A bill to amend the Higher Education Act of 1965 to provide significantly increased financial aid for needy students, provide universal access to postsecondary education, reduce student loan costs while improving student loan benefits, to streamline the Federal Family Education Loan Program, and for other purposes.
TABLE OF CONTENTS:
Part A: Pell Grants
Part B: Student Loan Provisions
Part C: Need Analysis and General Provisions
Part D: Effective Dates
Student Financial Aid Improvements Act of 1997 - Title I: Student Financial Aid Provisions - Part A: Pell Grants - Amends the Higher Education Act of 1965 (HEA) to increase the maximum Pell grant award from $2,700 to $3,000, subject to specified award rules.
Part B: Student Loan Provisions - Directs the Secretary of Education to recall from the reserve funds held by guaranty agencies specified minimum amounts in FY 1998 through 2002. Requires such recalled amounts to be: (1) in proportion to each guaranty agency's share of the total reserve funds held by guaranty agencies as of September 30, 1996; and (2) deposited in the Treasury. Requires each guaranty agency to transfer all reserve funds that it holds to a restricted account and invest those funds in U.S. Government securities specified by the Secretary. Prohibits a guaranty agency from using any restricted account funds for any purpose without the express permission of the Secretary, with specified exceptions for limited amounts of working capital to use for certain operational expenses. Provides that non-liquid reserve fund assets, as well as any liquid assets remaining in a guaranty agency's restricted account after the recalls, remain U.S. property, may only be used for purposes that the Secretary determines are appropriate, and are be subject to recall by the Secretary.
(Sec. 122) Provides borrowers under the Federal Family Education Loan (FFEL) program with certain extended and graduated repayment options currently available to Direct Loan program borrowers, including the option to change repayment plans. Directs the Secretary to ensure that the repayment plans offered to FFEL borrowers are comparable to Direct Loan repayment plans.
(Sec. 123) Reduces the applicable interest rate on all subsidized and unsubsidized FFEL and Direct Loans during in-school, grace, and deferment periods to the same rate as the borrowing rate of the Department of Education, but retains current cap levels on such interest rates. Specifies that the interest rate used to determine the rebate of excess interest under specified HEA is not to be used to change special allowance payments for the period affected by the rebate.
(Sec. 124) Revises specified HEA provisions to reduce the lenders' insurance rate from 98 to 95 percent.
(Sec. 125) Eliminates the one percent insurance premium charged to a FFEL borrower at the time of loan origination. Reduces FFEL origination fees on subsidized FFELs from three percent to two percent. Reduces the loan fee charged on Direct Loans from four percent to three percent for unsubsidized Direct Loans, and from four percent to two percent for subsidized Direct Loans.
(Sec. 126) Revises HEA provisions relating to role of the guaranty agency in the FFEL program. Declares that the Secretary is the sole guarantor of FFELs. Authorizes the Secretary to enter into an agreement with a guaranty agency to insure loans, with the guaranty agency acting as the agent of the Secretary. Allows any guaranty agency that had an agreement with the Secretary under specified provisions on the day before the date of enactment of this Act to enter into an initial agreement with the Secretary. Makes all existing guaranty agency agreements expire within 180 days of such date of enactment. Replaces outstanding loan insurance issued by the guaranty agency by loan insurance issued by the Secretary. Relieves the guaranty agency of any further liability on the loans. Authorizes interim administration measures necessary for the efficient transfer of such loan insurance function. Makes the new guaranty agreements effective for five years, and renewable by the Secretary for successive five-year periods, but authorizes the Secretary to terminate the agreements prior to expiration under certain circumstances. Authorizes the Secretary, after the initial agreement has ended, to enter into: (1) another agreement with that guaranty agency; (2) an alternate agreement with a different guaranty agency; or (3) one or more contracts under specifed provisions, under which contractors would carry out one or more of the functions formerly performed by the guaranty agency. Requires the agreement between the Secretary and a guaranty agency to specify the responsibilities of the guaranty agency, if any, with respect to certain functions.
Authorizes the Secretary to permit a guaranty agency to engage in other businesses, previously purchased or developed with reserve funds, that relate to the FFEL program. Provides that, under such agreements, guaranty agencies shall receive specified fees and revenues. Permits guaranty agencies to retain a share of their net revenues for activities in support of postsecondary education. Requires such share to be calculated and approved by the Secretary after determining an adequate level of economic incentive for guaranty agencies to maximize their efficiency, in an amount not to exceed 50 percent of guaranty agency net revenues. Requires guaranty agencies to carry out their responsibilities under the agreement in accordance with performance standards set by the Secretary and uniformly applied to all guaranty agencies. Directs the Secretary to compare the performance of the guaranty agencies with one another, and publicly disseminate such comparison. Establishes fines for guaranty agencies that fail to achieve a specified level of performance on one or more performance standards. Requires the guaranty agency, if its failure resulted in a financial loss to the United States, to indemnify the Secretary for that loss. Termination of a guaranty agency's agreement prior to the expiration date either automatically under certain circumstances or upon the Secretary's determination that the guaranty agency has substantially failed to achieve an acceptable level of performance.
Grants an exemption to lenders with small FFEL portfolios, by requiring only eligible lenders that originate or hold more than $5 million in FFELs during an annual audit period to submit to compliance audit for that period.
(Sec. 127) Repeals specified HEA provisions which require a State to pay to the Secretary an annual amount that represents the State's share of risk for high default rates at institutions within the State.
(Sec. 128) Revises HEA provisions relating to FFEL consolidation loans.
(Sec. 129) Authorizes the Secretary to enter into one or more contracts to carry out any of the functions that otherwise would be carried out by a guaranty agency.
(Sec. 130) Revises the definition of an eligible lender to require lenders to offer uniform terms and conditions to all borrowers taking out the same type of FFEL loans.
(Sec. 131) Requires computation of special allowance rates at the same time and in the same manner as student loan interest rates (annually rather than quarterly).
(Sec. 132) Revises provisions relating to the Student Loan Marketing Association (Sallie Mae) and its payment of an offset fee on loans it holds.
(Sec. 133) Limits the payment of a specified transition fee to: (1) institutions or consortia in their first year of participation in the Direct Loan program; and (2) an amount not more than an average of $10 per borrower at such institutions.
(Sec. 134) Sets funding levels through FY 2002 for mandatory administrative expenses for the student financial aid programs, including the Direct Loan program, at levels lower than the current baseline.
Part C: Need Analysis and General Provisions - Revises provisions for calculation of a postsecondary student's need for assistance under HEA title IV. (Provides, in various ways, that students' future eligibility for title IV assistance not be affected by their families' use of the HOPE Scholarship tax credit or the education and training tax deduction.)
(Sec. 142) Makes the income protection allowance (IPA) for independent students without dependents (other than a spouse) comparable to those used for parents of dependent students and for independent students with dependents. Permits updating IPA calculation to reflect inflation.
(Sec. 143) Requires the Secretary to define certain education-related terms for purposes of the HOPE Scholarship tax credit and the education and training tax deduction provided under specified provisions of the Internal Revenue Code. Makes inapplicable to such regulations specified HEA provisions relating to a deadline for publication of regulations in final form.
(Sec. 144) Extends the FFEL program and certain other HEA title IV student assistance provisions through FY 2002.
Part D: Effective Dates - Sets forth the effective dates for specified provisions of this Act.
Introduced in Senate
Sponsor introductory remarks on measure. (CR S3035, S3051-3056)
Read twice and referred to the Committee on Labor and Human Resources.
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