To amend the Higher Education Act of 1965 to provide more stringent requirements for the Robert T. Stafford Student Loan Program, and for other purposes.

Amends the Higher Education Act of 1965 (HEA) to revise requirements for the Robert T. Stafford Student Loan Program.

Revises requirements for guaranty agreements for reimbursing losses.

Requires a guaranty agency that receives reimbursement payment from the Secretary of Education (the Secretary) to: (1) assign, within 30 days of payment receipt, to the Secretary the promissory note for the loan on which such payment has been made. Makes such agency liable to the United States for collection costs if the Secretary succeeds in collecting any payment on such note from the borrower. Requires that any funds thus collected be deposited in the student loan insurance fund.

Requires a guaranty agency which has made payment on a default claim to file for such reimbursement by the later of: (1) the 45th day after making such payment; or (2) the 270th day after the loan became delinquent with respect to any installment.

Prohibits the Secretary from making any such reimbursement to a guaranty agency when a default claim is based on inability to locate the borrower, unless the guaranty agency demonstrates, in the filing for reimbursement, that diligent attempts have been made to locate the borrower through all skip-tracing techniques, including skip-tracing assistance from the Internal Revenue Service, credit bureaus, and State motor vehicle departments.

Repeals specified provisions relating to the Secretary's equitable share of payments made by the borrower.

Revises requirements for disbursement of student loans. Prohibits an eligible lender from selling a promissory note for any loan made, insured, or guaranteed under the Stafford Program until all proceeds of such loan have been disbursed. Requires the seller and purchaser of any such loan to notify the borrower at the time of its sale as to the sale and its effects on the borrower.

Repeals specified provisions which: (1) limit imposition of civil penalties on lenders or guaranty agencies for specified violations, failures, or misrepresentations; (2) allow them to correct such violations to avoid liability for such penalties prior to an enforcement action; and (3) deem as a single violation subject to a single penalty a number of such violations which arise from a specific practice.

Revises the definition of due diligence to cover the making (as well as the servicing and collection) of loans insured under the Stafford Program.

Revises provisions for the Student Loan Marketing Association (Sallie Mae). Authorizes the Secretary of the Treasury to make necessary rules and regulations to ensure that the purposes for which Sallie Mae was established are accomplished. Authorizes the Secretary of Education and the Secretary of the Treasury to: (1) examine and audit Sallie Mae's books and financial transactions; and (2) require Sallie Mae to report on its activities. Requires Sallie Mae to provide for the conduct an annual independent compliance audit (in addition to financial audit requirements) by an independent certified public accountant in accordance with Federal standards, to determine its compliance with HEA. Grants such auditor and the Inspector General access to all items necessary for such audit.

Establishes Stafford Program requirements for State approval of proprietary trade schools. Requires such approval to consist of a qualitative review and assessment of the school's facilities and activities, including on-site inspection. Requires that such State higher education agency approval extend for a period of not more than three years. Sets forth proprietary school application approval requirements, State approval criteria, and revocation procedures. Requires separate certification, approval, and accreditation to be obtained if a proprietary trade school or branch changes ownership resulting in a change of control, or if the school opens a new branch.

Revises general provisions for program participation agreements, for all HEA student assistance programs, to remove requirements that certain hearings be on the record.

Revises HEA to require each loan servicing agency and entity acting as a secondary market to provide for the conduct of annual independent compliance and financial audits.

Requires reports to the Secretary on any financial interest held in any other entity participating in any student assistance program by officers, directors, employees, and consultants of specified entities engaged in making decisions or providing advice on administration of any such program or funds or the eligibility of any entity or individual to participate.

Amends the Department of Education Organization Act to establish: (1) the position of Assistant Secretary for Student Financial Assistance; and (2) the Office of Student Financial Assistance Oversight and Enforcement, to be administered by that Assistant Secretary.

Authorizes the Commissioner of the Social Security Administration, or a designee, to assist the Secretary in determining if Stafford Program student loan borrowers are using true and correct social security numbers when applying for such loans.

Requires Federal and State financial regulatory agencies to provide the Secretary with information pertaining to an institution participating in any HEA student financial assistance program, upon a request pursuant to the Secretary's request pursuant to the Secretary's oversight responsibilities.

Requires the Inspector General to review and report to the Congress on the role of guaranty agencies within the Stafford Program, examining their operations and relationship with State governments.Requires such report to consider and make recommendations on specified topics, including increasing agency oversight of proprietary trade schools, increasing disincentives for high default rate portfolios, and consolidation or elimination of the agencies role.

Directs the Secretary to report to the Congress: (1) on the advisability of statutory protection for officials of accrediting agencies involved in the performance of legitimate Stafford Program activities; and (2) on the feasibility of setting limits on the type of proprietary trade school education that Federal funds should subsidize.

Directs the President, with the Secretary's assistance, to report to the Congress on how to: (1) develop greater support and respect for skills training; (2) determine what skills the United States needs; (3) promote the most effective balance between skills training and academic forms of postsecondary education; and (4) develop the most useful balance between Federal loans and grants in the provision of skills training.