A bill to amend the Higher Education Act of 1965 to prevent abuses in the Supplemental Loans for Students program under part B of title IV of the Higher Education Act of 1965, and for other purposes.

(Measure passed Senate, amended)

Amends the Higher Education Act of 1965 (the Act) to remove the exemption for Supplemental Loans for Students (SLS loans) from certain eligibility requirements under title IV (Student Assistance) of the Act. Revises such requirements to provide that SLS and Guaranteed Student Loan (GSL loan) recipients must have: (1) received a determination of eligibility or ineligibility for a Pell Grant for the relevant period of enrollment; and (2) filed an application for such a grant, if determined to be eligible.

Requires, for eligibility for an SLS loan for any period of enrollment, that a student must have: (1) received a determination of need for a GSL loan; and (2) applied for such a loan, if determined to have need for it.

Reduces the amount of an individual's SLS loan eligibility by the amount of such individual's GSL loan eligibility (added to other financial aid).

Revises the conditions of SLS eligibility of undergraduate dependent students. Requires "exceptional" (rather than "extenuating") circumstances to preclude such a student's parents from borrowing under the parent loan (PLUS loan) program. Requires appropriate documentation that such circumstances exist to be maintained in the institution's records to support such determination.

Requires that SLS loans be disbursed in a specified manner to reduce student interest costs. Makes special rules for multiple disbursement also applicable to SLS loans.

Makes students in teacher training programs eligible for GSL loans regardless of specified restrictions on such eligibility.

Provides that, for purposes of Pell Grant need analysis and general student aid need analysis provisions, income tax payments to specified U.S. territories and possessions or to foreign governments shall be treated as Federal income taxes.

Amends guaranteed student loan program provisions of the Act (as amended by the Augustus F. Hawkins-Robert T. Stafford Elementary and Secondary School Improvement Amendments of 1988) to specify that the guaranteed student loan program shall be referred to as the Robert T. Stafford Student Loan Program. (Currently the name is optional.) Requires that guaranteed student loans be known as Stafford Loans.

Amends the Compact of Free Association Act of 1985 (the Compact) to extend the Pell Grant, Supplemental Educational Opportunity Grant, and College Work-Study programs to students who are or will be citizens of the Federated States of Micronesia or the Marshall Islands and who attend postsecondary institutions in the United States, its territories and commonwealths, the Trust Territory of the Pacific Islands, the Federated States of Micronesia, or the Marshall Islands. Makes such extension inapplicable to any student receiving assistance pursuant to specified provisions of the Compact or the Compact with Palau.

Revises title III (Institutional Aid) of the Act to prohibit any historically black college or university which receives funds under part B (Strengthening Historically Black Colleges and Universities) from receiving funds under part A (Strengthening Institutions) of such title. Adds to authorized uses of funds from grants to institutions under part B: (1) faculty development; (2) funds and administrative management, and funds for acquisition of equipment for use in strengthening funds management; and (3) joint use of facilities, such as laboratories and libraries.

Qualifies for part B funds any branch campus of a southern institution of higher education that before September 30, 1986, received a special needs grant and was formally recognized by the National Center for Education Statistics as a Historically Black College or University, but did not qualify as a part B institution or after October 17, 1986.

States that specified provisions for deferment of student loan repayment during internship refer to internships required to begin professional practice or service after January 1, 1986.

Applies specified provisions of the Higher Education Technical Amendments Act of 1987 to loans made under the guaranteed student loan program before, on, or after the date of enactment of such Act.

Delays the effective date of specified regulations relating to new special conditions imposed on an institution's authority to measure academic programs in clock or credit hours.