utah, Ver- mont, Virginia, West Virginia, Canada, Mexico 4 California, Idaho, Massachusetts, North Carolina, Ohio, Rhode Island, South Carolina 5 Hawaii, Maryland, Michigan, Wisconsin 6 Delaware, District of Columbia, Minnesota, Oregon 7 New York 8 Other 4 (4) ALLOWANCE FOR SOCIAL SECURITY TAXES.The allow- ance for social security taxes is equal to the amount earned by the student multiplied by the social security withholding rate appropriate to the tax year of the earnings, up to the maxi- mum statutory social security tax withholding amount for that same tax year. (5) The student's available income (determined in accord- ance with paragraph (1) of this subsection) is assessed at 50 percent. (h) STUDENT CONTIUBUTION FROM ASSETS.The student con- tribution from assets is determined by calculating the net assets of the student and multiplying such amount by 35 percent, except that the result shall not be less than zero. (i) ADJUSTMENTS TO PARENTS' CONTRIBUTION FOR ENROLLMENT PERIODS OTHER THAN 9 MONTHS FOR PURPOSES OTHER THAN SUB- PART 2 OF PART A OF THIS TITLE.For periods of enrollment other 21!i"7 Sec. 476 HIGHER EDUCATION ACT OF 1965 278 than 9 months, the parents' contribution from adjusted available income (as determined under subsection (b)) is determined as fol- lows for purposes other than subpart 2 of part A of this title: (1) For periods of enrollment less than 9 months, the par- ents' contribution from adjusted available income is divided by 9 and the result multiplied by the number of months enrolled. (2) For periods of enrollment greater than 9 months (A) the parents' adjusted available income (determined in accordance with subsection (b)(1)) is increased by the difference between the income protection allowance (deter- mined in accordance with subsection (c)(4)) for a family of four and a family of five, each with one child in college; (B) the resulting revised parents' adjusted available income is assessed according to subsection (e) and adjusted according to subsection (b)(3) to determine a revised par- ents' contribution from adjusted available income; (C) the original parents' contribution from adjusted available income is subtracted from the revised parents' contribution from adjusted available income, and the re- sult is divided by 12 to determine the monthly adjustment amount; and (D) the original parents' contribution from adjusted available income is increased by the product of the month- ly adjustment amount multiplied by the number of months greater than 9 for which the student will be enrolled. (20 U.S.C. 1087oo) Enacted October 17, 1986, P.L. 99-498, sec. 406(a), 100 Stat. 1456, amended June 3, 1987, P.L. 100-50, sec. 14(1)-(12), 101 Stat. 349; amended July 23, 1992, P.L. 102-325 sec. 471(a), 106 Stat. 587; amended December 20, 1993, P L 103-208, sec. 2(g)(2)-(e), 107 Stat. 2472. SEC. 476. FAMILY CONTRIBUTION FOR LNDEPENDENT STUDENTS WITHOUT DEPENDENTS OTHER THAN A SPOUSE. (a) COMPUTATION OF EXPECTED FAMILY CONTRIBUTION.For each independent student without dependents other than a spouse, the expected family contribution is determined by (1) adding (A) the family's contribution from available income (determined in accordance with subsection (b)); and (B) the family's contribution from assets (determined in accordance with subsection (c)); and (2) dividing the sum resulting under paragraph (1) by the number of students who are enrolled or accepted for enroll- ment, on at ,least a half-time basis, in a degree, certificate, or other program leading to a recognized educational credential at an institution of higher education that is an eligible institution in accordance with the provisions of section 487 during the award period for which assistance under this title is requested; except that the amount determined under this subsection shall not be less than zero. (b) FAMILY'S CONTRIBUTION FROM AVAILABLE INCOME. (1) IN GENERAL.The family's contribution from income is determined by (A) deducting from total income (as defined in section 480) (i) Federal income taxes; ' S 279 HIGHER EDUCATION ACT OF 1965 Soc. 476 (ii) an allowance for State and other taxes, deter- mined in accordance with paragraph (2); (iii) an allowance for social security taxes, deter- mined in accordance with paragraph (3); (iv) an income protection allowance of (I) $3,000 for single students; (II) $3,000 for married students where both are enrolled pursuant to subsection (a)(2); and (III) $6,000 for married students where one is enrolled pursuant to subsection (a)(2); and (v) in the case where a spouse is present, an em- ployment expense allowance, as determined in accord- ance with paragraph (4); and (B) assessing such available income in accordance with paragraph (5). (2) ALLOWANCE FOR STATE AND OTHER TAXES.The allow- ance for State and other taxes is equal to an amount deter- mined by multiplying total income (as defined in section 480) by a percentage determined according to the following table (or a successor table prescribed by the Secretary under section 478): Percentages for Computation of State and Other Tax Allowance If the students' State or territory of residence is The per- centage is Alaska, American Samoa, Florida, Guam, Nevada, South Dakota, Ten- nessee, Texas, Trust Territory, Virgin Islands, Washington, Wyoming o Connecticut, Louisiana, Puerto Rico 1 Arizona, New Hampshire, New Mexico, North Dakota 2 Alabama, Colorado, Illinois, Indiana, Kansas, Mississippi, Missouri, Montana, Nebraska, New Jersey, Oklahoma 3 Arkansas, Georgia, Iowa, Kentucky, Maine, Pennsylvania, Utah, Ver- mont, Virginia, West Virginia, Canada, Mexico 4 California, Idaho, Massachusetts, North Carolina, Ohio, Rhode Island, South Carolina 5 Hawaii, Maryland, Michigan, Wisconsin 6 Delaware, District of Columbia, Minnesota, Oregon 7 New York 8 Other 4 (3) ALLOWANCE FOR SOCIAL SECURITY TAXES.The allow- ance for social security taxes is equal to the amount earned by the student (and spouse, if appropriate), multiplied by the so- cial security withholding rate appropriate to the tax year pre- ceding the award year, up to the maximum statutory social se- curity tax withholding amount for that same tax year. (4) EMPLOYMENT EXPENSES ALLOWANCE.The employment expense allowance is determined as follows (or using a succes- sor provision prescribed by the Secretary under section 478): (A) If the student is married and the student's spouse is employed in the year for which income is reported, such allowance is equal to the lesser of $2,500 or 35 percent of the earned income of the student or spouse with the lesser earned income. tiEST COPY AVAILABLE 77-3O 0-94--I0 Sec. 476 HIGHER EDUCATION ACT OF 1965 280 (B) If a student is not married, the employment ex- pense allowance is zero. (5) ASSESSMENT OF AVAILABLE INCOME.The family's available income (determined in accordance with paragraph (1)(A) of this subsection) is assessed at 50 percent. (C) FAMILY CONTRIBUTION FROM ASSETS. (1) IN GENERAL.The family's contribution from assets is equal to(A) the family's net worth (determined in accordance with paragraph (2)); minus (B) the asset protection allowance (determined in ac- cordance with paragraph (3)); multiplied by (C) the asset conversion rate (determined in accord- ance with paragraph (4)); except that the family's contribution from assets shall not be less than zero. (2) FamILY's NET WORTH.The family's net worth is cal- culated by adding (A) the current balance of checking and savings ac- counts and cash on hand; (B) the net value of investments and real estate, ex- cluding the net value in the principal place of residence; and (C) the adjusted net worth of a business or farm, com- puted on the basis of the net worth of such business or farm (hereafter referred to as "NW"), determined in ac- cordance with the following table (or a successor table pre- scribed by the Secretary under section 478), except as pro- vided under section 480(f): Adjusted Net Worth of a Business or Farm If the net worth of a business or farm is Then the adjusted net worth is Less than $1 $0 $1$75,000 40 percent of NW $75,001$225,000 $30,000 plus 50 percent of NW over $75,000 $225,001$375,000 $105,000 plus 60 percent of NW over $225,000 $375,001 or more $195,000 plus 100 percent of NW over $375,000 (3) ASSET PROTECTION ALLOWANCE.The asset protection allowance is calculated according to the following table (or a successor table prescribed by the Secretary under section 478): ) 281 HIGHER EDUCATION ACT OF 1965 Sec. 476 Asset Protection Allowances for Families and Students If the age of the student is- And the student is married single 25 or less $ 0 $0 26 2,200 1,600 27 4,300 3,200 28 6,500 4,700 29 8,600 6,300 30 10,800 7,900 31 13,000 9,500 32 15,100 11,100 33 17,300 12,600 34 19,400 14,200 35 21,600 15,800 36 23,800 17,400 37 25,900 19,000 38 28,100 20,500 39 30,200 22,100 40 32,400 23,700 41 33,300 24,100 42 34,100 24,700 43 35,000 25,200 44 35,700 25,800 45 36,600 26,300 46 37,600 26,900 47 38,800 27,600 48 39,800 28,200 49 40,800 28,800 50 41,800 29,500 51 43,200 30,200 52 44,300 31,100 53 45,700 31,800 54 47,100 32,600 55 48,300 33,400 56 49,800 34,400 57 51,300 35,200 58 52,900 36,200 59 54,800 37,200 60 56,500 38,100 61 58,500 39,200 62 60,300 40,300 63 62,400 41,500 64 64,600 42,800 65 or more 66,800 44,000 (4) ASSET CONVERSION RATE.-The asset conversion rate is 35 percent. (d) COMPUTATIONS IN CASE OF SEPARATION, DIVORCE, OR DEATH.-In the case of a student who is divorced or separated, or whose spouse has died, the spouse's income and assets shall not be 2 ;) Sec. 477 HIGHER EDUCATION ACT OF 1965 282 considered in determining the family's contribution from income or assets. (20 U.S.C. 1087pp) Enacted October 17, 1986, P.L. 99-498, sec. 406(a), 100 Stat. 1463; amended June 3, 1987, P.L. 100-50, sec. 14(1), (3), (4), (13)(17), 101 Stat. 349, 351; amended July 23, 1992, P.L. 102-325, sec. 471(a), 106 Stat. 594; amended December 20, 1993, P.L. 103-208, sec. 2(g)(6), 107 Stat. 2472. SEC. 477. FAMILY CONTRIBUTION FOR INDEPENDENT STUDENTS WITH DEPENDENTS OTHER THAN A SPOUSE. (a) COMPUTATION OF EXPECTED FAMILY CONTRMUTION.For each independent student with dependents other than a spouse, the expected family contribution is equal to the amount determined by (1) computing adjusted available income by adding (A) the family's available income (determined in ac- cordance with subsection (b)); and (B) the family's contribution from assets (determined in accordance with subsection (c)); (2) assessing such adjusted available income in accordance with an assessment schedule set forth in subsection (d); and (3) dividing the assessment resulting under paragraph (2) by the number of family members who are enrolled or accepted for enrollment, on at least a half-time basis, in a degree, cer- tificate, or other program leading to a recognized educational credential at an institution of higher education that is an eligi- ble institution in accordance with the provisions of section 487 during the award period for which assistance under this title is requested; except that the amount determined under this subsection shall not be less than zero. (b) FAMILY'S AVAILABLE INCOME. (1) IN GENERAL.The family's available income is deter- mined by deducting from total income (as defined in section 480) (A) Federal income taxes; (B) an allowance for State and other taxes, determined in accordance with paragraph (2); (C) an allowance for social security taxes, determined in accordance with paragraph (3); (D) an income protection allowance, determined in ac- cordance with paragraph (4); and (E) an employment expense allowance, determined in accordance with paragraph (5). (2) ALLOWANCE FOR STATE AND OTHER TAXES.The allow- ance for State and other taxes is equal to an amount deter- mined by multiplying total income (as defined in section 480) by a percentage determined according to the following table (or a successor table prescribed by the Secretary under section 478): ) I) 4, =*. 283 HIGHER EDUCATION ACT OF 1965 Sec. 477 Percentages for Computation of State and Other Tax Allowance And family's total income is If student's State or territory of residence is less than $15,000 $15,000 or more Alaska, Puerto Rico, Wyoming 3 2 American Samoa, Guam, Louisiana, Nevada, Texas, Trust Territory, Virgin Islands 4 3 Florida, South Dakota, Tennessee, New Mexico 5 4 North Dakota, Washington 6 5 Alabama, Arizona, Arkansas, Indiana, Mississippi, Missouri, Montana, New Hampshire, Oklahoma, West Virginia 7 6 Colorado, Connecticut, Georgia, Illinois, Kansas, Kentucky 8 7 California, Delaware, Idaho, Iowa, Nebraska, North Caro- lina, Ohio, Pennsylvania, South Carolina, Utah, Vermont, Virginia, Canada, Mexico 9 8 Maine, New Jersey 10 9 District of Columbia, Hawaii, Maryland, Massachuseas, Or- egon, Rhode Island 11 10 Michigan, Minnesota 12 11 Wisconsin 13 12 New York 14 13 Other 9 8 (3) ALLOWANCE FOR SOCIAL SECURITY TAXES.The allow- ance for social security taxes is equal to the amount estimated to be earned by the student (and spouse, if appropriate) multi- plied by the social security withholding rate appropriate to the tax year preceding the award year, up to the maximum statu- tory social security tax withholding amount for that same tax year. (4) INCOME PROTECTION ALLOWANCE.The income protec- tion allowance is determined by the following table (or a suc- cessor table prescribed by the Secretary under section 478): Sec. 477 HIGHER EDUCA110N ACT OF 1965 284 Income Protection Allowance Family Size Number in College For each (including student) 1 2 3 4 5 additional subtract: 2 $10,520 $8,720 $1,790 3 13,100 11,310 $9,510 4 16,180 14,380 12,590 $10,790 5 19,090 17,290 15,500 13,700 $11,910 6 22,330 20,530 18,740 16,940 15,150 For each additional add: 2,520 2,520 2,520 2,520 2,520 (5) EMPLOYMENT EXPENSE ALLOWANCE.The employment expense allowance is determined as follows (or a successor table prescribed by the Secretary under section 478): (A) If the student is married and the student's spouse is employed in the year for which their income is reported, such allowance is equal to the lesser of $2,500 or 35 per- cent of the earned income of the student or spouse with the lesser earned income. (B) If a student qualifies as a surviving spouse or as a head of household as defined in section 2 of the Internal Revenue Code, such allowance is equal to the lesser of $2,500 or 35 percent of the student's earned income. (C) FAMILY'S CONTRIBUTION FROM ASSETS. (1) IN GENERAL.The family's contribution from assets is equal to (A) the family net worth (determined in accordance with paragraph (2)); minus (B) the asset protection allowance (determined in ac- cordance with paragraph (3)); multiplied by (C) the asset conversion rate (determined in accord- ance with paragraph (4)), except that the result shall not be less than zero. 2 ')4 285 HIGHER EDUCATION ACT OF 1965 Sec. 477 (2) FAMILY NET WORTH.The family net worth is cal- culated by adding (A) the current balance of checking and savings ac- counts and cash on hand; (B) the net value of investments and real estate, ex- cluding the net value in the principal place of residence; and (C) the adjusted net worth of a business or farm, com- puted on the basis of the net worth of such business or farm (hereafter referred to as "NW"), determined in ac- cordance with the following table (or a successor table pre- scribed by the Secretary under section 478), except as pro- vided under section 480(f): Adjusted Net Worth of a Business or Farm If the net worth of a business or farm- is Then the adjusted net worth is Less than $1 $0 $1$75,000 40 percent of NW $75,001$225,000 $30,000 plus 50 percent of NW over $75,000 $225,001$375,000 $105,000 plus 60 percent of NW over $225,000 $375,001 or more $195,000 plus 100 percent of NW over $375,000 (3) ASSET PROTECTION ALLOWANCE.The asset protection allowance is calculated according to the following table (or a successor table prescribed by the Secretary under section 478): Sec. 477 HIGHER EDUCA110N ACT OF 1965 286 Asset Protection Allowances for Families and Students If the age of the student is- And the student is married single 25 or less $ 0 $0 26 2,200 1,600 27 4,300 3,200 28 6,500 4,700 29 8,600 6,300 30 10,800 7,900 31 13,000 9,500 32 15,100 11,100 33 17,300 12,600 34 19,400 14,200 35 21,600 15,800 36 23,800 17,400 37 25,900 19,000 38 28,100 20,500 39 30,200 22,100 40 32,400 23,700 41 33,300 24,100 42 34,100 24,700 43 35,000 25,200 44 35,700 25,800 45 36,600 26,300 46 37,600 26,900 47 38,800 27,600 48 39,800 28,200 49 40,800 28,800 50 41,800 29,500 51 43,200 30,200 52 44,300 31,100 53 45,700 31,800 54 47,100 32,600 55 48,300 33,400 56 49,800 34,400 57 51,300 35,200 58 52,900 36,200 59 54,800 37,200 60 56,500 38,100 61 58,500 39,200 62 60,300 40,300 63 62,400 41,500 64 64,600 42,800 65 or more 66,800 44,000 (4) ASSET CONVERSION RATE.-The asset conversion rate is 12 percent. (d) ASSESSMENT SCHEDULE.-The adjusted available income (as determined under subsection (a)(1) and hereafter referred to as "AAI") is assessed according to the following table (or a successor table prescribed by the Secretary under section 478): tir 287 HIGHER EDUCATION ACT OF 1965 Sec. 478 Assessment From Adjusted Available Income (AAI) If AM is Then the assessment is Less than $3,409 $750 $3,409 to $9,400 22% of AAI to $11,800 2,068 + 25% of AAI over 9,400 11,801 to 14,201 to 16,600 2,668 + 29% of AM over 11,800 3,364 + 34% of AAI over 14,200 $16,601 to 19,000 4,180 + 40% of AAI over 16,600 $19,001 or more 5,140 + 47% of AAI over 19,000 (e) COMPUTATIONS IN CASE OF SEPARATION, DIVORCE, OR DEATH.In the case of a student who is divorced or separated, or whose spouse has died, the spouse's income and assets shall not be considered in determining the family's available income or assets. (20 U.S.C. 1087qq) Enacted October 17, 1986, P.L. 99-498, sec. 406(a), 100 Stat. 1465; amended June 3, 1987, P.L. 100-50, sec. 14(1)(6), (8), (18), (19), 101 Stat. 349, 350, 351; amended July 23, 1992, P.L. 102-325, sec. 471(a), 106 Stat. 597; amended December 20, 1993, P.L. 103-208, sec. 2(g)(2), (7), 107 Stat. 2472. SEC. 478. REGULATIONS; UPDATED TABLES. (a) AUTHORITY TO PRESCRIBE REGULATIONS RESTRICTED.(1) Notwithstanding any other provision of law, the Secretary shall not have the authority to prescribe regulations to carry out this part except (A) to prescribe updated tables in accordance with sub- sections (b) through (h) of this section; or (B) to propose modifications in the need analysis methodol- ogy required by this part. (2) Any regulation proposed by the Secretary that (A) updates tables in a manner that does not comply with subsections (b) through (h) of this section, or (B) that proposes modifications under paragraph (1)(B) of this subsection, shall not be effective unless ap- proved by joint resolution of the Congress by May 1 following the date such regulations are published in the Federal Register in ac- cordance with section 482. If the Congress fails to approve such regulations by such May 1, the Secretary shall publish in the Fed- eral Register in accordance with section 482 updated tables for the applicable award year that are prescribed in accordance with sub- sections (b) through (h) of this section. (b) INCOME PROTECTION ALLOWANCE.For each academic year after academic year 1993-1994, 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). Such revised table shall be developed by increasing each of the dollar amounts con- tained in the table in each such section by a percentage equal to the estimated percentage increase in the Consumer Price Index (as determined by the Secretary) between December 1992 and the De- cember next preceding the beginning of such academic year, and rounding the result to the nearest $10. (C) ADJUSTED NET WORTH OF A FARM OR BUSINESS.For each award year after award year 1993-1994, the Secretary shall pub- lish in the Federal Register a revised table of adjusted net worth of a farm or business for purposes of sections 475(d)(2)(C), 476(c)(2)(C), and 477(c)(2)(C). Such revised table shall be developed- 2 1-4 7 C Sec. 478 HIGHER EDUCATION ACT OF 1965 288 (1) by increasing each dollar amount that refers to net worth of a farm or business by a percentage equal to the esti- mated percentage increase in the Consumer Price Index (as de- termined by the Secretary) between December 1992 and the December next preceding the beginning of such award year, and rounding the result to the nearest $5,000; and (2) by adjusting the dollar amounts "$30,000", "$105,000", and "$195,000" to reflect the changes made pursuant to para- grap_h (1). (d) EDUCATION SAVINGS AND ASSET PROTECTION ALLOWANCE. For each award year after award year 1993-1994, the Secretary shall publish in the Federal Register a revised table of allowances for the purpose of sections 475(dX3), 476(c)(3), and 477(c)(3). Such revised table shall be developed by determining the present value cost, rounded to the nearest $100, of an annuity that would pro- vide, for each age cohort of 40 and above, a supplemental income at age 65 (adjusted for inflation) equal to the difference between the moderate family income (as most recently determined by the Bureau of Labor Statistics), and the current average social security retirement benefits. For each age cohort below 40, the allowance shall be computed by decreasing the allowance for age 40, as up- dated, by one-fifteenth for each year of age below age 40 and rounding the result to the nearest $100. In making such determinations (1) inflation shall be presumed to be 6 percent per year; (2) the rate of return of an annuity shall be presumed to be 8 percent; and (3) the sales commission on an annuity shall be presumed to be 6 percent. (e) ASSESSMENT SCHEDULES AND RATES.For each award year after award year 1993-1994, the Secretary shall publish in the Federal Register a revised table of assessments from adjusted available income for the purpose of sections 475(e) and 477(d). Such revised table shall be developed (1) by increasing each dollar amount that refers to ad- justed available income by a percentage equal to the estimated percentage increase in the Consumer Price Index (as deter- mined by the Secretary) between December 1992 and the De- cember next preceding the beginning of such academic year, rounded to the nearest $100; and (2) by adjusting the other dollar amounts to reflect the changes made pursuant to paragraph (1). a) DEFINITION OF CONSUMER PRICE INDEX.As used in this section, the term "Consumer Price Index" means the Consumer Price Index for All Urban Consumers published by the Department of Labor. Each annual update of tables to reflect changes in the Consumer Price Index shall be corrected for misestimation of ac- tual changes in such Index in previous years. (g) STATE AND OTHER TAX ALLOWANCE.For each award year after award year 1993-1994, the Secretary shall publish in the Federal Register a revised table of State and other tax allowances for the purpose of sections 475(c)(2), 475(g)(3), 476(b)(2), and 477(b)(2). The Secretary shall develop such revised table after re- view of the Department of the Treasury's Statistics of Income file 2'48 289 HIGHER EDUCATION ACT OF 1965 See. 479 and determination of the percentage of income that each State's taxes represent. (h) EMPLOYMENT EXPENSE ALLOWANCE.For each award year after award year 1993-1994, the Secretary shall publish in the Federal Register a revised table of employment expense allowances for the purpose of sections 475(c)(5), 476(b)(4), and 477(b)(5). Such revised table shall be developed by increasing the dollar amount specified in sections 475(c)(5)(A), 475(c)(5)(B), 476(b)(4)(A), 476(b)(4)(B), 477(b)(5)(A), and 477(b)(5)(B) to reflect increases in the amount and percent of the Bureau of Labor Statistics budget of the marginal costs for meals away from home, apparel and up- keep, transportation, and housekeeping services for a two-worker versus one-worker family. (20 U.S.C. 1087rr) Enacted October 17, 1986, P.L. 99-498, sec. 406(a), 100 Stat 1470; amended June 3, 1987, P.L. 100-50, sec. 14(20)-(22), 101 Stat. 351; amended July 23, 1992, P.L. 102-325, sec. 471(a), 106 Stat. 602; amended December 20, 1993, P.L. 103-208, sec. 2(g)(8) and (9), 107 Stat. 2472. SEC. 479. SIMPLIFIED NEEDS TESTS. (a) SIMPLIFIED APPLICATION SECTION. (1) IN GENERAL.The Secretary shall develop and use an easily identifiable simplified application section as part of the common financial reporting form prescribed under section 483(a) for families described in subsections (b) and (c) of this section. (2) REDUCED DATA REQUIREMENTS.The simplified applica- tion form shall (A) in the case of a family meeting the requirements of subsection (b)(1), permit such family to submit only the data elements required under subsection (b)(2) for the pur- poses of establishing eligibility for student financial aid under this part; and (B) in the case of a family meeting the requirements of subsection (c), permit such family to be treated as hav- ing an expected family contribution equal to zero for pur- poses of establishing such eligibility and to submit only the data elements required to make a determination under subsection (c). (b) SIMPLIFIED NEEDS TEST. ( 1) ELIGIBILITY.An applicant is eligible to file a sim- plified form containing the elements required by paragraph (2) if (A) in the case of an applicant who is a dependent student(i) the student's parents file or are eligible to file a form described in paragraph (3) or certify that they are not required to file an income tax return and the student files or is eligible to file such a form or cer- tifies that the student is not required to file an income tax return; and (ii) the total adjusted gross income of the parents (excluding any income of the dependent student) is less than $50,000; or (B) in the case of an applicant who is an independent student Sec. 479 HIGHER EDUCATION ACT OF 1965 290 (i) the student (and the student's spouse, if any) files or is eligible to file a form described in paragraph (3) or certifies that the student (and the student's spouse, if any) is not required to file an income tax re- turn; and (ii) the adjusted gross income of the student (and the student's spouse, if any) is less than $50,000. (2) SIMPLIFIED TEST ELEMENTS.The six elements to be used for the simplified needs analysis are (A) adjusted gross income, (B) Federal taxes paid, (C) untaxed income and benefits, (D) the number of family members, (E) the number of family members in postsecondary education, and (F) an allowance (A) for State and other taxes, as de- fined in section 475(cX2) for dependent students and in section 477(b)(2) for independent students with dependents other than a spouse, or (B) for State and other income taxes, as defined in section 476(b)(2) for independent stu- dents without dependents other than a spouse. (3) QUALIFYING FORMS.A student or family files a form described in this paragraph if the student or family, respec- tively, files (A) a form 1640A or 1040EZ (including any prepared or electronic version of such form) required pursuant to the Internal Revenue Code of 1986; or (B) an income tax return (including any prepared or electronic version of such return) required pursuant to the tax code of the Commonwealth of Puerto Rico, Guam, American Samoa, the Virgin Islands, the Republic of the Marshall Islands, the Fed.erated States of Micronesia, or Palau. (C) ZERO EXPECTED FAMILY CONTRIBUTION.The Secretary shall consider an applicant to have an expected family contribution equal to zero if (1) in the case of a dependent student (A) the student's parents were not required to file an income tax return under section 6012(a)(1) of the Internal Revenue Code of 1986; and (B) the sum of the adjusted gross income of the par- ents is less than or eaual to the maximum amount of in- come (rounded annually to the nearest thousand dollars) that may be earned in 1992 or the current year, whichever is higher, in order to claim the maximum Federal earned income credit; or (2) in the case of an independent student with dependents other than a spouse (A) the student (and the student's spouse, if any) was not required to file an income tax return under section 6012(a)(1) of the Internal Revenue Code of 1986; and (B) the sum of the adjusted gross income of the stu- dent and spouse (if appropriate) is less than or equal to the maximum amount of income (rounded annually to the 291 HIGHER EDUCATION ACT OF 1965 Sec. 479A nearest thousand dollars) that may be earned in 1992 or the current year, whichever is higher, in order to claim the maximum Federal earned income credit. An individual is not required to qualify or file for the earned in- come credit in order to be eligible under this subsection. (20 U.S.C. 1087ss) Enacted October 17, 1986, P.L. 99-498, sec. 406(a), 100 Stat. 1472; amended June 3, 1987, P.L. 100-50, sec. 14(23)-(25), 101 Stat. 352; amended April 9, 1991, P.L. 102-26, sec. 11, 105 Stat. 129; amended July 23, 1992, P.L. 102- 325, sec. 471(a), 106 Stat. 604; amended December 20, 1993, P.L. 103-208, sec. 2(g)(10)-(15), 107 Stat. 2472-73. SEC. 479A. DISCRETION OF STUDEN"J FINANCIAL AID ADMINISTRA- TORS. (a) IN GENERAL.Nothing in this part shall be interpreted as limiting the authority of the financial aid administrator, on the basis of adequate documentation, to make adjustments on a case- by-case basis to the cost of attendance or the values of the data items required to calculate the expected student or parent contribu- tion (or both) to allow for treatment of an individual eligible appli- cant with special circumstances. However, this authority shall not be construed to permit aid administrators to deviate from the con- tributions expected in the absence of special circumstances. Special circumstances shall be conditions that differentiate an individual student from a class of students rather than conditions that exist across a class of students. Adequate documentation for such adjust- ments shall substantiate such special circumstances of individual students. In addition, nothing in this title shall be interpreted as limiting the authority of the student financial aid administrator in such cases to request and use supplementary information about the financial status or personal circumstances of eligible applicants in selecting recipients and determining the amount of awards under this title. No student or parent shall be charged a fee for collecting, processing, or delivering such supplementary information. (b) ADJUSTMENTS TO ASSETS TAKEN INTO ACCOUNT.A student fmancial aid administrator shall be considered to be making a nec- essary adjustment in accordance with subsection (a) if (1) the administrator makes adjustments excluding from family income any proceeds of a sale of farm or business assets of a family if such sale results from a voluntary or involuntary foreclosure, forfeiture, or bankruptcy or an involuntary liquida- tion; or (2) the administrator makes adjustments in the award level of a student with a disability so as to take into consider- ation the additional costs such student incurs as a result of such student's disability. (c) ADJUSTMENTS FOR SPECIAL CIRCUMSTANCES. (1) IN GENERAL.A student financial aid administrator shall be considered to be making an adjustment for special cir- cumstances in accordance with subsection (a) if (A) in the case of a dependent student-- (i) such student received a Federal Pell Grant as a dependent student in academic year 1992-1993 and the amount of such student's Federal Pell Grant for academic year 1993-1994 is at least $500 less than 3 1.1. Sec. 479B HIGHER EDUCAIION ACT OF 1965 292 the amount of such student's Federal Pell Grant foT: academic year 1992-1993; and (ii) the decrease described in clause (i) is the di- rect result of a change in the determination of such student's need for assistance in accordance with this part that is attributable to the enactment of the High- er Education Amendments of 1992; and (B) in the case of a single independent student (1) such student received a Federal Pell Grant as a single independent student in academic year 1992- 1993 and qualified as an independent student in ac- cordance with section 480(d) for academic year 1993- 1994, and the amount of such student's Federal Pell Grant for academic year 1993-1994 is at least $500 less than the amount of such student's Federal Pell Grant for academic year 1992-1993; and (ii) the decrease described in clause (i) is the di- rect result of a change in the determination of such student's need for assistance in accordance with this part that is attributable to the enactment of the High- er Education Amendments of 1992. (2) AMOUNT.A financial aid administrator shall not make an adjustment for special circumstances pursuant to this sub- section in an amount that exceeds one-half of the difference be- tween the amount of a student's Federal Pell Grant for aca- demic year 1992-1993 and the amount of such student's Fed- eral Pell Grant for academic year 1993-1994. (3) ACADEMIC YEAR LIMITATION.A financial aid adminis- trator shall make adjustments under this subsection only for Federal Pell Grants awarded for academic years 1993-1994, 1994-1995, and 1995-1996. (4) SPECIAL RuLE.Adjustments under this subsection shall be made in any fiscal year only if an Act that contains an appropriation for such fiscal year to carry out this sub- section is enacted on ar after the date of enactment of the Higher Education Technical Amendments of 1993. (5) LIMITATION.Adjustments under this subsection shall not be available for any academic year to any student who, on the basis of the financial circumstances of the student for the current academic year, would not have been eligible for a grant under this section in academic year 1992-1993. (20 U.S.C. 1087tt) Enacted October 17, 1986, P.L.. 99-498, sec. 406(a), 100 Stat. 1472; amended June 3, 1987, P.L. 100-50, sec. 14(26), 101 Stat. 352; amended De- cember 19, 1989, P.L. 101-239, sec. 2009, 103 Stat. 2122-2123; amended July 23, 1992, P.L. 102-325, sec. 471(a), 106 Stat. 605; amended December 20, 1993, P.L. 103-208, sec. 2(g)(16), 107 Stat. 2473. SEC. 479B. DISREGARD OF STUDENT AID IN OTHER FEDERAL PRO- GRAMS. Notwithstanding any other provision of law, student financial assistance received under this title, or under Bureau of Indian Af- fairs student assistance programs, shall not be taken into account in determining the need or eligibility of any person for benefits or assistance, or the amount of such benefits or assistance, under any 293 HIGHER EDUCATION ACT OF 1965 Sec. 480 Federal, State, or local program financed in whole or in part with Federal funds. (20 U.S.C. 1087uu) Enacted October 17, 1986, P.L. 99-498, sec. 406(a), 100 Stat. 1472; amended June 3, 1987, P.L. 100-50, sec. 14(27), 101 Stat. 353; amended July 23, 1992, P.L. 102-325, sec. 471(a), 106 Stat. 606. SEC. 479C. NATIVE AMERICAN STUDENTS. In determining family contributions for Native American stu- dents, computations performed pursuant to this part shall exclude (1) any income and assets of $2,000 or less per individual payment received by the student (and spouse) and student's parents under the Per Capita Act or the Distribution of Judg- ment Funds Act; and (2) any income received by the student (and spouse) and student's parents under the Alaskan Native Claims Settlement Act or the Maine Indian Claims Settlement Act. (20 U.S.C. 1087uu-1) Enacted June 3, 1987, P.L. 100-50, sec. 14(27), 101 Stat. 353; amended July 23, 1992, P.L. 102-325, sec. 471(a), 106 Stat. 606. SEC. 480. DEFINITIONS. As used in this part: (a) TOTAL INCOME.(1) Except as provided in paragraph (2), the term "total income" is equ.:11 to adjusted gross income plus untaxed income and benefits for the preceding tax year minus ex- cludable income (as defined in subsection (e)). (2) No portion of any student financial assistance received from any program by an individual, and no portion of a national service educational award or post-service benefit received by an individual under title I of the National and Community Service Act of 1990 (42 U.S.C. 12571 et seq.), shall be included as income or assets in the computation of expected family contribution for any program funded in whole or in part under this Act. (b) UNTAXED INCOME AND BENEFITS.The term "untaxed in- come and benefits" means (1) child support received; (2) welfare benefits, including aid to families with depend- ent children under a State plan approved under part A of title IV of the Social Security Act and aid to dependent children; (3) workman's compensation; (4) veterans' benefits such as death pension, dependency, and indemnity compensation, but excluding veterans' education benefits as defined in subsection (c); (5) interest on tax-free bonds; (6) housing, food, and other allowances (excluding rent subsidies for low-income housing) for military, clergy, and oth- ers (including cash payments and cash value of benefits); (7) cash support or any money paid on the student's be- half, except, for dependent students, funds provided by the stu- dent's parents; (8) the amount of earned income credit claimed for Federal income tax purposes; (9) untaxed portion of pensions; (10) credit for Federal tax on special fuels; 3 : Sec. 480 HIGHER EDUCATION ACT OF 1965 294 (11) the amount of foreign income excluded for purposes of Federal income taxes; (12) untaxed social security benefits; (13) payments to individual retirement accounts and Keogh accounts excluded from income for Federal income tax pt.rposes; and (14) any other untaxed income and benefits, such as Black Lung Benefits, Refugee Assistance, railroad retirement bene- fits, or Job TraininA Partnership Act noneducational benefits. (C) VETERAN AND VETERANS' EDUCATION BENEFITS.(1) The term "veteran" means any individual who (A) has engaged in the active duty in the United States Army, Navy, Air Force, Marines, or Coast Guard; and (B) was released under a condition other than dishonor- able. (2) The term "veterans' education benefits" means veterans' benefits the student will receive during the award year, including but not limited to the following: (A) United States Code, title 10, chapter 2: Reserve Officer Training Corps scholarship. (B) linited States Code, title 10, chapter 106: Selective Re- serve.(C) United States Code, title 10, chapter 107: Selective Re- serve Educational Assistance Program. (D) United States Code, title 37, chapter 2: Reserve Officer Training Corps Program. (E) United States Code, title 38, chapter 30: Montgomery GI Billactive duty. (F) United States Code, title 38, chapter 31: vocational re- habilitation. (G) United States Code, title 38, chapter 32: Post-Vietnam Era Veterans' Educational Assistance Program. (H) United States Code, title 38, chapter 35: Dependents Educational Assistance Program. (I) Public Law 97-376, section 156: Restored Entitlement Program for Survivors (or Quayle benefits). (J) Public Law 96-342, section 903: Educational Assistance Pilot Program. (d) INDEPENDENT STUDENT.The term "independent", when used with respect to a student, means any individual who (1) is 24 years of age or older by December 31 of the award year;(2) is an orphan or ward of the court or was a ward of the court until the individual reached the age of 18; (3) is a veteran of the Armed Forces of the United States (as defined in subsection (cX1)); (4) is a graduate or professional student; (5) is a married individual; (6) has legal dependents other than a spouse; or (7) is a student for whom a financial aid administrator makes a documented determination of independence by reason of other unusual circumstances. (e) EXCLUDABLE INCOME.The term "excludable income" means- 3'14 295 HIGHER EDUCATION ACT OF 1965 Sec. 480 (1) any student financial assistance awarded based on need as determined in accordance with the provisions of this part, including any income earned from work under part C of this title; (2) any living allowance received by a participant in a pro- gram established under the National and Community Service Act of 1990; (3) child support payments made by the student or parent; and (4) payments made and services provided under part E of title IV of the Social Security Act. (f) ASSETS.(1) The term "assets" means cash on hand, includ- ing the amount in checking and savings accounts, time deposits, money market funds, trusts, stocks, bonds, other securities, mutual funds, tax shelters, and the net value of real estate, income produc- ing property, and business and farm assets. (2) With respect to determinations of need under this title, other than for subpart 4 of part A, the term "assets" shall not in- clude the net value of (A) the family's principal place of residence; or (B) a family farm on which the family resides. (g) NET ASSETS.The term "net assets" means the current market value at the time of application of the assets (as defined in subsection (f)), minus the outstanding liabilities or indebtedness against the assets. (h) TREATMENT OF INCOME TAXES PAID TO OTHER JURISDIC- TIONS.(1) The tax on income paid to the Governments of the Com- monwealth of Puerto Rico, Guam, American Samoa, the Virgin Is- lands, or the Commonwealth of the Northern Mariana Island.s, the Republic of the Marshall Islands, the Federated States of Microne- sia, or Palau under the laws ar plicable to those jurisdictions, or the comparable tax paid to the central government of a foreign country, shall be treated as Federal income taxes. (2) References in this part to the Internal Revenue Code of 1986, Federal income tax forms, and the Internal Revenue Service shall, for purposes of the tax described in paragraph (1), be treated as references to the corresponding laws, tax forms, and tax collec- tion agencies of those jurisdictions, respectively, subject to such ad- justments as the Secretary may provide by regulation. (i) CURRENT BALANCE.The term "current balance of checking and savings accounts" does not include any funds over which an in- dividual is barred from exercising discretion and control because of the actions of any State in declaring a bank emergency due to the insolvency of a private deposit insurance fund. (j) OTHER FINANCIAL ASSISTANCE; TUITION PREPAYMENT PLANS.(1) For purposes of determining a student's eligibility for funds under this title, estimated financial assistance not received under this title shall include all scholarships, grants, loans, or other assistance known to the institution at the time the deter- mination of the student's need is made, including veterans' edu- cation benefits as defmed in subsection (c). (2)(A) Except as provided in subparagraph (B), for purposes of determining a student's eligibility for funds under this title, tuition prepayment plans shall reduce the cost of attendance (as deter- 3 i5 Sec. 480 HIGHER EDUCATION ACT OF 1965 296 mined under section 472) by the amount of the prepayment, and shall not be considered estimated financial assistance. (B) If the institutional expense covered by the prepayment must be part of the student's cost of attendance for accounting pur- poses, the prepayment shall be considered estimated financial as- sistance. (3) Notwithstanding paragraph (1), a national service edu- cational award or post-service benefit under title I of the National and Community Service Act of 1990 (42 U.S.C. 12571 et seq.) shall not be treated as financial assistance for purposes of section 471(3). (k) DEPENDENTS.(1) Except as otherwise provided, the term "dependent of the parent" means the student, dependent children of the student's parents, including those children who are deemed to be dependent students when applying for aid under this title, and other persons who live with and receive more than one-half of their support from the parent and will continue to receive more than half of their support from the parent during the award year. (2) Except as otherwise provided, the term "dependent of the student" means the student's dependent children and other persons (except the student's spouse) who live with and receive more than one-half of their support from the student and will continue to re- ceive more than half of their support from the student during the award year. (1) FAMILY SIZE.(1) In determining family size in the case of a dependent student (A) if the parents are not divorced or separated, family members include the student's parents, and the dependents of the student's parents including the student; (B) if the parents are divorced or separated, family mem- bers include the parent whose income is included in computing available income and that parent's dependents, including the student; and (C) if the parents are divorced and the parent whose in- come is so included is remarried, or if the parent was a widow or widower who has remarried, family members also include, in addition to those individuals referred to in subparagraph (B), the new spouse and any dependents of the new spouse if that spouse's income is included in determining the parents' adjusted available income. (2) In determining family size in the case of an independent student(A) family members include the student, the student's spouse, and the dependents of the student; and (B) if the student is divorced or separated, family members do not include the spouse (or ex-spouse), but do include the .3tudent and the student's dependents. (m) Busmss ASSETS.The term "business assets" means property that is used in the operation of a trade or business, in- cluding real estate, inventories, buildings, machinery, and other equipment, patents, franchise rights, and copyrights. (20 U.S.C. 1087vv) Enacted October 17, 1986, P.L. 99-498, sec. 406(a), 100 Stat. 1472; amended June 3, 1987, P.L. 100-50, sec. 14(28), 101 Stat. 353-355; amended July 18, 1988, P.L. 100-369, sec. 7(b), 102 Stat. 837; amended November 16, 1990, P.L. 101-610, sec. 185(4), 104 Stat. 3168; amended July 23, 1992, P.L. 102-325, sec. 43'i6 297 HIGHER EDUCATION ACT OF 1965 Sec. 481 471(a), 106 Stat. 606; amended September 21, 1993, P.L. 103-82, sec. 102(c)(4), (5), 107 Stat. 824; airended December 20, 1993, P.L. 103-208, sec. 2(g)(17)(20), 107 Stat. 2474-75. PART G.GENERAL PROVISIONS RELATING TO STUDENT ASSISTANCE PROGRAMS SEC. 481. DEFINITIONS. (a) INSTITUTION OF HIGHER EDUCATION.(1) Subject to para- graphs (2) through (4) of this subsection, the term "institution of higher education" for purposes of this title includes, in addition to the institutions covered by the definition in section 1201(a) (A) a proprietary institution of higher education; (B) a postsecondary vocational institution; and (C) only for the purposes of part B of this title, an institu- tion outside the United States which is comparable to an insti- tution of higher education as defined in section 1201(a) and which has been approved by the Secretary for the purpose of part B. (2)(A) For the purpose of qualifying as an institution under paragraph (1)(C) of this subsection, the Secretary shall establish criteria by regulation for the approval of institutions outside the United States and for the determination that such institutions are comparable to an institution of higher education as defined in sec- tion 1201(a). In the case of a graduate medical school outside the United States, such criteria shall include a requirement that a stu- dent attending a graduate medical school outside the United States is ineligible for loans made, insured, or guaranteed under part B of this title unless (i)(I) at least 60 percent of those enrolled and at least 60 percent of the graduates of the graduate medical school outside the United States were not persons described in section 484(a)(5) in the year preceding the year for which a student is seeking a loan under part B of this title; and (II) at least 60 percent of the individuals who were stu- dents or graduates of the graduate medical school outside the United States (both nationals of the United States and others) taking the examinations administered by the Educational Commission for Foreign Medical Graduates received a passing score in the year preceding the year for which a student is seeking a loan under part B of this title; or (ii) the institution's clinical training program was approved by a State as of January 1, 1992. (B) For the purpose of qualifying as an institution under para- graph (1)(C), the Secretary shall establish an advisory panel of medical experts which shall (i) evaluate the standards of accreditation applied to appli- cant foreign medical schools; and (ii) determine the comparability of those standards to standards for accreditation applied to United States medical schools. If such accreditation standards are determined not to be com- parable, the foreign medical school shall be required to meet the requirements of section 1201(a). 3H7 Sec. 481 HIGHER EDUCATION ACT OF 1965 298 (C) The failure of an institution outside the United States to provide, release, or authorize release to the Secretary of such infor- mation as may be required by subparagraph (A) of this paragraph shall render such institution ineligible for the purpose of part B of this title. (D) The Secretary shall, not later than one year after the date of enactment of the Higher Education Amendments of 1992, pre- pare and submit to the Committee on Education and Labor of the House of Representatives and the Committee on Labor and Human Resources of the Senate a report on the implementation of the reg- ulations required by subparagraph (A) of this paragraph. (E) If, pursuant to this paragraph, an institution loses eligi- bility to participate in the programs under this title, then a student enrolled at such institution may, notwithstanding such loss of eligi- bility, continue to be eligible to receive a loan under part B while attending such institution for the academic year succeeding the academic year in which such loss of eligibility, occurred. (3) An institution shall not be considered to meet the definition of an institution of higher eduzation in paragraph (1), if such institution (A) offers more than 50 percent of such institution's courses by correspondence, unless the institution is an institu- tion that meets the defmition in section 521(4)(C) of the Carl D. Perkins Vocational and Applied Technology Education Act; (B) enrolls 50 percent or more of its students in cor- respondence courses, unless the institution is an institution that meets the definition in such section, except that the Sec- retary, at the request of such institution, may waive the appli- cability of this subparagraph to such institution for good cause, as determined by the Secretary in the case of an institution of higher education that provides a 2-year or 4-year program of instruction for which the institution awards an associate or baccalaureate degree; (C) has a student enrollment in which more than 25 per- cent of the students are incarcerated, except that the Secretary may waive the prohibition of this subparagraph for a nonprofit institution that provides a 4-year or a 2-year program of in- struction (or both) for which it awards a bachelor's or associ- ate's degree, respectively; or (D) has a student enrollment in which more than 50 per- cent of the students do not have a high school diploma or its recognized equivalent and does not provide a 4-year or a 2-year program of instruction (or both) for which it awards a bach- elor's or associate's degree, respectively, except that the Sec- retary may waive the limitation contained in this subpara- graph if a nonprofit institution demonstrates to the satisfaction of the Secretary that it exceeds such limitation because it serves, through contracts with Federal, State, or local govern- ment agencies, significant numbers of students who do not have a high school diploma or its recognized equivalent. (4) An institution shall not be considered to meet the definition of an institution of higher education in paragraph (1) if (A) the institution, or an affiliate of the institution that has the power, by contract or ownership interest, to direct or 3 0 8 A 299 HIGHER EDUCATION ACT OF 1965 Sec. 481 cause the direction of the management or policies of the insti- tution, has filed for bankruptcy; or (B) the institution, its owner, or its chief executive officer has been convicted of, or has pled nolo contendere or guilty to, a crime involving the acquisition, use, or expenditure of funds under this title, or has been judicially determined to have com - mitted fraud involving funds under this title. (5) The Secretary shall certify an institution's qualification as an institution of higher education in accordance with the require- ments of subpart 3 of part H. (6) An institution of higher education shall not be considered to meet the definition of an institution of higher education in para- graph (1) if such institution is removed from eligibility for funds under this title as a result of an action pursuant to part H of this title. (b) PROPRIETARY INSTITUTION OF HIGHER EDUCATION.For the purpose of this section, the term "proprietary institution of higher education" means a school (1) which provides an eligible program of training to prepare students for gainful employment in a recog- nized occupation, (2) which meets the requirements of clauses (1) and (2) of section 1201(a), (3) which does not meet the requirement of clause (4) of section 1201(a), (4) which is accredited by a nation- ally recognized accrediting agency or association approved by the Secretary pursuant to part H of this title, (5) which has been in existence for at least 2 years, and (6) which has at least 15 percent of its revenues from sources that are not derived from funds pro- vided under this title, as determined in accordance with regula- tions prescribed by the Secretary. Such term also includes a propri- etary educational institution in any State which, in lieu of the re- quirement in clause (1) of section 1201(a), admits as regular stu- dents persons who are beyond the age of compulsory school attend- ance in the State in which the institution is located. (C) POSTSECONDARY VOCATIONAL INSTITUTION.For the pur- pose of this section, the term "postsecondary vocational institution" means a school (1) which provides an eligible program of training to prepare students for gainful employment in a recognized occupa- tion, (2) which meets the requirements of clauses (1), (2), (4), and (5) of section 1201(a), and (3) which has been in existence for at least 2 years. Such term also includes an educational institution in any State which, in lieu of the requirement in clause (1) of section 1201(a), admits as regular students persons who are beyond the age of compulsory school attendance in the State in which the insti- tution is located. (d) ACADEMIC AND AWARD YEAR.(1) For the purpose of any program under this title, the term "award year" shall be defined as the period beginning July 1 and ending June 30 of the following year. (2) For the purpose of any program under this title, the term "academic year" shall require a minimum of 30 weeks of instruc- tional time, and, with respect to an undergraduate course of study, shall require that during such minimum period of instructional time a full-time student is expected to complete at least 24 semes- ter or trimester hours or 36 quarter hours at an institution that measures program length in credit hours, or at least 900 clock Sec. 481 HIGHER EDUCATION ACT OF 1965 300 hours at an institution that measures program length in clock hours. The Secretary may reduce such minimum of 30 weeks to not less than 26 weeks for good cause, as determined by the Secretary on a case-by-case basis, in the case of an institution of higher edu- cation that provides a 2-year or 4-year program of instruction for which the institution awards an associate or baccalaureate degree. (e) ELIGIBLE PROGRAM.(1) For purposes of this title, the term "eligible program" means a program of at least (A) 600 clock hours of instruction, 16 semester hours, or 24 quarter hours, offered during a minimum of 15 weeks, in the case of a program that (i) provides a program of training to prepare students for gainful employment in a recognized profession; and (ii) admits students who have not completed the equiv- alent of an associate degree; or (B) 300 clock hours of instruction, 8 semester hours, or 12 hours, offered during a minimum of 10 weeks, in the case of (i) an undergraduate program that requires the equiv- alent of an associate degree for admissions; or (ii) a graduate or professional program. (2)(A) A program is an eligible program for purposes of part B of this title if it is a program of at least 300 clock hours of instruc- tion, but less than 600 clock hours of instruction, offered during a minimum of 10 weeks, that (i) has a verified completion rate of at least 70 percent, as determined in accordance with the regulations of the Sec- retary; (ii) has a verified placement rate of at least 70 percent, as determined in accordance with the regulations of the Sec- retary; and (iii) satisfies such further criteria as the Secretary may prescribe by regulation. (B) In the case of a program being determined eligible for the first time under this paragraph, such determination shall be made by the Secretary before such program is considered to have satis- fied the requirements of this parasraph. (D THIRD PARTY SERVICER.For purposes of this title, the term "third party servicer" means any individual, or any State, or pri- vate, profit or nonprofit organization which enters into a contract with (1) any eligible institution of higher education to admin- ister, through either manual or automated processing, any as- pect. of such institution's student assistance programs under this title; or (2) any guaranty agency, or any eligible lender, to admin- ister, through either manual or automated processing, any as- poct of such guaranty agency's or lender's student loan pro- grams under part B of this title, including originating, guaran- teeing, monitoring, processing, servicing, or collecting loans. (20 U.S.C. 1088) Enacted October 3, 1980, P.L. 96-374, sec. 461(a), 94 Stat. 1444; amended October 17, 1986, P.L. 99-498, sec. 407(a), 100 Stat. 1476; amended June 3, 1987, P.L. 100-50, sec. 15(1), 101 Stat. 355; amended December 19, 1989, P.L. 101-239, secs. 2007 (b) and (c), 103 Stat. 2120, 2121; amended November 5, 1990, P.L. 101-508, sec. 3005(b), 104 Stat.1388-28; amended April 9, 1991, P.L. 102-26, sec. 2(a)(2) and (3), 105 Stat. 123; amended July 23, 1992, P.L. 102-325, sec. 481, 310 11 301 HIGHER EDUCATION ACT OF 1965 Sec. 482 106 Stat. 609; amended December 20, 1993, P.L. 103-208, sec. 2(1)(1)46), 107 Stat. 2475-76. SEC. 482. MASTER CALENDAR. (a) SECRETARY REQUIRED To COMPLY WITH SCHEDULE.To as- sure adequate notification and timely delivery of student aid funds under this title, the Secretary shall adhere to the following cal- endar dates in the year preceding the award year: (1) Development and distribution of Federal and multiple data entry forms (A) by February 1: first meeting of the technical com- mittee on forms design of the Department; (B) by March 1: proposed modifications and updates pursuant to section 478 published in the Federal Register; (C) by June 1: final modifications and updates pursu- ant to section 478 published in the Federal Register; (D) by August 15: application for Federal student as- sistance and multiple data entry data elements and in- structions approved; (E) by August 30: final approved forms delivered to servicers and printers; (F) by October 1: Federal and multiple data entry forms and instructions printed; and (G) by November 1: Federal and multiple data entry forms, instructions, and training materials distributed. (2) Allocations of campus-based and Pell *Grant funds (A) by August 1: distribution of institutional applica- tion for campus-based funds (FISAP) to institutions; (B) by October 1: fmal date for submission of FISAP by institutions to the Department; (C) by November 15: edited FISAP and computer printout received by institutions; (D) by December 1: appeals procedures received by in- stitutions; (E) by December 15: edits returned by institutions to the Department; (F) by February 1: tentative award levels received by institutions and final Pell Grant payment schedule; (G) by February 15: closing date for receipt of institu- tional appeals by the Department; (H) by March 1: appeals process completed; (I) by April 1: final award notifications sent to institu- tions; and (J) by June 1: Pell Grant authorization levels sent to institutions. (b) TIMING FOR REALLOCATIONS.With respect to any fimds re- allocated under section 413D(e), 442(e), or 462(j), the Secretary shall reallocate such funds at any time during the course of the year that will best meet the purpose of the programs under subpart 3 of part A, part C, and part E, respectively. However, such reallocation shall occur at least once each year, not later than Sep- tember 30 of that year. (C) DELAY OF EFFECTIVE DATE OF LATE PUBLICATIONS.Any regulatory changes initiated by the Secretary affecting the pro- grams pursuant to this title that have not been published in fmal 311 Sec. 483 HIGHER EDUCATION ACT OF 1965 302 form by Deceinber 1 prior to the start Of the award year shall not become effective until the beginning of the second awar4 year after such December 1 date. For award year 1994-95, this subsection shall not require a delay in the effectiveness of regulatory changes affecting parts B, G, and H of this title that are published in final form by May 1, 1994. (d) NOTICE TO CONGRESS.The Secretary shall notify the Coin- mittee on Labor and Human Resources of the Senate and the Com- mittee on Education and Labor of the House of Representatives when the items specified in the calendar have been completed and provide all relevant forms, rules, and instructions with such notice. When a deadline included in the calendar is not met, the Secretary, within 7 days, shall submit to the Committee on Labor and Human Resources of the Senate and the Committee -.n Education and Labor of the House of Representatives a written report, including proper documentation, as to why the deadline was not adhered to and 'a detailed plan for ensuring that subsequent dates are met. Nothing in this section shall be interpreted to penalize institutions or deny them the specified times allotted to enable them to return information to the Secretary based on the failure of the Secretary to adhere to the dates specified in this section. (20 U.S.C. 1089) Enacted October 3, 1980, P.L. 96-374, sec. 451(a), 94 Stat. 1445; amended April 7, 1986, P.L. 99-272, sec. 1089, 1C0 Stat. 354; amended October 17, 1986, P.L. 99-498, sec. 407(a), 100 Stat. 1477; amended June 3, 1987, P.L. 100-50, sec. 15(2), 101 Stat. 355; amended July 23, 1992, P.L. 102-325, sec. 482, 106 Stat. 612; amended December 20, 1993, P.L. 103-208, sec. 2(h)(7), (m), 107 Stat. 2476, 2486. SEC. 483. FORMS AND REGULATIONS. (a) COMMON FINANCIAL AID FORM AND PROCESSING. (1) SINGLE FORM REQUIRED.The Secretary, in cooperation with representatives of agencies and organizations involved in student financial assistance, shall produce, distribute, and process free of charge a common financial reporting form to be used to determine the need and eligibility of a student for fi- nancial assistance under parts A, C, D, and E of this title (other than under subpart 4 of part A) and to determine the need of a student for the purpose of part B of this title. The Secretary may include on the form developed pursuant to this paragraph not more than eight nonfinancial data items se- lected in consultation with the States to assist the States in awarding State student financial assistance. Such form shall satisf3r the requirements of section 401(d) of this title. For the purpose of collecting eligibility and other data for the purpose of part B, the Secretary shall develop a separate, identifiable loan application document (pursuant to section 432(m)) that applicants or institutions in which the students are enrolled or accepted for enrollment shall submit directly to eligible lenders and on which the applicant sLail clearly indicate a choice of a lender. (2) CHARGES TO STUDENTS AND PARENTS FOR USE OF FORM PROHIBITED.The common financial reporting form prescribed by the Secretary under paragraph (1) shall be produced, dis- tributed, and processed by the Secretary and no parent or stu- dent shall be charged a fee for the collection, processing, or de- 312 303 HIGHER EDUCATION ACT OF 1965 Sec. 483 livery of financial aid through the use of such form. The need and eligibility of a student for financial assistance under parts A, C, D, and E of this title (other than under subpart 4 of part A) and the need of a student for the purpose of part B of this title, may only be determined by using the form developed by the Secretary pursuant to paragraph (1) of this subsection. No student may receive assistance under parts A, C, D, and E of this title (other than under subpart 4 of part A) or have the student's need established for the purpose of part B of this title, except by use of the form developed by the Secretary pur- suant to this section. No data collected on a form for which a fee is charged shall be used to complete the form prescribed under paragraph (1). (3) DISTRIBUTION OF DATA.Institutions of higher edu- cation and States shall receive, without charge, the data col- lected by the Secretary using the form dpveleped pursuant to this section for the purposes of determining need and eligibility for institutional and State financial aid awards. Entities des- ignated by institutions of higher education or States to receive such data shall be subject to all requirements of this section, unless such requirements are waived by the Secretary. (4) CONTRACTS FOR COLLECTION AND PROCESSING.(A) The Secretary shall, to the extent practicable, enter into not less than 5 contracts with States, institutions of higher education, or private organizations for the purposes of the timely collec- tion and processing of the form developed pursuant to para- graph (1) and the timely delivery of the data submitted on such form. The Secretary shall use such contracts to assist States and institutions of higher education with the collection of additional data required to award State or institutional fi- nancial assistance, except that the Secretary shall not include these additional data items on the common fmancial reporting form developed pursuant to this section. The Secretary shall include in each such contract a requirement that-- (i) any charges by the contractor to the student or par- ent for additional data items required by a State or insti- tution for any purpose (regardless of the method of collec- tion) shall be reasonable and shall not exceed the marginal cost of collecting, processing, and delivering such addi- tional data, taking into account any payment received by the contractor to produce, distribute, and process the com- mon financial reporting form prescribed by the Secretary pursuant to paragraph (1); and (ii) the contractor will require any person or entity to whom the contractor provides such additional data to agree not to collect from any student or parent any charge that would not be permitted under this subparagraph for any such additional data. (B) To the extent practicable, the Secretary shall ensure that at least one contractor, or a portion of one contract, under this paragraph will serve graduate and professional students. (C) As part of the procurement process for the 1993-1994 award year, and for all procurements thereafter pertaining to the contracts under this paragraph, the Secretary shall require 313 Sec. 483 HIGHER EDUCATION ACT OF 1965 304 all entities competing for such contracts to comply with all re- quirements of this subsection and to (i) use the common financial reporting form as pre- scribed in paragraph (1), which shall be clearly identified as the "Free Application for Federal Student Aid"; and (ii) use a common, simplified reapplication form as the Secretary shall prescribe pursuant to subsection (b), in each award year. (D) The Secretary shall reimburse all approved contractors at a reasonable predetermined rate for processing such applica- tions, for issuing eligibility reports, and for carrying out other services or requirements that may be prescribed by the Sec- retary. (E) All approved contractors shall be required to adhere to all editing, processing, and reporting requirements established by the Secretary to ensure consistency. (F) No approved contractor shall enter into exclusive ar- rangements with guarantors, lenders, secondary markets, or institutions of higher education for the purpose of reselling or sharing of data collected for the multiple data entry process. All data collected under a contract issued by the Secretary pur- suant to this paragraph for the multiple data entry process is the exclusive property of the Secretary and may not be trans- ferred to a third party by an approved contractor without the Secretary's express written approval. (b) STREAMLINED REAPPLICATION PROCESS.(1) The Secretary shall, within 240 days after the date of enactment of the Higher Education Amendments of 1992, develop a streamlined reapplication form and process, including electronic reapplication process, consistent with the requirements of subsection (a), for those recipients who apply for financial aid funds under this title in the next succeeding academic year subsequent to the initial year in which such recipients apply. (2) The Secretary shall develop appropriate mechanisms to support reapplication. (3) The Secretary shall determine, in cooperation with States, institutions of higher education, agencies and organizations in- volved in student financial assistance, the data elements that can be updated from the previous academic year's application. (4) Nothing in this title shall be interpreted as limiting the au- thority of the Secretary to reduce the number of data elements re- quired of reapplicants. (5) Individuals determined to have a zero family contribution pursuant to section 479 shall not be required to provide any finan- cial data, except that which is necessary to determine eligibility under that section. (C) INFORMATION TO COMMITTEES OF CONGRESS.COpieS of all rules, regulations, guidelines, instructions, and application forms published or promulgated pursuant to this title shall be provided to the Committee on Labor and Human Resources of the Senate and the Committee on Education and Labor of the House of Rep- resentatives at least 45 days prior to their effective date. (d) TOLL-FREE INFORMATION.The Secretary shall contract for, or establish, and publicize a toll-free telephone service to provide 3/4. 305 HIGHER EDUCA110N ..1' OF 1965 Sec. 484 timely and accurate information to the general public. The informa- tion provided shall include specific instructions on completing the application form for assistance under this title. Such service shall also include a service accessible by telecommunications devices for the deaf (TDD's) and shall, in addition to the services provided for in the previous sentence, refer such students to the national clear- inghouse on postsecondary education that is authorized under sec- tion 633(c) of the Individuals with Disabilities Education Act. (e) PREPARER.Any financial aid application required to be made under this title shall include the name, signature, address or employer's address, social security number or employer identifica- tion number, and organizational affiliation of the preparer of such financial aid application. (f) SPECIAL RULE.Nothing in section 1544 of the Higher Edu- cation Amendments of 1992 shall relieve processors or institutions of higher education of any or all obligations under this section. (20 U.S.C. 1090) Enacted October 3, 1980, P.L. 96-374, sec. 451(a), 94 Stat. 1478; amended October 17, 1986, P.L. 99-498, sec. 407(a), 100 Stat. 1478; amended June 3, 1987, P.L. 100-50, sec. 15(3)(6), 101 Stat. 356; amended July 23, 1992, P.L. 102 325, sec. 483, 106 Stat. 612; amended December 20, 1993, P.L. 103-208, sec. 2(h)(8)(12), (m), 107 Stat. 2476, 2486. SEC. 484. STUDENT ELIGIBILITY. (a) IN GENERAL.In order to receive any grant, loan, or work assistance under this title, a student must (1) be enrolled or accepted for enrollment in a degree, cer- tificate, or other program (including a program of study abroad approved for credit by the eligible institution at which such student is enrolled) leading to a recognized educational creden- tial at an institution of higher education that is an eligible in- stitution in accordance with the provisions of section 487, ex- cept as provided in subsections (b)(3) and (b)(4), and not be en- rolled in an elementary or secondary school; (2) if the student is presently enrolled at an institution, be maintaining satisfactory progress in the course of study the student is pursuing in accordance with the provisions of sub- section (c); (3) not owe a refund on grants previously received at any institution under this title, or be in default on any loan from a student loan fund at any institution provided for in part E, or a loan made, insured, or guaranteed by the Secretary under this title for attendance at any institution; (4) file with the institution of higher education which the student intends to attend, or is attending (or in the case of a loan or loan guarantee with the lender), a document, which need not be notarized, but which shall include (A) a statement of educational purpose stating that the money attributable to such grant, loan, or loan guaran- tee will be used solely for expenses related to attendance or continued attendance at such institution; and (B) such student's social security number, except that the provisions of this subparagraph shall not apply to a student from the Republic of the Marshall Islands, the Federated States of Micronesia, or the Republic of Palau; 31'5 Sec. 484 HIGHER EDUCATION ACT OF 1965 306 (5) be a citizen or national of the United States, a perma- nent resident of the United States, able to provide evidence from the Immigration and Naturalization Service that he or she is in the United States for other than a temporary purpose with the intention of becoming a citizen or permanent resid.ent, or a permanent resident of the Trust Territory of the Pacific Islands, Guam, or the Northern Mariana Islands. (b) ELIGIBILITY FOR STUDENT LOANS.-(1) In order to be eligi- ble to receive any loan under this title (other than a loan under section 428B or 428C) for any period of enrollment, a student who is not a graduate or professional student (as defined in regulations of the Secretary), ansi who is enrolled in a program at an institu- tion which has a participation agreement with the Secretary to make awards under subpart 1 of part A of this title, shall (A)(i) have received a determination of eligibility or ineli- gibility for a Pell Grant under such subpart 1 for such period of enrollment; and (ii) if determined to be eligible, have filed an application for a Pell Grant for such enrollment period; or (B) have (A) filed an application with the Pell Grant proc- essor for such institution for such enrollment period, and (B) received from the financial aid administrator of the institution a preliminary determination of the student's eligibility or ineli- gibility for a grant under such subpart 1. (2) In order to be eligible to receive any loan under section 428A for any period of enrollment, a student shall (A) have received a determination of need for a loan under section 428(a)(2)(B) of this title; (B) if determined to have need for a loan under section 428, have applied for such a loan; and (C) has applied for a loan under section 428H, if such stu- dent is eligible to apply for such a loan. (3) A student who (A) is carrying at least one-half the normal full-time work load for the course of study that the student is pursuing, as de- termined by an eligible institution, and (B) is enrolled in a course of study necessary for enroll- ment in a program leading to a degree or certificate, shall be, notwithstanding paragraph (1) of subsection (a), eligible to apply for loans under part B or D of this title. The eligibility de- scribed in this paragraph shall be restricted to one 12-month pe- riod.(4) A student who (A) is carrying at least one-half the normal full-time work load for the course of study the student is pursuing, as deter- mined by the institution, and (B) is enrolled or accepted for enrollment in a program at an eligible institution necessary for a professional credential or certification from a State that is required for employment as a teacher in an elementary or secondary school in that State, shall be, notwithstanding paragraph (1) of subsection (a), eligible to apply for loans under part B, D, or E or work-study assistance under part C of this title. (5) Notwithstanding any other provision of this subsection, no incarcerated student is eligible to receive a loan under this title. 31.6 OP 307 HIGHER EDUCATION ACT OF 1965 Sec. 484 (C) SATISFACTORY PR0GRESS.(1) For the purpose of subsection (a)(2), a student is maintaining satisfactory progress if (A) the institution at which the student is in attendance, reviews the progress of the student at the end of each aca- demic year, or its equivalent, as determined by the institution, and (B) the student has a cumulative C average, or its equiva- lent or academic standing consistent with the requirements for graduation, as determined by the institution, at the end of the second such academic year. (2) Whenever a student fails to meet the eligibility require- ments of subsection (aX2) as a result of the application of this sub- section and subsequent to that failure the student has academic standing consistent with the requirements for graduation, as deter- mined by the institution, for any grading period, the student may, subject to this subsection, again be eligible under subsection (a)(2) for a grant, loan, or work assistance under this title. (3) Any institution of higher education at which the student is in attendance may waive the provisions of paragraph (1) or para- graph (2) of this subsection for undue hardship based on (A) the death of a relative of the student, (B) the personal injury or illness of the student, or (C) special circumstances as determined by the institution. (d) STUDENTS WHO ARE NOT HIGH SCHOOL GRADUATES.In order for a student who does not have a certificate of graduation from a school providing secondary education, or the recognized equivalent of such certificate, to be eligible for any assistance under subparts 1, 3, and 4 of part A and parts B, C, D, and E of this title, the student shall meet either one of the following stand- ards: (1) The student shall take an independently administered examination and shall achieve a score, specified by the Sec- retary, demonstrating that such student can benefit from the education or training being offered. Such examination shall be approved by the Secretary on the basis of compliance with such standards for development, administration, and scoring as the Secretary may prescribe in regulations. (2) The student shall be determined as having the ability to benefit from the education or training in accordance with such process as the State shall prescribe. Any such process de- scribed or approved by a State for the purposes of this section shall be effective 6 months after the date of submission to the Secretary unless the Secretary disapproves such process. In de- termining whether to approve or disapprove such process, the Secretary shall take into account the effectiveness of such proc- ess in enabling students without high school diplomas or the equivalent thereof to benefit from the instruction offered by in- stitutions utilizing such process, and shall also take into ac- count the cultural diversity, economic circumstances, and edu- cational preparation of the populations served by the institu- tions. (e) CERTIFICATION FOR GSL ELIGIBILITY.Each eligible institu- tion may certify student eligibility for a loan by an eligible lender under part B of this title prior to completing the review for accu- Sec. 484 HIGHER EDUCATION ACT OF 1965 308 racy of the information submitted by the applicant required by reg- ulations issued under this title, if (1) checks for the loans are mailed to the eligible institu- tion prior to disbursements; (2) the disbursement is not made until the review is com- plete; and (3) the eligible institution has no evidence or documenta- tion on which the institution may base a determination that the information submitted by the applicant is incorrect. (f) Loss OF ELIGIBILITY FOR VIOLATION OF LOAN LIMITS.(1) No student shall be eligible to receive any grant, loan, or work as- sistance under this title if the eligible institution determines that the student fraudulently borrowed in violation of the annual loan limits under part B, part D, or part E of this title in the same aca- demic year, or if the student fraudulently borrowed in excess of the aggregate maximum loan limits under such part B, part D, or part E. (2) If the institution determines that the student inadvertently borrowed amounts in excess of such annual or aggregate maximum loan limits, such institution shall allow the stud.ent to repay any amount borrowed in excess of such limits prior to certifying the student's eligibility for further assistance under this title. (g) VERIFICATION OF IMMIGRATION STATUS. (1) IN GENERAL.The Secretary shall implement a system under which the statements and supporting documentation, if required, of an individual declaring that such individual is in compliance with the requirements of subsection (a)(5) shall be verified prior to the individual's receipt of a grant, loan, or work assistance under this title. (2) SPECIAL RULE.The documents collected and main- tained by an eligible institution in the admission of a student to the institution may be used by the student in lieu of the doc- uments used to establish both employment authorization and identity under section 274A(b)(1)(B) of the Immigration and Nationality Act (8 U.S.C. 1324a) to verify eligibility to partici- pate in work-study programs under part C of this title. (3) VERIFICATION MECHANISMS.The Secretary is author- ized to verify such statements and supporting documentation through a data match, using an automated or other system, with other Federal agencies that may be in possession of infor- mation relevant to such statements and supporting documenta- tion. (4) REVIE1N.In the case of such an individual who is not a citizen or national of the United States, if the statement de- scribed in paragraph (1) is submitted but the documentation required under paragraph (2) is not presented or if the docu- mentation required under paragraph (2)(A) is presented but such documentation is not verified under paragraph (3) (A) the institution (i) shall provide a reasonable opportunity to sub- mit to the institution evidence indicating a satisfactory immigration status, and (ii) may not delay, deny, reduce, or terminate the individual's eligibility for the grant, loan, or work as- 318 309 HIGHER EDUCATION ACT OF 1965 Sec. 484 sistance on the basis of the individual's immigration status until such a reasonable opportunity has been provided; and (l3) if there are submitted documents which the insti- tution determines constitute reasonable evidence indicat- ing such status (1) the institution shall transmit to the Immigra- tion and Naturalization Service photostatic or other similar copies of such documents for official verifica- tion, (ii) pending such verification, the institution may not delay, deny, reduce, or terminate the individual's eligibility for the grant, loan, or work assistance on the basis of the individual's immigration status, and (iii) the institution shall not be liable for the con- sequences of any action, delay, or failure of the Service to conduct such verification. (h) LIMITATIONS OF ENFORCEMENT ACTIONS AGAINST INSTITU- TIONS.The Secretary shall not take any compliance, disallowance, penalty, or other regulatory action against an institution of higher education with respect to any error in the institution's determina- tion to make a student eligible for a grant, loan, or work assistance based on citizenship or immigration status (1) if the institution has provided such eligibility based on a verification of satisfactory immigration status by the Immi- gration and Naturalization Service, (2) because the institution, under subsection (h)(4)(A)(i), was required to provide a reasonable opportunity to submit documentation, or (3) because the institution, under subsection (h)(4)(B)(i), was required to wait for the response of the Immigration and Naturalization Service to the institution's request for official verification of the immigration status of the student. (i) VALIDITY OF LOAN GUARANTEES FOR LOAN PAYMENTS MADE BEFORE IMMIGRATION STATUS VERIFICATION COMPLETED.Notwith- standing subsection (h), if (1) a guaranty is made under this title for a loan made with respect to an individual, (2) at the time the guaranty is entered into, the provisions of subsection (h) had been complied with, (3) amounts are paid under the loan subject to such guar- anty, and (4) there is a subsecluent determination that, because of an unsatisfactory immigration status, the individual is not eligible for the loan, the official of the institution making the determination shall notify and instl uct the entity making the loan to cease further payments under the loan, but such guaranty shall not be voided or otherwise nullified with respect to such payments made before the date the entity receives the notice. 31_9 Sec. 484 HIGHER EDUCATION ACT OF 1965 310 (j ) 1 STUDENTS ATTENDING INSTITUTIONS IN THE FREELY ASSO- CIATED STATES AND ELIGIBILITY FOR TRIO PROGRAMS.Notwith- standing any other provision of law, a student who meets the re- quirements of paragraph (a)(5) of this section or who is a resident of the freely associated states, and who attends a public or non- profit institution of higher education located in any of the freely as- sociated states rather than a State, shall be eligible, if otherwise qualified, for assistance under subpart 1, 2, or 4 of part A or part C of this title. (k) SPECIAL RULE FOR CORRESPONDENCE COURSES.A student shall not be eligible to receive grant, loan, or work assistance under this title for a correspondence course unless such course is part of a program leading to an associate, bachelor or graduate degree. (1) COURSES OFFERED THROUGH TELECOMMUNICATIONS. (1) RELATION TO CORRESPONDENCE COURSES.A student enrolled in a course of instruction at an eligible institution of higher education (other than an institution that meets the defi- nition in section 521(4)(C) of the Carl D. Perkins Vocational and Applied Technology Education Act) that is offered in whole or in part through telecommunications and leads to a recog- nized associate, bachelor, or graduate degree conferred by such institution shall not be considered to be enrolled in correspond- ence courses unless the total amount of telecommunications and correspondence courses at such institution equals or ex- ceeds 50 percent of such courses. (2) RESTRICTION OR REDUCTIONS OF FINANCIAL AID.A stu- dent's eligibility to receive grants, loans, or work assistance under this title shall be reduced if a financial aid officer deter- mines under the discretionary authority provided in section 479A that telecommunications instruction results in a substan- tially reduced cost of attendance to such student. (3) SPECIAL RULE.For award years prior to the date of enactment of this subsection, the Secretary shall not take any compliance, disallowance, penalty, or other action against a student or an eligible institution when such action arises out of such institution's prior award of student assistance under this title if the institution demonstrates to the satisfaction of the Secretary that its course of instruction would have been in conformance with the requirements of this subsection. (4) DEFINITION.For the purposes of this subsection, the term "telecommunications" means the use of television, audio, or computer transmission, including open broadcast, closed cii- cuit, cable, microwave, or satellite, audio conferencing, com- puter conferencing, or video cassettes or discs, except that such term does not include a course that is delivered using video cassette or disc recordings at such institution and that is not delivered in person to other students of that institution. (in)2 STUDENTS WITH A FIRST BACCALAUREATE OR PROFES- SIONAL DEGREE.A student shall not be ineligible for assistance 'Section 801(a) of P.L. 102--73 added subsection (k) to section "484 of the Act (20 U.S C 1091)". 2Section 484(g) of the Higher Education Amendments of 1992 inserts a new subsection (n) Section 2(k)(8) of the Higher Education Technical Amendments of 1993 amended section 484 of 311 HIGHER EDUCATION ACT OF 1965 Sec. 484 under parts B, C, D, and E of this title because such student has previously received a baccalaureate or professional degree. (n) DATA BASE MATCHING.To enforce the Selective Service registration provisions of section 1113 of Public Law 97-252, the Secretary shall conduct data base matches with the Selective Serv- ice, using common demographic data elements. Appropriate con- firmation, through an application output document or through other means, of any person's registration shall fulfill the require- ment to file a separate statement of comphance. In the absence of a confirmation from such data matches, an institution may also use data or documents that support either the student's registration, or the absence of a registration requirement for the student, to fulfill the requirement to file a separate statement of compliance. The mechanism for reporting the resolution of nonconfirmed matches shall be prescribed by the Secretary in regulations. (o) STUDY ABROAD.Nothing in this Act shall be construed to limit or otherwise prohibit access to study abroad programs ap- proved by the home institution at which a student is enrolled. An otherwise eligible student who is engaged in a program of study abroad approved for academic credit by the home institution at which the student is enrolled shall be eligible to receive grant, loan, or work assistance under this title, without regard to whether such study abroad program is required as part of the student's de- gree program. (p) VERIFICATION OF SOCIAL SECURITY NUMBER.The Sec- retary of Education, in cooperation with the Commissioner of the Social Security Administration, shall verify any social security number provided by a student to an eligible institution under sub- section (a)(4) and shall enforce the following conditions: (1) Except as provided in paragraphs (2) and (3), an insti- tution shall not deny, reduce, delay, or terminate a student's eligibility for assistance under this part because social security number verification is pending. (2) If there is a determination by the Secretary that the so- cial security number provided to an eligible institution by a student is incorrect, the institution shall deny or terminate the student's eligibility for any grant, loan, or work assistance under this title until such time as the student provides docu- mented evidence of a social security number that is determined by the institution to be correct. (3) If there is a determination by the Secretary that the so- cial security number provided to an eligible institution by a student is incorrect, and a correct social security number can- not be provided by such student, and a loan has been guaran- teed for such student under part B of this title, the institution shall notify and instruct the lender and guaranty agency mak- ing and guaranteeing the loan, respectively, to cease further disbursements of the loan, but such guaranty shall not be void- the Higher Education Amendments of 1992 by inserting after subsection (h) a new subsection (1) as follows: "(i) EFFECTIvE DATE.The amendments made by subsection (g) with respect to the addition of subsection (n) shall be effective on and after December 1, 1987."; Section 484(n) was redesignated as subsection (m) by section 2(h)i25) of the Higher Education Amendments of 1993. 77-530 0-94-- I I Sec. 484A HIGHER EDUCA110N ACT OF 1965 312 ed or otherwise nullified with respect to such disbursements made before the date that the lender and the guaranty agency receives such notice. (4) Nothing in this subsection shall permit the Secretary to take any compliance, disallowance, penalty, or other regu- latory action against- (A) any institution of higher education with respect to any error in a social security number, unless such error was a result of fraud on the part of the institution; or (B) any student with respect to any error in a social security number, unless such error was a result of fraud on the part of the student. (20 U.S.C. 1091) Enacted October 3, 1980, P.L. 96-374, sec. 451(a), 94 Stat. 1448; amended April 7, 1986, P.L. 99-272, sec. 16032, 100 Stat. 354; amended October 17, 1986, P.L. 99-498, sec. 407(a), 100 Stat. 1479; amended Nov. 6, 1986, P.L. 99- 603, sec. 121(a)(3), 100 Stat. 3388; amended June 3, 1987, P.L. 100-50, sec. 15(7)- (9), 101 Stat. 356; amended July 18, 1988, P.L. 100-369, secs. 1, 2, and 6, 102 Stat. 835-836; amended October 24, 1988, P.L. 100-525, sec. 2(g), 102 Stat. 2611; amend- ed November 5, 1990, P.L. 101-508, sec. 3005(a), 104 Stat.1388-27; amended April 9, 1991, P.L. 102-26, sec. 2(b) and (c)(2), 105 Stat. 123; amended July 25, 1991, P.L. 102-73, 801(a), 105 Stat.359; amended July 23, 1992, P.L. 102-325, sec. 484, 106 Stat. 615; amended December 20, 1993, P.L. 103-208, sec. 2(h)(13)-(25), (m), 107 Stat. 2476-77, 2486. SEC. 484A. STATUTE OF LIMITATIONS. (a) IN GENERAL.-(1) It is the purpose of this subsection to en- sure that obligations to repay loans and grant overpayments are enforced without regard to any Federal or State statutory, regu- latory, or administrative limitation on the period within which debts may be enforced. (2) Notwithstanding any other provision of statute, regulation, or administrative limitation, no limitation shall terminate the pe- riod within which suit may be filed, a judgment may be enforced, or an offset, garnishment, or other action initiated or taken by- (A) an institution that receives funds under this title that is seeking to collect a refund due from a student on a grant made, or work assistance awarded, under this title; (B) a guaranty agency that has an agreement with the Secretary under section 428(c) that is seeking the repayment of the amount due from a borrower on a loan made under part B of this title after such guaranty agency reimburses the pre- vious holder of the loan for its loss on account of the default of the borrower; (C) an institution that has an agreement with the Sec- retary pursuant to section 453 or 463(a) that is seeking the re- payment of the amount due from a borrower on a loan made under part D or E of this title after the default of the borrower on such loan; or (D) the Secretary, the Attorney General, or the administra- tive head of another Federal agency, as the case may be, for payment of a refund due from a student on a grant made under this title, or for the repayment of the amount due from a borrower on a loan made under this title that has been as- signed to the Secretary under this title. (b) ASSESSMENT OF COSTS AND OTHER CHARGES.-Notwith- standing any provision of State law to the contrary- ; a s 372 313 HIGHER EDUCATION ACT OF 1965 Sec. 4MB (1) a borrower who has defaulted on a loan made under this title shall be required to pay, in addition to other charges specified in this title, reasonable collection costs; and (2) in collecting any obligation arising from a loan made under part B of this title, a guaranty agency or the Secretary shall not be subject to a defense raised by any borrower based on a claim of infancy. (20 U.S.C. 1091a) &Acted April 7, 1986, P.L. 99-272, sec. 16033, 100 Stat. 355; amended October 17, 1986, P.L. 99-498, sec. 407(a), 100 Stat. 1482; amended April 9, 1991, P.L. 102-26, sec. 3(a), 105 Stat. 124; amended December 20, 1993, P.L. 103-208, sec. 2(m), 107 Stat. 2486. SEC. 484B. INSTITUTIONAL REFUNDS. (a) REFUND POLICY REQUIRED.Each institution of higher edu- cation participating in a program under this title shall have in ef- fect a fair and equitable refund policy under which the institution refunds unearned tuition, fees, room and board, and other charges to a student who received grant or loan assistance under this title, or whose parent received a loan made under section 428B on behalf of the student, if the student (1) does not register for the period of attendance for which the assistance was intended; or (2) withdraws or otherwise fails to complete the period of enrollment for which the assistance was provided. (b) DETERMINATIONS.The institution's refund policy shall be considered to be fair and e uitable for purposes of this section if that policy provides for a refund in an amount of at least the larg- est of the amounts provided under (1) the requirements of applicable State law; (2) the specific refund requirements established by the in- stitution's nationally recognized accrediting agency and ap- proved by the Secretary; or (3) the pro rata refund calculation described in subsection (c), except that this paragraph will not apply to the institu- tion's refund policy for any student whose date of withdrawal from the institution is after the 60 percent point (in time) in the period of enrollment for which the student has been charged. (c) DEFINITIONS.(1) As used in this section, the term "pro rata refund" means a refund by the institution to a student attend- ing such institution for the first time of not less than that portion of the tuition, fees, room and board, and other charges assessed the student by the institution equal to the portion of the period of en- rollment for which the student has been charged that remains on the last day of attendance by the student, rounded downward to the nearest 10 percent of that period, less any unpaid charges owed by the student for the period of enrollment for which the student has been charged, and less a reasonable administrative fee not to exceed the lesser of 5 percent of the tuition, fees, room and board, and other charges assessed the student, or $100. (2) For purposes of paragraph (1), "the portion of the period of enrollment for which the student has been charged that remains", shall be determined (A) in the case of a program that is measured in credit hours, by dividing the total number of weeks comprising the 3?3 Sec. 485 HIGHER EDUCATION ACT OF 1965 314 period of enrollment for which the student has been charged into the number of weeks remaining in that period as of the last recorded day of attendance by the student; (B) in the case of a program that is measured in clock hours, by dividing the total number of clock hours comprising the period of enrollment for which the student has been charged into the number of clock hours remaining to be com- pleted by the student in that period as of the last recorded day of attendance by the student; and (C) in the case of a correspondence program, by dividing the total number of lessons comprising the period of enrollment for which the student has been charged into the total number of such lessons not submitted by the student. (20 U.S.C. 1091b) Enacted July 23, 1992, P.L. 102-325, sec. 485(a), 106 Stat. 619; amended December 20, 1993, P.L. 103-208, sec. 2(hX26) and (27), 107 Stat. 2477. SEC. 485. INSTITUTIONAL AND FINANCIAL ASSISTANCE INFORMATION FOR STUDENTS. (a) INFORMATION DISSEMINATION ACTIVITIES.(1) Each eligible institution participating in any program under this title shall carry out information dissemination activities for prospective and en- rolled students (including those attending or planning to attend less than full time) regarding the institution and all financial as- sistance under this title. The information required by this section shall be produced and be made readily available, through appro- priate publications and mailings, to all current students, and to any prospective student upon request. The information required by this section shall accurately describe (A) the student financial assistance programs available to students who enroll at such institution; (B) the methods by which such assistance is distributed among student recipients who enroll at such institution; (C) any means, including forms, by which application for student financial assistance is made and requirements for ac- curately preparing such application; (D) the rights and responsibilities of students receiving fi- nancial assistance under this title; (E) the cost of attending the institution, including (i) tui- tion and fees, (ii) books and supplies, (iii) estimates of typical student room and board costs or typical commuting costs, and (iv) any additional cost of the program in which the student is enrolled or expresses a specific interest; (F) a statement of the refund policy of the institution, as determined under section 484B, for the return e unearned tui- tion and fees or other refundable portion of cost, as described in subparagraph (E) of this paragraph, which refunds shall be credited in the following order: (i) to outstanding balances on loans under part B of this title for the period of enrollment for which a re- fund is required, (ii) to outstanding balances on loans under part D of this title for the period of enrollment for which a re- fund is required, 3 4 316 HIGHER EDUCATION ACT OF 1965 Sec. 485 (iii) to outstanding balances on loans under part E of this title for the period of enrollment for which a re- fund is required, (iv) to awards under subpart 1 of part A of this title,(v) to awards under subpart 3 of part A of this title, (vi) to other student assistance, and (vii) to the student; (G) the academic program of the institution, including (i) the current degree programs and other educational and train- ing programs, (ii) the instructional, laboratory, and other phys- ical plant facilities which relate to the academic program, and (iii) the faculty and other instructional personnel; (H) each person designated under subsection (c) of this sec- tion, and the methods by which and locations in which any person so designated may be contacted by students and pro- spective students who are seeking information required by this subsection; (I) special facilities and services available to handicapped students; (J) the names of associations, agencies, or governmental bodies which accredit, approve, o- license the institution and its programs, and the procedures under which any current or prospective student may obtain or review upon request a copy of the documents describing the institution's accreditation, ap- proval, or licensing; (K) the standards which the student must maintain in order to be considered to be making satisfactory progress, pur- suant to section 484(a)(2); (L) the completion or graduation rate of certificate- or de- gree-seeking, full-time, undergraduate students entering such institutions; (M) the terms and conditions under which students receiv- ing guaranteed student loans under part B of this title or di- rect student loans under part E of this title, or both, may (i) obtain deferral of the repayment of the principal and interest for service under the Peace Corps Act (as es- tablished by the Peace Corps Act (22 U.S.C. 2501) et seq.)) or under the Domestic Volunteer Service Act of 1973 (42 U.S.C. 4951 et seq.), or for comparable full-time service as a volunteer for a tax-exempt organization of dem- onstrated effectiveness in the field of community service, and (ii) obtain partial cancellation of the student loan for service under the Peace Corps Act (as established by the Peace Corps Act (22 U.S.C. 2501 et seq.)) under the Do- mestic Volunteer Service Act of 1973 (42 U.S.C. 4951 et seq.) or, for comparable full-time 1 service as a volunteer for a tax-exempt organization of demonstrated effective- ness in the field of community service; and Amendment made by sec. 10(a) of P.L. 102-26, 105 Stat. 128, inserted "undergraduate" after "fulltime" without futher specification. 3 ? 5 Sec. 485 HIGHER EDUCATION ACT OF 1965 316 (N) that enrollment in a program of study abroad approved for credit by the home institution may be considered enroll- ment in the home institution for purposes of applying for Fed- eral student financial assistance. (2) For the purpose of this section, the term "prospective stu- dent" means any individual who has contacted an eligible institu- tion requesting information concerning admission to that institu- tion. (3) In calculating the completion or graduation rate under sub- paragraph (L) of paragraph (1) of this subsection or under sub- section (e), a student shall be cmmted as a completion or gradua- tion if, within 150 percent of the normal time for completion of or graduation from the program, the student has completed or grad- uated from the program, or enrolled in any program of an eligible institution for which the prior program provides substantial prepa- ration. The information required to be disclosed under such subparagraph (A) shall, for any academic year beginning more than 270 days after the Secretary first prescribes final regulations pur- suant to such subparagraph (L), be made available to current and prospective students prior to enrolling or entering into any financial obligation; and (B) shall cover the one-year period ending on June 30 of the preceding year. (4) For purposes of this section, institutions may exclude from the information disclosed in accordance with subparagraph (L) of paragraph (1) the completion or graduation rates of students who leave school to serve in the armed services, on official church mis- sions, or with a recognized foreign aid service of the Federal Gov- ernment. (5) The Secretary shall permit any institution of higher edu- cation that is a member of an athletic association or athletic con- ference that has voluntarily published completion or graduation rate data or has agreed to publish data that, in the opinion of the Secretary, is substantially comparable to the information required under this subsection, to use such data to satisfy the requirements of this subsection; and (b) EXIT COUNSELING FOR B0RR0WERS.-(1)(A) Each eligible in- stitution shall, through fmancial aid officers or otherwise, make available counseling to borrowers (individually or in groups) of loans which are made, insured, or guaranteed under part B (other than loans made pursuant to section 428B) of this title or made under part D or E of this title prior to the completion of the course of study for which the borrower enrolled at the institution or at the time of cif. parture from such institution. The counseling required by this subsection shall include (i) the average anticipated monthly repayments, a review of the repayment options available, and such debt and manage- ment strategies as the institution determines are designed to facilitate the repayment of such indebtedness; and (ii) the terms and conditions under which the student may obtain partial cancellation or defer repayment of the principal and interest pursuant to sections 428(b), 464(c)(2), and 465. 31?,6 N 317 HIGHER EDUCATION ACT OF 1965 Sec. 485 (B) In the case of borrower who leaves an institution without the prior knowledge of the institution, the institution shall attempt to provide the information described in subparagraph (A) to the student in writing. (2)(A) Each eligible institution shall require that the borrower of a loan made under part B, D, or E submit to the institution, dur- ing the exit interview required by this subsection (1) the borrower's expected permanent address after leav- ing the institution (regardless of the reason for leaving); (ii) the name and address of the borrower's expected em- ployer after leaving the institution; (iii) the address of the borrower's next of kin; and (iv) any corrections in the institution's records relating the borrower's name, address, social security number, references, and driver's license number. (B) The institution shall, within 60 days after the interview, forward any corrected or completed information received from the borrower to the guaranty agency indicated on the borrower's stu- dent aid records. (c) FINANCIAL ASSISTANCE INFORMATION PERSONNEL.Each el- igible institution shall designate an employee or group of employ- ees who shall be available on a full-time basis to assist students or potential students in obtaining information as specified in sub- section (a). The Secretary may, by regulation, waive the require- ment that an employee or employees be available on a full-time basis for carrying out responsibilities required under this section whenever an institution in which the total enrollment, or the por- tion of the enrollment participating in programs under this title at that institution, is too small to necessitate such employee or em- ployees being available on a full-time basis. No such waiver may include permission to exempt any such institution from designating a specific individual or a group of individuals to carry out the pro- visions of this section. (d) DEPARTMENTAL PUBLICATION OF DESCRIPTIONS OF ASSIST- ANCE PROGRAMS.The Secretary shall make available to eligible institutions, eligible lenders, and secondary schools descriptions of Federal student assistance programs including the rights and re- sponsibilities of student and institutional participants, in order to (1) assist students in gaining information through institutional sources, and (2) assist institutions in carrying out the provisions of this section, so that individual and institutional participants will be fully aware of their rights and responsibilities under such pro- grams. In particular, such information shall include information to enable students and prospective students to assess the debt burden and monthly and total repayment obligations that will be incurred as a result of receiving loans of varying amounts under this title. In addition, such information shall include information to enable borrowers to assess the practical consequences of loan consolida- tion, including differences in deferment eligibility, interest rates, monthly payments, and finance charges, and samples of loan con- solidation profiles to illustrate such consequences. The Secretary shall provide information concerning the specific terms and condi- tions under which students may obtain partial or total cancellation or defer repayment of loans for service, shall indicate (in terms of 3?7 Sec. 485 HIGHER EDUCATION ACT OF 1965 318 the Federal minimum wage) the maximum level of compensation and allowances that a student borrower may receive from a tax-ex- empt organization to qualify for a deferment, and shall explicitly state that students may qualify for such partial cancellations or deferments when they serve as a paid employee of a tax-exempt or- ganization. Such information shall be provided by eligible institu- tions and eligible lenders at any time that information regarding loan availability is provided to any student. (e) DISCLOSURES REQUIRED WITH RESPECT TO ATHLETICALLY RELATED STUDENT AID.-(1) Each institution of higher education which participates in any program under this title and is attended by students receiving athletically related student aid shall annu- ally submit a report to the Secretary which contains (A) the number of students at the institution of higher education who received athletically related student aid broken down by race and sex in the following sports: basketball, foot- ball, baseball, cross country/track, and all other sports com- bined;(B) the number of students at the institution of higher education, broken down by race and sex; (C) the completion or graduation rate for students at the institution of higher education who received athletically related student aid broken down by race and sex in the following sports: basketball, football, baseball, cross country/track and all other sports combined; (D) the completion or graduation rate for students at the institution of higher education, broken down by race and sex; (E) the average completion or graduation rate for the 4 most recent completing or graduating classes of students at the institution of higher education who received athletically related student aid broken down by race and sex in the following cat- egories: basketball, football, baseball, cross country/track, and all other sports combined; and (F) the average completion or graduation rate for the 4 most recent completing or graduating classes of students at the institution of higher education broken down by race and sex. (2) When an institution described in paragraph (1) of this sub- section offers a potential student athlete athletically related stu- dent aid, such institution shall provide to the student and his par- ents, his guidance counselor, and coach the information contained in the report submitted by such institution pursuant to paragraph (1). (3) For purposes of this subsection, institutions may exclude from the reporting requirements under paragraphs (1) and (2) the completion or graduation rates of students and student athletes who leave school to serve in the armed services, on official church missions, or with a recognized foreign aid service of the Federal Government. (4) Each institution of higher education described in paragraph (1) may provide supplemental information to students and the Sec- retary showing the completion or graduation rate when such com- pletion or graduation rate includes students transferring into and out of such institution. 319 HIGHER EDUCATION ACT OF 1965 Sec. 485 (5) The Secretary, using the reports submitted under this sub- section, shall compile and publish a report containing the informa- tion required under paragraph (1) broken down by (A) individual institutions of higher education; and (E) athletic conferences recognized by the National Colle- giate Athletic Association and the National Association of Intercollegiate Athletics. (6) The Secretary shall waive the requirements of this sub- section for any institution of higher education that is a member of an athletic association or athletic conference that has voluntarily published completion or graduation rate data or has agreed to pub- lish data that, in the opinion of the Secretary, is substantially com- parable to the information required under this subsection. (7) The Secretary, in conjunction with the National Junior Col- lege Athletic Association, shall develop and obtain data on comple- tion or graduation rates from two-year colleges that award athlet- ically related student aid. Such data shall, to the extent prac- ticable, be consistent with the reporting requirements set forth in this section. (8) For purposes of this subsection, the term "athletically relat- ed student aid" means any scholarship, grant, or other form of fi- nancial assistance the terms of which require the recipient to par- ticipate in a program of intercollegiate athletics at an institution of higher education in order to be eligible to receive such assist- ance. (9) This subsection shall not be effective until the first July 1 that follows, by more than 270 days, the date on which the Sec- retary first prescribes fmal regulations pursuant to this subsection. The reports required by this subsection shall be due on that July 1 and each succeeding July 1 and shall cover the 1-year period end- ing June 30 of the preceding year. (f) DISCLOSURE OF CAMPUS SECURITY POLICY AND CAMPUS CRIME STATISTICS.-(1) Each eligible institution participating in any program under this title shall on August 1, 1991, begin to col- lect the following information with respect to campus crime statis- tics and campus security policies of that institution, and beginning September 1, 1992, and each year thereafter, prepare, publish, and distribute, through appropriate publications or mailings, to all cur- rent students and employees, and to any applicant for enrollment or employment upon request, an annual security report containing at least the following information with respect to the campus secu- rity policies and campus crime statistics of that institution: (A) A statement of current campus policies regarding pro- cedures and facilities for students and others to report criminal actions or other emergencies occurring on campus and policies concerning the institution's response to such reports. (B) A statement of current policies concerning security and access to campus facilities, including campus residences, and security considerations used in the maintenance of campus fa- cilities. (C) A statement of current policies concerning campus law enforcement, including -;.3e9 , Sec. 485 HIGHER EDUCATION ACT OF 1965 320 (i) the enforcement authority of security personnel, in- cluding their working relationship with State and local po- lice agencies; and (ii) policies which encourage accurate and prompt re- porting of all crimes to the campus police and the appro- priate police agencies. (D) A description of the type and frequency of programs designed to inform students and employees about campus secu- rity procedures and practices and to encourage students and employees to be responsible for their own security and the se- curity of others. (E) A description of programs designed to inform students and employees about the prevention of crimes. (F) Statistics concerning the occurrence on campus, during the most recent calendar year, and during the 2 preceding cal- endar years for which data are available, of the following criminal offenses reported to campus security authorities or local police agencies (i) murder; (ii) sex offenses, forcible or nonforcible; (Li) robbery; (iv) aggravated assault; (v) burglary; and (vi) motor vehicle theft. (G) A statement of policy concerning the monitoring and recording through local police agencies of criminal activity at off-campus student organizations which are recognized by the institution and that are engaged in by students attending the institution, including those student organizations with off-cam- pus housing facilities. (H) Statistics concerning the number of arrests for the fol- lowing crimes occurring on campus: (i) liquor law violations; (ii) drug abuse violations; and (iii) weapons possessions. (I) A statement of policy regarding the possession, use, and sale of alcoholic beverages and enforcement of State underage drinking laws and a statement of policy regarding the posses- sion, use, and sale of illegal drugs and enforcement of Federal and State drug laws and a description of any drug or alcohol abuse education programs as required under section 1213 of this Act. (2) Nothing in this subsection shall be construed to authorize the Secretary to require particular policies, procedures, or practices by institutions of higher education with respect to campus crimes or campus security. (3) Each institution participating in any program under this title shall make timely reports to the campus community on crimes considered to be a threat to other students and employees de- scribed in paragraph (1)(F) that are reported to campus security or local law police agencies. Such reports shall be provided to students and employees in a manner that is timely and that will aid in the prevention of similar occurrences. 330 321 HIGHER EDUCATION ACT OF 1965 Sec. 485 (4) Upon the request of the Secretary, each institution partici- pating in any program under this title shall submit to the Sec- retary a copy of the statistics required to be made available under paragraphs (1)(F) and (1)(H). The Secretary shall (A) review such statistics and report to the Committee on Education and Labor of the House of Representatives and the Committee on Labor and Human Resources of the Senate on campus crime statistics by September 1, 1995; and (B) in coordination with representatives of institutions of higher education, identify exemiilary campus security policies, procedures, and practices and disseminate information con- cerning those policies, procedures, and practices that have proven effective in the reduction of campus crime. (5)(A) For purposes of this subsection, the term "campus" includes (i) any building or property owned or controlled by the in- stitution of higher education within the same reasonably con- tiguous geographic area and used by the institution in direct support of, or related to its educational purposes; or (ii) any building or property owned or controlled by stu- dent organizations recognized by the institution. (B) In cases where branch campuses of an institution of higher education, schools within an institution of higher education, or ad- ministrative divisions within an institution are not within a rea- sonably contiguous geographic area, such entities shall be consid- ered separate campuses for purposes of the reporting requirements of this section. (6) The statistics described in paragraphs (1)(F) and (1)(H) shall be compiled in accordance with the definitions used in the uniform crime reporting system of the Department of Justice, Fed- eral Bureau of Investigation, and the modifications in such defini- tions as implemented pursuant to the Hate Crime Statistics Act. (7)(A) Each institution of higher education participating in any program under this title shall develop and distribute as part of the report described in paragraph (1) a statement of policy regarding (i) such institution's campus sexual assault programs, which shall be aimed at prevention of sex offenses; and (ii) the procedures followed once a sex offense has oc- curred. (B) The policy described in subparagraph (A) shall address the following areas: (i) Education programs to promote the awareness of rape, acquaintance rape, and other sex offenses. (ii) Possible sanctions to be imposed following the final de- termination of an on-campus disciplinary procedure regarding rape, acquaintance rape, or other sex offenses, forcible or nonforcible. (iii) Procedures students should follow if a sex offense oc- curs, including who should be contacted, the importance of pre- serving evidence as may be necessary to the proof of criminal sexual assault, and to whom the alleged offense should be re- ported. ,331 Sec. 485A HIGHER EDUCATION ACT OF 1965 322 (iv) Procedures for on-campus disciplinary action in cases of alleged sexual assault, which shall include a clear statement that- (I) the accuser and the accused are entitled to the same opportunities to have others present during a cam- pus disciplinary proceeding; and (II) both the accuser and the accused shall be informed of the outcome of any campus disciplinary proceeding brought alleging a sexual assault. (v) Informing students of their options to notify proper law enforcement authorities, including on-campus and local police, and the option to be assisted by campus authorities in notify- ing such authorities, if the student so chooses. (vi) Notification of students of existing counseling, mental health or student services for victims of sexual assault, both on campus and in the community. (vii) Notification of students of options for, and available assistance in, changing academic and living situations after an alleged sexual assault incident, if so requested by the victim and if such changes are reasonably available. (C) Nothing in this paragraph shall be construed to confer a private right of action upon any person to enforce the provisions of this paragraph. (20 U.S.C. 1092) Enacted October 3, 1980, P.L. 96-374, sec. 451(a), 94 Stat. 1449; amended October 17, 1986, P.L. 99-498, sec. 407(a), 100 Stat. 1482; amended June 3, 1987, P.L. 100-50, sec. 15(10)-(11), 101 Stat. 357; amended November 8, 1990, P L 101-542, sec. 103 (a) and (b), sec. 104(a), sec. 204(a), 104 Stat. 2381-2382, 238&-2384, 2385-2387; amended November 16, 1990, P.L. 101-610, secs. 201, 202, and 203, 104 Stat. 3171-3172; amended April 9, 1991, P.L. 102-26, sec. 10, 105 Stat 128; amended November 15, 1991, P.L. 102-164, sec. 603, 105 Stat. 1066; amended July 23, 1992, P.L. 102-325, sec. 486, 106 Stat. 620; amended December 20, 1993, P.L. 103-208, sec. 2(h)(28)-(37), (k)(9), (m), 107 Stat. 2477, 2486. SEC. 485A. COMBINED PAYMENT PLAN. (a) ELIGIBILITY FOR PLAN.-Upon the request of the borrower, a lender described in subparagraph (A), (B), or (C) of section 428C(a)(1) of this Act, or defined in subpart I of part C of title VII of the Public Health Service Act may, with respect to a consolida- tion loan made under section 428C of this Act (and section 439(0) of this Act as in effect prior to the enactment of section 428C) and loans guaranteed under subpart I of part C of title VII of the Public Health Service Act (known as Health Education Assistance Loans), offer a combined payment plan under which the lender shall sub- mit one bill to the borrower for the repayment of all such loans for the monthly or other similar period of repayment. (b) APPLICABILITY OF OTHER REQUIREMENTS.-A lender offering a combined payment plan shall comply with all provisions of sec- tion 428C applicable to loans consolidated or to be consolidated and shall comply with all provisions of subpart I of part C of title VII of the Public Health Service Act applicable to loans under that sub- part which are made part of the combined payment plan, except that a lender offering a combined payment plan under this section may offer consolidatiun loans pursuant to section 428C(b)(1)(A) if such lender holds any outstanding loan of a borrower which is se- lected for inclusion in a combined payment plan. 323 HIGHER EDUCATION ACT OF 1965 Sec. 485A (c) LENDER ELIGMILITY.Such lender may offer a combined payment plan only if (1) the lender holds an outstanding loan of that borrower which is selected by the borrower for incorporation into a com- bined payment plan pursuant to this section (including loans which are selected by the borrower for consolidation under this section); or (2) the borrower certifies that the borrower has sought and has been unable to obtain a combined payment plan from the holders of the outstanding loans of that borrower. (d) BORROWER SELECTION OF COMPETING OFFERS.In the case of multiple offers by lenders to administer a combined payment plan for a borrower, the borrower shall select from among them the lender to administer the combined payment plan including its loan consolidation component. (e) EFFECT OF PLAN.Upon selection of a lender to administer the combined payment plan, the lender may reissue any Health Education Assistance Loan selected by the borrower for incorpora- tion in the combined payment plan which is not held by such lend- er and the proceeds of such reissued loan shall be paid by the lend- er to the holder or holders of the loans so selected to discharge the liability on such loans, if (1) the lender selected to administer the combined pay- ment plan has determined to its satisfaction, in accordance with reasonable and prudent business practices, for each loan being reissued (A) that the loan is a legal, valid, and binding obligation of the borrower; (B) that each such loan was made and serviced in compliance with applicable laws and regula- tions; and (C) the insurance on such loan is in full force and effect; and (2) the loan being reissued was not in default (as defined in section 733(e)(3) of the Public Health Service Act) at the time the request for a combined payment plan is made. (0 NOTES AND INSURANCE CERTIFICATES.(1) Each loan re- issued under subsection (e) shall be evidenced by a note executed by the borrower. The Secretary of Health and Human Services shall insure such loan under a certificate of comprehensive insur- ance with no insurance limit, but any such certificate shall only be issued to an authorized holder of loans insured under subpart I of part C of title VII of the Public Health Service Act (including the Student Loan Marketing Association). Such certificates shall pro- vide that all loans reissued under this section shall be fully insured against loss of principal and interest. Any insurance issued with re- spect to loans reissued under this section shall be excluded from the limitation on maximum insurance authority set forth in section 728(a) of the Public Health Service Act. Notwithstanding the provi- sions of section 729(a) of the Public Health Service Act, the re- issued loan shall be made in an amount, including outstanding principal, capitalized interest, accrued unpaid interest not yet cap- italized, and authorized late charges. The proceeds of each such loan will be paid by the lender to the holder of the original loan being reissued and the borrower's obligation to that holder on that loan shall be discharged. Sec. 485B HIGHER EDUCATION ACT OF 1965 324 (2) Except as otherwise specifically provided for under the pro- visions of this section, the terms of any reissued loan shall be the same as the terms of the original loan. The maximum repayment period for a loan reissued under this section shall not exceed the remainder of the period which would have been permitted on the original loan. If the lender holds more than one loan insured under subpart I of part C of title VII of the Public Health Service Act, the maximum repayment period for all such loans may extend to the latest date permitted for any individual loan. Any reissued loan may be consolidated with any other Health Education Assistance Loan as provided in the Public Health Service Act, and, with the concurrence of the borrower, repayment of any such loans during any period may be made in amounts that are less than the interest that accrues on such loans during that period. (g) TERMINATION OF BORROWER ELIGIBILITY.The status of an individual as an eligible combined payment plan borrower termi- nates upon receipt of a combined payment plan. (h) FEES AND PREMIUMS.No origination fee or insurance pre- mium shall be charged to the borrower on any combined payment plan, and no origination fee or insurance premium shall be payable by the lender to the Secretary of Health and Human Services. (i) COMMENCEMENT OF REPAYMENT.Repayment of a combined payment plan shall commence within 60 days after the later of the date of acceptance of the lender's offer to administer a combined payment plan, the making of the consolidation loan or the reissuance of any Health Education Assistance Loans pursuant to subsection (e). (20 U.S.C. 1092a) Enacted October 17, 1986, P.L. 99-498, sec. 407(a), 100 Stat. 1484; amended June 3, 1987, P.L. 100-50, sec. 15(12), 101 Stat. 357; amended De- cember 20, 1993, P.L. 103-208, sec. 2(m), 107 Stat. 2486. SEC. 485B. 1 NATIONAL STUDENT LOAN DATA SYSTEM. (a) DEVELOPMENT OF THE SYSTEM.The Secretary shall con- sult with a representative group of guaranty agencies, eligible lend- ers, and eligible institutions to develop a mutually agreeable pro- posal for the establishment of a National Student Loan Data Sys- tem containing information regarding loans made, insured, or guar- anteed under part B and loans made under parts D and E, and for allowing the electronic exchange of data between program partici- pants and the system. In establishing such data system, the Sec- retary shall place a priority on providing for the monitoring of en- rollment, student status, information about current loan holders and servicers, and internship and residency information. Such data system shall also permit borrowers to use the system to identify the current loan holders and servicers of such borrower's loan. The information in the data system shall include (but is not limited to) (1) the amount and type of each such loan made; (2) the names and social security numbers of the borrow- ers; (3) the guaranty agency responsible for the guarantee of the loan; 'Section 204 of Public Law 101-610 (104 Stat. 3172) amended section 4858(a) of the Higher Education Act of 1965. These amendments could not be carried out. 34 325 HIGHER EDUCATION ACT OF 1965 Sec. 485B (4) the institution of higher education or organization re- sponsible for loans made under parts D and E; (5) the eligible institution in which the student was en- rolled or accepted for enrollment at the time the loan was made, and any additional institutions attended by the bor- rower; (6) the total amount of loans made to any borrower and the remaining balance of the loans; (7) the lender, holder, and servicer of such loans; (8) information concerning the date of any default on the loan and the collection of the loan, including any information concerning the repayment status of any defaulted loan on which the Secretary has made a payment pursuant to section 430(a) or the guaranty agency has made a payment to the pre- vious holder of the loan; (9) information regarding any deferments or forbearance granted on such loans; and (10) the date of cancellation of the note upon completion of repayment by the borrower of the loan or payment by the Sec- retary pursuant to section 437. (b) ADDITIONAL INFORMATION.For the purposes of research and policy analysis, the proposal shall also contain provisions for obtaining additional data concerning the characteristics of borrow- ers and the extent of student loan indebtedness on a statistically valid sample of borrowers under part B. Such data shall include (1) information concerning the income level of the borrower and his family and the extent of the borrower's need for stu- dent financial assistance, including loans; (2) information concerning the type of institution attended by the borrower and the year of the program of education for which the loan was obtained; (3) information concerning other student financial assist- ance received by the borrower; and (4) information concerning Federal costs associated with the student loan program under part B of this title, including the costs of interest subsidies, special allowance payments, and other subsidies. (c) VERIFICATION.The Secretary may require lenders, guar- anty agencies, or institutions of higher education to verify informa- tion or obtain eligibility or other information through the National Student Loan Data System prior to making, guaranteeing, or cer- tifying a loan made under part B, D, or E. (d) REPORT TO CONGRESS.The Secretary shall prepare and submit to the appropriate committees of the Congress, in each fis- cal year, a report describing the results obtained by the establish- ment and operation of the student loan data system authorized by this section. (e) STANDARDIZATION OF DATA REPORTING. (1) IN GENERAL.The Secretary shall by regulation pre- scribe standards and procedures (including relevant defini- tions) that require all lenders and guaranty agencies to report information on all aspects of loans made under this title in uni- form formats in order to permit the direct comparison of data 33 5 Sec. 485C HIGHER EDUCATION ACT OF 1965 326 submitted by individual lenders, servicers or guaranty agen- cies.(2) ACTWITIES.Por the purpose of establishing standards under this section, the Secretary shall (A) consult with guaranty agencies, lenders, institu- tions of higher education, and organizations representing the groups described in paragraph (1); (B) develop standards designed to be implemented by all guaranty agencies and lenders with minimum modifica- tions to existing data processing hardware and software; and (C) publish the specifications selected to be used to en- courage the automation of exchanges of information be- tween all parties involved in loans under this title. U) COMMON IDENTIFIERS.The Secretary shall, not later than July 1, 1993 (1) revise the codes used to identify institutions and stu- dents in the student loan data system authorized by this sec- tion to make such codes consistent with the codes used in each database used by the Department of Education that contains information of participation in programs under this title; and (2) modify the design or operation of the system authorized by this section to ensure that data relating to any institution is readily accessible and can be used in a form compatible with the integrated postsecondary education data system (IPEDS). (g) INTEGRATION OF DATABASES.--The Secretary shall integrate the National Student Loan Data System with the Pell Grant appli- cant and recipient databases as of January 1, 1994, and any other databases containing information on participation in programs under this title. (20 U.S.C. 1092b) Reenacted December 19, 1989, Pl. 101-239, sec. 2008, 103 Stat. 2121-2122; amended July 23, 1992, Pi. 102-325, sec. 487, 106 Stat. 623; amended December 20, 1993, P.L. 103-208, sec. 2(h)(38)(41), (m), 107 Stat. 2478, 2486. SEC. 485C. SIMPLIFICATION OF THE LENDING PROCESS FOR BORROW- ERS. (a) ALL LIKE LOANS TREATED AS ONE.To the extent prac- ticable, and with the cooperation of the borrower, eligible lenders shall treat all loans made to a borrower under the same section of part B as one loan and shall submit one bill to the borrower for the repayment of all such loans for the monthly or other similar period of repayment. Any deferments on one such loan will be con- sidered a deferment on the total amount of all such loans. (b) ONE LENDER, ONE GUARANTY AGENCY.To the extent prac- ticable, and with the cooperation of the borrower, the guaranty agency shall ensure that a borrower only have one lender, one holder, one guaranty agency, and one servicer with which to main- tain contact. (20 U.S.C. 1092c) Enacted July 23, 1992, P.L. 102-326, sec. 488, 106 Stat. 624. SEC. 486. TRAINING IN FINANCIAL AID SERVICES. (a) PROGRAM AUTHORITY.The Secretary is authorized to pro- vide grants to appropriate nonprofit private organizations or com- binations of such organizations to provide training for student fi- 327 HIGHER EDUCATION ACT OF 1965 Sec. 487 nancial aid administrators and TRIO personnel, at all levels of ex- perience, who provide or are involved in student financial aid serv- ices. (b) USE OF FUNDS.Financial assistance under this section may be used for (1) the operation of short-term training institutes and spe- cial training programs for student financial aid administrators or TRIO personnel designed to (A) improve the professional management skills of par- ticipants in such institutes and programs; (B) improve the delivery of student services; (C) improve students' or prospective students' informa- tion on the availability and operation of student financial assistance programs; and (D) improve the understanding and knowledge of the participants concerning the legislative and regulatory re- quirements of the student financial assistance programs and changes in such requirements; and (2) the development of appropriate training materials. (c) LIMITATIONS Grants authorized under this section (1) shall be limited to not less than $1,000,000 in the case of single-year grants; (2) shall be limited to not less than $1,000,000 per year in the case of multiple-year grants; (3) shall be limited to a maximum of 3 years in the case of multiple-year grants; and (4) may be renewed at the discretion of the Secretary. (d) AUTHORIZATION OF APPROPRIATIONS AND USE OF FUNDS. There are authorized to be appropriated $5,000,000 for fiscal year 1993 and such sums as may be necessary for each of the 4 succeed- ing fiscal years to carry out the provisions of this section. (20 U.S.C. 1093) Enacted October 3, 1980, P.L. 96-374, sec. 451(a), 94 Stat. 1450; amended October 17, 1986, P.L. 99-498, sec. 407(a), 100 Stat. 1487; amended July 23, 1992, P.L. 102-325, sec. 489, 106 Stat. 624. SEC. 487. PROGRAM PARTICIPATION AGREEMENTS. (a) REQUIRED FOR PROGRAMS OF ASSISTANCE; CONTENTS.In order to be an eligible institution for the purposes of any program authorized under this title, an institution must be an institution of higher education or an eligible insti',..ition (as that term is defined for the purpose of that program) and shall, except with respect to a program under subpart 4 of part A, enter into a program partici- pation agreement with the Secretary. The agreement shall condi- tion the initial and continuing eligibility of an institution to partici- pate in a program upon compliance with the following require- ments: (1) The institution will use funds received by it for any program under this title and any interest or other earnings thereon solely for the purpose specified in and in accordance with the provision of that program. (2) The institution shall not charge any student a fee for processing or handling any application, form, or data required to determine the student's eligibility for assistance under this title or the amount of such assistance. , 337 Sec. 487 HIGHER EDUCATION ACT OF 1965 328 (3) The institution will establish and maintain such ad- ministrative and fiscal procedures and records as may be nec- essary to ensure proper and efficient administration of funds received from the Secretary or from students under this title, together with assurances that the institution will provide, upon request and in a timely fashion, information relating to the administrative capability and financial responsibility of the institution to (A) the Secretary; (B) the appropriate State review entity designated under subpart 1 of part H; (C) the appropriate guaranty agency; and (D) the appropriate accrediting agency or association. (4) The institution will comply with the provisions of sub- section (b) of this section and the regulations prescribed under that subsection, relating to fiscal eligibility. (5) The institution will submit reports to the Secretary and, in the case of an institution participating in a program under part B or part E, to holders of loans made to the institu- tion's students under such parts at such times and containing such information as the Secretary may reasonably require to carry out the purpose of this title. (6) The institution will not provide any student with any statement or certification to any lender under part B that qualifies the student for a loan or loans in excess of the amount that student is eligible to borrow in accordance with sections 425(a), 428(a)(2), and 428(b)(1) (A) and (B). (7) The institution will comply with the requirements of section 485. (8) In the case of an institution that advertises job place- ment rates as a means of attracting students to enroll in the institution, the institution will make available to prospective students, at or before the time of application (A) the most re- cent available data concerning employment statistics, gradua- tion statistics, and any other information necessary to substan- tiate the truthfulness of the advertisements, and (B) relevant State licensing requirements of the State in which such institu- tion is located for any job for which the course of instruction is designed to prepare such prospective students. (9) In the case of an institution participating in a program under part B, the institution will inform all eligible borrowers enrolled in the institution about the availability and eligibility of such borrowers for State grant assistance from the State in which the institution is located, and will inform such borrowers from another State of the source for further information con- cerning such assistance from that State. (10) The institution certifies that it has in operation a drug abuse prevention program that is determined by the institution to be accessible to any officer, employee, or student at the in- stitution. (11) In the case of any institution whose students receive financial assistance pursuant to section 484(d), the institution will make available to such students a program proven suc- 338' 329 HIGHER EDUCATION ACT OF 1965 Sec. 487 cessful in assisting students in obtaining a certificate of high school equivalency. (12) The institution certifies that (A) the institution has established a campus security policy; and (B) the institution has complied with the disclosure re- quirements of section 485(0. (13) The institution will not deny any form of Federal fi- nancial aid to any student who meets the eligibility require- ments of this title on the grounds that the student is partici- pating in a program of study abroad approved for credit by the institution. (14)(A) The institution, in order to participate as an eligi- ble institution under part B, will develop a Default Manage- ment Plan for approval by the Secretary as part of its initial application for certification as an eligible institution and will implement such Plan for two years thereafter. (B) Any institution of higher education which changes ownership and any eligible institution which changes its status as a parent or subordinate institution shall, in order to partici- pate as an eligible institution under part B, develop a Default Management Plan for approval by the Secretary and imple- ment such Plan for two years after its change of ownership or status. (15) The institution acknowledges the authority of the Sec- retary, guaranty agencies, lenders, accrediting agencies, the Secretary of Veterans Affairs, and State review entities under subpart 1 of part H to share with each other any information pertaining to the institution's eligibility to participate in pro- grams under this title or any information on fraud and abuse. (16)(A) The institution will not knowingly employ an indi- vidual in a capacity that involves the administration of pro- grams under this title, or the receipt of program funds under this title, who has been convicted of, or has pled nolo contendere or guilty to, a crime involving the acquisition, use, or expenditure of funds under this title, or has been judicially determined to have committed fraud involving funds under this title or contract with an institution or third party servicer that has been terminated under section 432 involving the ac- quisition, use, or expenditure of funds under this title, or who has been judicially determined to have committed fraud involv- ing funds under this title. (B) The institution will not knowingly contract with or em- ploy any individual, agency, or organization that has been, or whose officers or employees have been (i) convicted of, or pled nolo contendere or guilty to, a crime involving the acquisition, use, or expenditure of funds under this title; or (ii) judicially determined to have committed fraud in- volving funds under this title. (17) The institution will complete surveys conducted as a part of the Integrated Postsecondary Education Data System (IPEDS) or any other Federal postsecondary institution data 339 Sec. 487 HIGHER EDUCATION ACT OF 1965 330 collection effort, as designated by the Secretary, in a timely manner and to the satisfaction of the Secretary. (18)(A) With respect to any institution that offers athlet- ically related student aid, the institution will (i) cause an annual compilation, independently audited not less often than every 3 years, to be prepared within 6 months after the end of its fiscal year, of (I) the total revenues, and the revenues from foot- ball, men's basketball, women's basketball, all other men's sports combined, and all other women's sports combined, derived by the institution from its inter- collegiate athletics activities; (II) the total expenses, and the expenses attrib- utable to football, men's basketball, women's basket- ball, all other men's sports combined and all other women's sports combined, made by the institution for its intercollegiate athletics activities; and (III) the total revenues and operating expenses of the institution; and (ii) make the reports on such compilations and, where allowable by State law, the audits, available for inspection by the Secretary and the public. (B) For the purpose of subparagraph (A) (i) revenues from intercollegiate athletics activities al- locable to a sport shall include without limitation gate re- ceipts, broadcast revenues, appearance guarantees and op- tions, concessions and advertising, but revenues such as student activities fees or alumni contributions not so allo- cable shall be included in the calculation of total revenues only; and (ii) expenses for intercollegiate athletics activities allo- cable to a sport shall include without limitation grants-in- aid, salaries, travel, equipment, and supplies, but expenses such as general and administrative overhead not so alloca- ble shall be included in the calculation of total expenses only. (19) The institution will not impose any penalty, including the assessment of late fees, the denial of access to classes, li- braries, or other institutional facilities, or the requirement that the student borrow additional funds, on any student because of the student's inability to meet his or her financial obligations to the institution as a result of the delayed disbursement of the proceeds of a loan made under this title due to compliance with the provisions of this title, or delays attributable to the institu- tion. (20) The institution will not provide any commission, bonus, or other incentive payment based directly or indirectly on success in securing enrollments or fmancial aid to any per- sons or entities engaged in any student recruiting or admission activities or in making decisions regarding the award of stu- dent financial assistance, except that this paragraph shall not apply to the recruitment of foreign students residing in foreign countries who are not eligible to receive Federal student assist- ance. 3 4 0 331 HIGHER EDUCATION ACT OF 1965 Sec. 487 (21) The institution will meet the requirements established by the Secretary, State postsecondary review entities, and ac- crediting agencies pursuant to part H of this title. (22) The institution will comply with the refund policy es- tablished pursuant to section 484B. (b) HEARINGS.-(1) An institution that has received written no- tice of a final audit or program review determination and that de- sires to have such determmation reviewed by the Secretary shall submit to the Secretary a written request for review not later than 45 days after receipt of notification of the final audit or program review determination. (2) The Secretary shall, upon receipt of written notice under paragraph (1), arrange for a hearing and notify the institution within 30 days of receipt of such notice the date, time, and place of such hearing. Such hearing shall take place not later than 120 days from the date upon which the Secretary notifies the institu- tion. (C) AUDITS; FINANCIAL RESPONSIBILITY; ENFORCEMENT OF STANDARDS.-(1) Notwithstanding any other provisions of this title, the Secretary shall prescribe such regulations as may be necessary to provide for (A)(i) except as provided in clause (ii), a financial audit of an eligible institution with regard to the fmancial condition of the institution in its entirety, and a compliance audit of such institution with regard to any funds obtained by it under this title or obtained from a student or a parent who has a loan in- sured or guaranteed by the Secretary under this title, on at least an annual basis and covering the period since the most recent audit, conducted by a qualified, independent organiza- tion or person in accordance with standards established by the Comptroller General for the audit of governmental organiza- tions, programs, and functions, and as prescribed in regula- tions of the Secretary, the results of which shall be submitted to the Secretary and shall be available to cognizant guaranty agencies, eligible lenders, State agencies, and the State review entities referred to in subpart 1 of part H; or (ii) with regard to an eligible institution which is audited under chapter 75 of title 31, United States Code, deeming such audit to satisfy the requirements of clause (i) for the period covered by such audit; (B) in matters not governed by specific program provisions, the establishment of reasonable standards of financial respon- sibility and appropriate institutional capability for the admin- istration by an eligible institution of a program of student fi- nancial aid under this title, including any matter the Secretary deems necessary to the sound administration of the financial aid programs, such as the pertinent actions of any owner, shareholder, or person exercising control over an eligible insti- tution; (C)(i) except as provided in clause (ii), a compliance audit of a third party servicer (other than with respect to the servicer's functions as a lender if such functions are otherwise audited under this part and such audits m eet the requirements of this clause), with regard to any contract with an eligible in- 3 4 1 Sec. 487 HIGHER EDUCATION ACT OF 1965 332 stitution, guaranty agency, or lender for administering or serv- icing any aspect of the student assistance programs under this title, at least once every year and covering the period since the most recent audit, conducted by a qualified, independent orga- nization or person in accordance with standards established by the Comptroller General for the audit of governmental organi- zations, programs, and functions, and as prescribed in regula- tions of the Secretary, the results of which shall be submitted to the Secretary; or (ii) with regard to a third party servicer that is audited under chapter 75 of title 31, United States Code, such audit shall be deemed to satisfy the requirements of clause (i) for the period covered by such audit; (D)(i) a compliance audit of a secondary market with re- gard to its transactions involving, and its servicing and collec- tion of, loans made under this title, at least once a year and covering the period since the most recent audit, conducted by a qualified, independent organization or person in accordance with standards established by the Comptroller General for the audit of governmental organizations, programs, and functions, and as prescribed in regulations of the Secretary, the results of which shall be submitted to the Secretary; or (ii) with regard to a secondary market that is audited under chapter 75 of title 31, United States Code, such audit shall be deemed to satisfy the requirements of clause (i) for the period covered by the audit; (E) the establishment, by each eligible institution under part B responsible for furnishing to the lender the statement required by section 428(a)(2)(A)(i), of policies and procedures by which the latest known address and enrollment status of any student who has had a loan insured under this part and who has either formally terminated his enrollment, or failed to re- enroll on at least a half-time basis, at such institution, shall be furnished either to the holder (or if unknown, the insurer) of the note, not later than 60 days after such termination or failure to re-enroll; (F) the limitation, suspension, or termination of the par- ticipation in any program under this title of an eligible institu- tion, or the imposition of a civil penalty under paragraph (2)(B) whenever the Secretary has determined, after reasonable no- tice and opportunity for hearing, that such institution has vio- lated or failed to carry out any provision of this title, any regu- lation prescribed under this title, or any applicable special ar- rangement, agreement, or limitation, except that no period of suspension under this section shall exceed 60 days unless the institution and the Secretary agree to an extension or unless limitation or termination proceedings are initiated by the Sec- retary within that period of time; (G) an emergency action against an institution, under which the Secretary shall, effective on the date on which a no- tice and statement of the basis of the action is mailed to the institution (by registered mail, return receipt requested), with- hold funds from the institution or its students and withdraw 312 333 HIGHER EDUCATION ACT OF 1965 Sec. 487 the institution's authority to obligate funds under any program under this title, if the Secretary (i) receives information, determined by the Secretary to be reliable, that the institution is violating any provi- sion of this title, any regulation prescribed under this title, or any applicable special arrangement, agreement, or limi- tation, (ii) determines that immediate action is necessary to prevent misuse of Federal funds, and (iii) determines that the likelihood of loss outweighs the importance of the procedures prescribed under sub- paragraph (D) for limitation, suspension, or termination, except that an emergency action shall not exceed 30 days un- less limitation, suspension, or termination proceedings are ini- tiated by the Secretary against the institution within that pe- riod of time, and except that the Secretary shall provide the in- stitution an opportunity to show cause, if it so requests, that the emergency action is unwarranted; (H) the limitation, suspension, or termination of the eligi- bility of a third party servicer to contract with any institution to administer any aspect of an institution's student assistance program under this title, or the imposition of a civil penalty under paragraph (2)(B), whenever the Secretary has deter- mined, after reasonable notice and opportunity for a hearing, that such organization, acting on behalf of an institution, has violated or failed to carry out any provision of this title, any regulation prescribed under this title, or any applicable special arrangement, agreement, or limitation, except that no period of suspension under this subparagraph shall exceed 60 days un- less the organization and the Secretary agree to an extension, or unless limitation or termination proceedings are initiated by the Secretary against the individual or organization within that period of time; and (I) an emergency action against a third party servicer that has contracted with an institution to administer any aspect of the institution's student assistance program under this title, under which the Secretary shall, effective on the date on which a notice and statement of the basis of the action is mailed to such individual or organization (by registered mail, return re- ceipt requested), withhold funds from the individual or organi- zation and withdraw the individual or organization's authority to act on behalf of an institution under any program under this title, if the Secretary (i) receives information, determined by the Secretary to be reliable, that the individual or organization, acting on behalf of an institution, is violating any provision of this title, any regulation prescribed under this title, or any applicable special arrangement, agreement, or limitation, (ii) determines that immediate action is necessary to prevent misuse of Federal funds, and (iii) determines that the likelihood of loss outweighs the importance of the procedures prescribed under sub- paragraph (F), for limitation, suspension, or termination, 3 4 , Sec. 487 HIGHER EDUCATION ACT OF 1965 334 except that an emergency action shall not exceed 30 days un- less the limitation, suspension, or termination proceedings are initiated by the Secretary against the individual or organiza- tion within that period of time, and except that the Secretary shall provide the individual or organization an opportunity to show cause, if it so requests, that the emergency action is un- warranted. (2) If an individual who, or entity that, exercises substantial control, as determined by the Secretary in accordance with the defi- nition of substantial control in subpart 3 of part H, over one or more institutions participating in any program under. this title, or, for purposes of paragraphs (1) (H) and (I), over one or more organi- zations that contract with an institution to administer any aspect of the institution's student assistance program under this title, is determined to have committed one or more violations of the re- quirements of any program under this title, or has been suspended or debarred in accordance with the regulations of the Secretary, the Secretary may use such determination, suspension, or debarment as the basis for imposing an emergency action on, or limiting, sus- pending, or terminating, in a single proceeding, the participation of any or all institutions under the substantial control of that individ- ual or entity. (3)(A) Upon determination, after reasonable notice and oppor- tunity for a hearing, that an eligible institution has engaged in substantial misrepresentation of the nature of its educational pro- gram, its financial charges, or the employability of its graduates, the Secretary may suspend or terminate the eligibility status for any or all programs under this title of any otherwise eligible insti- tution, in accordance with procedures specified in paragraph (1)(D) of this subsection, until the Secretary finds that such practices have been corrected. (B)(i) Upon determination, after reasonable notice and oppor- tunity for a hearing, that an eligible institution (I) has violated or failed to carry out any provision of this title or any regulation prescribed under this title; or (II) has engaged in substantial misrepresentation of the nature of its educational program, its fmancial charges, and the employability of its graduates, the Secretary may impose a civil penalty upon such institution of not to exceed $25,000 for each violation or misrepresentation. (ii) Any civil penalty may be compromised by the Secretary. In determining the amount of such penalty, or the amount agreed upon in compromise, the appropriateness of the penalty to the size of the institution of higher education subject to the determination, and the gravity of the violation, failure, or misrepresentation shall be considered. The amount of such penalty, when finally deter- mined, or the amount agreed upon in compromise, may be deducted from any sums owing by the United States to the institution charged. (4) The Secretary shall publish, after consultation with each State review entity designated under subpart 1 of part H, a list of State agencies which the Secretary determines to be reliable au- thority as to the quality of public postsecondary vocational edu- 314 335 HIGHER EDUCATION ACT OF 1965 Sec. 487 cation in their respective States for the purpose of determining eli- gibility for all Federal student assistance programs. (5) The Secretary shall make readily available to appropriate guaranty agencies, eligible lenders, State review entities des- ignated under subpart 1 of part H, and accrediting agencies or as- sociations the results of the audits of eligible institutions conducted pursuant to paragraph (1)(A). (6) The Secretary is authorized to provide any information col- lected as a result of audits conducted under this section, together with audit information collected by guaranty agencies, to any Fed- eral or State agency having responsibilities with respect to student financial assistance, including those referred to in subsection (a)(15) of this section. (7) Effective with respect to any audit conducted under this subsection after December 31, 1988, if, in the course of conducting any such audit, the personnel of the Department of Education dis- cover, or are informed of, grants or other assistance provided by an institution in accordance with this title for which the institution has not received funds appropriated under this title (in the. amount necessary to provide such assistance), including funds for which re- imbursement was not requested prior to such discovery or informa- tion, such institution shall be permitted to offset that amount against any sums determined to be owed by the institution pursu- ant to such audit, or to receive reimbursement for that amount (if the institution does not owe any such sums). (d) DEFINITION OF ELIGIBLE INSTITUTION.-For the purpose of this section, the term "eligible institution" means any such institu- tion described in section 481 of this Act. (e) CONSTRUCTION.-Nothing in the amendments made by the Higher Education Amendments of 1992 shall be construed to pro- hibit an institution from recording, at the cost of the institution, a hearing referred to in subsection (b)(2), subsection (c)(1)(D), or sub- paragraph (A) or (B)(i) of subsection (c)(2), of this section to create a record of the hearing, except the unavailability of a recording shall not serve to delay the completion of the proceeding. The Sec- retary shall allow the institution to use any reasonable means, in- cluding stenographers, of recording the hearing. (20 U.S.C. 1094) Enacted October 3, 1980, P.L. 96-374, sec. 451(a), 94 Stat. 1451; amended April 7, 1986, P.L. 99-272, sec. 16034, 100 Stat 356; amended October 17, 1986, P.L. 99-498, sec. 407(a), 100 Stat. 1486; amended December 19, 1989, P.L. 101-239, secs. 2003(c)(2) and 2006(c), 103 Stat. 2114, 2118-2120; amended Novem- ber 8, 1990, P.L. 101-542, sec. 205, 104 Stat. 2387; amended April 9, 1991, P.L. 102-26, sec. 2(c)(3), 105 Stat. 124; amended July 23, 1992, P.L. 102-325, sec. 490, 106 Stat. 625; amended December 20, 1993, P.L. 103-208, sec. 2(h)(42) and (43), (m), 107 Stat. 2478, 2486. SEC. 487A. QUALITY ASSURANCE PROGRAM. (a) IN GENERAL.-The Secretary is authorized to select institu- tions for voluntary participation in a Quality Assurance Program that provides participating institutions with an alternative man- agement approach through which individual schools develop and implement their own comprehensive systems to verify student fi- nancial aid application data, thereby enhancing program integrity within the student aid delivery system. The Quality Assurance Pro- gram authorized by this section shall be based on criteria that in- clude demonstrated institutional performance, as determined by Sec. 487A HIGHER EDUCATION ACT OF 1965 336 the Secretary, arid shall take into consideration current quality as- surance goals, as determined by the Secretary. (b) EXEMPTION FROM REQUIREMENTS.The Secretary is au- thorized to exempt any institution participating in the Quality As- surance Program from any reporting or verification requirements in this title, and may substitute such quality assurance reporting as the Secretary deems necessary to ensure accountability and compliance with the purposes of the programs under this title. (c) REMOVAL FROM THE PROGRAM.The Secretary is author- ized to determine (1) when an institution that is unable to administer the Quality Assurance Program must be removed from such pro- gram, and (2) when institutiorts desiring to cease participation in such program will be required to complete the current award year under the requirements of the Quality Assurance Pro- gram. (d) EXPERIMENTAL SITES.(1) The Secretary is authorized to select institutions for voluntary participation as experimental sites to provide recommendations to the Secretary on the impact and ef- fectiveness of proposed regulations or new management initiatives. (2) The Secretary is authorized to exempt any institution par- ticipating as an experimental site from any requirements in this title, or in regulations prescribed under this title, that would bias experimental results. (e) DEFINITIONS.For purposes of this section, "current award year" is defined as the award year during which the participating institution indicates its intention to cease participation. (20 U.S.C. 1094a) Enacted July 23, 1992, P.L. 102-325, sec. 491, 106 Stat. 629. SEC. 487B. ASSIGNMENT OF IDENTIFICATION NUMBERS. The Secretary shall assign to each participant in title IV pro- grams, including institutions, lenders, and guaranty agencies, a single Department of Education identification number to be used to identify its participation in each of the title IV programs. (20 U.S.C. 1094b) Enacted July 23, 1992, P.L. 102-325, sec. 491, 106 Stat. 629. SEC. 488. TRANSFER OF ALLOTMENTS. In order to offer an arrangement of types of aid, including in- stitutional and State aid which best fits the needs of each individ- ual student, an institution may (1) transfer a total of 25 percent of the institutions allotment under section 462 to the institution's allotment under section 413D or 442 (or both); and (2) transfer 25 percent of the institution's allotment under section 442 to the insti- tution's allotment under section 413D. Funds transferred to an in- stitution's allotment under another section may be used as a part of and for the same purposes as funds allotted under that section. The Secretary shall have no control over such transfer, except as specifically authorized, except for the collection and dissemination of information. (20 U.S.C. 1095) Enacted October 3, 1980, P.L. 96-374, sec. 451(a), 94 Stat. 1452; amended October 17, 1986, P.L. 99-498, sec. 407(a), 100 Stat. 1490; amended June 3, 1987, P.L. 100-50, sec. 15(14), 101 Stat. 357; amended July 23, 1992, P.L. 102 325, sec. 492, 106 Stat. 630; amended December 20, 1993, P.L. 103-208, sec. 2(m), 107 Stat. 2486. 337 HIGHER EDUCATION ACT OF 1965 Sec. 488A SEC. 488A. …